Experts warn Korea's proposed power GENCO merger could create monopoly
Experts at a seminar raised concerns that the proposed integration of Korea's five state-owned power generation companies (GENCOs) could weaken electricity market competition and deter private investment.
Our take
Would merging Korea's state-owned power generators hurt private investors in the power market?
The proposed merger of Korea's state generators into one seller with 32.7% of supply raises market power risk for private investors once price-based bidding starts, and market monitoring rules not yet written decide its size.
Under today's cost-based pool, generators submit costs rather than prices, so a large share matters little until price bidding, whose timing is not given. Even then, market power depends on whether other suppliers can replace the merged seller in a given hour and region.
What the source says
- Son Yang-hoon The integration of the five power generation companies could revert the electricity market to a past monopolistic structure.
- Cho Hong-jong The proposed integration is likely to be a 'competition-less integration' rather than a reform that fosters competition.
- The current Cost-Based Pool (CBP) market determines prices based on generation costs submitted by power companies, but the Price-Based Pool (PBP) would require power companies to bid prices directly.
- Jeon Woo-young If the integrated power company holds one-third of the total supply, it could dominate price bidding under the Price-Based Pool (PBP) system.
- Cho Hong-jong The integrated power company, acting as a major investor in renewable energy, could 'crowd out' private and new market entrants by leveraging its large investment capacity and generation assets.
- Jeon Woo-young If the integrated power company becomes a large subsidiary of KEPCO, it could raise issues of grid neutrality.
- Joo Sung-kwan Simply having a large market share does not necessarily mean exercising market dominance; it is necessary to consider the availability of alternative suppliers in specific times and regions, and actual bidding behavior.
For investors — Merchant storage investors and optimisers should track whether market monitoring rules arrive before or with price-based bidding, because spreads would then depend on how the largest seller bids.
Solar and wind developers should watch whether the merger sets a renewable investment mandate for the merged generator, which would decide how hard it competes with them for projects.
Watch: Continued discussions or official announcements regarding the proposed integration of Korea's five state-owned power generation companies.
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