Electricity Pricing Policy Alternatives to Control Rapid Electrification in Korea

  • Kim, Changseob (Dept. of Energy IT, College of Engineering, Gacheon University) ;
  • Shin, Jungwoo (Environmental Policy Research Group, Korea Environment Institute)
  • Received : 2015.01.23
  • Accepted : 2015.10.18
  • Published : 2016.03.01


Although South Korea experienced a rolling blackout in 2011, the possibility of a blackout in South Korea continues to increase due to rapid electrification. This study examines the problems of energy taxation and price distortions as possible reasons for the rapid electrification in South Korea, which is occurring at a faster rate than in Japan, Europe, and other developed countries. Further, we suggest new energy taxation and price systems designed to normalize electricity prices. In order to do so, we consider two possible scenarios: the first imposes a tax on bituminous coal for electricity generation and the second levies a tax to provide compensation for the potential damages from a nuclear accident. Based on these scenarios, we analyze the effects of a new energy system on electricity price and demand. The results show that a new energy system could guarantee the power generation costs and balance the relative prices between energy sources, and could also help prevent rapid electrification. Therefore, the suggested new energy system is expected to be utilized as a basis for energy policy to decrease the speed of electrification, thus preventing a blackout, and to induce the rational consumption of energy in South Korea.


  1. C. J. Andrews, “Reducing energy vulnerability,” Proceedings of the ISTAS 2005, 2005, pp. 1-5.
  2. E. Gnansounou,” Assessing the energy vulnerability: Case of industrialised countries,” Energy Policy, Vol. 36, 2008, pp. 3734-3744.
  3. M. Reymond, “European key issues concerning natural gas: Dependence and vulnerability,” Energy Policy, Vol. 35, 2007, pp. 4169-4176.
  4. H. Weisser, “The security of gas supply: A Critical issue for Europe?” Energy Policy, Vol. 35, 2007, pp. 1-5.
  5. W. Kroger, “Critical infrastructures at risk: A need for a new conceptual approach and extended analytical tools,” Reliability Engineering & System Safety, Vol. 93, 2008, pp. 1781-1787.
  6. E. Van der Vleuten and V. Lagendijk, “Transnational infrastructure vulnerability: the historical shaping of the 2006 European “Blackout.” Energy Policy, Vol. 38, 2010, pp. 2042-2052.
  7. P. Hines, J. Apt, and S. Talukdar, “Large blackouts in North America: Historical trends and policy implications,” Energy Policy, Vol. 37, 2009, pp. 5249-5259.
  8. Korea Power Exchange, Annual electricity power statistics in 2011, 2012 (in Korean).
  9. Q. Zhang, K. N. Ishihara, B. C. Mclellan, and T. Tezuka, “Scenario analysis on future electricity supply and demand in Japan,” Energy, Vol. 38, 2012, pp. 376-385.
  10. D. S. Callaway and I. A. Hiskens, “Achieving controllability of electric loads,” Proceedings of the IEEE, Vol. 99, 2011, pp. 184-199.
  11. G. Strbac, “Demand side management: Benefits and challenges,” Energy policy, Vol. 36, 2008, pp. 4419-4426.
  12. J. Torriti, M. G. Hassan, and M. Leach, “Demand response experience in Europe: Policies, programmes and implementation,” Energy, Vol. 35, 2010, pp. 1575-1583.
  13. Q. K. Nguyen, “Cambodia’s electricity sector in the context of regional electricity market integration,” in Energy market integration in East Asia: Theories, electricity sector and subsidies, Y. X. Wu, Ed. Jakarta: ERIA, 2012, pp. 253-267.
  14. Y. T. Cho, Energy tax system and subsidy policy for sustainable energy system, Energy taxation policy seminar 2007 at The Korean Association of Public Finance, 2007 (in Korean).
  15. C. S. Kim and Y. T. Cho, “A Study on the Night Thermal-storage Power Service: Sustainability and Energy Security,” Environmental and Resource Economics Review, Vol. 17, 2008, pp. 419-455 (in Korean).
  16. E. A. Abdelaziz, R. Saidur, and S. Mekhilef, S.,” A review on energy saving strategies in industrial sector,” Renewable and Sustainable Energy Reviews, Vol.15, 2011, pp. 150-168.
  17. H. Allcott, “Social norms and energy conservation,” Journal of Public Economics, Vol. 95, 2011, pp. 1082-1095.
  18. I. Ayres, S. Raseman, and A. Shih, "Evidence from two large field experiments that peer comparison feedback can reduce residential energy usage," NBER Working Paper No. 15386, 2009
  19. P. Palensky and D. Dietrich, “Demand side management: Demand response, intelligent energy systems, and smart loads,” IEEE Transactions on Industrial Informatics, Vol. 7, 2011, pp. 381-388.
  20. M. Castillo-Cagigal, A. Gutiérrez, F. Monasterio-Huelin, E. Caamaño-Martín, D. Masa, and J. Jiménez-Leube, “A semi-distributed electric demand-side management system with PV generation for self-consumption enhancement,” Energy Conversion and Management, Vol. 52, 2011, pp. 2659-2666.
  21. A. G. Tsikalakis and N. D. Hatziargyriou, Centralized control for optimizing microgrids operation. In Power and Energy Society General Meeting, 2011 IEEE (pp. 1-8). IEEE, 2011.
  22. Korea Energy Statistics Information System (KESIS,
  23. IEA, Electricity Information, IEA Statistics, 2012a.
  24. IEA, Electricity Information, IEA Statistics, 2004.
  25. IEA, Electricity Information, IEA Statistics, 2006.
  26. IEA, Electricity Information, IEA Statistics, 2008.
  27. IEA, Electricity Information, IEA Statistics, 2010.
  28. Korea Energy Economics Institute (KEEI), Yearbook of Energy Statistics 2011, 2012. (in Korean)
  29. Korea Energy Economics Institute (KEEI), The Energy consumption survey in 2011. Ministry of Knowledge and Economy, 2011. (in Korean).
  30. Ministry of Trade, Industry and Energy (MOTIE), The 2nd Korea national energy master plan, January 14, 2014. (in Korean)
  31. Y. Matsue, Summary and evaluation of cost calculation for nuclear power generation by the “Cost Estimation and Review Committee, The Institute of Energy Economics Japan, May 2012.
  32. Ministry of Commerce, Industry and Energy, The status of the midnight electricity service at night, 2007. (in Korean)
  33. IEA, IEA Energy Prices and Taxes (Third Quarter 2012), IEA Statistics, 2012b.
  34. K. Oshima, Damage of Fukushima nuclear accident and a new compensation scheme, 2013. from:
  35. Asia & Japan Watch, Fukushima crisis estimated to cost from 5.7 trillion yen to 20 trillion yen. June 01, 2011. from:
  36. Korean electric power corporation (KEPCO), The monthly Report on Major Electric Power Statistics, 2012a. (in Korean).
  37. Korean electric power corporation (KEPCO), Business Report in 2011, 2012c. (in Korean).
  38. Korean electric power corporation (KEPCO), News release material, 2012b. (in Korean).
  39. K.S. Park, “Issues on energy price system and its direction for improvement,” Korean Energy Economic Review, Vol. 10, 2011, pp. 111-142.
  40. J. Shin, J. Woo, S. Huh, J. Lee, and G., Jeong, “Analyzing public preferences and increasing acceptability for the renewable portfolio standard in Korea,” Energy Economics, Vol. 42, 2014, pp. 17-26.
  41. S. Huh, D. Kwak, J. Lee, and J. Shin, “Quantifying drivers’ acceptance of renewable fuel standard:Results from a choice experiment in South Korea,” Transportation Research Part D: Transport and Environment, Vol. 32, 2014, pp. 320-333.

Cited by

  1. Estimation of power outage costs in the industrial sector of South Korea vol.101, 2017,