Regional Industrial Electricity Rates Differentiated... The 'Boundary Dilemma'

The government aims to implement a differentiated tariff system by year-end, factoring in transmission costs, self-sufficiency rates, and balanced regional growth

Electricity self-sufficiency rate: How regions are grouped will be decisive

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As the government moves to introduce a regionally differentiated electricity tariff system that will lower industrial electricity rates by up to 10% in non-metropolitan areas, the detailed designation of regions—crucial for determining the actual discount rate—has emerged as a key factor in implementing the policy. Since electricity self-sufficiency rates can vary from hundreds- to tens of thousands-fold depending on the location of power plants even within the same city or province, the benefits and fairness of discounted rates can differ significantly depending on how regions are grouped.

According to the Ministry of Climate, Energy, and Environment and Korea Electric Power Corporation on the 27th, the government plans to implement the system within the year, building on the “Industrial Regional Electricity Tariff System” draft design released the previous day. The process will include gathering public feedback, finalizing specific regions, and revising the relevant public notice and electricity tariff terms and conditions.

The government’s plan first divides the country into four large zones according to the structure of the power transmission network: Southern Capital Area, Northern Capital Area, Central Region, and Southern Region. Within these, four further regions incorporating balanced growth criteria—such as “local preference index” and “industrial crisis areas”—are overlapped to ultimately define 11 regions in total. Each region’s industrial electricity rate will be determined based on three criteria: transmission cost, electricity self-sufficiency rate, and balanced growth.

For the Southern Capital Area, the existing rate will be maintained or adjusted by around 1 won per kWh; in the Northern Capital Area, rates may fall by up to 10 won; and in the Central Region, which includes Gangwon and Chungcheong, the decrease may reach up to 15 won. In the Southern Region, which includes Gyeongsang and Jeolla where nuclear and renewable energy facilities are relatively concentrated, the rate could fall by as much as 18 won—about 10% of last year’s industrial average sales price of 181.9 won per kWh.

The issue lies in the fact that one of the main factors—electricity self-sufficiency rate—can vary greatly depending on the grouping of regions. The electricity self-sufficiency rate is calculated by dividing the amount of electricity produced in a given region by its total consumption. A rate exceeding 100% means the region produces more electricity than it consumes and sends the surplus to other areas, while a rate below 100% means it must source electricity from outside regions.

According to the paper “A Review of Spatial Units for the Application of Regional Differential Electricity Tariffs” published by Professor Lee Jeongseop of Gyeongsang National University and Professor Lee Gangwon of Seoul National University in the Journal of Economic Geography of Korea, of Korea’s 17 major city and province administrations, an average of seven achieved a self-sufficiency rate above 100% between 2019 and 2021, with the other ten below 100%. Narrowing the analysis to 229 city, county, and district units, only 38 had a self-sufficiency rate above 100%, while the remaining 191 areas consumed more electricity than they produced.

Incheon is a notable example. When calculated by city/province unit, Incheon’s electricity self-sufficiency rate is a nation-leading 234.01%. However, by analyzing at the city, county, and district level, only two out of ten—Ongjin County, home to the Yeongheung thermal power plant, and the Seo District, with large power facilities—exceeded 100%. Ongjin’s rate reaches a staggering 13,605.56%, and Seo District’s 431.46%, but the remaining eight districts all fall below 100%. Yeonsu District is at 31%, and the other seven districts range from only 0.01% to 3.68%.

Busan shows a similar pattern. Busan’s overall self-sufficiency rate is 182%, but only Gijang County, where the Kori and Shin-Kori nuclear plants are located, and Saha District, home to a combined-cycle power plant, exceed 100%. The other 14 districts register only 0.02% to 11.22%. This indicates a stark disparity between areas with clustered power plants and those that are primarily energy consumers, even within Busan itself.

This phenomenon of power generation being concentrated in a few lower-level municipalities is clear. The same research indicates that the 15 cities, counties, and districts with the highest average generation from 2019 to 2021 accounted for roughly 387.33 million MWh, or 71.2% of the nation’s total. Uljin County in North Gyeongsang produced the most at about 43.4 million MWh, followed by Dangjin City (Chungnam) with 40.55 million MWh, Boryeong City 32.9 million MWh, Taean County 32.79 million MWh, and Gijang County (Busan) at 30.92 million MWh. This means that output is clustered in a few areas with nuclear, coal, or LNG power plants.

Of course, self-sufficiency rate itself is a difficult absolute benchmark. The aforementioned research also noted that it is hard to account fully for power used for the plants themselves and losses from power transmission and distribution. Thus, calculations of self-sufficiency rates might have a 5–6% margin of error, with the rate likely to be overstated in production regions and understated for consumer regions.

Nevertheless, the research team explained that electricity self-sufficiency rate remains a practical indicator for showing the imbalance of electricity production and consumption by region, and therefore should be utilized in the design of the differentiated tariff system. They emphasized the importance of defining the spatial unit, as outcomes can vary greatly depending on how comprehensively a “region” is constituted—even with identical rates of self-sufficiency. The researchers stressed, “It is essential to identify both the regions that produce electricity (and experience related disadvantages) and those that consume electricity (and gain associated benefits), and to properly analyze the appropriateness of the spatial units chosen for this differentiation.”

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