South Korea’s electricity costs remain elevated due to high import prices

Around 97% of the country’s energy needs are met by imported energy.

High electricity price in South Korea is expected to persist in the coming quarters as the prices for imported energy increase, according to a report by BMI.

Thermal coal and natural gas import prices remained elevated in 2021 and 2022, whilst import prices for bituminous coal surged by 122% year-on-year (YoY) growth in October 2021, whilst liquified natural gas posted a 181% YoY in May 2022.

Around 97% of the country’s energy needs are supplied by imports, BMI said, citing data from the Korea Electric Power Corporation (KEPCO), making the country highly exposed to volatile prices in the international market.

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“Elevated energy import prices over the past two years are placing upward pressures on electricity prices in South Korea, and we expect the cost of electricity to remain elevated for the coming quarters,” it said

BMI noted that this also affected the revenues of power generation companies with KEPCO reporting debt of over $149b in August 2023.

The government has also given the green light to electricity price hikes pushing rates to over 40% higher than in 2022.

“While the Ministry of Trade, Industry and Energy announced the freezing price hikes for the Q323 period, we believe that the cost of electricity will remain elevated over the coming quarters, ensuring profitability of the power market, before normalising in line with the energy import prices which are now falling,” it said.