South Korean Power Firms Unable to Project Long-Term Coal Losses Amid 2040 Phaseout Push: Report

Why It Matters

Without clear financial projections, South Korea’s coal‑phase‑out risks stalled reforms, stranded‑asset losses and heightened fiscal pressure on the state utility.

Key Takeaways

• Five state‑owned generators cannot model coal profitability past 2030.
• KEPCO’s stranded coal exposure estimated at $22‑33 billion.
• Capacity payments total ~$6 billion, largely to fossil‑fuel plants.
• Government targets 100 GW renewables by 2030, 21 coal units retained after 2040.
• SFOC urges audits, transparency, and early‑closure compensation for coal assets.

Pulse Analysis

South Korea’s aggressive energy‑transition agenda aims to replace coal with 100 GW of renewable capacity by 2030 and eliminate coal generation by 2040. The policy reflects broader Asian trends where governments are tightening emissions targets while grappling with energy security. Yet the success of this shift hinges on the ability of state utilities to quantify the financial fallout from retiring coal plants, a task complicated by volatile fuel prices, evolving carbon‑pricing mechanisms, and pending electricity‑market reforms.

Financially, the lack of long‑term forecasts exposes KEPCO and its subsidiaries to significant stranded‑asset risk. Independent analysis places KEPCO’s potential coal write‑downs at $22‑33 billion, a figure that could swell if early‑closure compensation and de‑capitalisation costs are not clearly defined. Meanwhile, capacity payments—approximately $6 billion in 2024—continue to subsidise fossil‑fuel generators, diverting funds from clean‑energy investments. This misallocation not only undermines the economic case for renewables but also raises concerns among investors demanding transparent risk assessments and alignment with global ESG standards.

The Solutions for Our Climate report recommends a suite of measures: mandatory disclosure of long‑term coal and LNG asset valuations, comprehensive stranded‑asset audits, and clear rules for early‑plant closure compensation. Implementing these steps would enable the government to restructure the five state‑owned generators into renewable‑focused entities without simply reshuffling risky assets. Such transparency could attract private capital for the renewable rollout, reduce fiscal exposure, and ensure South Korea meets its climate commitments while maintaining grid reliability.