Analysis of potential effects of renewable energy policy

Abstract

Korea has announced its goal of achieving net zero carbon emissions by 2050 by accelerating its shift toward renewable energy. We examined the effects of increasing renewable energy use on the demands for fossil fuels and the power supply price for the Korean electric power generation sector. Using the estimated price elasticities of demand between energy inputs, we can calculate that a 1% increase in renewable energy would lead to a 0.06%, 0.35%, and 0.17% lower demand for coal, oil, and gas, respectively, ceteris paribus, possibly resulting in a potential CO2 reduction by as much as 0.173 × 106 tons in total. The null hypothesis of no contribution of increasing renewable energy on power generation costs was rejected. The simulation results show that renewable energy generation costs did not increase sufficiently to cause the power supply price to rise significantly over the period 2000–2015.