LG Chem purchases electricity directly from exchange: Maeil

LG Chem purchases electricity directly from exchange: Maeil

July 02, 2025

LG Chem, a leading South Korean chemical company, has made a significant move in the energy sector by purchasing electricity directly from the Korea Electric Power Exchange (KEPCO) instead of going through the traditional intermediary, KEPCO. This shift is a response to the soaring industrial electricity prices that have increased by more than 70% over the past three years [1].

The direct power purchase system allows large-scale consumers, such as LG Chem, to buy electricity directly from the wholesale market without the intermediary fees. This system is particularly advantageous for companies like LG Chem, which have a high demand for electricity. By cutting out the intermediary, LG Chem can save on costs, making it more economically viable to operate in the current high-price environment.

According to the power industry, LG Chem has been buying electricity directly since the end of June 2025. Currently, LG Chem is the only major company to have adopted this direct purchasing model. Previously, SK Advanced had been the first to apply for the system but was approved later by the Electricity Committee of the Ministry of Trade, Industry, and Energy. However, LG Chem was the first to actually start direct purchases [1].

The rising industrial electricity prices have put a significant burden on companies, especially those in industries such as petrochemicals and steel. The government's decision to raise industrial electricity prices instead of household prices has led to an increase in the cost of production for these industries. As a result, companies are looking for alternatives to reduce their electricity costs, and direct power purchases seem to be a viable option [2].

The direct power purchase system allows companies to purchase electricity at the wholesale market price (SMP) plus network usage fees, which can be cheaper than the rates offered by KEPCO. This system is particularly beneficial for large companies with high electricity demands. The Korea Chemical Industry Association reports that the share of electricity prices among raw material costs has soared from 1% three years ago to almost 3% now, making direct purchases an attractive option [2].

However, the government has recently implemented stricter regulations to prevent companies from easily switching between KEPCO and direct purchases. The rules now allow for a minimum contract period of three years, and companies may face restrictions if they terminate their contracts early [2].

Despite these regulations, many companies are considering direct power purchases. Companies like Hanwha Solution and Korail are among those exploring this option. The Ministry of Trade, Industry, and Energy has revised the rules to allow for longer contract periods and stricter penalties for early termination, aiming to stabilize the power market and prevent a mass exodus from KEPCO [2].

In conclusion, LG Chem's move to purchase electricity directly from the exchange is a significant development in the South Korean energy sector. This shift could lead to further changes in the industry, with more companies adopting direct power purchases to manage their electricity costs. As the government continues to implement stricter regulations, the power market is likely to see a more stable and competitive environment.

References:
[1] https://www.mk.co.kr/en/economy/11376852
[2] https://www.mk.co.kr/en/business/11376750