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Investment incentives in the Korean electricity market

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  • Investment incentives in the Korean electricity market
  • Park, Jung-Yeon; Ahn, Nam-sung; Yoon, Yong-Beum; Koh, Kyung-ho; Bunn, Derek W.
  • University at Albany


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Title Investment incentives in the Korean electricity market
Similar Titles
Material Type Reports
Author(English)

Park, Jung-Yeon; Ahn, Nam-sung; Yoon, Yong-Beum; Koh, Kyung-ho; Bunn, Derek W.

Publisher

[Albany, U.S.]:University at Albany

Date 2007
Pages 15
Subject Country South Korea(Asia and Pacific)
Language English
File Type Link
Subject Economy < Economic Administration
Industry and Technology < Energy
Holding University at Albany

Abstract

This paper develops a model-based analysis of the effects of various capacity incentive systems on new investment in the Korean electricity market. The restructuring process in Korea allocated power generation to six firms, competing within a wholesale market, albeit strictly on a cost basis. Because of this cost-based pool, capacity payments were also introduced to encourage new investment. However, it is an open question whether the current fixed capacity payment scheme is enough to secure resource adequacy and consideration is being given to alternative mechanisms such as the use of LOLP. Using a detailed market simulation model, based on system dynamics, we compare these approaches in terms of how they may influence the investors’ decisions and thereby determine the system reserve margin. The simulation results suggest that there may be serious problems is staying with the current fixed capacity payments in order to achieve resource adequacy. (The rest omitted)