SO KOREA PRICES POWER FOR NEW ENERGY

The Price Is Right: Advanced Electricity Pricing in South Korea; What are the impacts of advanced pricing options on South Korea’s energy consumption—and who will be the beneficiaries?

Kamil Bojanczyk, June 20, 2012 (Greentech Media)

“…South Korean has arguably the most advanced national power grid of any developed country, and its electricity pricing structure is no different. Energy consumption in South Korea has doubled in the past 12 years, having the fastest growth rate among developed countries. The impact of such explosive growth has been the maturation of the wholesale market developed by Korea Power Exchange (KPX) and a well-developed consumer electricity pricing structure that helps smooth out demand growth. These pricing structures, in turn, foster growth in new technologies and services offered, including smart meters and new pricing mechanisms.

“South Korea’s wholesale electricity market operates on a cost-based pool, in which the price of electricity has two components: one, the marginal price, representing the variable cost of generating electricity; and two, the capacity price, representing the fixed cost of generating electricity.”

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“Unique to the South Korean electricity market is that the market price is set by actual variable costs, as opposed to the common method of using the bidding price. The nation’s only utility, KEPCO, which is also majority-owned by the government, has fared well over the years with keeping electricity prices low and keeping the lights on -- blackout time in South Korea is in the ultra-low 12- to 18-minute range, just 10 percent that of the reliable North American power grid.

“Korea Power Exchange (KPX) and KEPCO are in charge of demand-side management programs…[that] have been around since the 1970s…[and] have been an effective tool in curbing power system investments…Smart pricing systems are another key tool in place that reduces peak demand, in turn slowing down capacity and transmission investments. Residential pricing, for example, is far more advanced than in most U.S. utilities…KEPCO offers many pricing options for each customer class…In order for most of KEPCO’s rate classes to exist, advanced meter reading (AMR) meters must be installed. KEPCO is expanding its meter rollout to the residential sector…”

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