Analysis of Net-Metering and Cross-Subsidy Effects in South Korea: Economic Impact across Residential Customer Groups by Electricity Consumption Level

Abstract

Recently, thanks to various support mechanisms, residential photovoltaics (PVs) for self-consumption are proliferating at a rapid pace. The net-metering scheme, one of the prevailing support mechanisms for self-consumption PVs, contributes to the proliferation of residential PVs by enhancing the economic benefits of PV adopters, but it suffers from certain disadvantages, such as missing network revenue of utilities and spread of cross-subsidies between the customers. This paper analyzes the cross-subsidy effect of residential PV proliferation across customer groups segmented according to their PV adoption and electricity consumption level under the net-metering scheme in the Korean electricity market. The results show that missing network revenue of utilities increase by about 0.83% for every 1% increase of residential PV penetration, and customers in the lowest usage tier provide more cross-subsidies toward customers in the higher usage tiers as with higher proliferation of residential PVs. In addition, this paper suggests that the cross-subsidy effect between customers can be reduced by introducing a new network charge design that is more consistent with the cost-causality principle as well as targeted deployment policies for self-consumption PVs.