Korea to Tap Public Fund for 113 Trillion Won Power Grid Investment

The government has decided to include a plan to raise part of the 113 trillion won needed for domestic power grid construction through a public fund in the 12th Basic Plan for Electricity Supply and Demand. The measure takes into account that Korea Electric Power Corporation (KEPCO), which has been solely responsible for transmission line construction and maintenance costs, has debt exceeding 205 trillion won.

President Lee Jae-myung said at the Ministry of Climate, Energy and Environment's policy briefing held at the Sejong Government Convention Center on Saturday, "If KEPCO, which has significant debt, finds it difficult to bear the transmission network costs, my thought is that we should create a public fund that guarantees certain returns and gives citizens investment opportunities."

In response, Minister of Climate, Energy and Environment Kim Sung-hwan said, "We will include a plan for establishing a public fund in the 12th basic electricity plan." However, it is understood that whether to utilize the existing National Growth Fund or create a new fund has not yet been decided. Minister Kim responded to concerns about privatization of the transmission network by saying, "The private sector will not directly operate it."

Meanwhile, the ministry announced it would introduce seasonal and time-based pricing for industrial electricity rates to address the issue of excess solar power generation during daytime hours. The approach involves lowering daytime weekend rates and raising weekday nighttime rates to shift industrial power demand toward daytime hours.

The government's decision to utilize a public fund for power grid infrastructure construction comes as the success of artificial intelligence innovation and the energy transition centered on renewable energy depends on the power grid. As electricity demand grows exponentially, centered on AI data centers, regional transmission and distribution volumes are increasing accordingly. Moreover, with new power plants concentrated in renewable energy, the existing one-way transmission and distribution network must be reorganized into a two-way distributed system. The government plans to increase renewable energy generation capacity to 100GW by 2030 for use as a core power source, but if the transmission network is not built in time, there is a possibility of a blackout like the one in Spain.

Minister Kim told reporters, "Now is the time to transform the transmission and distribution network from the fossil fuel era into an intelligent two-way power grid suited for the renewable energy era," adding, "KEPCO has been investing roughly 5 trillion to 7 trillion won annually for transmission network maintenance and repairs, but we believe this alone will be woefully insufficient." In fact, the single West Coast high-voltage direct current (HVDC) transmission network project being pursued by power authorities is known to cost 12 trillion won alone.

KEPCO has consistently faced criticism that its financial burden is growing as its debt exceeds 205 trillion won. KEPCO's financing options are effectively limited to electricity rate revenue and bond issuances, but electricity rate revenue must be entirely allocated to debt repayment. Large-scale issuances of KEPCO bonds have caused disruptions in the bond market. The government's move to attract private capital for transmission network construction is interpreted as considering these circumstances.

However, some have raised concerns that as the public fund invests in transmission networks, the transmission business that KEPCO has monopolized as a public corporation could be privatized. Minister Kim drew a line on this, saying, "It is merely a matter of how to secure the necessary funds during the construction process. KEPCO will handle the operation."

The ministry's policy briefing heated up to the point of resembling an academic forum on nuclear power. President Lee engaged in heated discussions with key agency heads and conducted "fact-checking" related to the nuclear power field. President Lee opened by asking, "Is it true that reprocessing nuclear fuel significantly reduces its volume? Some experts say that's not the case."

In response, Choi Won-ho, chairman of the Nuclear Safety and Security Commission, answered that "the volume is reduced to about one-fifth," while Cho Sung-don, president of Korea Radioactive Waste Agency, offered a contrary view, saying "the disposal site area doesn't decrease that much." The different answers depended on whether the question was limited to spent fuel from light water reactors or included that from heavy water reactors.

When experts gave diverging opinions even on specific factual matters, President Lee emphasized again the importance of scientific discussion. "If you turn things into political agendas and fight, the truth doesn't emerge well," President Lee said. "This won't do." This appears to reflect his intention to execute energy policy based on pragmatism rather than ideology in such specialized areas.

Additionally, the Ministry of Climate, Energy and Environment announced at the briefing that it would promote sunshine and wind income villages and enact a Special Act on Agrivoltaics to achieve the 2030 renewable energy target of 100GW, while also strengthening regulations on disposable cups and plastic straws. Plans to reform industrial electricity pricing were also discussed. The approach involves supplying electricity cheaply during daytime hours when solar power generation is excessive and raising rates during nighttime hours when thermal and nuclear power plants are the main sources. The ministry said it would introduce time-of-use pricing that differentiates electricity rates by season and time.

The Ministry of Trade, Industry and Energy decided to provide large-scale subsidies comparable to the U.S. Inflation Reduction Act (IRA) subsidies to companies relocating to or investing in regional areas next year. The government plans to finalize "regional growth engine industries for 5 zones and 3 special areas" for balanced national development in February next year and concentrate a "growth package of five elements" including regulatory, talent, fiscal, financial and innovation support on these industries, introducing "Growth Engine Special Subsidies" as Korea's version of IRA subsidies.

Meanwhile, the briefing also addressed the issue of the unfair agreement that Korea Hydro & Nuclear Power (KHNP) signed with Westinghouse Electric Company (WEC) of the United States to resolve intellectual property issues. President Lee asked, "I heard KHNP signed a strange agreement with WEC over nuclear power technology. Why is an American company bullying Korean companies? Hasn't the patent validity period expired?"

Kim Yong-sun, commissioner of the Korean Intellectual Property Office, explained, "WEC's technology is a trade secret, not a patent, so it applies indefinitely."