Analyzing Economic Effects with Energy Mix Changes: A Hybrid CGE Model Approach

We evaluate the micro and macro-economic effects with the hybrid mixed complementary approach we design to take account of these unique features of the Korean electricity industry. The features we consider are not only the electricity itself but also the Korean electricity market mechanism. Unlike typical commodities, the electricity has unique features. As well known, the electricity supply is not easy to meet an instant hike of rump sum demand of electricity in a smooth and timely manner, since the quantity of power generating is fixed at specific time with the limited capacities. On top of that, we add the Korean electricity market mechanism that the selling price through the Korea Power Exchange (KPX) is unitary, although the marginal production cost of each generating technology. From the modeling point of view, we segment the Korean electricity industry into nine generating technologies such as six conventional and three renewable technologies. In addition, we construct the specifically defined 40-by-40 SAM table to include electricity generating sectors by different resources. With these assumptions, four scenarios for policy simulation are designed according to the supply share reduction of the nuclear power generation. The research result shows micro and macro-economic indices are negatively impacted especially in cases that the share of nuclear power is lower than that of basis case.