In recent years, industrial electricity prices have risen sharply, leading to an increase in corporations wanting to purchase electricity directly from the Korea Power Exchange, which operates the domestic power system. Currently, Korea Electric Power Corporation purchases electricity from the power exchange and sells it to homes and businesses, but now corporations want to buy directly from the power exchange without going through KEPCO. The industry anticipates that purchasing electricity directly without going through KEPCO could save some on electricity costs.
According to the industry on the 3rd, SK Gas's petrochemical subsidiary SK Advanced, LS MnM, and Korail are reviewing direct electricity purchases. A spokesperson for the power exchange stated, "Apart from SK Advanced, which is in the application process, multiple corporations have applied for direct purchase. Some public enterprises, including Korail, have also made inquiries."
Korail has a high electricity usage as 85% of its operational routes are on electric tracks. Last year, electricity costs amounted to 579.6 billion won out of a total operating expense of 6.636 trillion won. Korail had also stated in February that it is pursuing ways to reduce electricity costs as a matter of life and death. The Korea National Railroad Corporation commented regarding direct purchases, "It is true that we have considered direct electricity purchases, but nothing has been pursued or confirmed yet."
SK Advanced applied for direct purchase at the power exchange for the first time in November last year. On the 28th of last month, a revision of the market operation rules for the direct purchase system was passed by the Electric Power Commission under the Ministry of Trade, Industry and Energy. The revision includes detailed information for direct electricity purchases. A representative from the Ministry of Trade, Industry and Energy noted, "We have restructured the entry requirements so that the original intent of this system, which has been in place since 2003, can be revived. We hope that users who can adequately handle the uncertainties will come."
The industry expects that direct electricity purchases could reduce electricity costs by about 10%. A representative from SK Advanced stated, "Electricity prices have risen by 80 to 90% compared to four years ago, exceeding 180 won per kilowatt-hour, placing significant cost burdens. If these electricity prices persist, we might not be able to operate the factory." He added, "Currently, almost all corporations are researching ways to obtain cheaper electricity."
According to the Korea Enterprises Federation, industrial electricity prices have increased seven times and by a maximum of 80 won per kilowatt-hour over the past three years. This is approximately double the rates for residential dwellings and general use (40.4 won/kWh). KEPCO incurred a cumulative deficit due to the Moon Jae-in administration's nuclear phase-out policy, necessitating an increase in electricity prices; however, the political arena, mindful of public opinion, only raised the industrial electricity rates.
As a result of a fact-finding survey conducted by KEF on 112 corporations sensitive to electricity price increases, the average electricity payment for the target corporations has risen from about 48.15 billion won in 2022 to approximately 65.67 billion won in 2024, marking a 36.4% increase.
The sharp increase in electricity prices hits small and medium-sized enterprises even harder. A representative from a small business selling edible ice remarked, "Four years ago, my monthly electricity bill was about 19 million won, but now it exceeds 30 million won. Our sales are just over 2 billion won, and we have fewer than 10 employees, yet we are paying the same electricity rates as large corporations," adding, "Large corporations might build power plants and attempt direct purchases, but small businesses have no means. I wonder if we should continue this business. If there’s a way out, I want to escape."
A representative from a medium-sized corporation stated, "Our annual operating profit is around 70 billion won, but due to the electricity prices nearly doubling over the past 4 to 5 years, we are now paying about 200 billion won annually. We are considering self-generation as well as direct purchases."
Direct transactions between corporations and the power exchange are expected to be possible at least 2 to 3 months from now. A spokesperson from the power exchange remarked, "Now that the revision has been passed, there are no legal issues regarding direct electricity purchases, but there are practical procedures remaining such as sealing and permitting metering equipment for starting transactions." Another representative stated, "Even if electricity is purchased from another source, KEPCO must be contracted for transmission equipment, which will take more time." KEPCO maintains a negative stance on corporations' direct electricity purchases.
Since direct purchases of electricity are being attempted for the first time, it's uncertain how much costs will be reduced. Recently, the electricity wholesale price (SMP) has fluctuated significantly between 70 to 150 won per kilowatt-hour even within a single day. A representative from the Ministry of Trade, Industry and Energy stated, "The sales price continues to vary, and electricity costs depend on where, when, and how much is purchased, making it difficult to predict cost-saving effects. Although going through KEPCO has the advantage of reducing volatility, direct purchases will be more beneficial for corporations capable of managing that volatility effectively."
Professor Park Jong-bae from Konkuk University’s Department of Electrical and Electronic Engineering noted, "From the perspective of consumer corporations, having more options is a benefit, but the wholesale market is very volatile, so a management plan for it must be in place. Since the system is not yet properly prepared, rather than immediately establishing a competitive system, we should focus on stabilizing the direct purchase system."