[Viewpoint] Market forces can tame electric woes
Published: 20 Sep. 2011, 20:14
An unseasonable heat wave caused a rare power shortage and temporary blackouts. People were confounded by the sudden power outage that stopped traffic and elevators after the summer peak of electricity demand had passed. Authorities said a rolling blackout was necessary in some areas across the nation as demand unexpectedly exceeded supply. But the unforeseen daytime power cuts caused immense inconvenience and disarray in the metropolitan and rural areas. We are lucky that no casualties or major logistic or industrial accidents occurred.
Power companies have embarked on routine maintenance check-ups of power plants that have been running at full operating capacity during the summer peak. Reactors and steam generators must be regularly cleaned, examined and fixed to keep working correctly.
The cause of the blackout has not been fully explained, but government officials cited undercapacity on some power grids because of repair work while unseasonably high temperature stoked up industrial and consumer demand. If backup supplies had been sufficient, any unexpected high demand would not have been a problem.
Reserves fall either because generating capacity is short or demand is too high. Supply increases must be planned well ahead of the time they are needed. Power plants do not get built overnight. It takes about 10 years to complete a nuclear-powered reactor and several years to build conventional plants. If authorities had forecast a shortage, they should have prepared to boost supply a decade ago.
It is not that the country is short of power-generating capacity. In fact, several administrations have been criticized by environmentalists for overcrowding this small nation with power plants every time they announce plans to increase supply.
Demand should be estimated based on generating capacity. But authorities have failed to rein in demand in line with supply. They dared not raise electricity rates, an incentive that works efficiently to tame demand, for fear of stoking inflation. Political pressure to win votes by keeping public utility fees unchanged always gets the upper hand over the market principle of balancing supply and demand.
Consumers pay little heed to their use of electricity because prices are cheap. Nighttime consumption surged and restaurants changed to electric heating because fuel prices were more expensive than electricity. Koreans became extravagant in energy consumption, overcooling in summer and overheating in winter.
Politicians are foolish if they think the best way to serve the people is to keep electricity cheap. They are precipitating an energy crisis - habitual blackouts. Conservation and a stable supply is a better rationale in energy economics than keeping consumer prices close to an inflation target.
*The writer is a professor of economics at the University of Incheon.
By Sohn Yang-hoon
Power companies have embarked on routine maintenance check-ups of power plants that have been running at full operating capacity during the summer peak. Reactors and steam generators must be regularly cleaned, examined and fixed to keep working correctly.
The cause of the blackout has not been fully explained, but government officials cited undercapacity on some power grids because of repair work while unseasonably high temperature stoked up industrial and consumer demand. If backup supplies had been sufficient, any unexpected high demand would not have been a problem.
Reserves fall either because generating capacity is short or demand is too high. Supply increases must be planned well ahead of the time they are needed. Power plants do not get built overnight. It takes about 10 years to complete a nuclear-powered reactor and several years to build conventional plants. If authorities had forecast a shortage, they should have prepared to boost supply a decade ago.
It is not that the country is short of power-generating capacity. In fact, several administrations have been criticized by environmentalists for overcrowding this small nation with power plants every time they announce plans to increase supply.
Demand should be estimated based on generating capacity. But authorities have failed to rein in demand in line with supply. They dared not raise electricity rates, an incentive that works efficiently to tame demand, for fear of stoking inflation. Political pressure to win votes by keeping public utility fees unchanged always gets the upper hand over the market principle of balancing supply and demand.
Consumers pay little heed to their use of electricity because prices are cheap. Nighttime consumption surged and restaurants changed to electric heating because fuel prices were more expensive than electricity. Koreans became extravagant in energy consumption, overcooling in summer and overheating in winter.
Politicians are foolish if they think the best way to serve the people is to keep electricity cheap. They are precipitating an energy crisis - habitual blackouts. Conservation and a stable supply is a better rationale in energy economics than keeping consumer prices close to an inflation target.
*The writer is a professor of economics at the University of Incheon.
By Sohn Yang-hoon
with the Korea JoongAng Daily
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