Do Shifts in Renewable Energy Operation Policy Affect Efficiency: Korea’s Shift from FIT to RPS and Its Results

Hyungguen Park,Changhee Kim

doi:10.3390/su10061723

Hyungguen Park, Changhee Kim

Open Access

https://doi.org/10.3390/su10061723

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Abstract

South Korea’s new and renewable energy (NRE) policy experienced a drastic shift from the Feed-in Tariff (FIT) to the Renewable Portfolio Standard (RPS) in 2012. This study looks at the changes in the efficiency of NRE policy in this transition through DEA (Data Envelopment Analysis) and MI (Malmquist Index) methods, using investment for NRE technology development and for NRE dissemination as input factors and the number of firms, the number of employees, and the volume of NRE power generation as output factors. The results show a temporary drop in efficiency in 2012 during the transition period for the NRE industry as a whole. However, apart from those energy types with ulterior factors, the implementation of RPS increased the technical change (TC) of most NRE types. Furthermore, the findings highlight that, among South Korea’s three focal NRE industries—photovoltaic, wind power, and fuel cell energies—only fuel cell energies showed an increase in efficiency over time. South Korea’s policy shifts from FIT to RPS and the resulting effects on NRE policy’s efficiency provide a useful reference and guideline for government decision-making on NRE policy changes.

Highlights

South Korea’s new and renewable energy (NRE) policy was implemented full-scale in 2001 with the introduction of the Feed-in Tariff (FIT) policy to promote the NRE industry and to reduce the use of fossil fuels
As 2012 was the year when the shift from FIT to Renewable Portfolio Standard (RPS) was made, this decrease in efficiency may be interpreted as a short-term drop in efficiency occurring while the NRE industry was adopting to the transition
The results found in this study hold meaningful implications for predicting how the efficiency of NRE policy can change when a policy shift is made from FIT to RPS

Summary

Introduction

South Korea’s new and renewable energy (NRE) policy was implemented full-scale in 2001 with the introduction of the Feed-in Tariff (FIT) policy to promote the NRE industry and to reduce the use of fossil fuels. The South Korean government was no exception to this pressure, and in 2012, the government shifted its NRE policy from FIT to the Renewable Portfolio Standard (RPS) for reasons of high financial burden [3]. South Korea’s shift from FIT to RPS presents a meaningful case study for NRE policies because people were paying more and more interest to energy efficiency [4], and as such a complete shift in national policy is rarely found. According to South Korea’s New and Renewable Energy Center, other than South Korea, only three countries—Belgium, Italy, and Japan—have undergone a similar policy shift from FIT to RPS [5].

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