Essays on analysis of electricity-price policy

This thesis consists of two parts of essays on analysis of electricity-price policy and we choose South Korea as a case study at the both essays. The objective of the first essay was to analyse the effects of electricity-price policy on electricity demand and manufacturing output, focusing on how these relationships change over space. Our findings suggest that the South Korean government’s plan to increase the electricity price should be implemented with a caution. The plan would achieve the objective of mitigating electricity demand to avoid potential power shortages; however, the more rapid increase in electricity prices may trigger a slowdown in the manufacturing sector. Our findings also imply that South Korean experts’ suggestion of regionally-varying electricity pricing needs further consideration. Although reflecting regional differences in costs of supplying electricity is important, regionally-varying pricing may prompt a slowdown in the Seoul metro area manufacturing sector where manufacturing is more concentrated than in other areas.

The second essay analyzes the relationship between the effects of electricity price on electricity intensity in the manufacturing sector, focusing particularly on how this relationship changes over space and time. We found that increases in electricity price improved electricity-use efficiency in South Korea’s manufacturing sector in the long run, but not in the short run. The regional effects of electricity-price increases on electricity-use efficiency varied depending on time (i.e., short run and long run) and space. The differences may have resulted from different degrees of (1) substitutability of electricity-consuming equipment between the short and long runs and (2) price impact on electricity demand and manufacturing output in the regions’ manufacturing sectors. Our findings imply that first, electricity price increases are likely to be effective as a long-term tool to improve electricity efficiency in the manufacturing sector, but may not be as effective in the short run with some regional exceptions. Second, electricity price increases may hinder electricity-use efficiency in regions characterized by manufacturing sectors where price increases reduce manufacturing output relatively more than they reduce electricity demand.