South Korea to Cut Industrial Electricity Rates by Up to 10% in Some Regions

South Korea is set to implement a regional electricity pricing system for industrial users, a move designed to alleviate the financial burden on businesses and stimulate investment outside the Seoul metropolitan area. The Ministry of Climate, Energy and Environment and Korea Electric Power Corporation (KEPCO) unveiled the draft plan, which differentiates electricity rates based on local power supply and demand dynamics. Under the proposed system, regions with abundant electricity generation, such as Yeongnam and Honam in the south, could see their industrial electricity costs decrease by up to 10%, or approximately 13 to 18 won per kilowatt-hour (kWh), compared to the current average industrial rate of 181.9 won/kWh. Conversely, areas with higher demand and less local generation, like southern Seoul and Gyeonggi Province, will experience minimal reductions, possibly as little as 0 to 1 won per kWh. The government aims to encourage companies to invest in regions with surplus power, thereby reducing the need for extensive transmission infrastructure and mitigating associated conflicts. This initiative is rooted in the "Special Act on Distributed Energy," and the government anticipates it will reduce the overall electricity cost burden for industries by about 2.8 trillion won annually. Officials believe this policy will not only help rebalance power demand across the country but also enhance the competitiveness of domestic industries, particularly traditional manufacturing firms in regional areas. The plan also seeks to support the growth of advanced industries in the provinces, fostering job creation and economic revitalization. KEPCO plans to minimize its financial impact through measures like introducing a locational marginal pricing (LMP) system and seeking government financial support. The government is aiming to finalize and implement the system within the year.

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The introduction of the regional electricity pricing system for industrial use, following the time-based electricity rate reform in April, is key to reforming the electricity rate system for the mutual growth of KEPCO and industry.