A Power Generation Giant Emerges After 25 Years... Is 'K-Orsted' Possible? [Digging Energy]

Specialist Report

Criticism Over Inefficiency and Crisis Amid Coal Plant Closures

Five Power Generation Companies Moving Toward Integration as a Single Entity

Transformation from State-Owned Oil Company to Renewable Energy Leader

Denmark's Orsted as a Representative Success Story

Relying on a Single Business Model Is Risky...Need for Diversification

"Clear Principles and Vision Needed from a Public Benefit Perspective"

Aerial view of Korea Midland Power Boryeong Power Plant Headquarters

Korea Midland Power, Korea Western Power, Korea East-West Power, Korea Southern Power, and Korea South-East Power. These five companies may be unfamiliar to the general public, but they are core state-owned power generation utilities, producing about one-third of the country's electricity. At one point, they accounted for 60% of domestic power generation, playing a pivotal role in Korea's energy industry.

Efforts are underway to consolidate these five companies, each wholly owned by Korea Electric Power Corporation (KEPCO), into a single entity. This would result in the creation of a massive energy public enterprise with total annual sales of 30 trillion won and a workforce of 13,000 employees. The energy sector expects this move to be the biggest upheaval in 25 years, following the industry overhaul in 2001.

There are rising expectations ahead of the emergence of this energy "giant." It is anticipated that large-scale projects, such as offshore wind power, which require considerable capital, can be pursued rapidly. This initiative is benchmarking the transformation of Denmark’s former state-owned energy company Dong Energy into Orsted, a global leader in offshore wind power.

However, there are also significant concerns. Critics question the actual synergy effects of consolidating the power generation companies and point out that the specific benefits to the public are unclear. Local governments hosting the five headquarters worry about the potential shocks to their regional economies, such as declines in tax revenue and job losses. Others argue that the integration of the five companies does not directly guarantee the success of offshore wind projects.

Closure of Thermal Power Plants...Integration as an Inevitable Fate

The Ministry of Climate, Energy and Environment held an interim briefing on June 18, titled "Study on New Roles for Power Generation Public Enterprises in the Energy Transition Era." At the meeting, Samil PricewaterhouseCoopers, which was commissioned to study the integration plan, announced an interim result: recommending a "single-company consolidation" plan. The ministry intends to gather further input and unveil restructuring and reorganization plans for state-owned power generation firms within July.

In 2001, the government split KEPCO’s power generation division into six subsidiaries, under the pretext of introducing competition into the electricity market. Five companies focused on thermal power based on coal and liquefied natural gas (LNG) were created alongside Korea Hydro & Nuclear Power, which focused on nuclear and pumped-storage power generation. At the time, there were also plans to split off KEPCO’s transmission, distribution, and sales for privatization, but these were abandoned due to resistance from labor unions, leaving the restructuring incomplete.

In the 25 years since this unfinished restructuring, the generation subsidiaries have stably provided essential electricity. However, as the times have changed, the integration of the power generation companies has become an unavoidable fate.

This is largely due to the government’s policy to phase out coal-fired power plants by 2040, leaving the primarily thermal power-based public generators without a place in the industry. The government has been replacing retired coal-fired power plants with LNG plants, but LNG generation also cannot escape greenhouse gas emissions, suggesting that its role will inevitably diminish in the long term.

The generation companies are seeking to fill this emerging gap with renewable energy. Projects for solar, wind, and other renewables are now spreading nationwide, transcending regional boundaries. The old system of five coal-centered public enterprises is no longer viable. As coal power is phased out, staff must be reallocated or transferred, but the fragmented structure of the five companies makes this transition difficult and slow.

This is not the only issue. The similar business models among the generation companies have caused ongoing controversy over redundant work. Frequently, each company undertook overlapping R&D projects. Organizational inefficiency has become an issue as well. According to Samil PricewaterhouseCoopers, the number of employees per executive in the five power generation firms is 700, significantly higher than the corresponding numbers for KEPCO (3,300) and Korea Hydro & Nuclear Power (2,134).

The restructuring into five companies was not without its upsides. Internal competition helped lower fuel procurement costs for LNG and bituminous coal. There were also visible results in overseas business endeavors.

Integration for Renewable Energy?

The government has a different vision for the new integrated power generation company: becoming a driving force in expanding renewables. At a meeting with the CEOs of the five power generation companies on July 14, Kim Seong-hwan, Minister of Climate, Energy and Environment, stated, "Restructuring power companies goes beyond mere integration; it is a fundamental redesign to determine the role of public enterprises in the energy transformation era. Based on the capabilities and infrastructure the five companies have accumulated, they should lead the transition to a renewables-centered energy system."

Under the Renewable Portfolio Standard (RPS), state-owned power producers must supply a certain proportion of their total thermal generation from renewable sources (set at 15% for 2026). Until now, the companies met these quotas mostly by purchasing Renewable Energy Certificates (REC), rather than with direct investment.

In fact, as of 2024, the share of in-house renewables in the generation mix is as follows: Korea Western Power at 37%, Korea Southern Power at 34%, Korea South-East Power at 20%, and Korea Midland Power at 10%. Korea East-West Power lags at only 3%. The remaining quota was filled through REC purchases. The original intent of the RPS was to spur renewables investment from large-scale generators, but this goal was not realized.

The generation companies have prioritized investment in reliable LNG capacity over risky large-scale renewables, despite the need for significant capital. According to National Assembly audit data from October 2025, all 17 new power plants approved or promoted by the five companies since 2020 have been combined-cycle or cogeneration plants fueled by LNG, with total investments exceeding 12 trillion won. During the same period, there were no new investments in solar, wind, hydrogen, or energy storage systems (ESS).

The government hopes to see the public power companies evolve from merely complying with RPS quotas to becoming true developers of renewables. The focus of the integration is the expansion of renewable energy. By 2030, the government aims to increase renewables capacity to 100 GW, a target that will require substantial state-led capital investment.

The most symbolic area is offshore wind. Already, public-only tenders are held for fixed-price offshore wind power procurement. The Offshore Wind Power Special Act also gives preference to public entities owning more than 200 MW of coal-fired plants in the selection of offshore wind project operators.

Discussion is already active about the integrated public power company’s future offshore wind operations. At the "8th Offshore Energy Industry Forum & 55th Power Forum" held on July 10, Kim Yunseong, co-chair of the Offshore Energy Industry Forum, stated, "By sharing development risks with private developers and long-term business planning with domestic suppliers, the integrated public power company can drive the industry’s overall growth."

Nam Tae-sub, Senior Vice Chairman of the National Power Industry Workers' Federation, explained, "The integrated public power company can play a catalyst role in putting delayed or stalled projects back on track due to financial challenges or permitting issues." He also expressed hope that labor demand for the operation and maintenance of offshore wind, will absorb jobs lost from coal power plant closures.

'Role Model' Orsted Is Undergoing Restructuring...

Among advocates of integration in Korea, the most frequently cited case is Orsted, Denmark’s renewables company. At a forum last month, Cho Young-sang, Professor of Industrial Engineering at Yonsei University, said, "The integrated public power company should evolve into a renewables-only utility over the mid-to-long term, reinvesting surplus profits from coal and LNG into renewables with a virtuous workforce cycle."

Orsted's predecessor was Danish Oil and Natural Gas (DONG), a state-owned oil and gas developer in the North Sea. In 2006, DONG acquired five other Danish energy companies, reforming itself into Dong Energy. At the time of the merger, over 85% of its electricity generation relied on fossil fuels.

Dong Energy later declared its intention to become a renewables company and heavily invested in offshore wind. In 2017, it sold all oil and gas operations and changed its name to Orsted. Orsted is now the world’s largest offshore wind operator outside China.

However, Orsted has faced criticism for its concentration in the single business of offshore wind. In the United States, the industry faced setbacks after the start of the second Trump Administration, and global inflation further squeezed margins. Its stock price subsequently collapsed, and in October 2023, Orsted announced it would cut 2,000 jobs globally—one quarter of its 8,000-strong workforce.

In Germany, RWE spun off its thermal and renewable energy units (Innogy) in 2016, but the renewables business ultimately lacked sufficient investment capacity and was remerged with RWE. In its interim report, Samil PricewaterhouseCoopers noted, "Global case studies suggest that while integration can improve efficiency, concentrating too heavily on one business brings structural risks and limits resilience in times of crisis." Orsted is now diversifying across the renewables sector, not just offshore wind.

Industry observers argue that for the integrated public power company to be competitive in renewables, it must focus on workforce retraining and job flexibility. There are concerns that discussions on competitive advantage for new businesses, such as renewables, have been lacking, with policy debates focused only on the so-called "just transition" for coal plant closures. As one offshore wind industry official observed, "Public sector power company employees still lag behind private companies in experience and competitiveness in renewables. Given the public enterprise culture, job flexibility may not come easily."

What Are the Benefits for the Public?

There has also been criticism that the creation of a mega power public enterprise is too narrowly focused on scaling up renewables. For the public to be convinced and for the many conflicts arising from integration to be addressed, clear principles and a vision must be presented about the concrete benefits this will bring to citizens.

Ha Yoonhee, Professor at Korea University, asserted, "The slow spread of renewables has been caused more by regulatory and institutional shortcomings than by a lack of effort by state-owned generators," raising doubts about whether public enterprises can compete flexibly with global corporations. Kim Changhwan, Professor at Chung-Ang University’s College of Engineering, said, "The integration plan must spell out the tangible benefits for the public as well as specific targets to be achieved, so that the public can agree with and accept the outcome."

This content was produced with the assistance of AI translation services.