How South Korea plans to use the Iran crisis to spur a renewables revolution

In Guyang-ri, a farming village of 70 households about 90 minutes south-east of Seoul, residents gather for free communal lunches six days a week. The meals are funded by the village’s one-megawatt solar installation, which generates roughly 10m won ($6,800) in net profit each month.

“Residents eat lunch together every day, so we see each other’s faces, talk together,” says Jeon Joo-young, the village chief. “Bonds and solidarity between residents become much stronger. Life becomes more enjoyable.”

The shift has been dramatic. Before the solar project launched in 2022, the village of about 130 people had no restaurant, no easy way to move around, and little communal infrastructure. Now solar revenue pays for meals, a village “happiness bus” for elderly residents, a table tennis facility, and cultural activities.

Villagers in Guyang-ri enjoy a free meal, one of the free public benefits of the solar panels the village had installed Photograph: Guyang-ri village solar cooperative

The village deliberately chose to spend solar income on welfare rather than individual dividends, a decision Jeon says residents made themselves rather than being persuaded.

“If you divide money as individual income, people feel disconnected. People who didn’t know each other for years now get to know each other within days” through the restaurant, he says.

Guyang-ri serves as the national prototype for South Korea’s rapidly expanding “solar income village” programme, which aims to reach 2,500 villages by 2030. The government is aiming to create 700 this year – up sharply from roughly 150.

The acceleration is part of President Lee Jae Myung’s effort to use the Iran crisis as a catalyst for a faster clean energy transition. The country imports more than 90% of its primary energy, including roughly 70% of crude oil through the strait of Hormuz.

Lee has repeatedly framed fossil fuel dependency as a dangerous vulnerability, telling his cabinet that the “nation’s fate” depends on energy transition.

Many of the renewable targets predate the crisis, including a goal to generate 20% of electricity from renewables by 2030 and phase out coal by 2040, but officials say the pace and political urgency have shifted sharply, and funding increased.

A supplementary budget allocates about 500bn won to energy transition, funding grid infrastructure upgrades and increasing overall annual support for renewable energy projects to a record 1.1tn won ($670m).

400bn won in low-interest loans will be provided to other villages to accelerate deployment of solar panel projects. Photograph: Guyang-ri village solar cooperative

Additionally, 400bn won in low-interest loans will be provided to the villages programme to accelerate deployment.

Kim Sungwhan, the minister of climate, energy and environment, said: “Around the world, the Middle East war is driving even faster acceleration of renewable energy transition, so Korea too must pick up the pace.”

Renewing an old problem

But as renewable programmes scale up, they are colliding with the electricity grid’s capacity. Large parts of the south and south-west, where solar and wind development has concentrated, are already at or near capacity limits. Gigawatts of renewable projects are waiting for grid connection, with some renewable capacity in effect going to waste.

Hong Jong Ho, an energy economist at Seoul National University, argues South Korea’s energy crisis began long before the Iran war.

The state utility Korea Electric Power Corporation (Kepco), which controls national generation, transmission and distribution as a de facto monopoly and holds stakes in the state-owned companies operating most coal and nuclear plants, keeps electricity prices artificially low and discourages investment in renewable infrastructure, according to Hong.

“Decades of government-subsidised electricity have led many Koreans to view power as a public good that the government should provide cheaply and abundantly,” he says, which, in turn, erodes public acceptance of the costs of transition.

Kepco has focused on plans to build high-voltage transmission lines from renewable-rich southern regions to Seoul, but construction takes over a decade and faces growing local resistance from residents who view it as unfair: rural areas sacrificing land to supply the capital while receiving no price benefit under the country’s uniform national pricing system.

The push to expand solar is also exposing South Korea’s reliance on Chinese supply chains. China accounts for the vast majority of solar panels installed in the country, reflecting its dominance in global manufacturing and significantly lower costs.

The push to expand solar is also exposing South Korea’s reliance on Chinese supply chains. Photograph: Guyang-ri village solar cooperative

The government has responded with measures including domestic module requirements for solar villages and plans to introduce carbon footprint certification for imports.

But environmental groups argue the overall response to energy transition falls short.

Gahee Han, from group Solutions for Our Climate, acknowledged that President Lee has signalled “genuine political intent” in accelerating the transition.

The concern, she says, is whether momentum can translate into delivery. While about 500bn won was allocated to energy transition in the supplementary budget, around 5tn won was simultaneously directed toward absorbing fossil fuel price hikes, including direct subsidies to oil refineries through a petroleum price cap system.

“The government that suppresses price signals is the same government asking the public to conserve energy,” Han says. “This contradiction reflects a deeper institutional mindset that continues to shield fossil fuel incumbents from market reality.”

The government has delayed some coal plant closures and accelerated nuclear reactor restarts, which officials describe as temporary measures to maintain grid stability amid the Middle East crisis. But a recent cabinet meeting confirmed that “capacity payments”, or guaranteed income streams, will continue flowing to 21 coal-fired power plants beyond 2040 as emergency energy reserves.

“The window for transformative change is open now,” Han says. “Whether this government has the institutional courage to use it is the question that will define Korea’s energy future.”