Kim Sung-hwan, Minister of Climate, Energy and Environment, signaled a cut in industrial electricity rates, saying, "Considering that our industries are competing with China, there is a need to lower and stabilize industrial electricity rates." Kim also decided to secure additional budget and review subsidy reforms, as electric vehicle subsidies are expected to run out around August or September.
Kim announced these plans at a press briefing held at the Government Complex Seoul on Wednesday. Regarding industrial electricity rates, Kim stressed, "In major countries, industrial electricity rates, which must compete internationally, tend to be lower than other rates. But in Korea, industrial rates became the most expensive because they were unilaterally raised under the Yoon Suk-yeol administration. This must be corrected."
Indeed, according to Korea Electric Power Corporation (KEPCO), the average selling price of industrial electricity stood at 181.9 won per kilowatt-hour (kWh) as of last year, a sharp 8.2% increase from the previous year. Kim said, "Rates in China and the United States are around 120 won, while a significant portion of our industries compete with China. Petrochemical complexes and steel mills have not benefited from seasonal and time-of-use pricing, so we will support these places through a regional differential pricing system." The government plans to consider three factors when applying regional differential pricing: transmission grid costs, power self-sufficiency, and balanced national development.
At the same time, the government said it is reviewing measures to control prices so that energy costs do not rise if the Middle East conflict drags on. Kim said, "The current system marginal price (SMP) is around 120 won per kWh, falling short of the annual average SMP (146 won) at which KEPCO deficits become a concern, so KEPCO's burden is not severe at the moment." He added, "However, if the SMP rises, we are internally reviewing policies such as a price cap and an ex-post settlement system to prevent private power generators from making excessive profits in the process."
Kim also hinted at the possibility of overhauling EV subsidies. He explained, "Last year 200,000 electric vehicles were sold, and this year 350,000 to 400,000 are expected. Based on the current trend, there is a very high possibility that the subsidy budget will run dry around August or September." He stressed, "We will actively consult with the Ministry of Planning and Budget on measures such as converting subsidies into a fund, and will actively review ways to ensure electric vehicles are supplied as much as consumers demand."
In addition, the government plans to handle pending issues that had been postponed until after the local elections with a sense of urgency in the second half of the year. Kim said, "Now that the local elections are over, we will work to reasonably resolve the East Seoul converter station issue at an appropriate time with residents of Hanam, Gyeonggi Province, the Hanam mayor, and the Gyeonggi governor." He added, "On the issue of integrating the five state-owned power generation companies, we will provide an interim report on the research study results this month and continue full-fledged discussions."
