This study examines the structural limitations of Korea’s electricity market amid the growing share of renewable energy and seeks approaches to modify the market structure to facilitate a low-carbon transition. Korea’s electricity market currently functions as a cost-based, day-ahead market, which constrains its ability to manage supply-demand imbalances effectively as renewable energy rises. To address this, the study evaluates the necessity of introducing a capacity market as a forward mechanism, combined with generation-specific segmentation. A capacity market, in particular, is identified as a key tool to provide stable investment incentives for marginal generators, especially as the share of high-volatility resources like renewables increases, thus enhancing supply stability. Additionally, the study highlights the need to adjust capacity prices dynamically according to the market share of renewables and energy storage systems(ESS). In considering policies to support renewables and ESS, the study contrasts fixed-price contracts with dedicated capacity markets. While fixed-price contracts are vital in the short term to encourage market entry, it is equally important, in the long run, to operate the spot market in a technology-neutral manner to alleviate excessive risk burdens on wholesale market buyers. These insights offer policy recommendations to maintain a stable power supply and support the sustainable expansion of renewable energy.

ABSTRACT
Preface
Summary (KOR)

Chapter 1. Introduction

Chapter 2. Current Status and Changing Landscape of Korea’s Electricity Market
　Section 1. Characteristics and Objectives of Power System Operations
　Section 2. Changing Environment of the Domestic Electricity Market
　Section 3. Structural Limitations of Korea’s Electricity Market
　Section 4. Literature Review

Chapter 3. Model Analysis
　Section 1. The Model
　Section 2. Equilibrium Analysis
　Section 3. Policies for the Deployment of Renewable Energy and Energy Storage Systems

Chapter 4. Policy Implications
　Section 1. Functional Segmentation
　Section 2. Segmentation by Generation Type
　Section 3. Prerequisites for Advancing the Electricity Market

Chapter 5. Conclusion

References
Appendix