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Lee admits 'electricity prices will inevitably rise' if Korea meets emission targets

Published: 17 Aug. 2025, 17:38 Updated: 17 Aug. 2025, 17:57

President Lee Jae Myung speaks at a senior secretary meeting on Aug. 14 at the presidential office in Yongsan District, central Seoul. [JOINT PRESS CORPS]

Electricity bills may be one of the most sensitive issues for not only consumers, but also corporations, because they impact both household budgets and industrial costs. So when President Lee Jae Myung recently hinted at a potential rate hike, red alerts were turned on across the industry regarding the feasibility of his goals: Would it be possible, and if so, to what extent?

“At some point, electricity prices will inevitably rise if we are to meet our greenhouse gas reduction targets,” Lee said during a senior secretary meeting on Thursday. “We need to proactively inform the public and seek their understanding and consent.”

Under Korea's 2035 greenhouse gas reduction targets, the country must significantly boost its share of renewable energy. This will require large-scale investments in power generation. Without relying on additional debt, such costs would have to be covered by electricity bills.

The previous Yoon Suk Yeol administration also pledged to “normalize” — raise — electricity prices but only ended up raising industrial rates, which was seen as a partial increase at best.

As of the end of 2024, the share of renewable energy in Korea’s power mix stood at 10.6 percent. According to the 11th Basic Plan for Long-term Electricity Supply and Demand finalized in March, this proportion will grow to 29.2 percent by 2038. Supporting that growth will require major investments to expand power facilities. Offshore wind power — a focus of the current administration — costs 6 trillion to 7 trillion won ($4.3 billion to $5 billion) per gigawatt to develop. Meeting the government's 14-gigawatt goal by 2030 alone would demand roughly 100 trillion won in investment.

industrial electricity price hike graphic

Renewables also require complementary infrastructure, including large-scale transmission and distribution networks and energy storage systems. This is especially important because most renewable generation sites are in regions like South Jeolla or Jeju Island, while electricity demand is concentrated in the greater Seoul area. This geographic mismatch is why the administration is pursuing a so-called energy highway along the west coast.

Korea Electric Power Corporation (Kepco) also plans to invest 72.8 trillion won in transmission infrastructure through 2038, but the state-run electricity company is in no financial position to absorb these costs. As of June, its consolidated debt stood at 206.2 trillion won, with a debt-to-asset ratio of 472 percent. Further borrowing would be risky, making an electricity rate hike one of the few viable options to secure funding.

“Improving financial health and securing funding to overhaul the national power grid around the energy highway will be necessary,” said Choi Gyu-heon, a researcher at Shinhan Securities. “The possibility of a rate hike in the fourth quarter, during the off-peak season, should remain open.”

Even without the infrastructure investment, high generation costs remain a burden. According to Kepco, the company paid an average of 134.8 won per kilowatt-hour for electricity last year. When factoring in renewable energy certificates, solar power costs more than 200 won per kWh and offshore wind around 400 won — making it far more expensive than nuclear power, which costs just 66.4 won per kWh.

A citizen looks at electricity meters in a multiunit building Jongno District, central Seoul, on Sept. 22, 2024. [NEWS1]

In the long term, renewable energy could become cheaper than conventional sources since it does not require fuel purchases after initial facility investments. In the United States, for example, the cost of solar power — including facility expenses — is already comparable to that of natural gas, largely thanks to falling panel prices. But unlike countries with vast flatlands, Korea’s mountainous terrain makes large-scale renewable projects more difficult, meaning the cost gap with conventional electricity will likely persist for some time.

The growing electricity demand for AI could also drive up rates. The Lee administration has prioritized establishing Korea as a global AI powerhouse, a goal that will require large-scale data centers — facilities with significant energy needs. In the United States, AI-related electricity demand is already affecting rates. According to the U.S. Energy Information Administration, the average household electricity rate nationwide rose by 6.5 percent between May 2024 and May 2025, from 16.41 cents to 17.47 cents per kWh. North Carolina State University predicts that by 2030, average U.S. electricity rates will rise by 8 percent due to data center demand, with tech-heavy states like Virginia seeing increases of up to 25 percent.

Still, many believe raising household electricity rates in Korea is not a simple matter. Such a move could provoke public backlash and drive inflation. The previous Yoon administration avoided the issue by raising only industrial rates.

Staff from the Korea Electric Power Corporation (Kepco) repair a pylon in Nonsan, South Chungcheong, on Oct. 14, 2021. [JOONGANG ILBO]

Between 2022 and the end of last year, industrial electricity rates for high-voltage users rose to 185.5 won per kWh — a 75.8 percent jump. With prices having already surged more than 70 percent in the past three years, major energy-intensive firms are beginning to seek alternatives. In June, LG Chem started sourcing electricity directly from the Korea Power Exchange instead of Kepco. Other companies, including Lotte Chemical, Samsung Electro-Mechanics, Hanwha Solutions and Korail, are considering similar moves. Alarmed by the potential exodus of its top corporate customers, Kepco has even proposed cutting industrial rates to the Ministry of Trade, Industry and Energy.

“Korea faces the difficult task of striking a policy balance between raising electricity rates and maintaining industrial competitiveness,” said Jang Woo-seok, a senior research fellow at the Hyundai Research Institute, in a June report. “Increases in industrial rates raise manufacturing costs for power-hungry industries, undermining profitability and export competitiveness.”

“Raising electricity rates is inevitable to fund infrastructure like the energy highway,” said Kang Cheon-goo, a professor at Inha University’s Graduate School of Manufacturing Innovation. “Policymakers should proceed cautiously, taking into account falling global energy prices and the sharp industrial rate hikes already implemented.”

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY AHN HYO-SEONG [[email protected]]