The South Korean government is launching the country’s first distribution grid energy storage system (ESS) project to address grid saturation caused by the expansion of renewable energy. The plan involves installing large-capacity batteries on existing power grids to store surplus electricity and supply it during peak demand periods, enabling additional solar power connections without building new transmission lines.
The Ministry of Climate, Energy and Environment signed a business agreement on the 10th at KEPCO’s Gyeongin Construction Headquarters with nine integrated power plant (VPP) operators selected for the ‘Distribution Grid ESS Deployment Support Project.’ The selected companies are VPPLab, LG Energy Solution (373220), KEPCO KDN, SK Eternix, HD Hyundai Electric, Gridwiz, Korea East-West Power, Korea Midland Power, and Hyundai Engineering & Construction. Fourteen VPP operators applied for 82 distribution lines in this bidding round, with the ministry ultimately selecting 32 lines proposed by nine operators.
The selected operators will install 4MW (20MWh) of ESS on each distribution line. The total deployment scale is 128MW (640MWh), which will allow an additional 182.4MW of solar power currently awaiting connection to be linked to the power grid. The ministry plans to gradually expand the project, deploying approximately 700MW of distribution grid ESS by 2030 and connecting an additional 1GW of renewable energy. A total of 558.6 billion won (approximately $370.5 million) in government funds will be invested from 2026 to 2030.
Once the project is completed by 2030, it is expected to generate an additional 1,350GWh of solar power annually, averaging 3.7GWh per day. This is enough to supply renewable energy to approximately 50,000 households daily.
Distribution grid ESS operates by storing electricity in batteries during daytime hours when solar power generation is high, then discharging it in the evening or when grid capacity becomes available. This reduces temporary saturation of distribution lines, allowing additional power plants to connect to the existing grid. The selected operators will manage the distribution grid ESS for the next 20 years, integrating and managing distributed renewable energy resources while using artificial intelligence technology to optimize charging and discharging times, thereby enhancing power system flexibility and stability.
The ministry’s push for distribution grid ESS comes as existing power grids struggle to keep pace with the rapid expansion of renewable energy facilities. In South Korea’s Honam and Jeju regions, the hosting capacity of some substations and distribution lines has reached saturation due to the increase in renewable energy installations. Grid connections for new solar facilities are being delayed, and even already-connected power plants are experiencing output curtailment. The ministry plans to increase the capacity of existing lines using ESS instead of building new distribution networks.
The project has also intensified competition among battery manufacturers for market dominance. LG Energy Solution was selected as a sole VPP operator without participating in a consortium, securing seven of the total 32 distribution lines. This is interpreted as a strategy to directly acquire ESS operational data beyond simple battery supply and strengthen competitiveness in the future virtual power plant business.
In contrast, Samsung SDI (006400) batteries are reportedly being supplied to most of the remaining eight operator consortiums. Projects using SK On batteries are said to be relatively few. The industry views this project as the de facto first reference for the distribution grid ESS market, which is expected to expand to hundreds of MW in the future. Analysis suggests that companies securing actual operational data are highly likely to gain an advantageous position in subsequent projects and overseas orders.
Operators were selected in this bidding round primarily based on ternary (NCM) and lithium iron phosphate (LFP) batteries. The ministry plans to conduct a second bidding round in August targeting approximately 50 onshore and seven Jeju distribution lines, selecting around 20 additional lines. Starting from the second round, the market entry of next-generation batteries with long-duration, long-life, and high fire safety characteristics will be expanded. These will be applied first in the Jeju region, with plans to supplement the incentive point system for onshore projects.
Kim Sung-hwan, Minister of Climate, Energy and Environment, stated, “This project will serve as a milestone that directly resolves the connection issues of saturated distribution grids and opens a new path for renewable energy. Starting with the distribution grid ESS project, the government will actively support the establishment of an ESS and renewable energy convergence system to stabilize the power grid and swiftly usher in an era where renewable energy becomes a primary power source.”