Professor Kim Dae-wook warns Korea's regional electricity tariff plan risks becoming subsidy
Professor Kim Dae-wook criticized the Korean government's proposed regional industrial electricity tariff system at an October 10, 2026 parliamentary forum, arguing its design, which offers a 0-18 KRW/kWh reduction across all regions and an estimated 2.8 trillion KRW industrial cost cut, risks becoming an industrial subsidy.
Our take
What are the flaws in Korea's proposed regional electricity tariff design for industrial users?
Professor Kim Dae-wook argues that the Korean government's proposed regional industrial electricity tariff system, which offers a 0-18 KRW/kWh reduction across all regions, is fundamentally flawed by incorporating non-cost factors like regional development and industrial support, risking it becoming an opaque industrial subsidy rather than a true market signal.
The current design deviates from cost-based principles by including 'local preference index' and 'industrial crisis regions' concepts, blurring the intended signal for grid congestion. This leads to a uniform tariff reduction without a clear funding mechanism or corresponding increases elsewhere, creating cross-subsidies between misaligned wholesale and retail market zones (two vs. four regions) and potentially distorting location signals for new industrial investments.
What the source says
- Kim Dae-wook Professor Kim Dae-wook emphasized three key issues regarding the government's regional pricing plan: whether prices reflect actual grid costs, the purpose and burden of the 2.8 trillion KRW, and if actual tariff changes and corporate reactions have been confirmed.
- Kim Dae-wook Kim Dae-wook criticized the inclusion of a 'local preference index' and 'industrial crisis regions' concepts in the tariff design, arguing they dilute the focus on power system congestion and should be addressed through government budgets, not electricity tariffs.
- Kim Dae-wook The proposed system risks becoming an industrial subsidy due to a mismatch between wholesale (two regions) and retail (four regions) market zones, potentially leading to cross-subsidies unrelated to wholesale prices.
- Kim Dae-wook Kim Dae-wook proposed separating billing items while maintaining tariff levels, disclosing regional allocation formulas, and calculating the actual impact on individual companies.
- Kim Dae-wook Kim Dae-wook recommended aligning wholesale and retail market zones to a single standard and incorporating regional capacity signals into network charges, applying them to new and expanded facilities.
- Kim Dae-wook Kim Dae-wook stressed the need to explicitly separate policy support (industrial aid, regional balanced development) from cost-based regional pricing and redesign the system accordingly.
For investors — Investors in Korean DER should anticipate that the proposed regional industrial electricity tariff system may not provide clear, cost-reflective signals for grid conditions, potentially leading to distorted investment incentives and cross-subsidies that could impact DER project economics.
Watch: Ongoing parliamentary discussions and expert criticisms regarding the Korean government's regional industrial electricity tariff system design.
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