In recent years, as electricity prices have soared, steel and petrochemical companies that have high electricity consumption are making every effort to reduce costs by directly purchasing electricity and operating their plants at night.
According to the industry on the 5th, LG CHEM has been purchasing electricity directly since the end of June. Direct electricity purchase refers to users with a power supply facility capacity of 30,000㎸A (kilovolt-amperes) or more buying electricity directly from the electricity trading market without going through the Korea Electric Power Corporation. A power supply facility is an electrical facility that receives electricity from external power sources such as the Korea Electric Power Corporation or a power plant.
In the past, the Korea Electric Power Corporation purchased electricity from all power plants and sold it to corporations and households. However, as of the end of March, the system was revised to allow corporations to purchase electricity without going through KEPCO. The industry views the price, which includes network usage fees in addition to the wholesale market price (SMP) of electricity, as being cheaper than the industrial electricity rates of the Korea Electric Power Corporation.
Industrial electricity rates have sharply increased since the Moon Jae-in administration. Due to the nuclear phase-out policy, KEPCO's burden has grown, but the government, mindful of public opinion, has raised only industrial electricity rates while keeping household electricity rates to a minimum. The industrial electricity rate, which was 105.5 won per kWh in the first quarter of 2022, jumped by 75.83% to 185.5 won at the end of last year.
Dongkuk Steel Mill, which relies 100% on electric furnaces, has reduced daytime operation at its Incheon plant and expanded nighttime operations to cut electricity costs. During the summer, the daytime electricity rate is about 250 won per kWh, while the nighttime rate is about 120 won per kWh. From the 22nd of this month to the 15th of next month, operations at the Incheon plant will be suspended. Last year, Dongkuk Steel Mill paid 299.8 billion won in electricity costs.
POSCO and Hyundai Steel operate their own power plants using byproduct gases to secure their electricity supply. Hyundai Steel secures 50% of its total electricity usage from its own power plants, but last year, it incurred over 1 trillion won in electricity costs. Hyundai Steel plans to construct an additional liquefied natural gas (LNG) power plant in Dangjin, Chungcheongnam-do. POSCO also produced 85.5% of the electricity used in its steelworks through its own generation, utilizing byproduct gases as fuel for steelmaking and power plants.
The business community argues that shifting the burden of electricity costs solely onto corporations could stifle their production and investment activities. The Korea Enterprises Federation noted in a report, "If industrial electricity rates are excessively raised, it may dampen corporate activities. To enhance corporate competitiveness and alleviate the burden of electricity costs, improvements in seasonal and time-of-use pricing are necessary."