Abstract
The Korea electricity wholesale market is operated under the cost-based-pool system and the government regulation to the new generation capacities in order to insure the resource adequacy. The goal of government's regulation is the electricity market stability by attracting proper generation investment while keeping the reliability of system. Generation companies must mandatory observe that government plan by now. But if the restructuring is to be complete, generation companies should not bear any obligation to invest unless their profitability is guaranteed. Namely the investors' behavior will be affected by the market prices. In this paper, the system dynamics model for Korea wholesale electricity market to examine whether competitive market can help to stabilize is developed and analyzes the investors behavior. The simulation results show that market controlled by government will be operated stable without resulting in price spike but there is no lower price because of maintaining the reasonable reserve margin. However, if the competition is introduced and the new investment is determined by the investor's decision without government intervention, the benefits from lower wholesale price are expected. Nevertheless, the volatility in the wholesale market increases, which increases the investment risks.
