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Economic output-maximizing share of combined heat and power generation: The case of South Korea

Min, Jeoung-Sik, Lim, Seul-Ye, Yoo, Seung-Hoon
Energy policy 2019 v.132 pp. 1087-1091
air pollutants, air pollution, carbon dioxide, electric power, electricity, emissions, energy, heat, models, power generation, production functions, South Korea
The combined heat and power (CHP) generation, which can produce both heat and electricity at the same time, is so efficient that it can reduce energy use and even mitigate CO2 and air pollutants emissions. For this reason, the share of CHP generation worldwide is increasing and the optimal share of CHP generation in electric power generation is a serious concern in South Korea. This article attempts to estimate the optimal share by modeling the plausible relationship between CHP generation and national output in the Cobb-Douglas production function setting and then deriving the output-maximizing share of CHP generation. The production function is estimated for annual data from 1995 to 2017 using several quantile regressions. The optimal share is computed to be 13.8%. Therefore, it is recommended that South Korea should increase the share of CHP generation slightly, given that the share was 8.6% in 2017. If the optimal CHP share instead of the actual CHP share had been achieved in 2017, GDP in 2017 could have increased by 0.82%.