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 and Tae Yong Jung

Utilities Policy, 2020, vol. 67, issue C

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.

Keywords: Korea's renewable portfolio standard; LNG Import price; Cointegration; Vector error correction model; Long-term renewable purchase contract (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:juipol:v:67:y:2020:i:c:s0957178720301260

DOI: 10.1016/j.jup.2020.101132

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