The government is pushing a plan to merge Korea Electric Power Corp.'s (KEPCO) five power generation subsidiaries into a single company. If the integration plan is finalized next month, the five generators will be reunited for the first time in 25 years, since the restructuring of the power industry in 2001. A consulting report released by the Ministry of Climate, Energy and Environment proposed that a single-company system is most suitable for securing competitiveness and consolidating financial capacity for large-scale investment. However, since integration into a single state-owned enterprise could produce side effects such as organizational bloat and the loss of competition, the government plans to gather opinions through next month and finalize the plan.
When the five generators were separated from KEPCO 25 years ago, there was a blueprint to build a competitive system across generation, transmission, and sales. But after the follow-up stage of privatization fell through due to union opposition, the effort amounted to little more than reform in name only. The five companies subsequently only deepened structural inefficiency through similar business structures and overlapping investments. Against this backdrop, President Lee Jae-myung mentioned the need to consolidate the power generation public enterprises at the Ministry of Climate, Energy and Environment's policy briefing late last year.
This consolidation should serve as a catalyst for energy industry innovation that supports the nation's grand transformation in the artificial intelligence (AI) era. To that end, the focus should be placed on efficiency after integration rather than on integration itself. Overlapping investments and functions must be boldly streamlined, and the capacity to execute large-scale infrastructure investments such as renewable energy and the power grid must be raised further on the basis of economies of scale. Above all, being swayed by political influence is forbidden. If the integrated entity fails to respond swiftly to changes in the power industry while attending only to vested interests, the meaning of integration will inevitably fade.
During the remaining month until the final plan is confirmed, the government must carefully refine an integration plan that can ensure the stability of the power supply and take responsibility for the energy transition. It must also prepare measures to absorb the workforce redeployment and regional employment shocks resulting from the controversial closure of coal-fired power plants. On this occasion, the government should also begin in earnest a power market overhaul to invigorate new energy businesses. It must move quickly to introduce a price bidding system to invigorate competition in power sales and to establish an independent power oversight body. Only then can market predictability be enhanced and private investment invigorated. Now is the time to concentrate capabilities on building a 24-hour carbon-free power supply system, including nuclear power, for industrial competitiveness in the AI era.
