As industrial electricity rates have risen more than 70% over the past three years, refiners and petrochemical corporations, burdened by the costs, are building "power plants next to factories." To run their facilities, they need large amounts of electricity around the clock, 365 days a year, and they have judged that generating power themselves is cheaper than buying it from the Korea Electric Power Corporation.
According to the refining industry on the 19th, HD Hyundai Oilbank's wholly owned subsidiary HD Hyundai E&F is building one LNG power plant to supply electricity and steam to HD Hyundai Chemical in Seosan, South Chungcheong. The maximum generation capacity is 290 MW, with a target to begin commercial operation in the third quarter of next year.
The main reason for building their own power plants is cheaper electricity supply. According to KEPCO's Power Data Open Portal, the industrial electricity rate in the first half of this year was 179.2 won per kilowatt-hour (kWh).
SK hynix operates one 580 MW LNG cogeneration plant each in Icheon, Gyeonggi, and Cheongju, North Chungcheong, to supply stable power to its semiconductor fabs, and its generation unit cost is said to be in the low-to-mid 100 won range. HD Hyundai E&F is also known to be able to produce power at a similar unit cost.
HD Hyundai E&F plans to sell surplus electricity and steam to nearby factories at prices lower than current levels. LNG cogeneration plants not only produce electricity but also steam, which is essential for crude refining and petrochemical production, allowing sales and resulting in high generation efficiency. With the special law to support the petrochemical industry recently passing the National Assembly without measures to subsidize electricity rates, neighboring corporations are said to be favorable.
S-Oil is also building two more LNG-based power facilities at its Onsan plant in Ulsan ahead of the Shaheen Project's launch in 2027. In addition to the existing two, it plans to operate a total of four units starting late next year to produce 121 MW of electricity and use all of it at the Onsan plant. The self-generation ratio at the S-Oil Onsan plant is currently 10%, and the company expects it to rise to 42% after operation begins.
SK Innovation is reviewing installing a 300 MW-class LNG-based cogeneration plant at the Ulsan Complex (CLX). GS Caltex operates self-generation facilities at its Yeosu plant that produce 15 MW of electricity per day.
To generate energy directly and sell power to a specific industrial complex without going through KEPCO, a district electricity business license must be obtained from the Ministry of Trade, Industry and Energy's Electricity Committee. Following HD Hyundai E&F, Hanwha Energy also plans to build a 500 MW LNG power plant in the Yeosu National Industrial Complex through its subsidiary Yeosu Eco Energy and supply energy to nearby factories.
Yu Seung-hun, a professor of energy policy at Seoul National University of Science and Technology, said, "SK hynix has competitiveness in the semiconductor industry because it uses electricity at low cost," and added, "If cutting industrial electricity rates is difficult, the number of district electricity business licenses should be increased so corporations can receive power at lower prices."
KEPCO, on the other hand, argues that given volatile fuel prices and unstable power supply, the electricity refiners procure on their own is not cheaper than existing rates. It also notes that they could suffer blackouts due to unstable facilities during the power procurement process.
In fact, in Mar., LG CHEM and LOTTE Chemical's plants in Daesan experienced blackouts due to equipment problems at a district electricity operator, disrupting product output. In the past, Pocheon IPP, a private LNG power producer, was sold to a private equity fund in 2020 due to deteriorating business viability.