Industrial demand and transmission delays
Electricity demand is rising rapidly as investment in semiconductor factories and artificial intelligence (AI) data centers continues, but expansion of the transmission grid and substation facilities needed to support it is struggling to gather pace. Even when companies draw up investment plans and secure sites, failure to obtain the necessary power on time can disrupt both production facility operations and investment recovery schedules. The grid is becoming essential infrastructure that determines the location and competitiveness of advanced industries.
A grid seminar jointly hosted on October 28 by the National Economic Advisory Council and the Seoul National University Institute for Future Strategy focused on electricity supply for large industrial projects. According to materials presented at the seminar, the government's three major project areas, semiconductors, AI data centers and physical AI, require more than 30 GW of power. An analysis presented there indicated that even excluding these projects, approximately 7,500 km of additional transmission lines must be built by 2038.
Building transmission infrastructure can take longer than building power plants. The standard construction period for a 345 kV transmission line is nine years, but the actual average is 13 years, according to the presentation. Resident opposition, permitting delays and route changes are major causes of delays. Of the 75 projects for 345 kV transmission infrastructure scheduled for completion by 2030, 53 had not even started construction as of July this year, according to the materials presented. Even if planned electricity demand increases, industrial complexes cannot expand production capacity without the infrastructure to deliver power.
Grid shortages also directly affect corporate investment decisions. AI data centers require enormous amounts of electricity to run servers, and interruptions to a stable power supply cause problems for service operations and data processing. Supply stability is also important for semiconductor factories because of the nature of their production lines. Beyond simply securing sufficient electricity, grid stability must be maintained to manage voltage and frequency fluctuations.
Connection timing and investment costs
For data center projects, power supply contracts and the date electricity actually becomes available determine commercial viability. Even with a site and building permits secured, delayed grid connections can make it difficult to attract customers and obtain financing. If a developer cannot start operating a facility when expected, rent and financing costs continue to accrue while revenue is delayed. Grid expansion has thus become more than a public infrastructure undertaking; it is a factor determining risk for private investment projects.
The financial burden on Korea Electric Power Corporation is another problem to resolve. With KEPCO's accumulated losses and debt remaining substantial, investment in transmission and substation facilities for semiconductor clusters and data centers is expected to increase further. KEPCO's planned spending on grid construction from 2026 to 2030 is cited at 55.3 trillion won. Insufficient revenue from electricity sales would increase the likelihood of reliance on borrowing and corporate bond issuance, while higher financing costs could in turn constrain investment capacity.
Electricity charges and cost allocation
Electricity charges are difficult to separate from grid expansion. Keeping charges low can reduce the burden on households and businesses, but failure to recover the costs of power generation and transmission and distribution facilities could undermine long-term supply stability. Conversely, raising charges sharply would put pressure on prices and manufacturing costs. Calls for caution over further increases in industrial electricity charges also reflect the fact that domestic manufacturers already face a growing electricity cost burden.
Who should pay for grid construction is also disputed. When electricity demand from AI data centers and large industrial complexes is concentrated in particular regions, it is necessary to examine whether transmission construction costs should be shared by all electricity consumers. Proposals have also emerged to verify applicants' actual ability to carry out projects and impose certain obligations on capacity reservations, preventing applications for data centers of uncertain commercial viability from tying up power capacity.
Kwon Hyo-jae, head of COR Energy Insight, said at the grid seminar: “Transmission grid expansion could determine the success or failure of semiconductor, AI data center and physical AI projects.” Kwon added: “Performance deposits and capacity reservation charges should be introduced to verify whether companies requesting electricity can actually carry out their projects.”
Original Korean article: hinews.co.kr
English brief by Korea Wind Intelligence, koreawindintel.com
