KHNP’s Nuclear Bet: Can Timely Expansion Outpace Grid Bottlenecks and Political Risk?

South Korea's power grid is currently running on a nuclear-powered surge. In 2024, nuclear energy provided about one-third of the country's electricity from a fleet of 26 operable reactors with a combined capacity of 25.6 GWe. That baseline is now being significantly exceeded. For the first half of 2025, nuclear output grew 8.7% year-over-year, a pace that tripled the official annual target of 2.9%.

This acceleration is driven by operational efficiency. Fewer maintenance outages and some reactors running at full capacity have boosted generation. The 1.4 GW Shin Hanul #2 plant came online in April 2024, adding to the installed capacity. The result is a clear cost advantage. As the Korea Power Exchange notes, the market's basic principle is minimizing generation costs, and nuclear's lower fuel costs are pushing down coal usage. Indeed, coal-fired output plunged 16% in that same period.

The bottom line is that nuclear is currently outperforming its targets and providing a tangible economic and environmental benefit by displacing more expensive and polluting fossil fuels. However, this strong current performance masks a longer-term supply-demand question. The grid's transmission system is already strained, with plenty of coal plants sitting idle not by choice but due to clogged power lines. This bottleneck, coupled with slow power demand growth and declining industrial demand, means the immediate pressure is on integrating more low-cost nuclear power. The long-term supply security of the system, therefore, hinges not on today's output surge, but on the planned expansion of capacity to meet future needs.

The Expansion Plan: Ambition vs. Execution Risk

The government's roadmap for nuclear's future is now set. The 11th Basic Plan for Electricity Supply and Demand, approved in February 2025, lays out a clear ambition: to add two new large reactors with a combined capacity of 2.8 GWe and 700 MW of small modular reactors by 2038. This would increase nuclear's share of the power mix from about one-third today to 35.6% by 2038. The plan marks a decisive reversal from the previous administration's nuclear phase-out policy, now backed by the current government following a public opinion poll that showed strong support.

Yet the plan's timeline reveals a stark gap. The first new reactor is not expected to be operational until the late 2030s. This creates a multi-year period where the grid must rely on its existing fleet and the current surge in output to meet growing demand, which is projected to rise 1.8% annually through 2038. The execution risk here is substantial. The plan itself details a lengthy process: a bidding process for host cities by 2027, followed by site evaluation and a construction permit sought in the early 2030s. This is a complex, multi-year journey fraught with potential delays from permitting, financing, and local opposition.

The political stability of the plan is another variable. While the current administration has confirmed its continuation, the energy policy landscape can shift with elections. The previous nuclear phase-out policy was a major campaign promise, and the current plan's longevity depends on sustained political will. For now, the ambition is clear, but its feasibility hinges entirely on overcoming these execution risks and maintaining a stable policy environment. The plan sets a target for 2038, but the path to get there is long and uncertain.

KHNP's Strategic Moves: Securing Future Supply

KHNP's recent moves signal a clear long-term bet on nuclear's future, both at home and abroad. The utility is actively securing its position in the next generation of the industry. In January 2026, it made a landmark step by joining SK Innovation in investing in U.S.-based TerraPower, marking its first investment into an advanced nuclear company. This strategic intent is twofold: to be involved in cutting-edge technology like TerraPower's Natrium reactor and to build the foundation for potential future export markets. By combining its half-century of operational experience with SK Innovation's energy competitiveness and TerraPower's technology, KHNP aims to play a leading role in expanding the advanced nuclear market globally.

This forward-looking investment complements a parallel effort to maximize the value of its existing fleet. In early 2026, the Kori-2 reactor was restarted for the first time in about three years, following approval for continued operation last November. Extending the life of this and other aging plants is a critical bridge, ensuring stable, low-cost power while the long-term expansion plan unfolds.

Together, these actions paint a picture of a utility preparing for decades ahead. The investment in advanced technology is a bet on future demand and export opportunities, while the restart of existing plants is a pragmatic move to secure supply in the near term. For now, KHNP is building its future on two fronts: deepening its technological partnerships and maximizing the output from its proven domestic assets.

Catalysts and Risks: What to Watch

The current nuclear supply advantage in South Korea is not guaranteed. Its sustainability depends on a handful of critical variables that will play out over the coming years. The primary catalyst is the execution of the government's expansion plan. The 11th Basic Plan is approved, and the government has confirmed it will proceed. Yet the timeline is long, with the first new reactor not expected until the late 2030s. The key near-term events to monitor are the bidding process for host cities, slated for 2027, and the subsequent site evaluations and permit applications in the early 2030s. Any significant delay in this multi-year process would erode the plan's credibility and leave the grid reliant on its existing fleet for longer than intended.

A parallel risk is political and regulatory stability. The plan represents a reversal from a previous phase-out policy, and its longevity is contingent on sustained political will. While a recent public opinion poll showed strong support for nuclear, energy policy can shift with elections. The confirmation from the new administration in January 2026 was a positive signal, but the next major test will be the development of the 12th Basic Plan, which outlines the strategy for 2026-2040. Any deviation from the current expansion trajectory would be a major red flag for the nuclear supply-demand balance.

For KHNP, the utility's strategic bets are a key gauge of its confidence and a potential source of future value. The investment in TerraPower is a major step into advanced nuclear technology, aimed at securing a role in future export markets. The return on this investment, and the progress toward commercialization agreements, will be a tangible measure of whether these forward-looking partnerships translate into real business opportunities. At the same time, the utility's financial performance from its core operations will determine its ability to fund both the domestic expansion and these international ventures.

The bottom line is that the nuclear supply-demand equation is now a race between two timelines. On one side is the current surge in output from existing plants, which provides immediate cost and emissions benefits. On the other is the long-term plan to build new capacity, which is the only way to ensure supply security beyond the next decade. The variables to watch-the progress of the new reactors, the stability of the policy framework, and the returns on KHNP's strategic investments-are the factors that will determine whether this race is won or lost.