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Assessing Alternative Renewable Energy Policies in Korea’s Electricity Market

Kim, Hyun Seok

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Abstract

This paper, focusing on the renewable ortfolio standard (RPS), evaluates alternative enewable 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) ransactions. 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.

Issue Date
2019-11
Publisher
Korea Development Institute
DOI
https://doi.org/10.23895/kdijep.2019.41.4.67
Journal Title
KDI Journal of Economic Polilcy
Start Page
67
End Page
99
Language
eng
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