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Fri, May 20, 2022 | 09:39
Thoughts of the Times
Korea's strategy for smart grids
Posted : 2017-03-29 16:42
Updated : 2017-04-02 11:34
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By Sung-Young Kim & John A. Mathews


The central piece of infrastructure necessary to bringing about Korea's (indeed the world's) renewable energy revolution is the development of an IT-infused electric power grid (smart grid). Korea is characteristically accelerating
the development of a smart grid through indigenous research and development efforts centred on a modular approach, utilizing microgrids, and promoting competition. However, it was only until a series of announcements mid to late last year that Korea's greening strategy became a more serious possibility.


In July 2016, the Ministry of Trade, Industry and Energy (MOTIE) announced detailed investment plans (42 trillion won or 36.6 billion by 2020) for the development of renewable energy technologies, involving increasesto Korea's Renewable Portfolio Standard (RPS) targets.

Perhaps the most significant part of the July announcementwas that the MOTIE's plans were to be combined with the commitment that the Ministry "would come up with specific plans to allow renewable energy source-based power generators to participate in the energy sector" – with the clear intention that this would "attract more private companies to join the market."

Theplan would allow solar power producers to sell electricity directly to customers via the Korea Power Exchange (KPX).The opening up of the electricity industry to competition represents in our view the most concrete commitment yet in bringing about a greening of Korea's power systems.

At the 2016 Renewable Energy Business Investment Forum (held in December) the Ministry announced that the Korea Electric Power Corporation's (KEPCO) six subsidiaries will be investing 3.7 trillion won ($ 3.06 billion) in the construction of renewable energy generating facilitiesin 2017 and 2018. This includes 38.6 percent of the total investment in solar projects, 35 percent in wind, 17.9 percent in fuel cells and the remaining 8.5 percent in other technologies.

We see these developments as the first meaningful steps to breaking the quasi-monopoly held by the state-owned electric power utility, KEPCO, which retains 95% market share over power generation and 100 percent market share over transmission/distribution of the electricity industry.Indeed, liberalizationhas been the missing ingredient in policymakers' attempts to raise the level of renewable power generationin Korea in the past.

Liberalization of the Korean power generation sector

According to an IEA report, renewable energy levels in Korea are the lowest of any OECD country.In 2014, a mere 1.1 percent of the country's energy was sourced from renewables– representing little change since 1990. By comparison, in the major industrialized countries such as Germany, Japan and the United States, renewable energy sources made up 11.1%, 4.9 percent and 6.5 percent respectively.

In 2015, Korean power production was primarily sourced from non-renewable, conventional sources such as coal (31 percent), natural gas (14 percent), nuclear (13 percent), and petroleum and other liquids (41 percent).

Liberalization (the introduction of competition to KEPCO) is the critical move that will resolve two of the major blockages standing in the way of Korea's greening of its electricity power system. The first blockage has been the state's subsidisation of electricity prices (through capping price increases), which has not only led to substantial increases in consumption from 2002-2010, but has burdened KEPCO with increasing levels of debt.
The second hurdle is KEPCO's maintenance of a virtual monopoly over the generation, distribution and retail segments of the overall electricity industry (after stalled attempts to introduce full competition in the early 2000s). While private companies are allowed to participate in the generation of electricity and are responsible for the majority of renewable energy generation in Korea, they have a mere 5 percent share of total electricity generation.
In effect, it's fair to say that KEPCO's contribution to the generation of renewable energy (compared to other OECD countries as mentioned above) was almost next-to-nothing.

The government's promotion of smart microgrids and energy self-sufficient islands

Genuine competition could help accelerate nationally coordinated efforts to promote smart microgrids, which began in 2008 under former President Lee Myung-bak's ‘green growth' initiative and since 2013 under former President Park Geun-hye's ‘creative economy' initiative. There are three types of microgrids under development in Korea:an urban-based "Smart Grid Station (SGS)," "Energy Block Platforms" suitable for industrial complexes, and remote island-based microgrids.

Korea has now gone furthest in the development and export of remote island-type microgrids. Since October 2015, Gasa Island, a tiny island off Jindo in South Jeolla province, has been home to the world's first independent microgrid using a Korean-built Energy Management System (EMS) – a key technology in smart grids.

According to our interview with Chae Wookyu, a Senior Researcher at KEPCO Research Instituteand designer of the Gasa Island microgrid system, KEPCO purchased all necessary devices including wind turbines, photovoltaic modules, batteries, computer systems and other components, while the EMS was developed in-house. The Gasa island project is a prototype for as many as 86 other island-based projects planned by KEPCO with private firms such as Woojin Industrial Systems and LG CNS and others leading their construction.

The future of Korea's greening strategy?

The future success of Korea's efforts to green its power systems and secure leadership in the global smart grid industry (as it has done time and time again in other industries) will now hinge on the ability of the government to break KEPCO's dominance in the power market. Many of the technologies are commercially ready and service models are ripe for implementation but a market is yet to emerge. The MOTIE's commitments appear genuine, but introducing full competition will require tough decisions. To be sure, such discussions are nothing new and would appear limited in their effectiveness without the phasing out of the subsidies that keep electricity prices low.

John A Mathews is a professor at the Macquarie Graduate School of Management. Sung-Young Kim is lecturer in the Department of Modern History, Politics & International Relations at Macquarie University, Australia. This article is adapted from a longer version published in The Asia-Pacific Journal: Japan Focus. Write to sungyoung.kim@mq.edu.au.


 
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