In the era of the climate crisis, a new paradigm shift toward a decarbonized society requires a locally produced and consumed, distributed power grid system. As a tailored grid for the age of renewable energy-led power generation, the next-generation distributed power grid will be launched in earnest this year as its inaugural year. The Ministry of Climate, Energy and Environment (MCEE, Minister Kim Sunghwan) announced that it will hold the “Distributed Power Grid Forum” on the morning of February 20 at the Emerald Hall of Lotte Hotel (located in Jung-gu, Seoul).

This event was organized to ensure the successful implementation of the next-generation distributed power grid, which will be built in earnest this year with approximately KRW 321 billion in government funding. It brings together related companies, public institutions, universities, and associations to strengthen their commitment to cooperation and to discuss measures for swift and effective deployment.

Background

Achieving carbon neutrality requires an energy transition, yet the current power system continues to operate primarily around large-scale generators introduced during the 2001 restructuring of the electricity industry. 

In the past, system operation centered on transmission networks connected to large power plants. Today, however, the importance of operating distribution networks, where most solar power and other renewable sources are connected, has grown significantly. Distribution networks have evolved from one-way systems delivering electricity to consumers into complex grids where generation and demand-side resources coexist. The next-generation distributed power grid is a tailored system for the carbon-neutral era. It can be defined as an intelligent power grid system designed to maximize the integration of distributed energy resources such as solar power and to realize locally optimized production and consumption of electricity in each region.

Direction for Building the Next-Generation Distributed Power Grid
 

The direction for advancing the next-generation distributed power grid can be summarized as follows. 

First, innovation at the regional distribution network level will be promoted. Through this, the grid will actively accommodate variable renewable energy sources such as solar power and mitigate their variability, thereby contributing to system stability.

The government plans to significantly expand the deployment of flexibility resources, such as energy storage systems (ESS), in distribution networks where solar interconnection queues have become severe due to grid saturation, thereby facilitating additional solar connections. Starting with 20 systems this year, a total of 85 energy storage systems will be installed in distribution networks by 2030. Once completed, this is expected to enable approximately 485 MW of additional solar capacity to connect to the grid. In parallel, small-scale energy storage systems will also be deployed to help revitalize solar income villages.

* Distribution network ESS deployment: KRW 117.6 billion in government funding in 2026 (50% government share)

* Solar income village ESS deployment: KRW 98.4 billion in government funding in 2026 (50% government share)

Energy storage systems and other resources will be deployed to small- and medium-sized loads connected to distribution networks, such as agro-industrial complexes and university districts, to establish microgrids (small-scale self-sufficient power networks) that help level demand. Once implemented, these microgrids are expected to reduce distribution network loads, thereby increasing grid utilization, including enabling additional solar connections.

* Microgrid deployment: KRW 70.24 billion in government funding in 2026 (70-100% government share)

In addition, efforts will be made to make the rigid interconnection system more flexible. Moving away from the current passive, rated-capacity-based distribution grid interconnection management system, the government plans to expand the allowable capacity for renewable energy connections under conditional output control to up to 16 MW per distribution line. 

As flexibility resources are significantly expanded in distribution networks and additional solar capacity is connected, Korea Electric Power Corporation (KEPCO) will assume the role of a Distribution System Operator* (DSO), moving beyond its current function as a distribution network manager to ensure system stability. Using the Advanced Distribution Management System (ADMS), KEPCO will forecast solar generation in advance and implement dynamic control measures, such as directing energy storage systems to charge when distribution network overload is anticipated due to additional solar connections.

* An entity that moves beyond the traditional role of installing and maintaining distribution facilities to actively operating the distribution network in a manner similar to the transmission grid.

In addition, the government plans to introduce a separate compensation mechanism for flexibility resources that can substitute for grid construction, known as the “Non-Wires Alternatives (NWAs*)” program. When energy storage systems are installed in distribution networks, they can enable additional solar connections and thereby replace the need for new grid construction to accommodate such connections. Under this approach, project developers installing energy storage systems will be compensated with an amount equivalent to the avoided grid construction costs. The program will be piloted in Jeju starting in the first half of this year, with plans to expand it to the mainland by the second half of the year.

* Non-Wires Alternatives: Grid investment that uses non-traditional transmission and distribution solutions (such as energy storage systems) to defer or avoid the expansion of transmission and distribution networks

Second, reforms will be pursued to establish a market system suited to distributed power networks. A market framework that fully reflects the variability of renewable energy and the value of flexibility resources will be introduced. 

Innovative market mechanisms will be introduced, centered on Jeju. Through a power demand bidding system, when prices fall due to surplus renewable generation, demand will be encouraged to shift to various uses such as power-to-heat (P2H) and vehicle-to-grid (V2G). In addition, price bidding will be expanded to include all generation sources except those subject to minimum output requirements. Furthermore, the renewable energy bidding system implemented in Jeju will be introduced on the mainland within this year.

Lastly, an industrial ecosystem for next-generation distributed power grids will be established to lead the global market.

Major countries such as the United States, the United Kingdom, and the European Union (EU) are also advancing power grid reforms to expand renewable energy, and global investment in power grids is projected to reach USD 372 billion by 2030. Accordingly, to lead the global market for next-generation distributed power grids and promote exports, it is necessary to proactively establish an industrial ecosystem for next-generation distributed power grids. 

* Global grid investment: (2020) USD 235 billion → (2030E) USD 372 billion → (2050E) USD 636 billion (BNEF)

To this end, the government plans to establish the “K-GRID Talent and Startup Valley” through collaboration among Korea Institute of Energy Technology, Gwangju Institute of Science and Technology (GIST), Chonnam National University, state-run power companies, and private firms. A testbed will also be set up to validate next-generation distributed power grid technologies. 

In addition, to promote investment in startups with outstanding ideas, the government plans to host the “K-Grid Future Festival” (tentative name), inviting key domestic and international investors. It will also advance research and development on next-generation distributed power grids to identify core technologies, including a virtual distributed power testbed and an AI-based autonomous multi-microgrid operation platform. 

* K-GRID Talent and Startup Valley: KRW 19.5 billion in 2026 (100% government funding)

Next-generation distributed power grid R&D: KRW 3.4 billion in 2026 (100% government funding)

Key Highlights of the Distributed Power Grid Forum

At the event, two memoranda of understanding (MOUs) will be signed among relevant institutions to ensure the smooth implementation of the next-generation distributed power grid initiative. First, an MOU will be concluded among the MCEE, the KEPCO, the Korea Energy Agency, and the Korea Power Exchange to strengthen cooperation in grid information sharing and energy storage system operations for the development of the next-generation distributed power grid. In addition, to foster talent for next-generation distributed power grids, another MOU will be signed among the MCEE, Seoul National University, Chonnam National University, Korea Institute of Energy Technology, and the Gwangju Institute of Science and Technology.

Minister Kim Sunghwan of the MCEE stated, “Carbon neutrality is the minimum responsibility we owe to the planet and to future generations, and the key to achieving carbon neutrality ultimately lies in the energy transition.” He added, “The next-generation distributed power grid is a tailored system designed to respond to the climate crisis and realize carbon neutrality, and its swift implementation is essential.” He further emphasized, “As the next-generation distributed power grid project begins full-scale deployment this year, the government, industry, academia, and related institutions will join forces to ensure it becomes a global model.” 

Project operators for the deployment of energy storage systems in distribution networks and the establishment of microgrids under the next-generation distributed power grid initiative will be selected through a public call for proposals. The announcement will be issued in the first quarter, with project operators to be selected in the second quarter.

For further information, please contact the Public Relations Division. 

Contact person: Gina Lee, foreign media spokesperson

Phone: +82-44-201-6055

Email: gcjgina @gmail.com