National maximum electric consumption has increased more than power utility capacity has for the last 7 years. Therefore the electric reserve ratio was below 10% for 60 days in 2010 and more than 100 days in 2012. Since maximum electric consumption has been renewed during the winter period, it becomes an urgent issue to secure electric reserves in the coming winter. Therefore this report analyzes why the electric reserve has become an issue these days, and how the government should manage it.
Government has managed electric reserves through a financial program called “electric load management” which subsidizes large electric consumers such as steel and cement industry to reduce electric consumption in peak season. The program budget was set at 66.6 bil. won in 2012 by the National Assembly, but it is estimated that it will cost more than 225 bil. won in the end. For the last 5 years, the program spent 807 won to secure 1 kWh of reserve electricity. Compared with the highest price of 181 won/kWh for industrial use, it is clear that the program is very costly. Furthermore, government manages the electric load management program only for large electric consumers. Households face progressive electric bills to control large electric consumption at home. Commercial sectors get temperature regulation to reduce electric load in peak season. Only industrial sectors get financial incentive to reduce electric demand, which may incur inequality among industrial, commercial, and household sectors.
To secure electric reserves, at first, it is suggested that electric prices be raised to cover all costs for electricity generation. It has been kept low while the prices of other energy sources, such as oil and gas, have increased. The electric price should also represent every cost of generation, including the electric load management cost and neighborhood support cost. The second suggestion is to combine regulation with financial programs, in particular for large electric consumers.
Hur Gahyeong
Government has managed electric reserves through a financial program called “electric load management” which subsidizes large electric consumers such as steel and cement industry to reduce electric consumption in peak season. The program budget was set at 66.6 bil. won in 2012 by the National Assembly, but it is estimated that it will cost more than 225 bil. won in the end. For the last 5 years, the program spent 807 won to secure 1 kWh of reserve electricity. Compared with the highest price of 181 won/kWh for industrial use, it is clear that the program is very costly. Furthermore, government manages the electric load management program only for large electric consumers. Households face progressive electric bills to control large electric consumption at home. Commercial sectors get temperature regulation to reduce electric load in peak season. Only industrial sectors get financial incentive to reduce electric demand, which may incur inequality among industrial, commercial, and household sectors.
To secure electric reserves, at first, it is suggested that electric prices be raised to cover all costs for electricity generation. It has been kept low while the prices of other energy sources, such as oil and gas, have increased. The electric price should also represent every cost of generation, including the electric load management cost and neighborhood support cost. The second suggestion is to combine regulation with financial programs, in particular for large electric consumers.
Hur Gahyeong