Public preferences and increasing acceptance of time-varying electricity pricing for demand side management in South Korea

Abstract

Linking demand and supply management on the basis of public acceptance is essential to prepare for the energy transition from fossil fuels to environment friendly energy integration, and to ensure stability in electricity supply and demand management. Demand management could promote the conservation of energy resources by stabilizing electricity supplies and curbing consumer consumption, which could consequently help reduce capital expenditures. Major developed countries have improved the efficiency of electric facility operations by implementing demand management based on pricing programs. The Korean government also seeks to improve demand management by introducing time-of-use (TOU) tariffs to residential electricity consumers. However, the rate of residential customers switching to the TOU tariff in Korea is still low, which negatively affects the success of demand management. Accordingly, this study aims to consider the preference structure of residential electricity consumers for TOU pricing using a discrete choice experiment, and further derive policy implications to promote the pricing program's switching rate. The analysis of consumer preferences in this study shows that consumers prefer a TOU tariff plan that minimizes uncertainty. Therefore, it is necessary to provide consumers with information on their consumption amounts and usage patterns based on real-time metering to reduce consumer uncertainties. In conjunction with the findings from the scenario analysis on the choice probability of TOU tariffs, incentives such as subsidies for purchasing high-efficiency appliances and carbon points are an effective measure to lower the barrier to switching, and reduce additional utility expenses. Furthermore, diversifying tariff plan attributes is required in subsequent studies on public acceptance to accurately identify consumer preferences while considering the TOU tariff plan's rate of diffusion.