Korea Electric Power Corporation (KEPCO), which bears the costs of the energy storage system (ESS) central contract market, has not received contract pricing information from individual operators. As the expansion of renewable energy is expected to increase costs related to ESS, KEPCO's inability to verify contract prices is limiting its ability to assess settlement amounts and future financial impacts.
Concerns are rising that if KEPCO does not manage these costs effectively, it could lead to increased electricity supply costs, ultimately burdening consumers with higher electricity bills.
According to data submitted by the office of lawmaker Koo Ja-geun of the ruling People Power Party to the National Assembly's Industry, Trade, and Energy Committee on September 8, KEPCO has not received key contract information, including pricing, since the first ESS central contract market project in 2025.
The initial project in Jeju in 2023 involved a three-party contract among ESS operators, the power exchange, and KEPCO, allowing KEPCO to verify key details such as contract pricing. However, starting with the first project in 2025, the contract format shifted to a two-party agreement between operators and the power exchange, excluding KEPCO from the contract.
The ESS central contract market operates by having the power exchange select operators through competitive bidding, with operators receiving contract capacity settlement payments based on contract prices for 15 years after commercial operation begins. This cost is shared among power purchasers, including KEPCO, based on the amount of electricity purchased, with KEPCO's share reflected in its purchasing costs.
Contract prices are determined using a 'pay-as-bid' method, where the price proposed by each operator during bidding is applied and maintained for 15 years. The contract price for each operator is crucial as it influences the scale of long-term settlement amounts.
During discussions at the central contract market committee regarding the selection of preferred bidders for the first and second projects in 2025, KEPCO requested that relevant information, including contract prices, be shared on a limited basis. This request was aimed at ensuring that KEPCO, as a cost-bearer, could access this information without it being publicly disclosed.
However, the power exchange maintains that contract prices are managed information between contracting parties and that public disclosure could affect pricing in future bidding markets. ESS operators argue that since bid prices effectively represent cost information, revealing them could weaken their negotiating power in international bidding and contracting processes. They assert that they participated in the central contract market under the premise of keeping contract prices confidential.
Monthly settlement amounts are also not disclosed, as revealing these figures could allow for estimates of individual operators' contract prices based on contract capacity.
On the other hand, KEPCO, as a payer of central contract fees, distributes the total settlement amount based on the ratio of electricity purchased by time and buyer. However, without access to individual contract prices, KEPCO faces limitations in verifying settlement amounts and estimating future financial impacts.
KEPCO stated, "Considering the anticipated increase in purchasing costs due to the expansion of renewable energy and the increased volume of ESS deployment, as well as the initial investment burdens on operators, government support and a reasonable cost-sharing system are necessary."
Lawmaker Koo Ja-geun emphasized, "It is problematic that even KEPCO, which bears the costs, does not know the contract prices. Information necessary for settlement verification and financial impact analysis should be shared with KEPCO, even if on a limited basis." He added, "If this structure continues, it could raise concerns about potential mismanagement by KEPCO's management."
* This article has been translated by AI.
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