"Expanding Choices in Electricity Tariff Plans"... Calls for Power Market Reform

Presentation by the National Assembly Energy Joint Research Team at Policy Forum
"Building a Power Grid with Public and Private Participation, Regionally Differentiated Tariffs"

There have been calls for comprehensive reforms of the electricity system, including expanding choices in electricity tariff plans and restructuring the power market. The main argument is that, to strengthen energy security and industrial competitiveness, the rigid, supplier-centered system must shift to a more flexible, demand-driven market.

At 10:00 a.m. on July 4, a policy forum titled "Energy Policy Forum for Strengthening Industrial Competitiveness" was held at the National Assembly Members' Office Building in Yeongdeungpo-gu, Seoul. The forum addressed the structural issues of existing energy policies and discussed strategies to secure industrial competitiveness and achieve carbon neutrality. Key participants included Kim Kisik, President of the National Assembly Futures Institute, Kim Woni, a member of the Democratic Party, as well as officials from the Ministry of Trade, Industry and Energy, the Korea Chamber of Commerce and Industry, academia, and other major stakeholders.

The Energy Joint Research Team of the National Assembly Future Industry Forum presented practical measures for power system reform to secure future industrial competitiveness, such as expanding the power grid and restructuring the market. Jung Hoon, Head of the Future Industry Team at the National Assembly Futures Institute, pointed out, "A supply-focused energy policy led by the government and public enterprises has resulted in a persistently rigid market structure," and added, "Due to the government's politically motivated decisions on energy tariffs, price signals based on market principles have been lost."

He continued, "There is no large-scale funding plan for carbon neutrality, and related funds such as the Climate Response Fund and the Electricity Infrastructure Fund are not contributing to policy objectives due to inadequate budget allocation systems." He also noted, "The lack of linkage between energy policy and industrial policy limits our ability to respond to changes in the global economic order."

The research team argued for a sweeping overhaul of the power system, proposing policy tasks such as: reforming power industry governance; expanding and decentralizing power grid infrastructure; improving market structure and promoting competition; enhancing stable power supply and demand management; and fostering new energy technologies and industries.

Lee Daeyeon, Director of the Power Policy Research Division at the Korea Energy Economics Institute, stated, "A new power grid involving both the public and private sectors must be built, and the power market must be restructured to improve the grid acceptance of renewable energy." He added, "To resolve the oversupply of renewable energy in the Honam region, the early introduction of the new and renewable energy bidding market, currently being piloted in Jeju, should be pursued."

He further argued, "By introducing a transmission and distribution network usage fee system, regionally differentiated tariffs should be implemented, and options should be expanded through strategic procurement and tariff liberalization for demand-shifting companies in distributed energy special zones." Lee also said, "Participation of distributed energy integration business (VPP) operators in the ancillary services market should be allowed, and their utilization as flexible resources should be enhanced." He emphasized, "Distortions in industrial electricity tariffs should be alleviated, and dedicated tariff plans by industry sector should be introduced."

Relevant agencies also made recommendations. The Korea Power Exchange suggested pursuing both the decentralization of power generation sites and demand, and implementing regionally differentiated wholesale and retail tariffs. Korea Electric Power Corporation emphasized the need to secure timely expansion capabilities for the power grid, clarify role responsibilities, and rationalize network usage fees.