Chapter 4. Effects of the Electricity Tariff Rate Reform
C. Effects of Electricity Tariff Reforms on the Potential Household Fuel Cell Market
개편전기준 807kWh/월가구
Pre-reform baseline 807 kWh/month
개편후기준전구간경제성부족 Lack of economic appeal for all households after reform 6단계
3단계
6-stage system 3-stage system
3. Changing Feasibility of ESS
There is not currently a household ESS market in Korea, neither are there any government policies supporting the distribution of such systems. Therefore, it makes little sense to assess how the electricity tariff reform affects the non- existent ESS market. In this section, therefore, we examined only how the tariff reform affects the financial feasibility of ESS. By applying the conditions of the pre- and post-reform electricity tariff systems and the framework of analysis established in Section 4 of Chapter 3, we estimated the NPV of a representative ESS system for each given monthly household electricity consumption level. To complete these estimates, we posited monthly consumption levels in 50 kWh increments, ranging from 250 kWh to 600 kWh, and repeated our NPV estimations to find the exact monthly consumption level at which the ESS NPV would turn positive.
The same assumptions and preconditions that applied in Table 3-18were applied here as well. The capacity of the representative ESS was fixed at a constant level, and the same average monthly electricity outputs were adopted as those listed in Table 3-19. The net electricity consumption after ESS installation was estimated accordingly.
By applying the same processes used to estimate the electricity bill for a representative ESS-installed household consuming 450 kWh of electricity a month (see Table 3-20), we were also able to estimate the electricity bill for households consuming other amounts of electricity as well. The annual cash flows for households with different levels of electricity consumption were also estimated according to the processes outlined in Table 3-21.
The post-reform tariff system was applied to the aforementioned processes and conditionsto estimate the electricity bills and annual cash flows for households with ESS installations. Tables 4-13 and 4-14 show the electricity bills and cash flows for a representative ESS-installed household consuming 450 kWh of electricity a month, in conditions of both before and after the tariff reform. While the ESS installation lowers the household’s electricity bills both before and after the tariff reform, the cost-saving effect is greater before the reform. The tariff reform thus decreases the margin by which ESS decreases the household’s electricity bill amounts, from KRW 358,334 to KRW 261,892.
Table 4-13. Electricity Bill of a Representative ESS-Installed Household After Tariff Reform Month Net-metered
consumption
Basic fee (E)
Tariff (F)
ESS cost (G)
Subtotal
(E+F+G) VAT
Electricity Industry Base Fund Contribution
Total
1 363 1,600 49,288 4,851 55,739 7,757 2,870 66,366
2 363 1,600 49,288 4,851 55,739 7,757 2,870 66,366
3 363 1,600 49,288 4,851 55,739 7,757 2,870 66,366
4 363 1,600 49,288 4,851 55,739 7,757 2,870 66,366
5 363 1,600 49,288 4,851 55,739 7,757 2,870 66,366
6 363 1,600 49,288 4,851 55,739 7,757 2,870 66,366
7 363 1,600 49,288 4,851 55,739 7,757 2,870 66,366
8 363 1,600 49,288 4,851 55,739 7,757 2,870 66,366
9 363 1,600 49,288 4,851 55,739 7,757 2,870 66,366
10 363 1,600 49,288 4,851 55,739 7,757 2,870 66,366
Table 4-14. Annual Cash Flow of a Representative ESS-Installed Household After Tariff Reform Year Electricity bill prior to
ESS installation (A)
Electricity bill after ESS installation (B)
Difference (A-B)
0 0 2,656,500 -2,656,500
1 1,058,281 796,389 261,892
2 1,058,281 796,389 261,892
3 1,058,281 796,389 261,892
4 1,058,281 796,389 261,892
5 1,058,281 796,389 261,892
6 1,058,281 796,389 261,892
7 1,058,281 796,389 261,892
8 1,058,281 796,389 261,892
9 1,058,281 796,389 261,892
10 1,058,281 796,389 261,892
Table 4-15 and Figure 4-7 show the NPVs of ESS installations for different monthly household electricity consumption levels, before and after the tariff reform. Under pre-reform conditions, with the margin set at 442 kWh per month, there are certain households that have a financial incentive to install ESS without government aid. After the tariff reform, however, the NPVs for ESS become negative across all consumption levels.
In our analysis, as with other new and renewable energy installations, the NPVs for ESS increased under pre-reform conditions as the representative household consumed more electricity and the margins of improvement widened. However,
after the tariff reform, the NPVs for ESS decreased for households consuming 450 to 500 kWh of electricity a month.
Although not represented in the table below, the NPV for household ESS was determined to be at its greatest at the consumption level of 487 kWh per month, before declining rapidly at 488 kWh per month. A 3.3-kW ESS, capable of generating a maximum of 87 kWh of electricity a month, allows households consuming 200 to 400 kWh of electricity a month to pay a monthly basic fee of KRW 1,600, while a household consuming 1 kWh more of electricity a month would pay a basic fee of KRW 7,300, which would accumulate over the months and the entire 10-year span. The NPVs for ESS remain constant for some electricity consumption levels because the bills paid by these households increase by the same rate before and after ESS installation. A household consuming 250 kWh of electricity a month would see a slight improvement of the NPV for its ESS installation after the tariff reform, mainly because the household would be eligible for the Minimum Consumption Guarantee Credit under the reformed tariff system, while its ESS installation would help keep its net-metered consumption below 200 kWh a month.
Table 4-15. Comparison of NPVs for the Representative ESS Installation Before and After Tariff Reform (Unit: KRW 1,000)
Category Monthly consumption (kWh)
250 300 350 400 450 500 550 600
Before reform -1,657 -1,516 -908 -804 105 248 2,034 2,489
After reform -1,411 -1,516 -1,515 -1,516 -604 -804 -804 -804
Increase 247 - -607 -712 -709 -1,052 -2,838 -3,293
Figure 4-7. Comparison of NPVs for the Representative ESS Installation Before and After Tariff Reform
ESS 시장의규모변화 ESS 시장의질적변화
Change in magnitude of the ESS market Change in quality of the ESS market 개편전기준
442kWh/월가구
Pre-reform baseline 442 kWh/month 개편전
개편후
Pre-reform Post-reform
Under the current reformed tariff system, which charges the same tariffs regardless of season or hour, and with ESS not being used to save cheaper nighttime electricity, Korean households have no incentive to install ESS. This policy background and the relatively cheap price of electricity in Korea have prevented the emergence of a household ESS market in Korea. Should the power market in Korea, the household tariff system, and policy goals change, different household electricity tariffs could potentially apply by season and hour for ESS installations and for households that generate and consume electricity. The framework of analysis presented in this study could then be used to establish different hourly rates and possible discounts exclusively for ESS users.
4. Analysis of the Feasibility of PV Installations Under the Current Progressive Tariff System