A critical review of Korea's long-term contract for renewable energy auctions: The relationship between the import price of liquefied natural gas and system marginal price

Jongwoo Moon; Tae Yong Jung

doi:10.1016/j.jup.2020.101132

A critical review of Korea's long-term contract for renewable energy auctions: The relationship between the import price of liquefied natural gas and system marginal price

Jongwoo Moon, Tae Yong Jung

Graduate School of International Studies

Research output: Contribution to journal › Article › peer-review

10 Citations (Scopus)

Abstract

The aim of Korea's Renewable Portfolio Standard (RPS) and newly adopted auction system with a long-term fixed-price renewable contract was to support renewable energy providers in hedging electricity and Renewable Energy Certificate (REC) price risks. This study found a long-run positive relationship between the import price of Liquefied Natural Gas (LNG) and System Marginal Price (SMP) in Korea, demonstrating that the fluctuations in global fuel prices are likely to increase uncertainties in renewable investments. The fixed-price contract, which cannot be revised once determined, encourages renewable energy providers' speculative decision-making, and the uncertainty caused by the contract system may discourage investment decision-making.

Original language	English
Article number	101132
Journal	Utilities Policy
Volume	67
DOIs	https://doi.org/10.1016/j.jup.2020.101132
Publication status	Published - 2020 Dec

Bibliographical note

Publisher Copyright:
© 2020 Elsevier Ltd

All Science Journal Classification (ASJC) codes

Business and International Management
Development
Sociology and Political Science
Management, Monitoring, Policy and Law

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

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10.1016/j.jup.2020.101132

Cite this

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abstract = "The aim of Korea's Renewable Portfolio Standard (RPS) and newly adopted auction system with a long-term fixed-price renewable contract was to support renewable energy providers in hedging electricity and Renewable Energy Certificate (REC) price risks. This study found a long-run positive relationship between the import price of Liquefied Natural Gas (LNG) and System Marginal Price (SMP) in Korea, demonstrating that the fluctuations in global fuel prices are likely to increase uncertainties in renewable investments. The fixed-price contract, which cannot be revised once determined, encourages renewable energy providers' speculative decision-making, and the uncertainty caused by the contract system may discourage investment decision-making.",

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AB - The aim of Korea's Renewable Portfolio Standard (RPS) and newly adopted auction system with a long-term fixed-price renewable contract was to support renewable energy providers in hedging electricity and Renewable Energy Certificate (REC) price risks. This study found a long-run positive relationship between the import price of Liquefied Natural Gas (LNG) and System Marginal Price (SMP) in Korea, demonstrating that the fluctuations in global fuel prices are likely to increase uncertainties in renewable investments. The fixed-price contract, which cannot be revised once determined, encourages renewable energy providers' speculative decision-making, and the uncertainty caused by the contract system may discourage investment decision-making.

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KW - LNG Import price

KW - Long-term renewable purchase contract

KW - Vector error correction model

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A critical review of Korea's long-term contract for renewable energy auctions: The relationship between the import price of liquefied natural gas and system marginal price

Abstract

Bibliographical note

All Science Journal Classification (ASJC) codes

UN SDGs

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