Seoul: Climate Minister Kim Sung-whan on Thursday urged for measures to reduce industrial electricity rates to aid South Korean companies in bolstering their global competitiveness. This comes as the country continues its commitment to expanding clean energy amidst climate change and the rise of advanced industries.
According to Yonhap News Agency, Kim's remarks were made during a press conference commemorating the one-year anniversary of the Lee Jae Myung administration. The administration had transferred the responsibility of formulating energy policies from the industry ministry to the newly designated Ministry of Climate, Energy and Environment. This strategic change aims to reinforce South Korea's response to climate change and accelerate the nation's shift towards renewable energy.
Kim expressed regret over the previous increase in electricity rates during the former Yoon Suk Yeol administration, particularly for industrial use. He noted that many other nations have more expensive electricity rates for domestic use while keeping industrial rates lower to manage costs effectively.
In October 2024, South Korea raised the electricity rate for industrial use by 9.7 percent. This increase was due to the financial challenges faced by the Korea Electric Power Corp. (KEPCO), which were exacerbated by the global energy price surge during the Russia-Ukraine conflict.
Currently, South Korea's industrial electricity rate is 181 won (US$0.12) per kilowatt-hour (kWh), significantly higher than the 120 won per kWh rate in China and the United States. While rates in Europe and Japan are slightly higher, Kim emphasized the need for lower prices in Korea to remain competitive with Chinese firms. The government is considering implementing a differentiated electricity pricing scheme by region to address this issue.
The proposed regional electricity rate system aims to provide cheaper electricity prices to industries located outside the greater Seoul area, particularly those with high power consumption such as petrochemical and steel sectors.
Kim also reiterated the government's dedication to transitioning to clean energy, focusing on renewable sources and nuclear power, while moving away from coal power. The goal is to transform South Korea into an "electro-state."
In line with its nationally determined contribution (NDC) target for 2035, South Korea plans to reduce its greenhouse gas emissions by 53-61 percent from 2018 levels by 2035. The country aims to generate 30 percent of its power through renewable energy by 2035 and expand the installed capacity of renewable energy facilities to 100 gigawatts by 2030, with a phase-out of coal-fired power generation by 2040.
Renewable energy accounted for 11.4 percent of South Korea's total energy generation in 2025, while coal power comprised around 30 percent. Kim stated that the government will consider the growing demand for clean energy and the increasing electricity needs of sectors like artificial intelligence (AI) and other advanced industries when formulating the 12th basic plan for electricity supply and demand for the 2026-40 period.
Kim did not dismiss the possibility of constructing additional nuclear power plants, emphasizing a "practical" approach to decision-making.
Addressing speculations about a potential price cap on gas prices, which significantly influence domestic electricity rates, Kim indicated that there is no immediate upward pressure on electricity rates. However, he assured that the government would respond actively if ongoing energy price volatility affects KEPCO.
KEPCO risks incurring an operating loss if the average system marginal price (SMP), or wholesale electricity price, reaches 146 won per kWh. Currently, the SMP stands at approximately 126 won. During the Russia-Ukraine war, the SMP exceeded 190 won, even reaching 200 won at one point, leading to significant debt for the country's electricity provider.