Korean government weighs phased coal plant retirement by 2040
The Korean government, through the Ministry of Climate and Energy and the 12th Electricity Supply-Demand Basic Plan Steering Committee, discussed a policy to phase out coal-fired power generation by 2040, including early retirement for 21 units and designating up to 10 as "security power sources."
Our take
How does Korea plan to manage grid stability while phasing out coal by 2040?
The proposed "security power source" mechanism would decouple the physical presence of coal plants from their continuous market participation, allowing Korea to retain critical grid stability assets while formally advancing its decarbonization targets, with up to 10 units potentially designated for this role.
The government's proposal to phase out 60 coal units by 2040, including early retirement for 21 units, creates a significant power supply gap. To mitigate the risk of grid instability and ensure supply security during this transition, the "security power source" designation aims to preserve critical generation capacity without full market participation. This approach attempts to balance climate objectives with the practicalities of grid management, particularly given the intermittency of renewable energy sources and rising demand.
What the source says
- 39 coal units reaching their 30-year design life are to be retired by 2038.
- 21 coal units with remaining design life after 2038 are being considered for early retirement between 2037 and 2039.
- Up to 10 coal units are proposed to be designated as 'security power sources', which would not participate in the normal power market but would maintain facilities to restart during power supply crises or grid instability.
- The location of replacement LNG plants for coal units will be adjusted based on power demand and grid conditions, moving beyond simple same-site replacement.
- Kim Seong-hwan Kim Seong-hwan stated that the task is to design an orderly coal phase-out that minimizes public burden while addressing climate change.
- Preferential treatment in new power business bids, such as BESS, SMR, or LNG combined heat and power, is being considered for power operators participating in early coal plant retirement.
- Retiring 21 coal units simultaneously in 2040 would concentrate a significant burden on power supply and grid operation.
- The discussed proposals are not the final version for the 12th Electricity Supply-Demand Basic Plan and will undergo further public debate and expert consultation.
For investors — Investors in new generation assets should monitor the final details of the 12th Electricity Supply-Demand Basic Plan, as it will define specific incentives for transitioning coal operators into BESS, SMR, or LNG CHP projects. The "security power source" designation also creates a new category of non-market assets, potentially impacting grid revenue streams for new entrants.
Watch: Finalization and announcement of the 12th Electricity Supply-Demand Basic Plan, including the specific number of "security power sources" and transition support mechanisms.
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