Is the Korean public willing to pay for a decentralized generation source? The case of natural gas-based combined heat and power

Natural gas (NG)-based combined heat and power (CHP) plants can be installed near electricity-consuming areas and do not require large-scale and long-distance power transmission facilities. This paper attempts to assess the public's additional willingness to pay (WTP) for substituting consumption of a unit of electricity generated from nuclear power plant, currently a dominant power generation source in Korea, with that produced from NG-based CHP plant in terms of decentralized generation using the contingent valuation (CV) method. To this end, a CV survey of 1,000 households was implemented. The results show that the mean additional WTP for substituting nuclear power plant by NG-based CHP plant is estimated to be KRW 55.3 (USD 0.047) per kWh of electricity, which is statistically significant at the 1% level. This value amounts to 44.7% of the average price for electricity, KRW 123.69 (USD 0.106) in 2015, which implies that the public are ready to shoulder a significant financial burden to achieve the substitution. Moreover, the value can be interpreted as an external cost of nuclear power generation relative to NG-based CHP generation, or as an external benefit of NG-based CHP generation relative to nuclear power generation with a view to decentralized generation.