LG Energy Solution selected for South Korea's first distribution grid ESS project

LG Energy Solution has been selected as the operating entity for a government-backed project to build energy storage systems (ESS) to expand power infrastructure in the Honam region. The company plans to stabilize the grid using virtual power plant (VPP) platform technology, extending its role beyond battery supply to cover ESS construction and operation.

LG Energy Solution announced Friday it had been named the operating contractor for the Ministry of Climate, Environment and Energy's "2026 AI-Powered ESS Construction Support Project."

The company formed a consortium called "Haetbit Baejeonmang Energy" with Shinhan Asset Management to compete for the project. Of the nine operators and 32 distribution lines selected in total, LG Energy Solution secured seven distribution lines — the maximum any single operator could obtain — with a combined capacity of 140MWh at 20MWh per line.

LG Energy Solution will supply high-performance batteries and oversee ESS construction and AI-based operations. Shinhan Asset Management, drawing on its experience managing solar funds, will handle financial structuring backed by power market revenues to ensure a stable business foundation. Commercial operations are set to begin in 2027 and run for 20 years.

This is the first distribution grid ESS support project the government has undertaken. Existing substations and distribution lines in areas with concentrated renewable energy — including South Jeolla Province and Jeju — have reached capacity, forcing some generators to wait for grid access or curtail output.

The project's target areas of South Jeolla and North Jeolla provinces face the same problem: a surge in small-scale solar installations has pushed renewable energy directly connected to distribution networks beyond the lines' permitted capacity, causing connection delays and output curtailment.

To address this, the government is installing ESS units along distribution lines as a buffer. During peak generation hours, the ESS absorbs excess power to ease the load on the distribution grid; when demand is high or the system has spare capacity, it discharges. Distribution grid ESS can raise grid capacity in a short time without large-scale transmission network expansion.

LG Energy Solution plans to apply advanced AI prediction algorithms and VPP platform technology to improve renewable energy integration and grid stability simultaneously. The system is expected to connect 40 megawatts of solar generation currently awaiting grid access and accommodate an additional 52.4GWh of renewable energy annually. The company also plans to convert solar generation assets into dispatchable resources on an ongoing basis to contribute to grid stabilization in the Honam region.

LG Energy Solution said the selection marks a meaningful step in its evolution from a battery supplier to a VPP operator. The company has been steadily building AI-based ESS operating experience since it established and began running a distribution grid-linked ESS power plant in Seogwipo, Jeju in 2024.

"This selection is a significant achievement in our journey to evolve from a battery supplier into an energy platform company," said Kang Chang-beom, head of LG Energy Solution's ESS Battery Business Division. "We will accelerate business growth by leveraging our AI-based ESS operating capabilities and contribute to stabilizing the national power grid."

Meanwhile, LG Energy Solution began mass-producing lithium iron phosphate (LFP) batteries for ESS use Tuesday local time at the Tennessee factory of Ultium Cells, its battery joint venture with General Motors. The launch comes roughly four months after the company announced its LFP production plan for ESS in March, and reflects a strategy to partially convert production lines from electric vehicles to ESS in response to slowing EV market growth, diversify its product portfolio and accelerate its push into the North American market.