⚡ Why Regional Electricity Pricing Is Being Discussed

Korea’s structural supply-demand imbalance is driving policy change.

Figure 1. 2023 Seoul Metropolitan Area Power Supply & Demand (Peak Day).

According to the report, Korea’s electricity system faces a persistent mismatch between where electricity is consumed and where it is generated.

✔ Heavy demand concentration in the metropolitan area

• In 2023, the Seoul–Gyeonggi–Incheon region accounted for 41.2% of Korea’s peak demand (38,522 MW out of 93,615 MW).

• To meet this demand, 12,500 MW was imported from non-metropolitan regions.

✔ Demand in Gyeonggi Province will keep rising

• By 2029, 601 out of 732 new data centers (82%) will be located in the metropolitan area.

• These data centers are expected to consume 39,802 MW of electricity by 2029 (80.6% of national data center load).

• The Yongin semiconductor cluster alone may require up to 16 GW of additional supply through 2053.

✔ Meanwhile, generation continues to concentrate outside the metropolitan area

• From 2014 to 2024, the generation share outside the metro region increased from 71.89% to 74.23%,
  while the metropolitan share fell from 28.11% to 25.77%.

This structural imbalance places heavy pressure on transmission lines.

⚠️ Transmission Congestion Is Reaching Its Limit

• The metropolitan area is supplied by seven major transmission corridors.

• Their allowable transfer capability (voltage-stability limit) is 10,900–12,600 MW.

• On May 31, 2023 at 12:00, the imported power reached 11,058 MW,
  or 99.62% of the upper limit.

At the same time, new transmission construction faces public resistance:

• The Hanam HVDC converter station project was rejected due to insufficient community acceptance.

• Several 345 kV and HVDC projects have been delayed 66 to 150 months beyond schedule.

Transmission expansion is no longer a reliable solution.

📜 Policy Background: Legal Basis for Regional Pricing

• The Special Act on Distributed Energy (2024) allows electricity tariffs to differ by region,
  considering transmission and distribution costs.

Government direction:

• 2025 (first half): Regional differentiation in the wholesale market

• 2026 and beyond: Potential introduction of regional retail tariffs

KPX’s proposed market structure:

• Short-term: Zonal pricing (Metropolitan / Non-metropolitan / Jeju)

• Long-term: Nodal pricing at the bus level

🧠 How the Report Conducts Its Analysis

Our study uses:

• The KPG193 synthetic Korean power system (193 buses, 123 generators, 407 lines)

• Hour-by-hour demand and renewable data from 2022

🧪 Market Models Used in the Report (M1–M4)

Our study evaluates four different electricity market designs, ranging from a simple single-price system to a full nodal pricing system.
These models determine how regional electricity prices are calculated and how transmission congestion is reflected.

📈 Key Findings (Strictly from the Report)

1️⃣ Metropolitan wholesale prices barely change

Across scenarios:

• Metropolitan prices remain similar to the current SCED-based market (M2).

• A slight decrease appears only in M3-2 and M4.

2️⃣ Non-metropolitan prices fall sharply (~40%)

The result explicitly states:

“Non-metropolitan market prices decrease by approximately 40%.”

This creates major revenue impacts for non-metropolitan generators.

3️⃣ Relative profitability shifts toward Gyeonggi Province

• Non-metropolitan generators see significant revenue reductions.

• Metropolitan regions (including Gyeonggi) see little change, creating a relative advantage.

4️⃣ Retail tariffs: Gyeonggi consumers may feel disadvantaged

If retail tariffs follow wholesale prices:

• Non-metropolitan retail tariffs fall significantly.

• Metropolitan tariffs remain similar.

• This produces risk of perceived unfairness among metropolitan consumers.

5️⃣ Renewable investment potential in Gyeonggi remains limited

• High land costs result in poor economic feasibility for most ground-mounted solar projects.

• However, rooftop PV (LCOE ~ 96원/kWh) is economically viable across all cities in Gyeonggi Province.

6️⃣ Industrial clusters face steep price increases in nodal pricing

When industrial load increases by 3 GW in scenario M4:

• Yongin semiconductor cluster experiences 34% higher LMP (average scenario).

• Paju LCD complex shows up to 36% increase (autumn-night scenario).

Industrial zones without nearby generation resources are especially vulnerable.

🧭 Strategic Recommendations in the Report

✔ 1. Develop new generation capacity near congestion-prone areas in Gyeonggi

To prevent steep LMP increases when local loads grow.

✔ 2. Prioritize rooftop solar as the main renewable strategy

The only renewable option with strong economic feasibility across all cities.

✔ 3. Prepare policies to mitigate “consumer dissatisfaction”

Metropolitan retail prices may remain higher than non-metropolitan regions.

✔ 4. Manage risks in fast-growing industrial regions (Yongin, Paju)

Where future nodal prices may spike due to limited local generation.

📘 References

Kim, Jip, et al. “지역별 전기요금 차등제 도입 영향 및 경기도 대응 방안 (Impact of Introducing Regional Electricity Pricing and Strategic Responses for Gyeonggi Province)". Gyeonggi Research Institute, 2025.[link]