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Effective Electrical Policies in terms of DSM

Hyunah Song Korea Corporation Republic of Korea

Abstract This paper investigates how well energy policies are adopted and operated. In terms of DSM or the Demand Side Management, ways of modifying energy demand are introduced. Also their effects are showed. Furthermore future plans of DSM are illustrated shortly.

Key words: energy policy, DSM, Load Management, Energy Efficiency

1. Introduction Policies to promote new and industry are adopted by lots of countries in these days. Korea government provides long-term and low-interest loans for the customers or manufactures of new and renewable energy systems which have been completely commercialized. Additionally, the government has subsidy programs to create an initial market for new and renewable energy technologies. However production ratio of new and renewable energy to that of all kinds of energy is not exceeding 5% in most of the countries including Korea. That means that governments “still” should consider policies that use traditional energy effectively. Therefore it is worthy to analyze effective policies to energy in other countries. In the paper, Korea Electric Power Corporation or KEPCO’s policies to effective energy consumption are presented in terms of Demand Side Management, or DSM.

2. Demand Side Management Programs A. Definition of DSM The word, “Demand” means energy demand. DSM may seem to be an unrealistic goal because it is difficult to control consumers’ demand by suppliers’ intention. However it is not a forceful act, but really a voluntary one made by the consumers. DSM refers to the various efforts of power companies to effectively meet power demands by modifying customers' usage patterns with the least amount of cost. The figure below is the Daily Load Curve for the highest demand day in 2008 in Korea. (Unexpectedly, the highest demand in 2009 was in winter due to cold weather.) The horizontal line is a time line from 0 to 24 hours. And the vertical line is an overview of the energy amount produced. And these colorful areas show the various energy resources. The bottom zone in pink represents the power generated by nuclear energy, which is the most inexpensive resource in Korea. The yellowish green represents the imported energy and the blue represents the domestic coal energy. We call this rectangular shape the “Baseload ”. And the other area is called the “Non-baseload ”. The area is a representation of energy produced by oil, LNG and hydro that are responsible for quickly meeting demands but unfortunately they are costly in Korea. So if the Non-baseload peaks lessen: to nearer: the Baseload peaks then this would cut down the generation costs. In sum, energy production fees depend on when energy is consumed as well as how much energy is spent. That is why the DSM is adopted. [Unit: MW]

60,000

Non-baseload (by Oil, LNG, Hydro )

Baseload (by Nuclear, coal)

Fig 1 The Daily Load Curve

B. Types of DSM There are two ways of DSM. The first way is through the Load Management Program, which makes the peak load move to an inexpensive load. And it is implemented to level load patterns down by lessening the gap between peak loads and minimum loads. And it is also called the Peak Clipping, the Load Shifting, or the Valley Filling.

Load Management Program Energy Efficiency Program

KW KW

Hr Hr

Fig 2 Types of DSM

Fig 3 The Peak Clipping Fig 4 The Load Shifting Fig 5 The Valley Filling

And the other way is the Energy Efficiency Program. It helps customers demand less energy with the newer appliances than with the older, traditional appliances. It means that the Energy Efficiency Program refers to a program that curtails demands through energy efficient appliances and equipment. And it is called the Strategic Conservation.

Fig 6 Strategic Conservation

C. Structure of DSM implementation DSM is carried out as Fig 7. One of our government departments, the Ministry of Knowledge Economy sets up the DSM policy. And the Technology Evaluation & Planning is in charge of fund management. The DSM funds are raised from all customers’ electric bill. It is 3.7% of the rates. KEPCO, a public company for transmitting and distributing electricity operates the DSM program and it offers incentives to DSM participants. So it might be arguable that rate payers who don’t participate in the DSM program waste their money without any benefits. But, the DSM program makes utility companies cut their operation costs. So electricity rates would be increased: without this program. Therefore DSM is beneficial to all the utility companies, the participants of DSM and the other rate payers.

Ministry of Knowledge Economy

Plan Policy

Electric Power Industry Technology Evaluation & Planning Center (Fund Management)

Fund Coordination Participation All Customers KEPCO DSM Customers

Fund Incentives

Fig 7 Structure of DSM Implementation

D. The Load Management Program There are several kinds of Load Management Programs. Below are detailed explanations.

i. Adjusting Vacation & Maintenance Schedule With this program, customers who reduce their during specific days that KEPCO planned in advance are given monetary payments. To be eligible, customers’ peak demand should be more than 100kW. Also there are requirements for payments. The customers should reduce their peak demand by more than 3,000kW or 50% of the previous year’s peak demand. The customers who cut down their peak successfully are paid the amount of money that is reduced peak demand times incentive rates. And this program’s incentive rates are $0.64/kW. Furthermore there are additional benefits to the long-term contracted customers. If the customers contract with KEPCO consecutively for 3 years and reduce the load every year, the 5% extra incentives are given in the second year and the 10% extra in the third year. ii. Voluntary Load Reduction This program is similar to the former, Adjusting Vacation and Maintenance Schedule. For this program, financial incentives are offered for the customers who reduce their demand at 2 PM~4 PM. Like the former, customers’ peak demand should be more than 100kW. And the eligible customers should reduce their average demand between 2 and 4 PM by more than 3,000kW or 20% of their demand between 10 AM to 12 PM in the same day. And average demand is calculated every 30 minute. So if customers failed to cut down their peak demand one time frame among 4 frames, the incentives are calculated with just 3 time frames. And the incentive rates are $0.16/kW per one time frame. There are the same benefits to the long-term contracted customers. It is the 5% extra incentives in the second year and the 10% extra in the third year. iii. Thermal System This system is similar to an air conditioner. It differs in that it turns water into ice at night time when the electricity rates are inexpensive. Then the stored ice is used for the conditioner during the daytime. From the Daily Load Curve we can make sure that the energy at night is made of inexpensive resources such as nuclear and coal. So the electricity rates are not expensive. From 1972 KEPCO started to encourage customers to use more energy at night rather than during the daytime. And KEPCO has promoted the System since 1991.

Fig 8 System Operations (ordinary A/C vs. Thermal Energy Storage Sys.)

From Fig 8 above, the traditional A/C is on the left and the thermal energy storage system is on the right. Because the thermal energy storage system can make chilled water or ice at night, it needs a much smaller chiller than the ordinary A/C does. From Fig 9 below, the chilled water or ice are kept in the storage tank. Customers who installed this system can save on the bill for the inexpensive electricity rates at night. And the utility companies can save their generation costs by peak clipping. However building this system needs much more budget than building the traditional ones. So there are a various incentives.

Fig 9 System Layout (ordinary A/C vs. Thermal Energy Storage Sys.)

First of all, subsidies are provided to customers who installed this system. And the funds are paid in proportion to the reduced energy. The payment rates are in the table above.

Table 1 Payment rates for the Thermal Energy Storage System Reduced Energy 0~200kW 201~400kW 401kW~ Subsidy $ 470/kW $ 410/kW $ 343/kW

Moreover, KEPCO gives additional subsidies to the designing company that promoted this system. And customers ’ investing money can also be subtracted by 10% through Income Tax Deduction. And they also borrow investing money with low rates. These benefits are for encouraging the thermal energy storage system. iv. Remote Controlled Air-Conditioners Remote controlled air-conditioner refers to an air-conditioner which is installed with the pager that permits KEPCO to periodically turn it off and on during summer. KEPCO operates the control system within the extent of giving little discomfort to the customers. From Fig10, KEPCO makes the A/C compressor stop with 10-minute-cycle and changes temperature-setting of the A/C. Usually KEPCO controls the A/C for 2~3 hours. And the subsidy is $138 per the A/C ’s consuming energy. It is paid just one time.

Fig 10 Control Mechanism of the Remote Controlled Air-Conditioner

v. Demand Controllers It is a device which can control energy demand so that the installers can save their energy bills. And KEPCO offers financial incentives to the customers since the DC contributes to reduce Energy demand. The DC is functioned Fig 11.

Fig 11 Control Mechanism of the Demand Controller

The system consists of a personal computer, the DC and the WHM or the Watt Hour Meter. The DC receives two signals from the WHM. Two signals are the WP and EOI. The WP or the Watt Pulse means that the amount of the energy consumed. The EOI or the End of Interval is the time span the Watt Pulse is accumulated. The EOI is 15 minutes at KEPCO. For the eligible customers, their contract demand should be over 500kW. And the incentives are $1,467 per each one. vi. Direct Load Control It seems that this program isn’t democratic because of the word, “Direct Control ”. But it is. It is carried out by the contract with the customer. This is one of contingency plans just in case of emergency. When the reserve ratio is low, KEPCO can decrease their energy demand. The eligible customers are those who can reduce their demand more than 300kW. And KEPCO should renew its contract with customers every 3 year. And this program ’s incentives are a little bit complicated. There are two types of incentives. The Contract Rates are applied to the customers who have contracted with KEPCO. They are in proportion to the contracted Load Reduction. And the Implementation Rates are for those who have implemented the contract on request from KEPCO, as table 2. The more urgent requests by KEPCO, the higher the Implementation Rates. Fortunately KEPCO paid the Implementation Rates to contractors under simulated conditions. And it was the Day-ahead notice type.

Table 2 Implementation Rates for the Direct Load Control Implementation Rates Notice Type 50~100% More than 100% One day By 5 PM on the previous day $0.29/kWh $0.59/kWh ahead Between 5 PM on the Within 24 previous day and 3 hours $0.59/kWh $1.17/kWh hours before implementation Immediately Within 3 hours ahead $0.88/kWh $1.76/kWh

E. The Energy Efficient Program KEPCO promotes many energy efficient devices such as light fixtures, inverters and vending machines. Although these machines are highly energy efficient instead, they are also costly. However, KEPCO offers financial incentives for customers to make up the difference between the costs. Furthermore, the customers can save on their electric bills with these machines. i. Energy Efficient Lightings There are two types of energy efficient lightings: Energy Efficient Ballast and CFL or a Compact Fluorescent Lamp. Ballast is for stabilizing the current flow in lamps. And CFL is used instead of the Incandescent. Energy Efficient Ballast can save energy by 36% and CFL can do 75%. And incentives are provided to the customers whose reduced energy is more than 1kW. And the incentives are $2~6 per each one. ii. The Energy Welfare Program The Energy Welfare Program is for low-income families to reduce their energy bills and to know them how to use energy efficiently. It has been organized by KEPCO since 2004. And low-income families ’ monthly salary for four family members should be less than $1,239. Their number is over 830,000. And top priority is Juveniles, senior citizen and physically challenged people. KEPCO installs the energy efficient lightings for free. And KEPCO also exchanges malfunctioned circuit breakers and wall sockets and sometimes carries out interior wiring checkups.

Fig 12 Examples of the Energy Welfare Program

There are examples of the Energy Welfare Program as Fig 12. Devices before KEPCO carried out this program are on the left hand side of arrows and after this program are on the right hand side. The appliances became fresh and new. With this program KEPCO has helped low income families ’ energy save. iii. Inverters Motors are not easy to change their velocities because their frequency is constant. As Fig 13 inverters can change motors ’ frequency and voltage so that they can control the rotating speed, resulting in saving energy consumption. To be eligible for incentives customers should save energy more than 5kW by installing inverters. And the incentives are the amount of saved energy times $159/kW.

Fig 13 System Layout of Inverters iv. Energy Efficient Energy Efficient Transformers can save energy by reducing their loss. There are two kinds of Energy Efficient Transformers.

Fig 14 Silicon Steel vs. Metal Type

As Fig 14, a cross section picture above, an Amorphous Metal Type is irregular, comparing with the Silicon Steel. So it is easily magnetized due to its structure.

Fig 15 Refined Magnetic Domain The other is the Refined Magnetic Domain Type whose magnetic domain is refined with laser. So it is also easily magnetized thanks to a short distance between domains. To be eligible for incentives, transformers should be 3-phase. And incentives are the amount of reduced energy times $293/kW. v. Smart Vending Machines Smart Vending Machines contribute to curb the peak demand during the daytime as Fig 16. For three hours from 10:30 AM to 1:30 PM they are excessively cooled so that they are not need to be cooled during the next three hours from 1:30 PM to 4:30 PM. However their control devices are working during the daytime so that they can maintain appropriate temperature in the inside. And incentives are $194 per each which is the difference between the traditional vending machines and the smart vending machines.

Fig 16 System Operations of Smart Vending Machines

3. Effects of Demand Side Management A. Energy savings and peak clipping Listed below are accomplishments of KEPCO in 2008. There are the DSM programs on the left side and their results are on the right. And thanks to DSM KEPCO has managed to avoid the financial expenses of having to construct 3 plants whose respective capacity is 1GW. It ’s an incredible result.

Table 3 DSM Results of KEPCO in 2008 Peak Clipping Energy Savings Categorizes [MW] [MWh] Adjusting Vacation & Maintenance 1,598 - Schedule Voluntary Load Reduction 889 - Thermal Energy Storage System 34.4 - LMPs Remote Controlled Air-Conditioners 11.1 211

Demand Controller 24.6 - Direct Load Control - - EEPs Energy Efficient Lightings 34.5 177,106 (including Energy Welfare Program) Inverters 55.7 365,747 Energy Efficient Transformers 1.2 10,458 Smart Vending Machines 0.6 2,358 Sum 2,649 555,880

B. High The Load factor is a ratio of a load’s average to a load’s maximum. If the load factor is high it means that the facilities are operating well in terms of economics. As Fig 17 below, the load factor of KEPCO in 2008 was 76.9%, which is encouraging figure comparing with other developed countries such as Japan and . The load factor of Japan in 2006 was 62.9%, that of France in 2005 was 64.1% and that of the US was 59.3%. 80

78 77.7 76 76.9 76.2 76.2 74 73.8 73.9 72

70

68 '03 '04 '05 '06 '07 '08

Fig 17 Load Factor of KEPCO

C. Award Winner by PLMA And last but not least KEPCO has received an award in 2006 by PLMA, or the Peak Load Management Alliance. The title was the Outstanding Achievement Award in the area. This award was really symbolically significant to KEPCO. Firstly, KEPCO was the first winner outside of the US. And this title has officially established KEPCO as the advanced power supplier of DSM in the world.

4. Future strategies A. Changes to Tariff Since policies to DSM have been adopted, energy has been used effectively. Yet much more customers should be participated. Presently most of the participants of DSM are customers whose industries are commercial or industrial. Table 4 Electricity Sales of KEPCO in 2008

Street Categorize Residential Commercial Educational Industrial Agricultural Sum lightings

EA 13,473 2,503 34 329 1,196 884 18,419 (thousand)

Sales 77,269 86,827 5,783 203,475 8,869 2,847 385,700 (GWh) As Table 4, DSM would produce much more effects if residential customers take part in DSM. Unfortunately KEPCO does not have DSM policies for residential customers because of their stiff electricity tariffs. The tariffs, that are called “progressive” are not seasonal or time of use structure like that of commercial or industrial. Progressive rates are simple; if energy is used much, rates are much expensive. Currently and globally is studied and installing IHD or the In-Home- Display has been popular. Provided if residential tariffs change from progressive structure to TOU or the Time of Use Tariffs system and then DSM policy to residential customer based on IHD is built up, energy would be used effectively.

B. Development of DSM programs In case of Energy Efficient Programs, KEPCO has tried to distribute energy efficient appliances. But after disseminating energy efficient equipment, the way controlling it is also improtant. After installing energy efficient lightings, it is important to save energy by turning off unnecessary lamps such as those nearby windows during day time or in a vacant room. Since 2008 KEPCO has started to promote Lighting Control System that has remote sensors that can detect brightness and intensity of illumination. Therefore it can make the best suited working environment “economically”. That is to say, DSM policies have to focus on promoting DSM system rather than “only” energy efficient item.

C. Reasonable electricity rates In manufacturing sector, there are 3 categories that are the world best: semi-conductors, steel, vessels. Admittedly technologies that manufacturing them played a key role, low manufacturing costs made them competitive goods. Electricity rates in Korea are inexpensive comparing with other countries: 59% of that of Japan. Due to regulations, electricity rates are below than production costs. For 20 years electricity rates have increased by only 10% of inflation rate. However there are side-effects of low electricity rates. Electricity users do not tend to save energy. Ironically electricity consumption in Korea is higher than OECD’s average by 170%. It turns out that low electricity rates made customers uninteresting in electricity costs. In the near future electricity rates should be revised so that customers voluntarily save energy.

5. Conclusion This paper illustrates how much DSM policies had an effect on saving Energy amount used. A few countries adopted some DSM policies and operate differently. The matter is how DSM policies are changed according to ever-changing energy usage environment. To apply new DSM policies, as mentioned before, tariffs standards should be flexible. And systematic approach of DSM is needed. Furthermore reasonable rates are prerequisite. In the foreseeable future DSM should be developed so that various energy resources can be mixed effectively in terms of economically and environmentally.

Bibliography Korea Electric Power Corporation. 2010 “DSM” < http://kepco.co.kr/dsm> Electric Power Industry Technology Evaluation & Planning. 2009 “DSM Report in 2008” Korea Energy Management Corporation. 2010 “New and Renewable Energy” Busan Ilbo.