Prof. Seung Ill Moon, There is no ‘Green New Deal’ without modification of electricity rates (The Korea Economic Daily, 2020.08.04.)

2020-11-03l Hit 264

Should change the consumer pattern of energy by linking fuel costs with electricity prices

Seung Ill Moon

Not long ago, the government announced its vision for the “Korean version of the Green New Deal”. The plan is to invest 73.4 trillion won by 2025, including 42,7 trillion won from the National Treasury, create 659,000 jobs, and to establish a basis on which Korea will lead the post COVID-19 world. However, I was concerned whether the Green New Deal would work out as planned, for there was no clear suggestion on how to change the electricity tariff system.

For the Green New Deal to work out, change in the energy consumption pattern of the Korean people is more important than investment in hardware infrastructure. Consumers react sensitively to price. However, the current price system was established at a time when fossil fuel was in dominant use. It encourages a generous use of cheap and high-quality electricity. With such a price system, it is impossible to drive people to efficiently consume electric energy and to distribute green energy on a large scale. By restructuring the electricity tariff system, we should elicit active participation of consumers so that ultimately, the fruit of the Green New Deal will go to the consumers.

So how do we reorganize the electricity price system? It is predicted that the unit price for Korea’s large-scale renewable energy generation such as that of solar and wind power will be lower than the unit price of coal-fired power generation by 2026. We should take this opportunity to quickly build large-scale offshore wind farms and solar power complexes and to accelerate the rate in which the unit cost of generation is falling. Furthermore, Korea should espouse a green energy price system that projects the vision that whereas the price of green energy may be higher than fossil fuel generated electricity in the beginning, it will be cheaper in the long run. Companies that consume energy should be supported so that they participate in the ‘Renewable Energy (RE) 100’, in which companies use 100% renewable energy, so that they can directly trade in green energy.

Prior to the complete adoption of a green energy price system, it is necessary to implement a system that links the price of fuel and electricity rates. With this system, if fuel cost rises, the price of electricity increases while if it falls, so does the price of electricity.

If such a system had been implemented, the oil price plunge due to COVID-19 would have lightened the burden of electricity bills this summer. In particular, by connecting fuel costs and electricity price, the falling costs of green energy generation will be reflected in consumer prices in real time. Ultimately, this will allow the Green New Deal to benefit consumers by ensuring that they are reasonably paying for the costs of the conversion to clean energy and allowing the continued investment in infrastructure.

If the current electricity bill system is maintained, consumer behavior patterns will remain the same. Government investment without the participation of consumers is the equivalent to pouring water into a sieve. A reasonable restructuring of the electricity price system is the first step to success in the Green New Deal. Without such a reorganization, there is no Green New Deal.

Translated by: Jee Hyun Lee, English Editor of Department of Electrical and Computer Engineering,