Analysis of Net-Metering and Cross-Subsidy Effects in South Korea: Economic Impact across Residential Customer Groups by Electricity Consumption Level

Junhyung Kim, Keon Baek, Eunjung Lee and Jinho Kim ()
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Junhyung Kim: Korea Electric Power Corporation, Naju 58322, Republic of Korea
Keon Baek: Graduate School of Energy Convergence, Gwangju Institute of Science and Technology, Gwangju 61005, Republic of Korea
Eunjung Lee: Graduate School of Energy Convergence, Gwangju Institute of Science and Technology, Gwangju 61005, Republic of Korea
Jinho Kim: Graduate School of Energy Convergence, Gwangju Institute of Science and Technology, Gwangju 61005, Republic of Korea

Energies, 2023, vol. 16, issue 2, 1-14

Abstract: Recently, thanks to various support mechanisms, residential photovoltaics (PVs) for self-consumption are proliferating at a rapid pace. The net-metering scheme, one of the prevailing support mechanisms for self-consumption PVs, contributes to the proliferation of residential PVs by enhancing the economic benefits of PV adopters, but it suffers from certain disadvantages, such as missing network revenue of utilities and spread of cross-subsidies between the customers. This paper analyzes the cross-subsidy effect of residential PV proliferation across customer groups segmented according to their PV adoption and electricity consumption level under the net-metering scheme in the Korean electricity market. The results show that missing network revenue of utilities increase by about 0.83% for every 1% increase of residential PV penetration, and customers in the lowest usage tier provide more cross-subsidies toward customers in the higher usage tiers as with higher proliferation of residential PVs. In addition, this paper suggests that the cross-subsidy effect between customers can be reduced by introducing a new network charge design that is more consistent with the cost-causality principle as well as targeted deployment policies for self-consumption PVs.

Keywords: net-metering; residential rooftop PV; self-consumption PV; cross-subsidy; missing network revenue (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2023
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