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Electricity Pricing Policy Alternatives to Control Rapid Electrification in Korea
Abstract
Although South Korea experienced a rolling blackout in 2011, the possibility of a blackout in South Korea continues to increase due to rapid electrification. This study examines the problems of energy taxation and price distortions as possible reasons for the rapid electrification in South Korea, which is occurring at a faster rate than in Japan, Europe, and other developed countries. Further, we suggest new energy taxation and price systems designed to normalize electricity prices. In order to do so, we consider two possible scenarios: the first imposes a tax on bituminous coal for electricity generation and the second levies a tax to provide compensation for the potential damages from a nuclear accident. Based on these scenarios, we analyze the effects of a new energy system on electricity price and demand. The results show that a new energy system could guarantee the power generation costs and balance the relative prices between energy sources, and could also help prevent rapid electrification. Therefore, the suggested new energy system is expected to be utilized as a basis for energy policy to decrease the speed of electrification, thus preventing a blackout, and to induce the rational consumption of energy in South Korea.
... Korea's electricity supply is therefore based on providing lower-cost energy sources such as coal and nuclear power preferentially. 7 Due to the government's decades-long policy of maintaining low electricity prices, Korean consumers are accustomed to the low price and thus have less interest in improving energy efficiency or enhancing renewable and eco-friendly energy generation (Kim and Shin, 2016;Kim and Cho, 2017). Furthermore, the price of secondary energy, electricity, has been lower than that of primary energy in Korea until recently. ...
The peer-to-peer (P2P) electricity trading platform (ETP) is an electricity-sharing system by which individuals can sell surplus electricity or purchase electricity to meet a deficit in a regional power network. South Korea has allowed energy prosumers to engage in electricity trading from 2016 and is seeking ways to vitalize the electricity trading market. This study aims to estimate the willingness to pay (WTP) of respondents for the monthly usage of P2P ETP by using the contingent valuation method. Of the 1000 Korean respondents, 639 were willing to pay a fee for using the platform. The estimated WTP is KRW 5958.86 (USD 5.50) per month. Moreover, the estimated WTP is higher in respondents who have more background knowledge of the P2P ETP and who pay higher electricity fees. The estimated WTP is lower than the usage fees of existing ETPs in other countries, which is primarily due to Korea's low electricity prices. Furthermore, the estimation results show that enhancing consumer awareness of P2P trading and introducing market strategies based on electricity usage should be considered by electricity trading companies and regulators to enhance P2P ETP usage.
This study estimates the power outage costs of the industrial sector by not only considering production loss but also the customer's inconvenience and various damages. For the estimation, we used a Type II Tobit model with firm-level survey data for 430 firms, and considered factors affecting the outage cost such as outage duration, average annual sales, and average monthly electricity consumption, among others. In addition, we analyzed the effect of the preannouncement of a rolling blackout on outage cost savings, and also examined the value of an emergency generator. From the estimation results, we found that the estimated outage cost is 1.24–1.3 times greater than the simple value of lost load (VoLL), and this difference increases when companies have emergency generator. The commercial and public service sector can reduce the outage cost the most compared to other sectors when a preannouncement is provided, and operating emergency generators can lower the outage cost in these sectors. Finally, we confirm that South Korea's rolling blackout in the predetermined order by the industry is appropriate to minimize the outage costs for the national economy when the outage is preannounced, but is not appropriate when there is no preannouncement.
Energy management means to optimize one of the most complex and important technical creations that we know: the energy system. While there is plenty of experience in optimizing energy generation and distribution, it is the demand side that receives increasing attention by research and industry. Demand Side Management (DSM) is a portfolio of measures to improve the energy system at the side of consumption. It ranges from improving energy efficiency by using better materials, over smart energy tariffs with incentives for certain consumption patterns, up to sophisticated real-time control of distributed energy resources. This paper gives an overview and a taxonomy for DSM, analyzes the various types of DSM, and gives an outlook on the latest demonstration projects in this domain.
Recent decades have witnessed on the one hand a much greater and tighter integration of goods or services supply systems and growing interconnectedness as well as changing organizational and operational factors, and on the other hand an increased social vulnerability in the face of accidental or intentional disruption. The work of the International Risk Governance Council (IRGC) in the field of critical infrastructures has focused on both the risks associated with five individual infrastructures and the issues associated with the increasing interdependence between them. This paper presents a selection of system weaknesses and a number of policy options that have been identified and highlights issues for further investigation and dialogue with stakeholders. Furthermore, the need to extend current modeling and simulation techniques in order to cope with the increasing system complexity is elaborated. An object-oriented, hybrid modeling approach promising to overcome some of the shortcomings of traditional methods is presented.
Over the last few years, load growth, increases in intermittent generation, declining technology costs and increasing recognition of the importance of customer behaviour in energy markets have brought about a change in the focus of Demand Response (DR) in Europe. The long standing programmes involving large industries, through interruptible tariffs and time of day pricing, have been increasingly complemented by programmes aimed at commercial and residential customer groups. Developments in DR vary substantially across Europe reflecting national conditions and triggered by different sets of policies, programmes and implementation schemes. This paper examines experiences within European countries as well as at European Union (EU) level, with the aim of understanding which factors have facilitated or impeded advances in DR. It describes initiatives, studies and policies of various European countries, with in-depth case studies of the UK, Italy and Spain. It is concluded that while business programmes, technical and economic potentials vary across Europe, there are common reasons as to why coordinated DR policies have been slow to emerge. This is because of the limited knowledge on DR energy saving capacities; high cost estimates for DR technologies and infrastructures; and policies focused on creating the conditions for liberalising the EU energy markets.
Energy is a strategic resource that has justified as well as influenced the outcomes of wars, fueled as well as strangled economic progress, polluted as well as cleaned up the environment. This paper sheds empirical light on the ideological battleground over energy security policy. Using international data, the paper demonstrates how countries have made distinctive choices affecting the importance of energy as a determinant of economic growth. This paper puts the current debate over oil imports in historical context, considers the relative merits of supply-side and demand-side solutions, and proposes a policy synthesis.
By providing feedback to customers on home electricity and natural gas usage with a focus on peer comparisons, utilities can reduce energy consumption at a low cost. We analyze data from two large-scale, random-assignment field experiments conducted by utility companies providing electricity (the Sacramento Municipal Utility District (SMUD) and electricity and natural gas (Puget Sound Energy (PSE), in partnership with a private company, Positive Energy/oPower, which provides monthly or quarterly mailed peer feedback reports to customers. We find reductions in energy consumption of 1.2% (PSE) to 2.1% percent (SMUD), with the decrease sustained over time (seven months (PSE) and twelve months (SMUD).
The production and use of renewable fuels in the transport sector are rapidly increasing. Renewable fuel standard (RFS) is a strong regulatory component and quantitative policy expected to have a significant market impact. In Korea, RFS implementation was agreed upon in July 2013 and will be enforced beginning in July 2015. Drivers’ acceptance is the most important consideration for RFS introduction and sustainable implementation. This study analyzed Korean customer preferences for RFS and quantified their acceptance level according to policy design. A choice experiment was analyzed with a mixed logit model to reflect the heterogeneity of respondents’ preferences. Respondents were relatively sensitive to the price increase, while other attributes had little effect on acceptance of RFS. Differences between the influences of attributes on drivers’ acceptance should be considered when designing RFS implementation. Furthermore, it is recommended that the price of transportation fuels should be limited to an increase between KRW 10 and 20/liter (USD 8.879 × 10−3 and 1.776 × 10−2/liter) to ensure high acceptance level, secure a budget for infrastructure, and achieve substantial environmental improvement.
In order to respond to the challenge of climate change, similar to other countries, Korea has announced various policies to vitalize the development and uptake of renewable energy. The Renewable Portfolio Standard (RPS) is the most striking example of a policy in this area. This study employs a conjoint survey and Bayesian mixed logit model to analyze consumer preferences for specific attributes of the RPS policy. It analyzes households' marginal willingness to pay (MWTP) for the RPS with specific attributes and simulates the degree of household acceptability of the policy through a scenario analysis. Comparison between costs and benefits of implementing the policy is also attempted by analyzing the households' MWTP with the actual transition expense of RPS implementation incurred by electricity supply companies. The simulation results provide implications for improving RPS policy implementation; households consider the creation of new jobs as the most important policy attribute, followed by increase in electricity prices, damage to forests, reduction in CO2 emissions, and length of power outages. Moreover, the Korean household is willing to accept an increase of up to 1.39% in its electricity prices (relative to 2012), and the median MWTP of each household for RPS implementation is KRW 734.99/month (USD 0.67/month).
Under continuing policies of CO2 emissions reduction, it is crucial to consider scenarios for Japan to realize a safe and clean future electricity system. The development plans for nuclear power and renewable energy - particularly solar and wind power - are being reconsidered in light of the Fukushima nuclear accident. To contribute to this, in the present study, three electricity supply scenarios for 2030 are proposed according to different future nuclear power development policies, and the maximum penetration of renewable energy generation is pursued. On the other side of the equation, three electricity demand scenarios are also proposed considering potential energy saving measures. The purpose of the study is to demonstrate quantitatively the technological, economic and environmental impacts of different supply policy selections and demand assumptions on future electricity systems. The scenario analysis is conducted using an input–output hour-by-hour simulation model subject to constraints from technological, economic and environmental perspectives. The obtained installed capacity mix, power generation mix, CO2 emissions, and generation cost of the scenarios were inter-compared and analyzed. The penetration of renewable energy generation in a future electricity system in Japan, as well as its relationship with nuclear power share was uncovered.
This paper presents the operation of an Electrical Demand-Side Management (EDSM) system in a real solar house. The use of EDSM is one of the most important action lines to improve the grid electrical efficiency. The combination between the EDSM and the PV generation performs a new control level in the local electric behavior and allows new energy possibilities. The solar house used as test-bed for the EDSM system owns a PV generator, a lead-acid battery storage system and a grid connection. The electrical appliances are controllable from an embedded computer. The EDSM is implemented by a control system which schedules the tasks commanded by the user. By using the control system, we define the house energy policy and improve the energy behavior with regard to a selected energy criterion, self-consumption. The EDSM system favors self-consumption with regard to a standard user behavior and reduces the energy load from the grid.
An industrial sector uses more energy than any other end-use sectors and currently this sector is consuming about 37% of the world's total delivered energy. Energy is consumed in the industrial sector by a diverse group of industries including manufacturing, agriculture, mining, and construction and for a wide range of activities, such as processing and assembly, space conditioning, and lighting. This paper presents a comprehensive literature review about industrial energy saving by management, technologies and policies. Latest literatures in terms of thesis (MS and PhD), journal articles, conference proceedings, web materials, reports, books, handbooks on industrial energy management, policies and energy savings strategies have been compiled. Energy saving by management including energy audit, training programs and housekeeping beside some energy management practices in the world has been reviewed. Energy saving technologies, such as use of high efficiency motors (HEMs), variable speed drives (VSDs), economizers, leak prevention and reducing pressure drop has been reviewed. Based on energy saving technologies results, it has been found that in the industrial sectors, a sizeable amount of electric energy, emissions and utility bill can be saved using these technologies. Payback periods for different energy savings measures have been identified and found to be economically viable in most cases. Finally, various energy-saving policies for few selected countries were reviewed.
The “European Blackout” of 4 November 2006 is a key reference in current debates on transnational electricity infrastructure vulnerability and governance. Several commentators have observed that to understand what happened, one must look at history. Our paper answers this call and demonstrates how historical choices, path dependencies, and ways of dealing with these afterwards, have shaped Europe's electric power infrastructure and its vulnerability geography. We show that the decentralized organization of transnational electricity infrastructure and governance, often blamed for present-day power grid fragility, was informed by reliability considerations that still count today. We also address the (meso)regional logic of the failure, foregrounding how stakeholders from different parts of Europe historically chose to collaborate in different ways, with due consequences for the 2006 disturbance and other recent blackouts. Finally, the paper observes that today's notion of transnational electricity infrastructure vulnerability, supposedly demonstrated by the 2006 blackout, is highly contested as many stakeholders find the system extremely reliable.
In this paper, the major benefits and challenges of electricity demand side management (DSM) are discussed in the context of the UK electricity system. The relatively low utilisation of generation and networks (of about 50%) means that there is significant scope for DSM to contribute to increasing the efficiency of the system investment. The importance of the diversity of electricity load is discussed and the negative effects of DSM on load diversity illustrated. Ageing assets, the growth in renewable and other low-carbon generation technologies and advances in information and communication technologies are identified as major additional drivers that could lead to wider applications of DSM in the medium term. Potential benefits of DSM are discussed in the context of generation and of transmission and distribution networks. The provision of back-up capacity by generation may not be efficient as it will be needed relatively infrequently, and DSM may be better placed to support security. We also present an analysis of the value of DSM in balancing generation and demand in a future UK electricity system with significant variable renewable generation. We give a number of reasons for the relatively slow uptake of DSM, particularly in the residential, commercial and small business sectors. They include a lack of metering, information and communication infrastructure, lack of understanding of the benefits of DSM, problems with the competitiveness of DSM when compared with traditional approaches, an increase in the complexity of system operation and inappropriate market incentives.
The emergence of new big consumer countries on the energy markets and the perspective of oil and gas depletion at the end of the current century raise the concerns about fair distribution of the remaining resources for the common and sustainable well-being of the mankind. High volatility of energy prices discourages the investment and delays the energy technology transition. Voluntary measures are needed mainly in industrialised countries in order to develop alternative and sustainable energy sources, to enable technology transfer towards emerging and developing countries and to avoid struggle for energy procurement. In this paper, a composite index of energy demand/supply weaknesses is defined as a proxy of energy vulnerability. The proposed index is based on several indicators such as energy intensity, oil and gas import dependency, CO2 content of primary energy supply, electricity supply weaknesses and non-diversity in transport fuels. The assessment of this composite index for selected industrialised countries is discussed as well as the sensitivity to various factors.
Due to the high demand for natural gas from emerging countries and because natural gas has become an increasingly valuable resource is electricity production, natural gas demand should increase. This paper re-examines the geopolitical key issues related to natural gas as well as the uneven distribution of natural gas resources on a worldwide scale. This paper proposes to define the significance of liquefied natural gas in gas exchanges and it analyses the problem of European gas vulnerability using several indicators.
Using data from the North American Electric Reliability Council (NERC) for 1984-2006, we find several trends. We find that the frequency of large blackouts in the United States has not decreased over time, that there is a statistically significant increase in blackout frequency during peak hours of the day and during late summer and mid-winter months (although non-storm-related risk is nearly constant through the year) and that there is strong statistical support for the previously observed power-law statistical relationship between blackout size and frequency. We do not find that blackout sizes and blackout durations are significantly correlated. These trends hold even after controlling for increasing demand and population and after eliminating small events, for which the data may be skewed by spotty reporting. Trends in blackout occurrences, such as those observed in the North American data, have important implications for those who make investment and policy decisions in the electricity industry. We provide a number of examples that illustrate how these trends can inform benefit-cost analysis calculations. Also, following procedures used in natural disaster planning we use the observed statistical trends to calculate the size of the 100-year blackout, which for North America is 186,000Â MW.
This paper evaluates a pilot program run by a company called OPOWER, previously known as Positive Energy, to mail home energy reports to residential utility consumers. The reports compare a household’s energy use to that of its neighbors and provide energy conservation tips. Using data from randomized natural field experiment at 80,000 treatment and control households in Minnesota, I estimate that the monthly program reduces energy consumption by 1.9 to 2.0 percent relative to baseline. In a treatment arm receiving reports each quarter, the effects decay in the months between letters and again increase upon receipt of the next letter. This suggests either that the energy conservation information is not useful across seasons or, perhaps more interestingly, that consumers’ motivation or attention is malleable and non-durable. I show that “profiling,” or using a statistical decision rule to target the program at households whose observable characteristics suggest larger treatment effects, could substantially improve cost effectiveness in future programs. The effects of this program provide additional evidence that non-price “nudges” can substantially affect consumer behavior.
Gas is competing with oil for being the dominant energy source. In electricity generation gas is to play as pivotal a role as oil in transportation. The security equation of gas and electricity become unseparably interrelated. Energy disruptions have considerable influence on the national accounts far beyond the direct cost of market participants (asymmetry). The present gas supply to the EU depends dangerously on too few sources and venues. There is a decided lack of optionality. The EU directly or through its members needs a clear proactive policy on “Security of Gas Supply” with a strong multilateral direction. The measures developed for the oil industry over the last 30 years can at least serve as a starting point for a constructive debate. When discussing security of supply dependence it is useful to clearly define the various risks one wishes to protect against. Free riders relying on alternative fuels without participating in their security systems are not permissible.
Microgrids are low-voltage (LV) distribution networks comprising various distributed generators (DGs), storage devices, and controllable loads that can operate either interconnected or isolated from the main distribution grid as a controlled entity. This paper describes the operation of a central controller for microgrids. The controller aims to optimize the operation of the microgrid during interconnected operation, i.e., maximize its value by optimizing the production of the local DGs and power exchanges with the main distribution grid. Two market policies are assumed including demand-side bidding options for controllable loads. The developed optimization algorithms are applied on a typical LV study case network operating under various market policies and assuming realistic spot market prices and DG bids reflecting realistic operational costs. The effects on the microgrid and the distribution network operation are presented and discussed.
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