KPX Seeks to Broaden Its Horizons

Sets its sights on evolving into a comprehensive energy trading institution

Korea Power Exchange (KPX), which will celebrate the 10th anniversary of its establishment in 2011, has come up with a new brand, "Smart KPX," to open up the future of electricity.
With KPX CEO and Chairman Oh Il-hwan taking the helm, KPX is determined to take the initiative in the smart grid, a key infrastructure for the low-carbon, green growth paradigm, and transform itself into a comprehensive energy institution in the future. The following are excerpts of an interview between NewsWorld and the KPX chairman, who touched on its tasks and future plans.
Question: Will you explain the status of KPX, which is unfamiliar to the general public, including its responsibilities?
Answer: In accordance with the government policy to restructure the power generation sector into a competitive one out of the four power industries ― power generation, transmission, distribution and sales ― six power companies were spun off from Korea Electric Power Corp. (KEPCO) in April 2001 and the power generation market was introduced. Following the change of the power generation market into a competitive one, KPX was established as an organization responsible for the power market and power system management.
Following the introduction of competition in the power market, KPX was established on Apr. 2, 2001 as an independent, non-profit entity, charged with two major responsibilities.
First, KPX operates the power market. It transacts power between GENCOs and KEPCO, which is responsible for power sales.
Second, KPX is charged with balancing power demand and supply and power system management. Since it is hard to stockpile power, power demand and supply are required to correspond. As power demand fluctuates from moment to moment, KPX is responsible for readjusting power generation according to a change in power demand. It is also in charge of such tasks as operating and controlling transmission and distribution facilities designed to transport generated power to consumers.
Q: Will you tell us about the prospects for power supply and demand during this summer?
A: A power demand peak occurs around mid-August when the summer holiday season ends. This summer's highest power demand is projected to grow to 65.35 million kW, a 4.1 percent rise over last year.
As the downpour season began in July, precipitation registered for 20 days in Seoul. As the average temperature dropped 1.8 degrees in Centigrate due to the frequent rainfall even into August, a rise in power consumption is leveling off.
As more power units were constructed, adding 4.5 million kW more than last year for a total capacity of 73 million kW in order to secure a stable supply of electricity, the nation has power reserves of 7.6 million kW. Given the stable situation with reserves of more than 6 million kW, despite the arrival of a belated heat, a stable supply of power is predicted to be possible.
Q: In summer, the public's use of air-conditioners is on the rise. How much of the nation's power demand is for using air-conditioners?
A: The power demand for using air-conditioners is estimated at 15 million kW, accounting for 23 percent of the nation's highest power peak projected at 65.35 million kW. It means that meeting the demand for using air-conditioners amounts to operating 15 nuclear power units each with a capacity of 1 million kW.
The problem is that the demand for using air-conditioners is on a constant surge. Take a look at the power demand fluctuations over the past five years: the annual demand increase for air-conditioning in summer averaged 1 million kW. If this trend continues, the power demand for air-conditioning is projected to grow to 25 million kW in 2022, accounting for about 30 percent of the estimated power peak. It means that the power demand rise for air-conditioning will take up more than half of the nation's total energy demand. Whether the power demand for air-conditioning is managed well hinges on the stable supply of power in the future.
Q: These days, "Smart grid" technology is the main topic being discussed in the power industry. Korea has been designated as a leading country in the smart grid sector during the G-8 Summit. How will Korea implement the smart grid project?
A: Our nation was designated as a leading country in the smart grid field during the G-8 Summit talks, but as one of those in the power industry, I'm feeling not just greatly proud, but also burdened with a heavy responsibility.
The smart grid project is being pushed by the government as one of the key projects to pursue its low-carbon, green growth strategies. The detailed design of a complex accommodating approximately 3,000 households designed to experiment smart grid technology on Jeju Island is under way. The Ministry of Knowledge Economy plans to complete a smart grid roadmap by this November, calling for achieving the goal of becoming the world's first nation to build smart grid networks.
What is smart grid technology, then? Speaking in easy words, we chose our cell phone service provider, which offers price options corresponding to our calling patterns. If smart grid networks are established, we can choose power according to our consumption patterns.
Power price fluctuations should be determined in real time to carry out a smart grid system. KPX plans to produce power prices in real time in a more precise fashion by innovating the power industry to advanced levels. The smart grid is a new business model with new added value designed to optimize energy efficiency by combining IT technology with existing electricity networks and digitalizing a power system.
Q: KPX is said to be preparing itself for handling emissions trading in the case it is introduced to reduce greenhouse gas emissions.
A: The government on July 6 announced a roadmap for a five-year national strategy on green growth. I understand that the government plans to establish a basic plan on greenhouse gas emission trading in 2009, and the plan calls for the implementation of a pilot project in 2011 with the goal of introducing an emissions trading system in state in 2012.
The Korean power industry, which accounts for 26 percent of the nation's total greenhouse gas emissions, will be the sector most affected by the introduction of emissions trading. In a response, KPX developed and began to announce an index on greenhouse gas emissions if the power sector in 2007 and nurtured 200 experts.
A trial emissions trading survey of five power companies ― KOSEP, KOMIPO, WP, KOSPO and EWP ― was conducted late last year to analyze how emissions trading will have an impact on the power industry.
This year's mock emissions trading survey is being conducted for four months from Aug. 10 to cover not only power generation companies but also steel, cement and refinery companies ― 24 industrial entities with heavier greenhouse gas emissions. The outcome of the trial emissions trading survey will be significant, given the fact that the involved companies account for an equivalent of 40 percent of the nation's total greenhouse gas emissions.
The goal of emissions trading is to reduce greenhouse gas emissions, blamed for global warming, Carbon credits should not be considered merely as financial instruments that are purchased at lower prices and sold at higher prices to earn profits. The introduction of emissions trading would deal the greatest blow to the power market, having a direct impact on electricity charges, so I understand that the operation of emissions trading and the power market need to be integrated.
Q: A little more than one year has passed since you took office. What achievements have you made?
A: I took office as the KPX chairman in June 2008. Korea ranks sixth in terms of power system management in the world. My first accomplishment was having successfully operated the sixth largest single power system in the world without a hitch last summer ― my principal job of ensuring the stable supply of power.
Second, I feel proud for having supplied good-quality power to the people at cheaper prices through the efficient operation of the power market despite international price surges for such fuels as crude oil and bituminous coal.
I also take pride in the role of KPX, which acts as a think tank for smart grid policies by recognizing changes in the power industry in advance and responding to them. These achievements are owed to the KPX staff's dedication to their jobs on the basis of their expertise.
While faithfully carrying out our basic task of ensuring a stable supply of power during my tenure, I will strive to help Korea ascend one step higher by actively joining the national low-carbon, green growth policies for nurturing national growth engines of the future.
Q: You have focused on educating your staff as well as giving lectures and studying. Will you elaborate on your management mottos?
A: The current times are dubbed as the knowledge & information society and the era of change. A decade ago, the construction of power plants and transmission line networks were key tasks of the power industry, but things are now changing fast toward a knowledge & information industry.
Following the introduction of the power market, power is traded like ordinary products. These days, the industry is evolving into the smart grid, a key infrastructure for low-carbon, green growth, by combining IT technology into power networks.
KPX, at the center of the fast-changing power industry, is required to be armed with extensive expertise. Even though I have been in energy policy positions with the government for a long time, I've done my best to acquire new knowledge since taking office as the KPX chairman.
As Nidec Corp. CEO Shigenobu Nagamori said, "Education is the top welfare policy for staff members." I will spare no efforts in paying attention and investing into nurturing our staff into top-notch experts as the most effective means to develop the power industry.
Q: KPX will celebrate the 10th anniversary of its founding in 2011. What is KPX's goal and vision in the next decade?
A: KPX unveiled the new brand "Smart KPX" meant to open up the future of electricity in early July. It symbolizes KPX's determination to take the initiative in the smart grid, a key infrastructure of the low-carbon, green growth paradigm and to transform itself into a comprehensive energy institution in the future.
Its first goal is to upgrade its own power market to more competitive and advanced levels.
Second, KPX is doing its utmost to brace for becoming an emissions trading institution.
Third, GENCOs are required to supply new and renewable energy sources, including wind power and photovoltaic power in the years to come. KPX is making efforts to be charged with issuing new and renewable energy equipment certifications and trading.
KPX is striving to evolve into a comprehensive energy trading institution by 2015 by expanding its businesses to diverse areas related to the leading role of smart grid and low-carbon, green growth. nw

(right) Korea Power Exchange (KPX) Chairman and CEO Oh Il-hwan. KPX CEO Oh shakes hands with his PJM counterpart Terry Boston after signing an MOU on smart grid technology at the KPX head office on June 9.

KPX CEO Oh waves the flag carrying his company's new brand "Smart KPX" in July.