[Reporter’s Notebook] "AI, Electricity Rates, and Carbon Transition"... The Triple Power Challenge Facing Companies

Burden of Industrial Electricity Rate Hikes Grows
Urgent Need to Improve Energy Transition Policies

"For companies, discussing the current electricity cost burden feels like standing on the guillotine."

When asked about the burden of electricity rates, corporate representatives all expressed discomfort. This is because they are simultaneously facing a "triple challenge" of rising electricity costs, instability in electricity supply due to the transition to artificial intelligence (AI), and pressure from the new government to reduce carbon emissions.

According to data submitted to the National Assembly by Korea Electric Power Corporation (KEPCO), the top 30 corporations used 98,552 GWh of electricity last year. Over the past three years, international oil prices have surged and KEPCO's debt has accumulated. In response, the government froze residential electricity rates but rapidly raised industrial electricity rates. While this measure was intended to ease the burden of living costs for households, the increase in electricity rates has been directly transferred to companies as higher costs.

However, the increase in industrial electricity rates is no longer seen as a viable solution as new industries such as AI and semiconductors are gaining momentum. AI semiconductors consume dozens of times more electricity than conventional products. As manufacturing processes become more advanced, power consumption continues to rise. Companies such as Samsung Electronics and SK Hynix are building large semiconductor clusters in Yongin to meet development demand. It is expected that more than 10 GWh of large-scale electricity supply?equivalent to a quarter of the power demand in the Seoul metropolitan area?will be needed.

The new government is putting the expansion of renewable energy at the forefront of its energy supply strategy. Companies also agree that a shift from the current KEPCO-centered electricity supply system to a new structure is necessary to address the triple challenge. However, they are still struggling to apply this in practice. The amount of electricity traded by companies that own their own power generators accounts for less than 1?2% of the total electricity bill.

The best way for companies to reduce their burden while following government policy is to establish systems for alternative power generation. However, to purchase electricity directly from renewable energy producers, companies must pay high grid usage fees or build more self-owned power plants. In practice, there is a consensus that there is no concrete manual for contracts between companies. For companies whose primary goal is to pursue profit, this situation is inevitably burdensome.

Changing a long-established structure requires significant effort. If the government encourages a transition to renewable energy, it must first lay the institutional groundwork by removing unreasonable barriers so that companies can utilize new power sources. Electricity rates should also be applied sequentially according to actual demand by season and region, and the criteria for fuel cost adjustments should be clarified. Rather than simply shifting the burden onto the private sector, the government must prioritize realistic structural design.