Korea pushes LMP for market, shields nuclear with profit contracts
The Korean government is pushing to implement Locational Marginal Pricing (LMP) for the electricity market by year-end, which is projected to reduce private generators' annual profits by up to 660 billion KRW. Simultaneously, Korea Hydro & Nuclear Power (KNHP) passed a Government-Approved Contract (VC) plan for 30 nuclear power plants on October 28, 2026, guaranteeing their profits.
Our take
Will Korea's locational power pricing help or hurt storage and solar investors outside the capital region?
Locational pricing in Korea, still a proposal, would push price risk in non-capital regions onto uncontracted plants, giving storage cheaper daytime charging but weakening wholesale revenue for solar without a long-term contract.
Korea Power Exchange simulated prices, not a forecast, split in about 31% of hours, mostly around midday, and the non-capital price was always the lower one. The final rule decides the rest, because hedging tools and relief for existing plants remain undecided.
What the source says
- The introduction of Locational Marginal Pricing (LMP) is being pursued with the goal of revising the Electricity Market Operating Rules by year-end.
- Park Soo-min Rep. Park Soo-min's office, using Korea Power Exchange data, analyzed that if the non-capital region System Marginal Price (SMP) drops by 10.6 KRW/kWh, 17 private generators' annual profit would decrease by a total of 660 billion KRW.
- A private coal power company official stated that a 1 KRW drop in SMP reduces their annual profit by 9-12 billion KRW.
- The same private coal power company's own LMP simulation projected an annual profit decrease of 120 billion KRW.
- GS EPS's annual profit is estimated to decrease by 74.3 billion KRW under LMP.
- Tongyeong Eco Power's annual profit is estimated to decrease by 60.1 billion KRW under LMP.
- Ulsan GPS's annual profit is estimated to decrease by 57.3 billion KRW under LMP.
- Existing power plants, which cannot relocate, cannot respond to the price signals of LMP.
- Congestion revenue from regional price differences is being considered for non-capital region electricity bill discounts.
- Financial Transmission Rights (FTR) or grace periods for existing power plants have not yet been decided.
- Industry representatives express concern that the LMP price reduction risk will be concentrated on some private generators due to separate settlement methods for nuclear (VC) and renewables (long-term contracts).
For investors — Merchant storage investors and optimisers should test non-capital sites against midday charging prices in the exchange's simulation, while treating it as a simulation and not a revenue forecast.
Solar developers should separate contracted from wholesale revenue in non-capital models and check how contract settlement would work under locational pricing, which is not yet published.
Watch: Final approval of the Electricity Market Operating Rules revision for LMP implementation by the Ministry of Climate, Energy and Environment.
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