Korean SMP Falls to 95.54 KRW/kWh During Chuseok Despite Gas Price Hike
During Korea's four-day Chuseok holiday from September 24-27, the System Marginal Price (SMP) averaged 95.54 KRW/kWh, falling below 100 KRW/kWh despite a concurrent rise in power generation gas prices.
Our take
Why did Korea's SMP drop during Chuseok despite rising gas prices?
Low electricity demand during the Chuseok holiday significantly reduced the influence of expensive LNG generation on the System Marginal Price (SMP), shifting the marginal generator to cheaper coal and nuclear power for 67% of the period, despite a 54.6% rise in gas prices since March.
The System Marginal Price (SMP) is determined by the most expensive generator needed to meet demand at any given hour. During the holiday, a sharp drop in electricity demand, reaching as low as 43.9 GW, meant that less expensive generators like coal and nuclear power were sufficient to cover the load for most of the period. This contrasts with the usual market conditions where higher demand typically places LNG power, with its higher fuel costs, as the marginal generator, leading to higher SMPs.
What the source says
- Coal power determined the System Marginal Price (SMP) for 64 hours out of the 96-hour Chuseok holiday period.
- Nuclear power determined the SMP for 3 hours during the holiday, with prices ranging from 5.89 to 7.14 KRW/kWh when Hanbit Unit 4 and Hanul Unit 5 were marginal.
- The SMP dropped to 0 KRW/kWh for one hour on September 25 and again for one hour on September 27.
- During the 27 hours when LNG power determined the SMP, prices were mostly in the 110 KRW range, with Korea Western Power's Gumi Combined Cycle Power Plant being the marginal generator for 26 of those hours.
- From February to May of the current year, LNG's monthly SMP determination share ranged from 87.6% to 98.3%, while coal's share was 1.7% to 11.3%.
- Korea Gas Corporation The price of natural gas for power generation increased from 16,048 KRW/GJ in March to 24,807 KRW/GJ in September.
- Power industry official Essential power generators are compensated for their generation costs even if the System Marginal Price (SMP) falls to zero, meaning Korea Electric Power Corporation's power purchase costs do not decrease proportionally.
- Korea Electric Power Corporation had forecast a minimum electricity demand of 33.1 GW for Chuseok day, but actual minimum demand reached 45.3 GW.
For investors — Investors in Korean DERs should anticipate significant revenue volatility during low-demand periods, as SMP can drop sharply and even to zero, though essential generators may still receive cost compensation from KEPCO.
Watch: Monitoring SMP trends during future low-demand periods, especially holidays, and Korea Electric Power Corporation's actual power purchase costs compared to SMP.
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