"Power Generation Companies' Capacity Settlement Amount 33 Trillion Won...Aged Coal Power Plants Also Receive 3 Trillion Won"

"Environmental Dispatch Regression... Differential Payment Needed Considering Generator Lifespan and Equipment Efficiency"

[Image source=Yonhap News]

[Asia Economy Reporter Moon Chaeseok] It has been revealed that the capacity payments made by Korea Electric Power Corporation (KEPCO) to power generation companies over the past five years have reached 33 trillion won. It has been pointed out that even aging coal power plants that have been in operation for more than 20 years received about 3 trillion won in capacity payments, which goes against environmentally friendly power generation.

According to data submitted for the national audit by Kim Kyung-man, a member of the National Assembly's Industry, Trade, Energy, Small and Medium Enterprises Committee from the Democratic Party of Korea, obtained from the Korea Power Exchange and the five major power generation companies on the 7th, the total capacity payments made to public power corporations and private power companies over the past five years amounted to 33.0278 trillion won.

The amount increased from 4.7519 trillion won in 2015 to 6.4018 trillion won last year. This year, 4.6956 trillion won had been paid as of August.

Capacity payments refer to a type of compensation paid by KEPCO to power generation companies for fixed costs such as construction investment costs for power facilities, labor costs, and maintenance costs that cannot be recovered through variable costs (fuel costs) under the Cost-Based Pool (CBP) market introduced in 2001.

They were introduced to secure adequate installed capacity and to encourage new facility investments.

The problem lies in the structure where capacity payments are determined based on the supply capacity (installed capacity) bid by the power generation companies regardless of whether the generator wins the bid.

Capacity payments continue to be paid for the installed capacity of aging coal power plants that have been in operation for more than 20 years.

According to Representative Kim, the utilization rate of aging coal power plants over 20 years old declined from 84.4% in 2016 to 70.9% last year. The capacity payments made to these power plants over the past five years amounted to 3.1526 trillion won.

Representative Kim pointed out that annually, 650 billion to 750 billion won in capacity payments are paid to aging coal power plants, which are known as the main culprits of fine dust pollution.

Representative Kim said, "Contrary to the purpose of the system's introduction, it is acting as a factor for power companies to continue holding onto aging power plants instead of decommissioning them," and added, "Measures should be devised to differentially pay capacity payments to power plants that can secure appropriate reserve power considering the lifespan or equipment efficiency of the generators."

This content was produced with the assistance of AI translation services.