KPX's proposed regional LMP faces private coal opposition, legal threat
The Korea Power Exchange (KPX) is advancing a proposal for regional Locational Marginal Pricing (LMP) in Q4 2026, which private coal generators estimate could reduce their current revenues by approximately 30%. This market rule change is currently under review by the Rules Revision Committee.
Our take
How would Korea's proposed regional LMP impact private coal generators and market dynamics?
The Korea Power Exchange's proposed regional Locational Marginal Pricing (LMP) would disproportionately shift revenue risk onto private coal generators, who project a 30% decline in earnings, by penalizing their non-capital region locations and large-scale facilities while other generation types remain protected.
LMP introduces regional price differentiation based on grid conditions, meaning generators in constrained areas would receive lower prices. Private coal plants, often located in non-capital regions with significant capacity, face reduced dispatch and lower revenue when grid congestion occurs. This effect is compounded by the higher dispatch priority of nuclear power and policy protection for renewables, leaving private coal to bear the brunt of curtailment and price suppression.
What the source says
- The Korea Power Exchange initially planned to implement the market rule revision for regional LMP in Q3 2026 but postponed it.
- Private coal power generators Private coal generators are considering legal action if the market rule revision proceeds without sufficient compensatory measures.
- Power generation industry The power generation industry argues that nuclear power maintains high dispatch priority, and renewable energy is protected by government expansion policies.
- Power generation industry The industry claims that the absence of private LNG power plants in non-capital regions means the burden of LMP would disproportionately fall on private coal facilities located there.
- The Donghae-to-Capital Region HVDC is scheduled for completion in 2027.
- Korea Power Exchange The Korea Power Exchange asserts that industry concerns are excessive, as LMP price signals would only activate in regions and during times of actual grid constraints.
- Power generation industry Generators contend that current information on regional grid constraints, generation, and transmission is insufficiently disclosed to objectively analyze LMP's impact.
- Power generation industry The industry demands objective impact analysis, information disclosure, and investment recovery plans for existing generators before LMP implementation.
For investors — Investors in Korean private coal assets should prepare for potential revenue erosion and increased operational uncertainty due to regional LMP, especially given existing low utilization rates. Monitor the Rules Revision Committee's Q4 2026 discussions for compensatory measures or legal challenges.
Watch: The Korea Power Exchange's Rules Revision Committee meeting in Q4 2026 to discuss the regional LMP proposal.
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