『Abstract
In South Korea, the incentive scheme for generators to add new
power generation is based on the system marginal price (SMP) and
the capacity payment (CP). The infra-marginal generators receive
an extra margin due to the high SMP level and the new infra-marginal
generators need to be built to achieve the optimal fuel mix. However,
the Metropolitan zone needs more marginal generators due to the
transmission congestion and environmental regulations, but the
marginal generator in the Metropolitan zone does not have adequate
profits for the new investment under the current CP. This paper
suggests the appropriate investment incentive scheme for different
zones. The introduction of forward capacity markets for different
regions creates higher capacity market prices in the Metropolitan
zone than those in the Southern zone. The introduction of forward
capacity market also induces a new LNG generator investment in
the Metropolitan zone while only new infra-marginal generators
need to be added in the Southern zone.
Keywords: Resource adequacy; Capacity payment; Forward local capacity
market』
1. Introduction
2. The Korean electricity market and resource adequacy
2.1. Overview of the Korean power system
2.2. The cost-based pool (CBP) in the wholesale market
2.3. Capacity compensation: regulatory standard versus market
orientation
2.4. The current CP calculation
2.5. Shortcomings of the CP
3. New alternative designs for resource adequacy in Korea
3.1. Different CP levels for different generators
3.2. Adjusted uniform CP
3.3. Local capacity markets with entry
3.3.1. Supply bids based on the variable cost
3.3.2. Demand curve construction
3.3.3. Market clearing procedure
3.3.4. Capacity market with supply bid cap and opportunity cost
4. Simulation
4.1. Demand fluctuation
4.2. VRR curve variations
4.3. Extension of transmission capacity from the Southern zone
to the Metropolitan zone
4.4. Supply fluctuations
4.4.1. Nuclear unit's social cost
4.4.2. Delayed construction of nuclear plants
4.4.3. CO2 emission price
4.4.4. LNG price change
5. Concluding remarks
References