Korea Weighs Changes to LNG Capacity Market Evaluation Criteria
Korea is reviewing evaluation criteria for its LNG capacity market, proposing to strengthen heat and decarbonization assessments while maintaining the influence of capacity price (CP).
Our take
Will Korea's proposed LNG capacity market reforms effectively balance price competition with decarbonization goals?
The proposed changes to Korea's LNG capacity market evaluation criteria aim to incentivize decarbonization and heat supply by increasing their weight, but the dominant influence of the capacity price (CP) remains, potentially leading to continued low-price bidding risks for developers.
The proposed shift in evaluation points from electricity to heat and the inclusion of decarbonization plans reflect a strategic move to align LNG power generation with Korea's carbon neutrality goals. However, by maintaining the 50% weight for capacity price, the government risks undermining these new priorities, as developers may still prioritize aggressive low-price bids to secure projects. This creates a tension between immediate cost-efficiency and long-term sustainability objectives, potentially jeopardizing project viability and the quality of decarbonization efforts.
What the source says
- The price and non-price evaluation ratio for the LNG capacity market is being maintained at 50:50, as in the pilot project.
- The heat evaluation score is proposed to increase from 25 to 40 points, while the electricity evaluation score would decrease from 25 to 10 points.
- Decarbonization transition is expected to be a key evaluation factor in the main market, requiring facilities to respond to carbon-free fuel conversion and the '2050 Carbon Neutrality Roadmap'.
- Long-term reduction plans utilizing renewable/unused heat, heat pumps, electrode boilers, hydrogen co-firing/full-firing, and Carbon Capture, Utilization, and Storage (CCUS) will be reflected in the evaluation.
- Greenhouse gas emission standards are to be gradually strengthened, reducing allowed emissions per 1MWh of heat production for district heating and industrial complexes, aiming for zero by 2050.
- Excessive low-price bidding could lead to deteriorated profitability and increased burden on project financing after winning a bid.
- Failure to meet emission standards may result in capacity payment reductions or contract term shortening.
- An industry official stated that while securing Capacity Price (CP) competitiveness is crucial at the bidding stage, long-term considerations must include heat supply and carbon neutrality transition.
For investors — Investors and operators in Korea's LNG capacity market will need to develop robust long-term decarbonization strategies and heat supply plans to secure project bids, even as aggressive capacity price bidding remains a significant competitive factor.
Watch: The tender announcement for the 1.3GW LNG capacity market within 2026, and further details on proposed price evaluation methods to prevent low-price bidding.
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