Application of an Operating Reserve Demand Curve in ERCOT in the South Korean Electricity Market to Accommodate High Penetration Levels of Renewable Energy

We suggest a real-time (RT) capacity payment given as a price incentive to peak generators that provide capacity to power systems to achieve favorable return on investment (ROI) for generator investment costs. In the South Korean (Korean) electricity market with the application of merit order, it is hard for peak generators to retrieve investment costs and thus a missing money problem occurs. As the proportion of renewable energy increases, it will become harder for generators to achieve favorable ROI. Furthermore, more generators are necessary to provide regulation services to mitigate the fluctuation of renewable energy while enduring high fixed costs and low energy prices. Therefore, we suggest that the price of operating reserves based on the operating reserve demand curve (ORDC) should be used as a RT price incentive. We design an ORDC for the Korean market based on the methodology of Electricity Reliability Council of Texas (ERCOT), using the 2021 Korean electricity demand and supply data. We also verify the validity of this Korean ORDC by calculating the changes in generator profit.