Korea's five state-run power generation companies should be merged into a single company with three divisions to stably carry out the energy transition and expand public interest in the energy sector, experts proposed. The plan calls for one company to manage three generation divisions: coal, liquefied natural gas (LNG), and renewable energy. A survey also found that 73.5% of employees at the power generation companies favor integration into a single company.
Cho Young-sang, a professor of industrial engineering at Yonsei University, said at the "Power Generation Public Enterprise Integration Policy Forum" held at the National Assembly on Wednesday, "Considering the decline in thermal power generation, the stable progress of the energy transition, and transition costs, the most reasonable approach is a single-company integration with a three-division system covering coal, LNG, and renewables." The forum was hosted by the National Federation of Electric Power Industry Unions and Kim Jung-ho, chairman of the National Assembly's Climate, Energy, Environment and Labor Committee.
In 2001, the government separated the generation division of Korea Electric Power Corp. (015760.KS) as part of the restructuring of the power industry, splitting it into five companies: Korea South-East Power, Korea Southern Power, Korea East-West Power, Korea Western Power, and Korea Midland Power. However, criticism has mounted that the separation did not lead to substantive competition among the generators and instead created inefficiencies, prompting the government to pursue consolidation of the power generation public enterprises.
On this point, Cho said, "Since 2001, the impact of public-sector electricity production on gross domestic product (GDP) has declined." He added, "Contrary to the original purpose of the restructuring, which was to enhance efficiency through the introduction of competition, the loss of economies of scale caused by splitting the generators and the inefficiency of duplicate investments may have had some negative effects at the national economic level."
Experts argued that a single-company structure, in which one company handles all generation, is more desirable than a multi-company structure in which two or three companies separately oversee renewable energy and coal/LNG generation.
Cho said, "A two-company integration is the most intuitive solution for achieving economies of scale based on current thermal power output. But considering a future in which total thermal generation declines, there is a high likelihood that neither of the two companies will be able to sustain economies of scale." He added, "A two-company system cannot fully resolve the issues of duplicate investment and coordination costs that have been pointed out since the restructuring."
Cho emphasized, "It is more reasonable to first integrate into a single power generation public enterprise, then gradually reduce the share of coal and LNG, and ultimately transition to an appropriate scale."
Meanwhile, an online survey conducted by polling firm Embrain from the 6th to the 27th of last month on 1,259 employees at the five power generation public enterprises found that 73.5% of respondents (925 people) said integration into a single power generation public enterprise would be most desirable. Another 15.8% (199 people) said integration into two or three institutions by region or generation source would be desirable, while 9.2% (116 people) said the current system should be maintained.
