Quantifying Social Benefits of Virtual Power Plants (VPPs) in South Korea: Contingent Valuation Method

Dongnyok Shim ()
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Dongnyok Shim: Department of Advanced of Industry Fusion, Konkuk University, Seoul 05029, Republic of Korea

Energies, 2025, vol. 18, issue 12, 1-16

Abstract: This study is one of the first empirical attempts to quantify the social benefit of virtual power plants (VPPs) in South Korea using the contingent valuation method (CVM). As Korea pursues its ambitious carbon neutrality goal by 2050, VPPs have emerged as a critical technology for managing the intermittency of renewable energy sources and ensuring grid stability. Despite their recognized technical potential, the social and economic value of VPPs remains largely unexplored. Through a nationwide survey of 1105 households, we employed a double-bounded dichotomous choice spike model to estimate willingness to pay (WTP) for government-led VPP implementation. The analysis revealed two distinct dimensions influencing VPP valuation: electricity bill perceptions and electricity generation mix preferences. Results indicated that Korean households exhibited significant but heterogeneous WTP for VPP implementation, with unconditional mean annual WTP ranging from KRW 23,474 to KRW 26,545 per household. Notably, support for renewable energy transition showed stronger positive effects on WTP compared to nuclear expansion preferences, suggesting VPPs are primarily valued as renewable energy enablers. The substantial spike probability (32–34%) indicated that approximately one-third of the population has zero WTP, highlighting challenges in introducing novel energy technologies. Key determinants of positive WTP included perceived fairness of electricity pricing, support for market-based mechanisms, and preferences for transitioning from coal and nuclear to renewables. These findings provide critical policy insights for VPP deployment strategies, suggesting the need for phased implementation, targeted communication emphasizing renewable integration benefits, and coordination with broader electricity market reforms. The study contributes to energy transition economics literature by demonstrating how public preferences for emerging grid technologies are shaped by both economic considerations and environmental values.

Keywords: virtual power plants; contingent valuation method; willingness to pay; renewable energy integration; energy transition; non-use value (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: 2025
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