Would people pay a price premium for electricity from domestic wind power facilities? The case of South Korea
2021
Lee, Kyung Sook | Kim, Ju-Hee | Yoo, Seung-Hoon
South Korea tried to drastically expand the capacity of wind power generation from 1.8 GW in 2020 to 24.9 GW in 2034. Moreover, the “Green New Deal” policy is being implemented to promote employment and growth by using domestic wind power facilities. This article estimates additional willingness to pay (WTP) or price premium, for electricity generated from domestic wind power facilities over that from imported ones. For this purpose, a contingent valuation survey of 1000 households was carried out employing the closed-ended question during September 2020. A spike model is utilized to reflect the zero WTP values reported by 58.3% of the interviewees. Several factors affecting the price premium were also analyzed to derive implications. The average price premium for electricity generated from domestic wind power generation facilities was estimated to be KRW 22.5 (USD 0.019) per kWh with statistical significance. This value reaches 21.4% of the electricity price for 2019 (KRW105 or USD 0.089 per kWh). It should be noted that more than half of the people reported a zero price premium, as they thought that “Green” is more important than “New Deal,” or they worried that the supply of domestic wind power facilities could raise electricity bills.
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