Professor urges swift shift to price-based bidding in Korea's power market
Professor Cho Hong-jong argues that Korea's electricity market reform discussions are misguided by focusing on renewable energy supply targets rather than stable grid operation, recommending a rapid transition from the current Cost-Based Pool (CBP) to a Price-Based Pool (PBP) to reflect supply-demand scarcity.
Our take
Why does Korea's current power market structure impede grid stability and renewable integration?
The author argues that the Korean government's approach to electricity market reform, by prioritizing renewable energy deployment targets of 100GW by 2030 and 220GW by 2040 while delaying price-based bidding, creates a fundamental contradiction that distorts resource allocation and increases hidden system costs.
The current CBP system, by not reflecting real-time supply and demand scarcity in prices, fails to provide economic incentives for flexible resources like ESS and demand response, which are crucial for integrating intermittent renewables. This structural flaw means that even with announced plans for PBP transition, delaying its full implementation to 2027 while simultaneously isolating renewables through fixed-price contracts exacerbates grid instability and leads to increased forced curtailment, shifting costs onto the system rather than revealing them through price signals.
What the source says
- The current electricity market (CBP) evaluates only variable costs like fuel expenses to determine dispatch priority and pricing, preventing the market from discovering true prices.
- The lack of price signals for scarcity in the current system discourages investment in flexible resources such as peak generation, energy storage systems (ESS), and demand response.
- Korean government The government's 'Electricity Market System Improvement Direction' announced in May 2024 foreshadowed a transition to price-based bidding (PBP).
- Korean government The government plans to open a real-time market in 2027, deferring a full transition to price-based bidding.
- Delaying the transition to PBP due to fear of price spikes will lead to higher costs through increased forced curtailment, grid reinforcement, and settlement conflicts.
- The 1st Renewable Energy Basic Plan proposes target prices of 80 won for solar PV and 150 won for offshore wind, which is contradictory to large-scale renewable expansion.
- Korean government Renewable energy is planned to be isolated from the market through 20-year fixed-price contracts, two-way CFDs, and administrative bidding.
For investors — Investors in Korean DER, particularly those in flexible resources like ESS and demand response, face continued uncertainty and suppressed returns as long as the market maintains its Cost-Based Pool structure and delays a full transition to price-based bidding.
Watch: Monitoring the Korean government's specific timeline and implementation details for the full transition from Cost-Based Pool (CBP) to Price-Based Pool (PBP), especially beyond the planned 2027 real-time market opening.
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