Economic evaluation for generation investment in South Korea electricity market

The electricity power industry has transformed from an integrated structure to a competitive market. Generally, investing generators in the electric power industry requires huge funds and takes long periods of construction in the need to continuously provide stable electricity power. Before the reform of the power industry took place in South Korea, the government had planed the electric power investment to keep the balance of supply and demand in the long run, and the Korea Electric Power Corporation (KEPCO), which is an integrated structure of the electric power industry in South Korea used to invest electric power equipments. However, after the deregulation, a new concept of expansion plan has been introduced to the electric power industry. The main change from the previous plan is that generation companies have an opportunity to plan their own investment in electricity power equipments with less constraints. In this paper, we represent the method that evaluates the economic efficiency between the investment in electric power generators in an existing monopoly formation and the investment made after reform. And we apply the methods to the electricity market in South Korea. The research contribution of this paper is in the methodological use of economic evaluation generation investment.