Business · Energy & Commodities · 3 hrs ago
South Korea moves to let power plants sell electricity directly to nearby businesses
South Korea’s climate and energy ministry has begun drafting rules for power plants with limited grid access to sell directly to nearby businesses.
The proposed deals, called transmission-constrained power purchase agreements, would let plants sell electricity without going through the power market.
A legal basis was created in August 2024, but follow-up steps were delayed.
The government hopes the deals will help attract factories and data centres to regions outside the capital area.
Nearby businesses could get electricity at a lower cost, while power plants could make up some lost revenue if regional wholesale prices fall under a planned pricing system.
One possible use is supplying a proposed large AI data centre near Gangneung from a nearby coal-fired plant.
The rules are still being drafted, and officials are considering limits on eligible businesses and on how long deals can last, partly to avoid extending coal power as South Korea pursues a 2040 coal phase-out.
South Korea’s climate ministry has begun drafting rules to let power plants in areas with limited transmission capacity sell electricity directly to nearby businesses.
The proposed transmission-constrained power purchase agreements would allow plants to sell power without going through the electricity market.
The policy aims to attract investment outside the capital region by offering nearby companies a potential source of lower-cost electricity.
The legal basis was established in an amendment to the Electricity Business Act in August 2024, but follow-up procedures were delayed.
The proposal raises concerns about extending the operating life of coal plants and disagreements over which businesses should qualify.
- Who
- South Korea’s Ministry of Climate, Energy and Environment is drafting the rules. Power plants and nearby electricity-consuming businesses could take part.
- What
- The proposed agreements would allow power plants constrained by transmission limits to sell electricity directly to nearby businesses.
- When
- The ministry recently began drafting the rules, according to the article published on October 30, 2026. The legal basis was established in August 2024.
- Where
- The policy concerns power plants and businesses in areas outside the capital region where transmission capacity is limited.
- Why
- The government aims to attract regional investment and provide businesses with potentially lower-cost electricity. It could also help generators offset revenue losses under location-based wholesale pricing.
South Korean government
Private power generators
Eligibility for agreements
South Korean government
The draft rules are reported to limit eligibility to large new power users in the plant’s area or businesses expanding existing facilities by at least 50%.
Private power generators
Generators want existing businesses in the area to qualify, saying that limiting agreements to new investment would delay relief from transmission constraints.
An amendment to the Electricity Business Act, introduced by lawmaker Lee Cheol-gyu, established the legal basis for the agreements.
The Ministry of Climate, Energy and Environment began drafting a notice setting out detailed requirements for the agreements.
- Proposed policy
- Transmission-constrained power purchase agreements
- Legal basis
- Electricity Business Act amendment, August 2024
- Potential buyers
- Nearby factories, data centers and other large electricity users
- Draft eligibility
- New large power users or businesses expanding existing facilities by at least 50%
- Coal phase-out target
- 2040
What people are saying
For the government’s strategy to develop five major and three special metropolitan areas and large regional projects to succeed, power-intensive companies relocating to the regions need affordable and stable electricity.
The significance is that transactions can take place at individual prices outside the regulated tariff system, and this can help attract AI data centers to the region.