Power has a genuine price

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Power has a genuine price

A sweltering heat wave descended upon Seoul as soon as a long stretch of rain petered out. The sweaty and sizzling weather can be endured. What is excruciating is the suspense of not knowing when the power will flick off across the city and perhaps the nation.

The government is desperately trying to meet the peak demand for electricity through various conservation measures, but it’s a basic fact that all of its campaigning may be of no use - if the heat keeps up. The nation may face another shameful moment like the blackout of Sept. 15, 2011. Watching Korea’s power policy these days, we feel like primitive farmers tending rice paddies who have to rely on rainfall as their only water source. If there’s not enough rain during planting season, farmers have to give up planting seeds and their harvests won’t be very good. The government’s power policy these days is just as dicey. Energy authorities let out an almost audible sigh of relief over the unusually long rains because they helped put off a power crisis. Now that they can no longer depend on rain to cool off the country, it’s in their hands to keep the crisis in check.

The Ministry of Trade, Industry and Energy forecasts electricity demand would peak at 78.70 million kilowatts this week. Even if it uses all of the backup power grids, the country’s total supply capacity is at 77.67 million kilowatts. No matter how it tries, it is short 1.03 million kilowatts. Without emergency action, power outages may be unavoidable. We cannot entirely blame the government. Predicting a worst-ever power shortage this summer due to the closure of three nuclear reactors, the government maximized power supply capacity and enforced a nationwide conservation campaign. But it cannot build a power station overnight or run reactors under repair or renovation. Since it cannot do more on the supply end, the country’s power policy is at the mercy of its users.

Public-sector buildings have been forced to keep air conditioning to a minimum and public areas cannot run air conditioning with their windows or doors open. On the industrial front, 2,637 manufacturers have been asked to adjust their production schedules to help save power use by 15 percent. The measures are more or less state-enforced. People are sweating in the sweltering heat and companies are cutting back on industrial activities in order to prevent a blackout. Everyone is paying a price because of the country’s poor energy policies.

Even if the country somehow gets through the summer without a major outage, another crisis awaits in the winter peak season when home heaters jack up power use. The supply cannot be bolstered in a short period of time, but demand is ever on the rise. Without addressing this structural imbalance, power crises will become seasonal.

Fixed distortions in utility fees contribute to the structural problem with supply and demand. Electricity demand has been increasing sharply because utility fees remain below production cost. Meanwhile, supply capacity remained unchanged because of delays in building new nuclear reactors. When supply was enough, a sharp increase in the use of cheap electricity didn’t matter. It only translated into ballooning deficits for the Korea Electric Power Corp. But as the unreasonable price structure continued, it began to undermine power capacity. Cheap fees fanned demand in electricity and constrained supply, making power short. Today’s crisis stemmed from the price structure.

Electricity is an indispensable energy source to run the economy. Many regard energy as a public resource that must be shared equally among the people. But electricity is not a public resource. Public goods refer to national assets and services like defense, firefighting and parks that are accessible to anyone without an extra fee. They can be used for free and the cost is financed through taxes. Market principles do not apply to them because they are unrelated to consumption and price. Electricity is a general good that can only be used after paying for it. But there has been a misconception that even though we pay for energy resources like gasoline and oil, we do not have to pay extra for power produced from energy. That is how we arrived at today’s power crisis.

We came to use electricity as if it was free because of this misconception. It is obvious that people will use more electricity at fixed and cheap rates rather than gas, which fluctuates according to the market. Users have been encouraged to use electricity and now they are told they must cut back.

We need to change our perspective on electricity first. If power rates are set according to market principles, profligacy with electricity would decrease without anyone telling people to save. The industrial sector would conserve and vie to develop technology to save energy and reduce production costs.

For now, we all have to turn off the lights and air conditioning to weather the power crisis. But we cannot go on surviving in this outdated, makeshift way. Only a fundamental change in the pricing system can put a stop to our power insecurity.

*The author is an editorial writer of the JoongAng Ilbo.

By Kim Jong-soo
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