Elsevier

Energy Policy

Volume 45, June 2012, Pages 133-141
Energy Policy

Governing the transition of socio-technical systems: A case study of the development of smart grids in Korea

https://doi.org/10.1016/j.enpol.2012.02.005Get rights and content

Abstract

This paper examines the motivations, processes and outcomes of the development of smart grids in South Korea through the perspectives of governance and innovation systems. Drawing on desktop research and semi-structured interviews, this paper has two major findings. First, the development of smart grids in Korea has been shaped by various factors including macroeconomic policy, the role of the government, and experimentation. The complex interactions between these factors at the landscape, regime and niche levels has impacted on the development of smart grids. Second, while Korea's government-led approach has its strengths in driving change, it has also exposed weaknesses in the country's ability to mobilise the private sector and consumer participation. Major obstacles including partial electricity market reform and public distrust exist. A systemic perspective is needed for policy in order to accommodate the changes required for smart grid development. Regulatory reforms, particularly price-setting mechanisms, and consumer engagement are priority areas for policy change.

Highlights

► Smart grid developments in Korea have been affected by factors that go beyond technological ones. ► Those factors include macroeconomic policy, government's role, and experimentations. ► These factors also interacted at the landscape, regime and niche levels. ► The government-led approach has limitations in engaging the private sector and consumers. ► Major constrains include partial electricity market reform and public distrust.

Introduction

Smart grids are electricity networks that utilise information technology to enhance the reliability, security and efficiency of power systems (KSGI, 2011). A distinctive feature of smart grids is the ability to integrate the actions of all users including generators and consumers (IEA, 2011). Smart grids have a major role to play in a low-carbon future: they can be instrumental in energy saving and accommodating a broad range of generation and storage options including renewable energy, and thus are a key to both demand and supply-side management of energy systems.

The potential opportunities and benefits of smart grids could be substantial. The Electric Power Research Institute (EPRI) estimated that an investment of $338 billion to $476 billion for a fully functional smart grid could result in benefits up to $2 trillion in the US (EPRI, 2011). Faruqui et al. (2010a) also estimated that 67 billion euros for building and running peak infrastructure could be avoided in the EU if dynamic pricing can be adopted.

The US, EU, Japan, and Korea have been among the first-movers in the development of smart grids. These economies have adopted different pathways with varying levels of achievement. In the US, for example, the emphasis is on smart metering and grid modernisation (Executive Office, 2011). In contrast, Europe places emphasis on decentralised systems with active participation from end-users who can sell surplus electricity that they generate from micro-generation technologies such as small wind turbines at household and community levels (Ragwitz et al., 2010).

The transition from large-scale carbon/nuclear-based electricity grid systems to smart grid systems however is a difficult and complex process that goes beyond technological challenges. Smart grids look very different from today's grid systems, involving a shift from centralised, fossil fuel/nuclear-based and non-participatory power systems to one which can accommodate a wide range of energy sources including both centralised energy systems and decentralised renewable energy such as wind and solar energy (MKE and KSGI, 2009). Smart grids are also characterised by two-way relationships with well-informed and actively involved end-users. Dynamic pricing, which is the charging of different electricity rates at different times of the day and year to reflect the time-varying cost of supplying electricity (Faruqui and Palmer, 2011, p. 16), and smart metre roll-outs would need to be introduced to enable effective consumer engagement in demand side management (IEA, 2011). The challenges of smart grid development therefore are numerous, including realigning the interests of business, government and electricity consumers to overcome resistance to change (Executive Office, 2011, IEA, 2011). However, little is known about how these challenges can be overcome.

This paper examines governing processes for the transition of socio-technical systems, applied through a case study of smart grids in South Korea (hereafter Korea). The paper examines the motivations, processes and outcomes of the development of smart grids in Korea using the concepts of governance and innovation systems as an analytical framework.

Korea merits study because its government-led and export-oriented approach to developing smart grids appears to differ in many interesting ways when compared with other countries. A number of recent policy developments, most notably the national Smart Grid Roadmap and a major demonstration project known as the Smart Grid Testbed on Jeju Island, can provide useful information for analysis.

The analysis presented here draws on data and information derived from desktop research, semi-structured interviews and field observations. The interview data consists of seven in-depth interviews with stakeholders conducted in Korea in April 2011, two follow-up email correspondence and four telephone interviews.

The richness of the information derived from our face-to-face interviews has the strength to reveal the critical interactions of complex social phenomena (Miles and Huberman, 1994). However, qualitative case studies may suffer from what Miles and Huberman (1994, p. 281) have termed the “limitations of interpretivism”—they are may be a “person-specific, artistic, private/interpretive act that no one else can viably verify or replicate it”.

Our study adopted several measures to overcome these limitations. First, the interviewees were carefully selected informants who occupy roles or positions in an organisation, social networks, communities of a political system and are therefore knowledgeable about the issues studied (Johnson, 1990). They came from the government, energy companies, universities and research institutes (see Appendix 1). Second, we used semi-structured questionnaires which were developed on the basis of our literature review as a way to facilitate systematic interviews across interviewees. Third, e-mail correspondence and follow-up telephone interviews were conducted to collect supplementary information and to clarify data. Fourth, the interviews were recorded and transcribed to reduce inaccuracies due to poor recall. Fifth, as far as such information is accessible to us we have used data we collected from publications to corroborate data provided by our interviewees.

The following section provides an overview of smart grid developments in Korea. This is followed by a discussion on the theoretical framework that integrates the key concepts of governance and innovation systems. The framework is then used to inform our analysis of the Korean case.

Section snippets

Smart grid development in Korea: An overview

South Korea, officially the Republic of Korea, has a geographical area of 99,720 km2 and a population of 48.22 million in 2010 (KOSTAT, 2011a). It is a major developed country in Asia which ranks 14th globally by GDP (World Bank, 2011). Korea was the world's 10th largest energy consumer in 2008 (EIA, 2011). As a country that has no oil, no high quality coal, and produces only 1.5% of the natural gas it requires, Korea is dependent on imports to meet almost all of its energy needs (EIA, 2010).

Smart grid in theoretical perspective

A scanning of the literature suggests that two substantive bodies of theory are instructive in helping to analyse the development of smart grids: governance and innovation systems studies.

Factors underpinning Korea's smart grid development

Korea's socio-technical system for smart grids possesses a number of characteristics which appeared to create opportunities as well as barriers for the development of smart grids. These factors can be found at the landscape, regime and niche levels of the socio-technical system.

Discussion: The strengths and weaknesses of the government-led approach

The emergence of the Korean model, which is distinguished by a government-led and export-oriented approach, poses a number of important questions: to what extent has this model driven changes in the innovation system? Who are driving (or creating barriers) for change and how? Before discussing our findings, we must begin by acknowledging that our observations should be interpreted with caution. In electricity sectors where large existing investments in fossil fuel-based and nuclear

Conclusion

Driven by its “Green Growth Vision”, Korea embarked on its smart grid initiatives in 2009. Within just three years the country has made some important progresses in the development of smart grids although problems still exist. This paper adopted the perspectives of governance and innovation systems as a general analytical framework for understanding and critically examining the recent evolution of smart grids in Korea.

We have two major findings. First, we have revealed the complexity of the

Acknowledgments

We would like to acknowledge appreciation to our anonymous interviewees in Korea for contributing their insights and providing useful information. We thank the two anonymous reviewers for their careful reading and valuable comments on our paper. We remain solely responsible for any errors and omissions in the findings and interpretations expressed in this paper. We gratefully acknowledge the funding of this research by the University of Hong Kong through the Initiative on Clean Energy and

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