Government Finalizes Incentive Direction for Decentralized Special Zones... Reduction of Electricity Trading Costs

The Ministry of Trade, Industry and Energy announced on the 8th that it has finalized the incentive direction for Distributed Energy Specialized Zones (Distributed Special Zones). This aims to alleviate the burden on the power grid and reduce the use of high-cost generators in the metropolitan area, targeting the reduction of ancillary costs from direct power trading and resolving electricity price disparities between regions.

Distributed Special Zones are an advanced concept compared to existing district electricity businesses, allowing distributed energy operators to simultaneously generate and sell power within the designated area. A different tariff system from Korea Electric Power Corporation (KEPCO) is partially permitted, and regulatory exemptions enabling the demonstration of overseas new power business models are also applied.

The government plans to lower distribution network loss rates and reduce ancillary costs incurred during direct power trading by activating local power supply and demand within the Distributed Special Zones. In particular, the loss rate for high-voltage distribution users will be reduced by about 1.2 percentage points compared to the existing level, and discounts on network usage fees are under consideration. Additionally, exemptions on some climate and environmental costs will be promoted for power sources with significant greenhouse gas reduction effects, such as renewable energy, district energy, and hydrogen fuel cells.

The supplementary power charges received from KEPCO will be guaranteed at the existing district electricity business operator level initially, while new optional choices will be provided to expand operator autonomy. If benefits such as grid congestion relief from distributed energy introduction are confirmed, reductions in additional settlement charges will also be pursued. However, statutory costs such as the power fund and welfare special tariffs will continue to apply to distributed energy power trading.

The government expects that these policies will lead to electricity price reductions outside the metropolitan area, promoting the relocation of large-scale power demands such as data centers to provincial regions.

Additionally, for demand-attracting Distributed Special Zones, the review items of power system impact assessments will be simplified, and priority installation of electrical supply facilities such as 154kV substations will be implemented to enhance project predictability.

In saturated grid areas like the metropolitan region, incentives will be given to encourage new generator entry by awarding bonus points in LNG capacity market bids, and renewable energy financial support projects for solar power facilities will be prioritized. In particular, solar power installations in industrial complexes, factories, and urban buildings will receive support ahead of other regions.

When distributed energy operators apply for exemptions, a ‘negative-type regulatory exemption’ will be applied, which involves re-examining related regulations from the ground up. To assist initial project promotion, up to 6 billion KRW in national funding (3 billion KRW annually, up to 2 years) will be provided through the ‘Future Regional Energy Ecosystem Activation Project.’

The Ministry of Trade, Industry and Energy plans to receive applications for Distributed Special Zone designation from local governments by the 5th, then finalize the designated areas through practical evaluation committees and energy committee deliberations within the first half of the year. Subsequently, related regulation amendments and detailed support plans will be prepared and announced through KEPCO’s board of directors and the Electricity Committee.