Electric power industry restructuring and ROE: The case of Korea Electric Power Corporation

Korea's electric power industry was previously run by Korea Electric Power Corporation (KEPCO) in a natural monopoly-type structure. As economy of scale was waning in influence and management effectiveness began to increase in importance, KEPCO was divided into six subsidiaries and faced competition beginning in April 2001. This study evaluates the restructuring process for Korea's power industry and analyzes the financial outcomes based on return on equity (ROE). The results show that the ROE ratio increased. In the analysis period (1993–2004), the financial ratio showed a better performance than that before restructuring. However, productivity ratios such as productivity of capital (or gross value added to total assets) and gross value added to property, plant, and equipment decreased compared to the situation before restructuring. It is believed that the results were due to the increased financial leverage of KEPCO. For this reason, KEPCO should make further efforts to manage its debt in a systematic way.     

Modeling market power in Korea's emerging power market

The Korean power market is being formed from the unbundled generation, transmission and distribution assets of Korea Electric Power Corporation. The KEPCO generation has been allocated to six independent gencos with a combined generating capacity of 46,629 MW in 2002. This gave an 11% margin over the peak load that year (41,921 MW).     

Electricity industry restructuring revisited: the case of Korea

In 2004, the Korean Government suspended its electricity market reform based on the two-thirds majority recommendation of a six-member joint study team. This suspension effectively interrupts the basic plan adopted in 1998 by the previous administration to divest and privatize Korea Electric Power Corporation's (KEPCO's) generation segment in 2000–2002, implement transmission open access and wholesale competition by 2008, and introduce retail competition thereafter. This policy-decision followed the controversial debate on electricity market reform in Korea. Reform proponents claim that electricity can be treated as ordinary goods exchangeable in the competitive market, and any problems caused by the transition to the market system are manageable. By contrast, reform opponents argue that effective competition of the power industry is not yet feasible due to the idiosyncratic nature of electricity (e.g., low-price elasticity of demand and not being storable at low cost) as well as the country's isolated electricity network. In suspending the electricity reform, the current administration accepted the final conclusion of the joint study team in the Tripartite Commission on the ground that the alleged benefits of reform are theoretical and uncertain, while the real costs and risks are substantial.     

Voluntary electricity conservation of households after the Great East Japan Earthquake: A stated preference analysis

This paper examines the voluntary electricity-saving awareness of households after the Great East Japan Earthquake and the subsequent accident at the Fukushima nuclear power station. We conduct a conjoint analysis of consumer stated preferences for the settings of air conditioners, refrigerators, and the standby power of electrical appliances, based on a web questionnaire survey administered in the areas supplied by the Tokyo Electric Power Company (TEPCO) and Kansai Electric Power Company (KEPCO). The main findings of this paper are as follows. First, we observe awareness of voluntary electricity conservation among the households in both the TEPCO and KEPCO areas after the disasters. Second, awareness of voluntary power saving is higher in the TEPCO area, which has been directly affected by the electric power shortages, in comparison with the KEPCO area, where there was no such direct impact. Third, if power prices are to be further raised, the consumer responses to the price changes would be small in both areas. Furthermore, we show that the potential voluntary reduction in electric power consumption of a household in the TEPCO area is 26% more than that in the KEPCO area during the summer peak periods.     

Deregulation,vertical unbundling and the performance of China's large coal-fired power plants

In 2003, China's integrated electricity utility – the State Power Corporation (SPC) – was unbundled and dismantled into five generation groups and two grid companies in an effort to increase competition and improve efficiency. In this paper, we study the impact of this deregulation reform on the operational efficiency for a balanced panel of 34 large power plants for the period 1997–2010. We find that on average these power plants have converged to the technological frontier over the sample period. Controlling for substantial heterogeneity in the technical profile, we also find that the unbundling reform has boosted productivity of China's large thermal power plants; however, the presumably differential impacts of the reform on the previously SPC-managed power plants and the independent power producers in our sample are insignificant.     

The optimal fuel mix and redistribution of social surplus in the Korean power market

This paper investigates the difference between the optimal fuel mix incorporating a pre-installed generation capacity constraint and the actual fuel mix in the Korean power market. Since the restructuring of the market, the fuel mix has been determined partly by investors and partly by the Basic Plan for Long-Term Electricity Supply and Demand (BPE). Both the system marginal price (SMP), and the capacity payment (CP), which has been based on the fixed cost of a specific gas turbine generator, were intended to provide an investment incentive in the market; however, they did not bring about an optimal fuel mix in Korea. Under the circumstances of a shortage of base load generators, these generators may garner excessive profits due to a high SMP level. However, the adjustment scheme of profit between KEPCO and Gencos left scant profit for generators. This paper suggests that a contract is needed to create the appropriate profit and tax levels for these base load generators. The redistribution of profit improves equality between consumers and generators, and the proper margin creates incentives for base load technology investment in Korea.     

Pricing of electricity in China

In China, the State Power Corporation (SPC) was the dominant producer and supplier of electric power. Our price estimation results based on published data of the SPC indicate that short run cost factors, like fuel costs and investment expenditure, were more important in the price determination process. Although the power purchase prices paid by the SPC to independent power producers (IPPs) have already covered capital costs, capital costs of generation and transmission assets owned by the SPC were ignored in the process. Our studies indicate that electricity prices in China were highly subsidized and below the average total costs of generation and transmission.     

Serbian energy development based on lignite production

Lignite, as an energy resource, is a mainstay of electricity generation in the Republic of Serbia. Installed capacity of lignite power plants represents 68% of the total installed capacity of Electric Power Industry of Serbia, the only company in Serbia, which manages electricity generation. In the future, with the increase in demand for electricity, both in Serbia and in Europe, we should expect more extensive and effective utilization of lignite as the main energy potential. In addition, due to increased emissions of CO₂, NO_X and other pollutants, the Republic of Serbia must accelerate the implementation of flexible mechanisms of Kyoto Protocol and the guidelines set by the European Union. Lignite in the future will retain its existential importance in the electricity generation in the Republic of Serbia.     

On-grid electricity tariffs in China: Development,reform and prospects

With the introduction of market-oriented measures in China's power sector in the mid-1980s, electricity sale prices to the grid companies—on-grid electricity tariffs—became the focus of the energy industry, thus affecting all related stakeholders, including fuel suppliers, power generators and end-use consumers. A number of changes have gradually been undertaken in terms of electricity tariff settings and their implementation to address specific requirements of the expansion of the power industry at each stage of its development. On-grid electricity tariffs had been used as a key lever to attract investment in power generation at an early stage of reform and then to encourage competition in the power industry. In response to the rising concerns about environmental protection and the promotion of clean energy utilisation, tariffs have progressively been developed for renewable electricity generation, which has contributed to massive expansion of the renewable power industry in China. This paper reviews key milestones of the development of on-grid electricity tariffs in China, examines the tariff-setting mechanisms of coal-fired power plants and renewable power generation, analyses the factors associated with the adjustments of the tariff levels and discusses the options for further reform and more effective electricity pricing.     

Energy efficiency,CO2 emission performance and technology gaps in fossil fuel electricity generation in Korea: A meta-frontier non-radial directional distance functionanalysis

This paper proposes a meta-frontier non-radial directional distance function to model energy and CO₂ emission performance in electricity generation. This approach allows for the consideration of the group heterogeneity of electricity generation, non-radial slacks, and undesirable outputs simultaneously. We extend several standardized indices to measure total-factor energy efficiency, CO₂ emission performance, and technology gaps in electricity generation. We estimate the potential reductions in energy use and CO₂ emissions under different technology assumptions. We conduct an empirical analysis of fossil fuel electricity generation in Korea by using the proposed approach. The results indicate that coal-fired power plants show higher levels of total-factor energy efficiency and CO₂ emission performance than oil-fired ones. Under the meta-frontier technology assumption, coal-fired power plants show a smaller technology gap than oil-fired ones. This suggests that the Korean government should promote technological innovation to reduce technology gaps for oil-fired plants, thereby improving energy and CO₂ emission performance and meeting emission reduction targets in the electricity generation industry.     

Dynamic simulation model of a coal thermoelectric plant with a flue gas desulphurisation system

In this paper a Dynamic Simulation Model has been used to present the likely responses of the electricity industries’ latest perturbations such as: changes in environmental regulations, international fuel market evolution, restriction on fuel supply and increase on fuel prices, liberalisation of the European Electricity Market, and the results of applying energy policies and official tools such as taxes and emission allowances.

The case under study refers to the Teruel Power Plant, built after the 1970s oil crisis to ensure national electricity supply; burning domestically produced coal in order to ensure local mining activity. The Teruel Power Plant has made relevant investments in order to meet emission limits, such as a Flue Gas Desulphurisation Plant. The economic viability of the power stations has to be analysed after environmental costs have been internalised.

A system is defined that studies the coal-firing Electric Power Plant selling energy to the free electricity market, whenever the generation cost is competitive. A Dynamic Simulation Model would appear to be an accurate tool to optimise power station management within different frameworks.     

Nigeria's electric power sector reform: what should form the key objectives?

Nigeria's electric power sector requires substantial reform if the country's economic development and poverty alleviation program is to be realised. This understanding is behind the reform programme recently initiated by the Nigerian government with the goal of privatising the national electric power monopoly, NEPA. Currently, the country faces serious energy crisis due to declining electricity generation from domestic power plants which are basically dilapidated, obsolete, unreliable and in an appalling state of disrepair, reflecting the poor maintenance culture in the country and gross inefficiency of the public utility provider. Building on an analysis of the major shortcomings of the current electric power company, this paper presents the central issues that should form the key objectives of the proposed reform. This include corporatization of the electric power industry, increasing access and power delivery capacity, constraining the costs of the power industry and increasing efficiency and share of renewables in energy generation, as well as minimising environmental damage. We conclude with the observation that efforts at reform will not yield the desired result if the current end-user inefficiency is not constrained. As Nigeria implements its national utility privatisation programme, it is hoped that this review will benefit policy makers and emerging managers and providers of electricity service in the country.     

超（超）临界空冷机组技术与经济性研究

阐述了超（超）临界空冷发电机组的参数选型和技术方案、空冷汽轮机的关键技术参数,并以2台600 MW超临界空冷电站作为研究对象,根据《2009中国电力行业年度发展报告》提供的有关数据,对超临界空冷电站的发电成本及其敏感因素进行分析测算.结果表明：目前国内已经具备了设计制造600~1 000 MW级超（超）临界机组的能力,在国内已有的先进、成熟技术基础上,通过重点开展关键部件和技术的研究和开发,有条件形成具有自主知识产权的超（超）临界空冷机组成套设计制造技术;在一定的比投资下,上网电价随煤价的上升而提高;在一定煤价下,比投资提高,上网电价也将提高;空冷电站的年平均热效率与电厂运行方式和空冷机组的热效率密切有关,提高年平均热效率是降低发电成本、提高运行经济性的关键之一;在空冷机组的选型上,应选用高效率的超（超）临界机组,并使机组在高负荷状态下运行.     

Front Cover

Next-generation control equipment for the transmission grid was installed in 2001 at a New York Power Authority (NYPA) substation as part of a project that will increase power flow transfer limit by 240 MW, approximately enough electricity for more than 200,000 homes. The project is the result of long-term collaborative research with EPRI, Siemens, and numerous energy companies including NYPA, Tennessee Valley Authority (TVA), and American Electric Power (AEP). The new control equipment, called a convertible static compensator (CSC) is quietly revolutionizing the way electricity is transported and controlled on the US National power grid, updating the grid to the standards needed to meet the demands of the electronic revolution while benefiting the environment by reducing the need to build new transmission lines.     

Dynamics of productivity change in the Australian electricity industry: Assessing the impacts of electricity reform

The Australian electricity industry has undergone a significant reform, since the mid-1990s. Key changes comprised functional unbundling, market restructuring, regulatory reform, public corporatisation and privatisation. Technological development has been another indisputable constituent of these changes, in the wake of ICT revolution. The principle rationale behind these changes has been that they would improve productivity of the industry and social well-being of people. This paper examines the dynamics of productivity changes in the Australian electricity industry and conducts several hypotheses-testings to identify whether industry's efficiency measures are truly improved as a result of the reform-driven changes. Malmquist Total Factor Productivity Index approach and ANOVA are used for this purpose. The results reveal that the productivity gains in the industry have been largely driven by technological improvements and, to a lesser extent, by reform-induced comparative efficiency gains. On average at national level and for the entire industry, there are efficiency gains that, to large extents, can be attributed to functional unbundling and public corporatisation and, to a lesser extent, to market restructuring and privatisation. The results, however, reveal that the reform-driven changes have made insignificant contribution to comparative efficiency, at the level of thermal generation.     

国华电力公司锅炉节能降耗途径

针对国华电力公司节能降耗的目标,从锅炉安全运行、设备选型、设计优化、运行优化以及节能改造等方面提出了实现目标的策略和方法,并对具体的节能降耗措施进行了初步效果预测。     

A CGE analysis for quantitative evaluation of electricity market changes

Risk and uncertainty entailed by electricity industry privatization impose a heavy burden on the political determination. In this sense, ex ante analyses are important in order to investigate the economic effects of privatization or liberalization in the electricity industry. For the purpose of fulfilling these quantitative analyses, a novel approach is developed, incorporating a top-down and bottom-up model that takes into account economic effects and technological constraints simultaneously. This study also examines various counterfactual scenarios after Korean electricity industry reform through the integrated framework. Simulation results imply that authorities should prepare an improved regulatory system and policy measures such as forward contracts for industry reform, in order to promote competition in the distribution sector as well as the generation sector.     

Electric power grid interconnection in Northeast Asia

In spite of regional closeness, energy cooperation in Northeast Asia has remained unexplored. However, this situation appears to be changing. The government of South Korea seems to be very enthusiastic for power grid interconnection between the Russian Far East and South Korea to overcome difficulties in finding new sites for building power facilities to meet its need for increased electricity supplies. This paper analyzes the feasibility of this electric power grid interconnection route. The issues addressed include electricity market structures; the prospects for electric power industry restructuring in the Russian Federation and South Korea; the political issues related to North Korea; the challenges for the governments involved and the obstacles anticipated in moving this project forward; project financing and the roles and concerns from multilateral and regional banks; and institutional framework for energy cooperation. While there are many technical issues that need to be resolved, we think that the great challenge lies in the financing of this commercial project. Thus, the governments of the Russian Federation and South Korea involved in the project need to foster the development of their internal capital markets and to create confidence with international investors. To this end, on energy side, this involves defining a clear energy policy implemented by independent regulators, speeding up the already started but delayed reform process of restructuring electric power industry and markets, and establishing a fair and transparent dispute resolution mechanism in order to reduce non-commercial risks to a minimum. The paper argues that establishing a framework for energy cooperation in this region will contribute positively towards that end, although views differ regarding its specific form. Finally, given that North Korea has a crucial transit role to play and faces a very unstable political situation, it is concluded that moving the project forward needs to be contingent on a resolution of the North Korea's nuclear crisis.     

Wind electricity in Greece: recent developments, problems and prospects

Electricity generation from renewable energy sources (RES) in Greece is regulated by the energy law 2244/94 which provides incentives to attract private investments in the RES sector. The wind energy sector is highly attractive due to the verified large wind potential in many regions of the country. This paper presents the current situation concerning wind energy exploitation, analyses the technical problems following the penetration of wind power into electricity grids, and the consequent technical solutions proposed by the Public Power Corporation (PPC). It also describes the perspectives for high wind power penetration into Greek power system.