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Korea’s private power grids pull out amid slump in wholesale price

Collected: 2016.09.14

Distributed: 2016.09.19

Source: Go Direct

South Korea’s private grids fueled by liquefied natural gas (LNG) are pulling out of the market one by one as losses extend from prolonged slump in wholesale prices and market glut, but their exit raises concerns for future power supply from reduced capacity.

According to the Independent Power Producer Association (IPPA) Monday, three among eight private power grid operators including Posco Energy Co., GS EPS Co., SK E&S Co., Pocheon Power Co., Dongducheon Dream Power Co., and Pyeongtaek Energy Service Co. have decided or mulling to exit from the business.

Large companies under the encouragement from the government have built power grids to supply to the state utility firm Korea Electric Power Corp. to help expand capacity following the blackout crisis in 2011 amid dispute in construction of state-funded power stations and nuclear reactors.

But it turned out KEPCO did not require use of that much capacity amid cheap crude and other energy prices.

The operation rate of local LNG-based power plants slid to 40 percent in June from 63 percent from the same month in 2013. The LNG suppliers were able to sell electricity to KEPCO at system margin price (SMP) of 65 won per kilowatt-hour (kW⋅h) in June, compared with 152 won per kW⋅h three years ago. Private grids have been incurring losses from last year, making the parent groups to decide to pull out of the business.

Private-sector generators make up 16 percent of power supply and their pullout could in the longer run significantly reduce capacity.

By Hong Jong-sung

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