Seoul City Pilots 'Hourly Rate System'... Promoting Cost Savings with Eco-Friendly Pricing

Higher Electricity Prices During High Consumption Daytime... Eco-Friendly Rate Plan Achieves Greenhouse Gas Reduction by Encouraging User Distribution and Reducing Reserve Power Production Considering Lifestyle Patterns

[Asia Economy Reporter Lim Cheol-young] The Seoul Metropolitan Government announced on the 29th that it will pilot the “Time-of-Use Electricity Rate Plan,” an eco-friendly electricity tariff system that sets different electricity rates according to the time of day to encourage cost savings.

The “Time-of-Use Electricity Rate Plan” typically charges higher rates during daytime hours when citizens’ electricity consumption is high, and lower rates during times such as night and early morning when electricity usage is low. Currently, residential electricity rates follow a progressive rate system where the price increases as electricity consumption rises, regardless of the time of day.

With this rate plan applied, consumers are expected to become eco-friendly users while reducing their electricity bills. By understanding and using electricity during cheaper time periods that fit their lifestyle patterns, they can save on electricity costs. For example, an office worker who leaves for work in the morning and returns in the evening can save more on electricity bills by running washing machines or vacuum cleaners at night when rates are relatively low, compared to using the progressive rate system.

Seoul City explained that the Time-of-Use Electricity Rate Plan is also efficient from the perspective of national power management. Seoul expects that by distributing users through this plan, additional power plants will not need to be operated, thereby reducing greenhouse gases and fine dust.

Accordingly, a pilot project for the Time-of-Use Electricity Rate Plan will first be conducted targeting 3,000 households in Namgajwa Raemian, Hongjewon Hyundai, and Hongje Centreville apartments within the Seoul-type Energy Innovation District in Seodaemun-gu. The 3,000 households will be selected through a public contest, and the project will be implemented by September 2023. To allow residents to check real-time electricity usage, “smart meters” (remote meters) will be installed free of charge on electricity, heating, and gas meters in each of the 3,000 households, and a mobile app linking electricity usage and billing information has also been developed. During the project period, participating households will receive a monthly electricity bill discount of 2,000 KRW.

Seoul plans to additionally introduce the “Time-of-Use Electricity Rate Plan” to 2,000 households in Yangcheon-gu next year and gradually expand it to other areas of Seoul based on the pilot results. This pilot project is being promoted as part of the Ministry of Trade, Industry and Energy’s “Future Smart Grid Demonstration Project.”

Furthermore, through the “Future Smart Grid Demonstration Project,” Seoul will also promote various other initiatives. These include the “Green Premium Rate Plan,” which offers a separate electricity rate for consumers using electricity generated from renewable energy; the “Shared Solar Service,” which allows sharing of surplus renewable energy with other households; and the “National DR (Demand Response)” program, where users reduce electricity consumption upon request from the Korea Power Exchange.

Kim Yeon-ji, Director of the Environmental Citizen Cooperation Division at Seoul City, said, “Through the Time-of-Use Electricity Rate Plan pilot project, we expect consumers to transform from passive electricity users to eco-friendly consumers who actively save electricity and adjust demand patterns. We will reduce consumers’ electricity bill burdens and expand new services that enable voluntary responses to the climate crisis.”