The electricity shortage cost in Korea: An input-output analysis

ABSTRACT

The highly reliable infrastructure of Korea’s electricity sector has played a key role in the well-being of Koreans. The reliability of electricity supply is characterized almost exclusively by shortage costs. This study employs input-output analysis to measure the electricity shortage costs in Korea and determine the optimal way in which limited electric power resources can be allocated to various sectors while maximizing the total value added. The results indicate that the marginal cost of unsupplied electricity ranged from KRW 147 to KRW 5,891 per kWh and that these total costs depended not only on the shortage percentage of each non-electricity sector but also on the level of its final demand. The quantitative results are expected to be useful for policymakers attempting to set economic reliability standards and plan curtailment strategies for electricity supply and demand.

KEYWORDS:

• Electricity
• input-output analysis
• Korea
• marginal cost
• shortage cost

Notes

¹ In 2007, USD 1 was approximately equal to KRW 930.