"South Korea's Decarbonization Costs Are Rising... Competition and Efficiency Needed"

Interview with Hugo Batten, Aurora Energy Research Asia-Pacific Director
"Despite Low Share of Renewables, Grid Congestion Is Emerging"

"Although the share of renewable energy in South Korea is only 10%, grid congestion is already occurring."

Hugo Batten, Regional Director of Asia-Pacific at Aurora Energy Research, a UK-based energy research and consulting firm, made this comment in an interview with Asia Economy on September 18, when asked about the biggest challenges facing South Korea's power grid.

Batten analyzed that South Korea's power grid faces structural limitations. He explained, "Due to the country's small land area, high population density, and complex coastline, developing renewable energy is not easy in South Korea." He added, "There is significant seasonal variability in wind and solar power, and the country is highly exposed to volatility in the global liquefied natural gas (LNG) market." He also noted that South Korea faces the complex challenge of pursuing both decarbonization and market liberalization simultaneously.

Solutions are not simple. Batten pointed out that in order to resolve grid congestion (curtailment) caused by the expansion of renewables, all grid expansion measures included in the 11th Basic Plan for Electricity Supply and Demand must be fully implemented. However, he noted that the cost of building transmission networks has surged recently, and there are ongoing issues with securing public acceptance for grid infrastructure and regulatory uncertainty.

Hugo Batten, Regional Director of APAC at Aurora Energy Research. Aurora Energy Research

In countries such as Australia, Japan, and the Philippines, grid construction costs have risen two to three times compared to five to eight years ago. The rapid buildout of energy infrastructure being pursued by the new administration in South Korea is also expected to entail significant costs.

Batten explained that although the levelized cost of electricity (LCOE) for renewables such as solar and wind has decreased, the overall system cost is rising. This is due to increasing costs associated with transmission network construction, grid stabilization facilities, and backup batteries required for restructuring the power system.

To address this, he suggested that efficient market design is needed to promote competition and improve efficiency. This can be interpreted as a call to reform the current electricity market structure, where Korea Electric Power Corporation holds a monopoly over transmission and retail. He also advised that the grid should be expanded quickly to connect power plants without delay.

Additionally, Batten emphasized the need to strengthen LNG strategies. He stated, "Even as the share of renewables increases, LNG power generation will determine the system marginal price (SMP) for 80-90% of the time," adding that managing volatility is key.

Aurora Energy Research predicted that as renewable energy grows rapidly, output curtailment in the Jeonnam region could become more severe. Batten forecasted, "If 20 gigawatts (GW) of offshore wind are installed in the Jeonnam region by the mid-2030s, some solar power plants could face output curtailment as high as 20-25%."

To mitigate this, he recommended installing battery energy storage systems (BESS) for output adjustment and introducing virtual transmission networks to optimize power flows without physical expansion.

Aurora Energy Research is active in the Asia-Pacific region, focusing on South Korea, Australia, Singapore, Malaysia, Japan, the Philippines, and India, and is also considering entering the Chinese market. On September 17, the company hosted the event "Advancing with Renewables: South Korea's Grid Constraints and Market Changes" at The Westin Josun Seoul, attended by five domestic and international financial institutions, power generation companies, and investors.