A CGE analysis for quantitative evaluation of electricity market changes

• A novel approach is proposed for incorporating a top-down and bottom-up model.
• This study examines various counterfactual scenarios after Korean electricity industry reform.
• An improved regulatory system and policy measures are required before the reform

Risk and uncertainty entailed by electricity industry privatization impose a heavy burden on the political determination. In this sense, ex ante analyses are important in order to investigate the economic effects of privatization or liberalization in the electricity industry. For the purpose of fulfilling these quantitative analyses, a novel approach is developed, incorporating a top-down and bottom-up model that takes into account economic effects and technological constraints simultaneously. This study also examines various counterfactual scenarios after Korean electricity industry reform through the integrated framework. Simulation results imply that authorities should prepare an improved regulatory system and policy measures such as forward contracts for industry reform, in order to promote competition in the distribution sector as well as the generation sector.