Powering the Grid: South Korea’s 2025 ESS Auction

The South Korean government, under the auspices of its carbon neutrality and energy transition goals, has launched the 2025 1st ESS Central Contract Market auction, marking an evolution in the country’s battery energy storage system strategy.

South Korea’s Renewable Energy Landscape

South Korea has committed to increasing renewable energy capacity while maintaining grid stability. Under its 2030 Nationally Determined Contribution, South Korea aims to reduce greenhouse gas emissions by 40% below 2018 levels, with the 11th Basic Plan for Electricity Supply and Demand targeting approximately 21.7% of electricity generation from renewable sources by 2030, up from less than 10% in 2020. Korea’s energy transition strategy includes significant investments in solar and wind generation, supported by advanced digital grid management and flexible generation resources. However, the inherent intermittency of renewable energy creates challenges for real-time balancing and system reliability, making battery energy storage system projects critical to addressing these issues.

Introduction of the ESS Auction in Korea

The Energy Storage System (ESS) Central Contract Market was established to ensure grid reliability through long-term procurement of dispatchable capacity from ESS resources. The ESS market in Korea is designed as a centralized auction system the Korea Power Exchange (KPX) administers, where winning bidders enter into 15-year fixed-capacity contracts to supply standby grid support.

The 2025 1st ESS Central Contract Market auction follows a previous round and includes a total of 540 MW of capacity across the mainland and Jeju Island. It reflects a maturing framework for ESS deployment, with updated procurement criteria and greater procedural clarity. Notably, while the earlier round was limited to Jeju Island, the 2025 round expands to cover mainland Korea as well, broadening market participation and project diversity. This evolution follows the challenges observed in the Jeju-only auction, which highlighted key barriers such as land and permitting delays, grid interconnection bottlenecks, and documentation inconsistencies. In response, KPX has refined its processes for 2025, offering clearer templates and implementing stage-gated milestones.

Auction Structure, Procedure, and Selection Criteria

The 2025 auction will allocate a total of 540 MW of grid-connected ESS capacity through a competitive selection process, consisting of 500 MW on the mainland and 40 MW on Jeju Island. Projects must have a design capacity that exceeds 10 MW (60 MWh) but remains below 100 MW (600 MWh), and bids must be submitted in increments of 1 MW (6 MWh).

Each participating system must be capable of discharging a minimum of 383 full charge-discharge cycles per year on the mainland and 395 cycles per year in Jeju. These systems must maintain operational performance over a 15-year contract term. All awarded projects must achieve commercial operation by December 2026.

Under the auction terms, projects that have previously received government subsidies or are participating in other support programs, such as the Renewable Portfolio Standard, are ineligible for this auction. Dual participation is expressly prohibited to avoid overlapping compensation under multiple incentive regimes.

Key Schedule and Submission Requirements

Proposal Submission Requirements

Each bidder must prepare and submit a comprehensive application package, which includes:

• A detailed business plan outlining the project’s overall development and implementation;
• Technical specifications, including battery system performance guarantees;
• Interconnection plans and supporting materials, including grid connection point details;
• Project cost breakdown;
• Creditworthiness documentation, such as corporate registration and credit rating reports;
• Safety and reliability measures, including fire prevention, equipment protection, and related insurance coverage;
• Legal and regulatory compliance documents, including permitting status and required safety declarations; and
• Evidence of local community acceptance, such as results of public opinion surveys or signed consent forms from local residents.



Selection Criteria

Submissions will be evaluated based on a weighted scoring methodology that integrates both price and non-price criteria:

• Price Competitiveness: Evaluated based on proposed capacity charges;
• Grid Interconnection: Assessed based on contribution to grid stability, whether the system is connected at 154 kV or higher, and the level of output control capability;
• Industrial and Economic Contribution: Evaluated on the expected contribution to the domestic ESS industrial ecosystem;
• Fire and Facility Safety: Assessed based on the adequacy of the fire prevention plan, the emergency response plan, and fire safety of the equipment.
• Technical Strength: Assessed on the warranty life and operating efficiency of the proposed battery systems;
• Community Acceptance and Project Preparedness: Evaluated based on the level of community support or acceptance, the adequacy of the project development plan, and overall project preparedness; and
• Project Credibility: Determined by the applicant’s financial statements, credit ratings, and funding plans.

Bidders will be disqualified from selection if they score less than 40% of the allocated points in any of the following categories: Grid Interconnection, Industrial and Economic Contribution, or Fire and Facility Safety. The minimum score requirement for the Grid Interconnection category applies only to mainland projects and does not apply to projects located in Jeju.

Post-Auction Requirements for Successful Bidders

Following selection, successful bidders must obtain a Generation Business License within six months. The long-term capacity contract with KPX must then be executed within one month of license issuance. At the time of contract execution, a performance bond equal to 10% of the total value of the bid must be posted, calculated based on the bid price and projected annual discharged energy (383 cycles for mainland projects; 395 cycles for Jeju). Noncompliance with these milestones may result in the award’s cancellation or the capacity contract’s termination.

Post-Bid Investment Considerations and Transfer Restrictions

Investors considering post-award investment in successful projects under the 2025 ESS Central Contract Market auction should assess both regulatory and contractual restrictions on equity transfers. In Korea, public procurement processes and government-administered programs often impose limitations on changes to project ownership or control.

This framework is also reflected in the 2025 ESS auction. While the initial bid notice did not expressly address post-award equity transfers, KPX confirmed in its Q&A published in mid-June 2025 that any post-bid change in control or change in shareholder composition requires prior approval from the Central Contract Market Committee. Although the Q&A does not specify the exact approval criteria, based on prior practice and the structure of the solicitation, the Committee may evaluate factors such as the incoming shareholder’s financial standing and operational track record, its consistency with the original bid assumptions, and whether the original developer retains primary responsibility for project implementation.

In parallel, the Electricity Business Act (EBA) imposes statutory controls on changes in the ownership of licensed electricity businesses, including battery energy storage system projects that have already obtained a Generation Business License. Any transaction that results in the acquisition of a controlling interest, typically understood as 20% or more with effective management influence, requires prior approval from the Ministry of Trade, Industry, and Energy. This process involves an Electricity Regulatory Commission review and includes an evaluation of the incoming shareholder’s technical and financial capabilities, as well as the implications for the licensed project’s continued operation and compliance. Even if the Central Contract Market Committee grants transfer approvals under the ESS auction rules, any ownership change must still comply with these statutory requirements under the EBA.

Foreign investors considering entry into awarded battery energy storage system projects must also comply with Korea’s foreign investment reporting requirements under the Foreign Investment Promotion Act. Where the transaction involves acquiring 10% or more of the project company, a foreign investment report must be submitted either prior to or within 30 days after the transaction, depending on the structure. This filing is typically made through a Korean commercial bank or Invest Korea, and upon completion, the investor is issued a Foreign Investment Registration Certificate. This certificate is necessary for future dividend repatriation, share transfers, and certain tax filings.

Takeaways

The 2025 1st ESS Central Contract Market auction offers developers access to potentially stable, 15-year revenue streams in a maturing policy environment. With increasing renewable energy penetration and a stronger emphasis on dispatchable grid support, Korea’s battery energy storage system market is positioned for sustained growth, creating opportunities for well-structured and locally integrated projects. Under the 11th Basic Plan for Electricity Supply and Demand, Korea intends to continue ESS procurement through the Central Contract Market mechanism, totaling 2.1 GW on the mainland between 2026 and 2029, and 0.12 GW in Jeju between 2026 and 2028. In light of this plan, further rounds of ESS auctions are expected in the coming years.