SK E&S-Jungbu Power Cooperation
LNG Cogeneration Power Plant Project
SK Hynix Production Cost
Annual Savings of 150 Billion KRW
Completion Target in 2026
SK E&S, in collaboration with Korea Midland Power, has received final approval for the 'Yongin Semiconductor Cluster District Energy Project.' This project marks the first instance of public-private cooperation to supply heat and electricity for the construction of a large-scale semiconductor industrial complex, enabling SK Hynix to achieve an annual production cost reduction exceeding 150 billion KRW.
According to industry sources on the 8th, the government has granted final approval for a liquefied natural gas (LNG) combined heat and power (CHP) plant (district energy) project to provide stable electricity and heat to the world's largest Yongin Semiconductor Cluster. Following this approval, SK E&S and Korea Midland Power will establish a special purpose company (SPC) to carry out the district energy project and aim to complete the power plant by the second half of 2026. District energy facilities are power plants equipped with both electricity generation and heat supply systems for district heating. They offer high energy efficiency and reduce the costs associated with constructing large-scale transmission lines such as transmission towers, making them primarily built around large industrial complexes or new towns. The installation of district energy facilities within industrial complexes reduces the burden of constructing large transmission infrastructure while ensuring stable power supply, thereby lowering social and economic costs.
The district energy facility to be developed by SK E&S and Korea Midland Power will have a capacity of 1.05 GW (gigawatts). This capacity is sufficient to supply heat to fabs (semiconductor manufacturing plants) 1 through 4 within SK Hynix’s Yongin Semiconductor Cluster. Stable heat supply is essential in semiconductor manufacturing processes to maintain constant temperature and humidity 24/7. Even a one-degree drop in temperature can disrupt semiconductor fab production. A factory shutdown of about two minutes can result in losses of approximately 10 billion KRW. With the district energy facility in place at the Yongin Semiconductor Cluster, heat production costs are expected to decrease by about 15%, and energy consumption by 26%, compared to boiler-based production methods.
LNG power generation, which emits less carbon, is expected to provide stable energy supply. Although LNG power generation is not an energy source that qualifies for RE100 (100% renewable energy use), SK E&S is integrating CCS (carbon capture and storage) technology to promote a low-carbon LNG business, which is anticipated to contribute to carbon reduction.
The project is also expected to serve as a stable revenue source for the merged entity of SK E&S and SK Innovation, scheduled to launch in November. With this project, SK E&S, the leading private LNG operator and power producer in Korea, will supply LNG to an additional 1 GW-class power plant, complementing its currently operated 5 GW LNG power plants, thereby further strengthening its LNG value chain competitiveness. Considering that the Ministry of Industry surveyed a 7.3 GW scale of new LNG combined heat and power construction intentions in January this year, SK E&S’s acquisition of the 1.05 GW LNG power generation rights with Korea Midland Power is regarded as a significant achievement.
Generally, district energy facilities experience most of their heat demand concentrated in winter. However, semiconductor industrial complexes maintain consistent heat and power demand throughout the year regardless of season, enabling stable revenue generation. SK E&S is expected to leverage LNG directly imported from countries like Australia to reduce fuel costs and expand LNG demand for the merged entity.
At a corporate briefing held the previous day, Choohyung Wook, CEO of SK E&S, stated, "Considering the SK Hynix Yongin Semiconductor Cluster district energy project, the Boryeong hydrogen co-firing power project, and additional demand expansion in Europe and Southeast Asia, the total power generation capacity is expected to exceed 8 GW, with LNG demand reaching 10 million tons, further enhancing the cost and operational competitiveness of the LNG value chain."
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