Korean Energy Economic Review ISSN:1599-7057(Print) 에너지경제연구

Due to distinct feature of power generation sector in Korea, fuel substitution of the sector has been rarely investigated. Under the consideration of circumstance in the sector, this study employed and modified the previous model by changing the characteristics of choice set for fuels. The modified model describes the log of cost share ratio by single fuel, which enables individual estimation of each input rather than a system. The modified model satisfies nonnegativity and homogeneity, and can be extended to a system by imposing symmetry condition. Due to insufficient data series, only modified individual cost share model was applicable to analysis of fuel substitution in power generation. The estimation result of modified cost share model showed high of 0.90~0.98. Total product of elasticity was statistically significant in coal and nuclear which are for basis load. All own price elasticities were negative except nuclear and coal, and inelastic except oil. Oil and LNG were unsymmetric substitutes. Consumption share of coal was estimated to increase by 3.7%p on 10% increase of total elasticity, but for nuclear to decrease by 6.6%p during 1990~2000, which implies that the elasticity for basis load increased by coal power plants more than nuclear power.