6.3 future costs of electricity generation
Figure 6.5 shows that the introduction of renewable technologies under the Energy [R]evolution scenario slightly increases the costs of electricity generation in the South Korea compared to the Reference scenario. This difference will be less than 1 cent/kWh up to 2020, however. Because of the lower CO2 intensity of electricity generation, electricity generation costs will become economically favourable under the Energy [R]evolution scenarios and by 2050 costs will be 2 respective 4.2 cents/kWh below those in the Reference scenario.
Under the Reference scenario, by contrast, unchecked growth in demand, an increase in fossil fuel prices and the cost of CO2 emissions result in total electricity supply costs rising from today’s US$ 34 billion per year to more than US$ 117 billion in 2050. Figure 6.5 shows that the Energy [R]evolution scenario not only complies with South Korea’s CO2 reduction targets but also helps to stabilise energy costs. Increasing energy efficiency and shifting energy supply to renewables lead to long term costs for electricity supply that are one third lower than in the Reference scenario.
The Advanced Energy [R]evolution scenario will lead to a higher proportion of variable power generation sources (PV, wind and ocean power), reaching 41% by 2030 and 73% by 2050.
Expansion of smart grids, demand side management and storage capacity through an increased share of electric vehicles will therefore be used to ensure better grid integration and power generation management.
In both Energy [R]evolution scenarios the specific generation costs are almost on the same level until 2030. By 2050, however the Advanced version results in a reduction of 2.2 cents/kWh lower generation costs, mainly because of better economics of scale in renewable power equipment. Due to the faster and earlier expansion of renewable technologies the overall total supply costs in 2030 are US$ 7 billion higher in the Advanced case than in the basic case. However, in 2050 total supply costs are US$ 9 billion lower than in the basic Energy [R]evolution scenario, despite the increased electricity consumption in the transport sector.