Energy & Infrastructure Alert | November.09.2018
On November 1, 2018, the Ministry of the Environment ("MOE") announced that, at the "4th Review Session on Basic Policy Regarding Solar Facilities and the Environmental Impact Assessment," it plans to make certain large-scale solar projects subject to the Environmental Impact Assessment Act ("EIA Act").
The EIA Act divides projects into two classes: (i) Class 1 Projects that have a major impact on the environment and (ii) Class 2 Projects that are comparable in scale and have a notable impact. Environmental impact assessment ("EIA") is mandatory for Class 1 Projects, while Class 2 Projects are screened based on local conditions.
The question is: how will large-scale solar projects be classified?
Initially, the assumption was that the only criteria would be land area (hectares), as is the case when determining the necessity of EIA under ordinance and as currently applicable to solar projects.
MOE, however, has indicated that power capacity is likely to be the determining factor for EIA under the EIA Act, since "classifications under the Electricity Business Act are based on capacity (kW) and EIA under the EIA Act reflects directly upon project permit screenings under the Electricity Business Act." Further, proposals have been set forth to define (i) Class 1 Projects for solar projects as having a "capacity (kW) equivalent to 100 hectares or more," in line with current criteria for Class 1 Projects for land readjustment and other surface-improvement projects that are based on having a land modification area of 100 hectares or more; and (ii) Class 2 Projects for solar projects as having a "comparable scale" equivalent to 0.75 times the criteria for Class 1 Projects, in accordance with laws and ordinances currently in place for other sectors.
What then is "capacity equivalent to 100 hectares"?
Based on current data, MOE approximates 32MW for solar projects already installed under the FIT scheme and 36MW for solar projects that have obtained FIT approvals. As is the case for other energy sources, however, this dataset is based on grid-connected output; that is, with respect to mega solar, it represents PCS rather than solar panel capacity.
Although the majority of the review committee members agreed with the proposal by MOE to use "100 hectares or more" as a criteria, there have been many objections to using "capacity (kW) equivalent to 100 hectares or more."
Further, while EIA under ordinance takes approximately 1 year to complete, EIA under the EIA Act is expected to take 3 to 4 years. For solar projects subject to EIA under the EIA Act, this inevitably means that the development period will be drawn out and operators will face higher development risk in conjunction with the risk of having reduced applicable procurement prices or truncated procurement periods due to delay in the start of operations.
These matters are to be reconsolidated as a final draft by MOE in January of next year and as a formal report by the end of March, upon further discussion by the review committee. There is to be a call for public comment prior to finalization.
With respect to EIA under the EIA Act, it will be essential to monitor what scale criteria will apply to solar projects as well as which projects in various stages of development will be subject to the requirements, and further, whether appropriate transitional measures will be put in place.