Korean market
South Korea’s power market is undergoing a structural shift in 2025–2026
21 Aug 2026 · SuhngJoon Han
South Korea’s power market is undergoing a structural shift in 2025–2026, marked by private generators overtaking the five state-owned power companies for the first time, while the government advances an “electro-state” strategy to secure massive new power supplies for its AI and semiconductor megaprojects.
Overall power market trends
Private generation surpasses state-owned generators: In 2025, the five state-owned thermal power companies (excluding nuclear) generated 194,903 GWh, down year-on-year, while private generators produced 215,827 GWh, exceeding the public companies by about 20,000 GWh. Over the past decade, output from the five public firms fell 27%, whereas private generation rose 126%.
SMP and REC markets: Over the latest 12 months (July 2025–July 2026), the System Marginal Price (SMP) for on-grid power averaged 108.29 KRW/kWh, and the REC spot price averaged 71,692 KRW/REC, reflecting evolving revenue conditions for generators amid renewable expansion.
Trends among state-owned and private generators
State-owned power companies (the “Big Five”)
Declining output: The five thermal power affiliates of KEPCO (Korea Electric Power Corporation) have seen sustained output declines due to aging coal/LNG fleets, fuel cost pressures, and the government’s decarbonization push.
Integration discussions: Ongoing debates about consolidating the five companies (or creating a holding-company structure) suggest potential governance and investment realignments ahead.
Private power producers
Rapid growth: Independent Power Producers (IPPs) and other private developers are expanding capacity and output through LNG combined-cycle plants, renewables, and ESS-linked projects.
Diversified revenue models: Private firms are increasingly managing exposure to SMP and REC volatility via long-term PPAs, industrial park direct-supply schemes, and hybrid renewable+storage portfolios.
Government megaprojects and power supply plans
The government is pushing three megaprojects—AI data centers, semiconductor clusters, and physical AI—and has unveiled an “electro-state” strategy to meet the resulting surge in electricity demand.
Scale of new demand: By 2041, an additional 38.4 GW (about 260 TWh/year) of power is estimated to be required—roughly 44% of South Korea’s total 2025 generation.
12th Basic Plan for Electricity Supply and Demand: The draft, due in September 2026, is expected to incorporate about 15 GW of demand from megaprojects with concrete plans, deferring the remainder until later revisions.
Honam–Yongin semiconductor power pact: A supply agreement signed in August 2026 commits to delivering over 20 GW to the Honam and Yongin semiconductor clusters by 2041, with 3 GW prioritized for Honam from 2029 and 14+ GW phased in for Yongin.
Energy mix and supply measures
100 GW renewables target (accelerated): The plan includes early deployment of border-area and reclaimed-land solar, agrivoltaics, mandatory rooftop solar on factories, and offshore wind to reach 100 GW of renewable capacity ahead of schedule.
Grid and flexibility resources: Measures include deploying distribution-level ESS (128 MW/640 MWh), expanding pumped hydro and other flexibility assets, and proactively reinforcing transmission to serve AI data centers and semiconductor fabs.
Nuclear and LNG under review: To secure baseload in Honam, the government is considering two additional APR1400 reactors (2.8 GW) at the Hanbit site, alongside LNG generation to support process heat and grid stability.
Institutional and governance reforms
Electricity Supervisory Authority: The Ministry of Climate, Energy and Environment plans to advance legislation in the second half of 2026 to establish a new Electricity Supervisory Authority, restructuring market oversight into a four-stage framework (policy–deliberation/decision–investigation/supervision–execution/operation).
Mega Special Zone Act: To fast-track the three megaprojects, a special-zone law with around 300 regulatory exemptions is being prepared to streamline permitting and accelerate power and water infrastructure.
Implications
Growing role of private generators: Rising demand and new business models (renewables, storage, PPAs) are set to further increase private generators’ market influence.
Need for public generator restructuring: Facing output declines and consolidation talks, the state-owned firms must pivot toward LNG transitions, new renewable/ESS investments, and direct industrial supply schemes.
Power security and investment risks: The sheer scale of megaproject demand, combined with uncertainties around nuclear approvals, transmission build-out, and environmental opposition, makes project timing and deliverability key risk factors for market participants.