Korea's Regional Wholesale Pricing Simulation Shows 31% Price Separation
Korea Power Exchange (KPX) simulation of regional wholesale electricity pricing (LMP) from July 2025 to June 2026 revealed price separation between the Seoul Metropolitan Area and non-Seoul regions for 31% of operating hours, with the former averaging 10.6 KRW/kWh higher. This proposed system aims to reflect transmission congestion in market prices.
Our take
Who wins under Korea's proposed regional wholesale power pricing, storage or solar outside Seoul?
If adopted, Korea's proposed regional wholesale pricing would favour battery storage outside the Seoul region, which could charge at lower midday prices, and weigh on solar there, which would sell at those prices.
In the exchange's one-year simulation, prices outside the Seoul region were never higher than inside it, and they split most often around midday. How wide the gap stays depends on whether transmission such as the east coast HVDC line keeps pace with renewable build.
What the source says
- The proposed LMP would determine different market prices regionally when transmission congestion occurs, based on generation plans that reflect transmission constraints.
- The simulation covered 8,760 hours, with prices separating for 2,748 hours (31.4%) and remaining identical for 6,012 hours.
- Seasonal price separation varied, with 568 hours in July 2025 but only 51 hours in January 2026.
- Actual price differences and separation frequency will depend on future transmission network expansion and renewable energy penetration speed.
- Increased price volatility from LMP could create business opportunities for new electricity market participants like Energy Storage Systems (ESS) and Virtual Power Plants (VPP).
- Reforms will improve how grid-constrained generators participate in price determination and increase the hot start-up cost calculation time for coal power from 6 to 12 hours.
- Improvements to LNG combined cycle power plant modeling are targeted for January 2027, and coal power start-up cost improvements for March 2027.
- Separate compensation for downward reserve, which reduces generation to manage oversupply, is also being pursued.
- Linking wholesale price signals with retail tariff signals is necessary to influence consumers' location choices.
- Sweden's market split into four zones in 2011 to reflect transmission congestion between its hydro-rich north and industrial south, resulting in the north's average market price being half of the south's in 2024.
For investors — Merchant storage investors should test sites outside the Seoul region against the exchange's simulated hourly prices, which are not forecasts, and treat the midday spread as exposed to transmission build such as the east coast HVDC line.
Solar developers outside the Seoul region should run wholesale revenue cases at a lower midday price than today's single national price, since separated prices in the simulation always fell on their side.
Watch: Monitoring of Korea Power Exchange's detailed proposals for generator price determination and settlement reforms, particularly regarding downward reserve compensation and the progress of transmission network expansion projects.
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