Building a power system centered on renewable energy requires a paradigm shift from Korea’s existing centralized model, which relies on large-scale fossil fuel power plants, to a distributed structure. At the heart of this paradigm shift is the Virtual Power Plant (VPP), which integrates Distributed Energy Resources (DERs)—such as solar power, wind energy, Energy Storage Systems (ESS), and Demand Response (DR) to operate and participate in the wholesale power market.

Nevertheless, the Korean government has not established adequate policy measures to incentivize the transition to a distributed power system. The existing wholesale power market continues to prioritize the operation and compensation of large-scale fossil fuel power plants, while lacking the market structure and the infrastructure required to support the expansion of DERs. This report examines the key challenges to the expansion of VPPs as an essential component of Korea’s renewable energy transition and suggests possible solutions.