Korea proposes regional power pricing to address grid constraints
Korea is pursuing the introduction of a Locational Marginal Pricing (LMP) system.
Our take
Who wins and loses if Korea introduces locational power pricing without hedging tools?
Under Korean locational pricing, spot-exposed solar outside the capital region would lose most, storage charging there at midday could gain and plants on settlement adjustment coefficients would be partly shielded, though no rules exist.
The KPX simulation shows non-capital-region prices never above the capital's, with splits concentrated at midday. Without transmission build-out and hedges such as financial transmission rights, the signal cannot move plants already built, so the outcome turns on whether those arrive with the pricing change.
For investors — Solar developers outside the capital region should test revenue against a lower midday price case and check how fixed-price contracts would settle against a regional price, which is not published.
Merchant storage investors and optimisers should treat cheaper midday charging outside the capital region as an upside case rather than a base case, since some summer days turn worse and no rules exist.
Watch: The ongoing discussion and pursuit of introducing Locational Marginal Pricing (LMP) in Korea.
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