South Korea government implements regional pricing with support for power producers

The South Korean government decided to apply a regional Locational Marginal Pricing system to the electricity market while offering transition measures for affected power producers.

The government rejected requests from the power industry to exclude existing power plants from the rules or to delay implementation until 2029. Officials stated that exempting older plants would undermine market fairness because identical electricity produced in the same area should not be purchased at higher prices just because of a plant's age.

To help producers manage the transition, the government plans to offer a long-term fixed contract option for spot solar power operators. This system could allow owners to secure a fixed price for the remaining lifespan of their facilities, with potential penalties for those who delay joining the contract. Small-scale solar operators with capacities of 1 megawatt or less can currently sign direct sales contracts with Korea Electric Power Corporation.

These smaller businesses can receive a monthly average price instead of selling at low rates during peak sunlight hours. The government also intends to compensate thermal power plants for potential losses by increasing costs for starting up plants and raising payments for standby capacity during grid emergencies.