Electricity & Regulatory Overview of Korea Sep. 28, 2016 Ministry of Trade, Industry &Energy Electricity Regulatory Commission

1 2 3 Contents Electricity Industry Overview Power Market Regulation The New Energy Industry 3

Electricity Industry Overview 1

Korea Overview - Power Sector Characteristics People served : 50 million Isolated power grid Highly dependent on foreign resources - 95.3% of primary energy in 2015 (270 million Toe) Primary energy proportion (2014) - Oil: 37.1%, Coal: 29.9%, LNG: 16.9%, Nuclear: 11.7% Renewable & Hydro : 4.4% As you may know, Korean power network is not interconnected with its neighboring countries. Because Korea does not have any given natural resources, we must import most of fuels and depend 97% of primary energy on imported energy. Nevertheless, we have seen very high growth rate of electricity demand so far and we still have 5~7% of annual growth in electricity demand.

Capacity by Fuel Type & Genco (2015) Generating Capacity : 98,812MW By Fuel Type By Generation Companies Unit : MW Unit : MW 5 Gencos(KEPCO Subsidy) 47,498(53.8%) Private 24,275(18.8%) KHNP 27,039 (27.4%) 98,812 98,812 In the aspect of facilities capacity according to fuel source, there are coal of 33%, nuclear power of 25%, LNG of 27%, and oil and waterpower of about 7%. 6 subsidiary companies of Korean Electricity Power Corporation, KEPCO, takes up 87% of national facilities. Remaining facilities belong to IPP. * IPP: Independent Power Producer * As of DEC 2015

Retail Sectors & Transmission Power Sales Transmission Circuit Length Unit : C-km In the aspect of facilities capacity according to fuel source, there are coal of 33%, nuclear power of 25%, LNG of 27%, and oil and waterpower of about 7%. 6 subsidiary companies of Korean Electricity Power Corporation, KEPCO, takes up 87% of national facilities. Remaining facilities belong to IPP. * IPP: Independent Power Producer * As of DEC 2015

Electricity Market Structure 1,214 Total 9 (Above 30MVA) CES: Community Energy System

Electricity Market Characteristics Mandatory Pool (above 1MW Gen) Cost-Based Pool (CBP) Generator production levels and prices managed by KPX on the basis of generation cost The Generation Cost Evaluation Committee (GCEC) evaluates the generation cost Day-Ahead Market 1-hour Trading Interval

Growth of Electricity Market “2015 : Trade amount of 495 billion kWh, Trade volume of 38 billion US$” Numbers of Member Companies Unit : No. Trade Amount Unit : billion kWh Trade Volume Unit : billion dollars 1,222 40 495 38 480 490 38 880 549 ’13 ’14 ’15 ’13 ’14 ’15 ’13 ’14 ’15 9 9

Power Market Regulation 2

Power Market Regulatory Structure Market Surveillance Committee Monitor Compliance Market Rule MOTIE Electricity Business Licenses Final Approval of General Supply Provisions & Electricity Market Rules Review Business Licenses Review General Supply Provisions & Electricity Market Rules Legal Dispute Mediation KOREC

About Korean Electricity Regulatory Commission Legal Status - Korean Electricity Regulatory Commission, (KOREC), with the secretariat bureau, is formed within the Ministry of Trade, Industry & Energy Mission Licensing electricity companies Protecting the rights & interests of consumers Monitoring antitrust activities Supervising the operation of electricity market and power system Restructuring the electricity industry

About Electricity Market Surveillance Committee Legal Status Founded under KOREC Providing technical support to KOREC KPX is performing the practical roles of the EMSC secretariat Mission Monitoring compliance with the Market Rules Making market surveillance plan yearly Develop & operate market monitoring system

The New Energy Industry 3

Policy for New Energy Industry Policy Aim • To respond to new climate change regime • To find out solutions to help businesses join this initiative • To accelerate investment by global companies to new renewable energy and ICT New industry where anybody can generate energy with new renewables and ICT and sell the surplus electricity New renewable energy, efficient coal-fired power generation Industries with high efficiency of manufacturing process New industry to promote not only EVs but also the broader ecosystem Key Issues Energy Prosumer Low-carbon Power Generation Environment-friendly Manufacturing Process Electric Vehicles

Deregulations to Promote the New Energy Industry Business Examples Prosumer’s Direct Sale of Electricity Small Generation Aggregators (SGAs) in the Market Resale of Electricity by EV Charging Service Providers Plan to Permit All ESS-based Businesses ※ For details, see the appendix.

Electricity business is growing and energy market is changing Concluding Remarks Electricity business is growing and energy market is changing Market regulation is changing for the development of New Energy Industry

Appendix 1) Prosumer’s Direct Sale of Electricity - Generation & sale - Measurement of generated volume - Issuance of electricity bills <Consumer A: Prosumer + KEPCO> <Consumer B: Prosumer + KEPCO> <Consumer C: KEPCO> Electric power supply & billing Payment of electricity bills Measurement of consumption Last resort

<Small-sized Electricity Trading> Appendix 2) Small Generation Aggregators (SGAs) in the Market <Small-sized Electricity Trading> DER trading market Wholesale electricity market Prosumer Distribution of electricity KPX SGA Electricity & REC payment PV (DER 1) EV (DER 2) ESS (DER 3) PV (DER 4) ESS (DER 5) Trader A B Electricity market REC market Trading market Composition Roles • A market operated by KPX in order to collect DER • DER (PV, ESS, and EVs) and SGAs • Connection and management of DER and SGAs via the trading market (online portal)

Appendix ? ! 3) Resale of Electricity by EV Charging Service Providers To-be ! Direct purchase available from KPX Resale of the purchased electricity available As-is ? Electricity purchasable only from KEPCO Lack in institutional basis of paid EV Charging service EV Driver Charging service provider Direct sale allowed Charging service provider EV Driver

Total energy management Performance improvement Appendix 4) Plan to Permit All ESS-based Businesses Purchase of Electricity Sale of Electricity Electric power trading Consumer New renewables Total energy management Consulting Quality assurance After-sale service Maintenance Performance improvement Leasing ESS provider