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Assessing Alternative Renewable Energy Policies in Korea’s Electricity Market

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  • Kim, Hyunseok

Abstract

This paper, focusing on the renewable portfolio standard (RPS), evaluates alternative renewable energy policies. We propose a tractable equilibrium model which provides a structural representation of Korea’s electricity market, including its energy settlement system and renewable energy certificate (REC) transactions. Arbitrage conditions are used to define the core value of REC prices to identify relevant competitive equilibrium conditions. The model considers R&D investments and learning effects that may affect the development of renewable energy technologies. The model is parameterized to represent the baseline scenario under the currently scheduled RPS reinforcement for a 20% share of renewable generation, and then simulated for alternative scenarios. The result shows that the reinforcement of the RPS leads to higher welfare compared to weakening it as well as repealing it, though there remains room to enhance welfare. It turns out that subsidies are welfare-inferior to the RPS due to financial burdens and that reducing nuclear power generation from the baseline yields lower welfare by worsening environmental externalities.

Suggested Citation

  • Kim, Hyunseok, 2019. "Assessing Alternative Renewable Energy Policies in Korea’s Electricity Market," KDI Journal of Economic Policy, Korea Development Institute (KDI), vol. 41(4), pages 67-99.
    • Handle: RePEc:zbw:kdijep:210413
    DOI: 10.23895/kdijep.2019.41.4.67
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    References listed on IDEAS

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    More about this item

    Keywords

    Electricity Market; Renewable Portfolio Standard; Technology; Renewable Energy Certificate; Welfare;
    All these keywords.

    JEL classification:

    • Q21 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Demand and Supply; Prices
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • Q31 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Demand and Supply; Prices

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