Invest KOREA

The history of the power industry was opened at 3 p.m. on September 4, 1882. The first commercial power plant “Pearl Street Station” serving 400 lamps at 82 customers with 6 power generators. It was the moment that the commercialization of electric energy, which revolutionize the world, began in earnest. Five years later, electric energy arrived at Seoul. The history of Korea’s electricity began with the lamps in front of Geoncheonggung Palace in Gyeongbokgung Palace.

Since then, the power industry has expanded by keeping the lights on. The power system that produces and transmits electricity is often called the greatest achievement of engineering in the 20th century. Electricity itself was revolutionary. Not only this, but electricity brought about numerous industrial revolutions as it became widely accessible.

However, paradoxically, the power industry had not experienced innovation as strong as its birth. Although improvement has been made consistently, there was no innovation disruptive enough to make a turnaround. The power industry has continued to grow in scale and complexity, becoming the biggest machine of human history. Over decades, as the power system has exposed its limits, the need for changes has also grown.

First of all, the power system is established and operated under the premise of “demand dictates supply.” Consumers pay the bills depending on their usage in accordance with the rates system, which is pre-determined and has a long change cycle (e.g., once a year or every two years) based on constant power load. However, this principle has the following limits by its nature.

▸ Requirement margins including rapid load following and large spinning reserve cause an oversized system resulting in inefficient usage and waste of fuel.
▸ Fixed electric prices (charges), its unique characteristics, un dermine development towards energy storage, expansion of customer-owned (small-scale) power facilities.
▸ As customers are isolated from the supply system, they are vulnerable to both short-term outage and long-term supply emergencies.

Another problem is substantiality. Electric power generation accounts for 30 percent of global warming. The main culprit of the problem is the source for electricity-fossil fuels. With growing voices for Decarbonization these days, the usage and expansion of renewable energy sources has been increasingly called for in the power system. However, renewable energy sources are not appropriate for the existing power system, as they are uncertain and intermittent.

As a solution to address such problems, an overarching idea has been put forward: smart grid to establish and operate a smart power system utilizing ICT technologies. In some respects, the commercialization of electricity has brought about and developed the ICT industry. Conversely, now, ICT is pushing for innovation of the power industry, with smart grid standing at the forefront.

The idea to apply ICT to the power industry was already present in the 1990s when personal computers became widely available in offices. In all the power companies around the world, there have been divisions and staff in charge of telecommunications. However, going further than simply adopting ICT, the idea to integrate ICT with the whole system to create smart grid appeared in the early 2000s.

Most notably, an American Electric Power Research Institute (EPRI) suggested building a new architecture of power system through the “Intelligrid Program” in cooperation with experts from around the world, including the U.S., France, Japan, and others. At around the same time in Europe, a smart grid project was run as an initiative to efficiently support the expansion of renewable energy. Korea has implemented the Power IT project to efficiently use the power system since 2005. The goal has been to efficiently and safely operate power transmission and distribution systems by applying ICT, rather than to more efficiently accommodate various energy resources such as demand resources, electric vehicles and renewable energy.

The Korean government is planning to actively use big data analysis in resolving social issues. In the past, it has been difficult to reveal the behavior and perception of the public through data. However, with the easing on personal information regulations on the horizon, an attempt will be made to understand social issues through big data. In addressing 40 major social issues calling for urgent resolution, published by the Korean government in 2018, big-data analysis will be applied.

The 1st basic plan of smart grid was devised in June 2012, putting forward 16 policy tasks in four areas-strategy, institutional improvement, technology development, and establishment of the groundwork. It also set the target of building urban centers in seven metropolitan areas.

<Table 1> The Smart Grid Roadmap Goals by Implementation Area, 2010

Source: National Smart Grid Roadmap, Ministry of Knowledge Economy, January 25, 2010

With expansion of smart grid infrastructure, Energy Storage System (ESS) and charging stations for electric vehicles have been deployed.

Meanwhile, Advanced Metering Infrastructure (AMI), regarded as the core infrastructure of smart grid, has been lagging behind in deployment as it was interrupted by patent disputes over telecommunications technologies.

Demand Response (DR), which is expected to generate new added value and improve overall system efficiency by resolving low resilience of demands-a characteristic of the existing power system-was introduced in November 2014 and secured 4.3 GW capacity of demand response as of August 2018. Considering that the entire generation capacity of Korea is approximately 100 GW, it can be interpreted that 4 percent is set aside as demand response.

However, the plan’s original goal of delivering new values to mass consumers has not been reached. The introduction of various rates systems, and utilization of power big data have exposed limits in creating various services due to the lack of market design, institutions, and fundamentals. In particular, the Jeju Smart Grid Demonstration Project (2009-2013) and K-MEG project (2011-2014), implemented as a demonstration project, have failed to achieve expected results due to an inappropriate subject selection for demonstration, absence of post-management, and insufficient creation of appropriate institutions. In other words, they mostly achieved the goal of infrastructure construction but fell short of creating various services.

The expired 1st basic plan of smart grid has been evaluated as being focused on “Functionality implementation from a supplier side.” The 2nd smart power grid plan sets the direction as “In the age of energy transition, create a power market ecosystem by putting consumers at the center” to produce practical changes that consumers can actually feel and experience.

Accordingly, it suggests four policy tasks: 1) Stimulate new smart grid services; 2) Create a smart grid town; 3) Expand smart grid infrastructure and facilities; 4) Lay the foundation to expand a smart grid. To this end, the government plans to invest KRW 4.5 trillion, 75 percent up from the 1st plan, to lay the groundwork for creating new services and support the private sector to enter new markets.

To turn the 2nd plan into success, reforming relevant institutions is urgently required. For sure, supplying required infrastructure at the right time is important. However, it is also critical to implement practical policies to reshape the power industry structure, which has been put on hold, and create a new market. By the time when the 2nd plan is completed, we should be able to see creation of power service markets and emergence of various stakeholders led by consumers. Also, the 2nd plan contains the goal of advancing the power industry into a growth industry which is capable of creating added-value on its own and playing the role as a driving force for job creation and growth, rather than remaining as the basic industry, in step with the government’s energy transition plan.

<Table 2> The Korean Government’s Plan for Investment on Smart Grid

(unit: KRW 100 M)

* During the 2nd basic plan period, investment of the government/public center might change depending on the budget review process.
Source: The 2nd Basic Plan of Smart Grid in Korea, MOTIE, August 2018

By SunKyo Kim, Ph.D. in Electrical Engineering (sunkyo@kistep.re.kr)
Korea Institute of Science&Technology Evaluation and Planning(KISTEP)

< *The opinions expressed in this article are the author’s own and do not reflect the views of KOTRA >

¹⁾ WAMS: Wide Area Monitoring System
²⁾ WACS: Wide Area Control System
³⁾ HAN: Home Area Network
⁴⁾ HEMS: Home Energy Management System
⁵⁾ IDC: Internet Data Center
⁶⁾ BEMS: Building Energy Management System
⁷⁾ FEMS: Factory Energy Management System
⁸⁾ BMS: Battery Management System
⁹⁾ PCS: Power Conversion System
¹⁰⁾ AMS: Asset Management System
¹¹⁾ DR: Demand Response