Investment Incentives for Nuclear Generators and Competition in the Electricity Market of Korea

Abstract

In this paper, we analyzed the performance of nuclear generators and the effects of the market rules on the financial performance of the nuclear generators in Korea and found that the current market rules that apply to nuclear reactors are likely to induce an inefficient outcome. We proposed an alternative set of rules for nuclear power plants that are superior to the current rules in that it gives KHNC and its employees a stronger incentive for efficiency in operations. We also analyzed the incentives of major players that make decisions on the development and construction part of the nuclear power industry. We found that current regime does not assign authorities and risks properly and is likely to lead to inefficiency in development, procurement, and construction of nuclear power plants and argued for reallocation of authorities and risks in such a way that the parties that are exposed to the risks are given the authorities to control them. Lastly, we briefly discussed the key issues in investment in small modular reactors in Korea and the market rules that are appropriate to apply to SMART generators.