Industrial electricity rates to become cheaper the farther they are from Seoul, with up to 10% discount

South Korea is set to introduce a new industrial electricity rate system that will offer lower prices to regions farther from the capital, Seoul. The policy, announced by the Ministry of Climate, Energy and Environment and Korea Electric Power Corporation (KEPCO), aims to reduce industrial electricity costs by 1 to 18 won per kilowatt-hour (kWh), with the most significant reductions for areas with less reliance on the national power grid and higher local power generation capacity.

The country will be divided into four major regions based on the power grid and self-sufficiency: the southern region (Yeongnam and Honam), the central region (Chungcheong and Gangwon), northern Seoul metropolitan area, and southern Seoul metropolitan area. Within these, 11 distinct areas will be established based on factors like distance from Seoul, population, and socio-economic development, as indicated by the Ministry of Interior and Safety's regional preferential index.

The southern region could see electricity prices drop by 13 to 18 won per kWh, while the central region might see a reduction of 10 to 15 won. The northern Seoul metropolitan area could experience a decrease of 6 to 10 won, and the southern Seoul metropolitan area, 0 to 1 won. For the southern region, this could translate to a price reduction of up to 10% compared to the average industrial electricity sale price of 181.9 won per kWh in 2025.

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Following the time-of-use electricity rate system announced in April, this industrial regional differential electricity rate system is a core part of reforming the electricity rate structure. Through this reform, we expect to promote investment in non-metropolitan areas by power-intensive companies, reduce the burden of transmission grid construction, and enhance balanced development and industrial competitiveness.

This initiative is projected to reduce the annual electricity cost burden for businesses by approximately 2.8 trillion won. KEPCO is considering measures such as applying different wholesale electricity prices for the Seoul metropolitan area and other regions, along with government financial support, to mitigate the impact on KEPCO's finances. The ministry anticipates that this policy will influence companies' location choices, encourage investment in non-metropolitan areas, and boost regional economies and job creation.

Minister of Climate, Energy and Environment Kim Sung-hwan stated, "Following the time-of-use electricity rate system announced in April, this industrial regional differential electricity rate system is a core part of reforming the electricity rate structure." He added, "Through this reform, we expect to promote investment in non-metropolitan areas by power-intensive companies, reduce the burden of transmission grid construction, and enhance balanced development and industrial competitiveness."

However, Lee Heon-seok, policy committee member at the Energy Justice Action, expressed concerns, calling it "effectively a reduction in industrial electricity rates." He stressed the need for measures to address KEPCO's financial deficits, which are largely covered by industrial electricity sales. Lee also advocated for the introduction of regional differential rates for household electricity, alongside policies supporting local renewable energy generation.

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It is effectively a reduction in industrial electricity rates, and measures must be taken to address KEPCO's finances, which have largely relied on industrial electricity sales. Furthermore, alongside policies for local renewable energy generation for 'local production for local consumption,' regional differential rates for household electricity should also be introduced through social consensus.