International Organizations Request Korea's Power Market Transparency and Direct Renewable Energy Transactions

[Asia Economy Reporter Moon Chaeseok] Following the International Energy Agency (IEA)'s recommendation to open the electricity market, which is virtually monopolized by Korea Electric Power Corporation (KEPCO), to the private sector, The Climate Group, the global RE100 campaign organizer, has urged the Korean government to introduce a Power Purchase Agreement (PPA) system.

On the 26th of last month, the IEA stated, "Korea's power sector operates as a mandatory pool with a single buyer, and wholesale and retail prices are set by the government rather than the market," adding, "The failure to open the power sector and introduce true competition and an independent regulatory body across the entire value chain could be a major obstacle to Korea's energy transition."

The domestic power industry is structured such that KEPCO virtually monopolizes all sectors including generation, transmission (power transmission and distribution), and sales. In the generation sector, KEPCO's six power generation subsidiaries hold over 80% market share, and KEPCO has a 100% monopoly in the transmission and distribution sector. In the sales sector, private operators other than KEPCO have a negligible share.

Subsequently, The Climate Group, a multinational non-profit organization based in London, UK, requested the Korean government on the 4th to "create a market where corporate buyers of all sizes can directly trade with renewable energy suppliers."

In summary, they demanded that the Korean government ▲ establish a structure where KEPCO and private operators can compete, and ▲ expand the renewable energy market through matching between companies and renewable energy providers to accelerate the energy transition.

For this to be realized, ▲ the government must improve the decision-making structure that controls electricity prices, and ▲ KEPCO must be able to stabilize its finances even if it is not a coal-fired power generation subsidiary. The goal should be achieved on the premise that KEPCO does not engage in renewable energy generation business.

Contrary to these international demands, the amendment of the PPA law is sluggish. Rather, the possibility of KEPCO participating in renewable energy generation business is increasing.

Earlier, Democratic Party lawmaker Kim Seonghwan introduced the PPA law as the main proposer in July, but it reportedly failed to pass the Industry, Trade, and Energy Special Committee on the 26th of last month due to opposition from the opposition party.

Another Democratic Party lawmaker, Song Gapseok, has introduced the "Partial Amendment to the Electricity Business Act" as the main proposer, supporting KEPCO's entry into the renewable energy generation business.