Grid-locked

North Korea needs energy. But can the parties negotiating a solution to the nuclear crisis come up with a viable way to plug in the North?

Nighttime satellite images sparkle with the bright city lights of South Korea and Japan, while neighboring North Korea remains shrouded in darkness. The country’s energy needs are dire: 23 million people struggle to get by on 2 gigawatts of energy (less power than the amount consumed by a single U.S. city of 1 million people). North Korea’s energy shortage likely contributed to its mid-1990s famine, when electric irrigation pumps and threshers stopped working. Factories throughout the country stand idle, and homes sometimes receive as little as two hours of electricity per day. Many have come to rely on candles and wood-burning stoves.

Small wonder, therefore, that the recent “breakthrough” at the September 2005 round of six-party talks on Pyongyang’s nuclear program hinged upon a commitment from the five other parties–the United States, South Korea, Japan, Russia, and China–to provide the North with energy assistance. Pyongyang, in turn, has agreed to a set of principles that would lead to the North “abandoning all nuclear weapons and existing nuclear programs” and returning to the global nonproliferation regime.

But how will this energy be provided? Immediately after the September announcement, North Korean officials stated that the only form of energy assistance that mattered to them was the provision of light water nuclear reactor technology–a demand that U.S. negotiators branded as unacceptable. [1]  South Korea, however, has offered an alternative–instead of building power plants in the North, Seoul would directly supply 2 gigawatts of electricity through power lines spanning across the demilitarized zone (DMZ).

This proposal, however, is fraught with both technical and political difficulties. If the South’s plan serves as the basis for the next round of six-party talks, then any final agreement is likely to be built upon very wobbly foundations. The six parties should instead consider adopting a short-term, alternative package of energy assistance that would provide more energy services faster, cheaper, and at lower risk. Doing this would give immediate substance to pledges to supply energy assistance–substance that has been sorely lacking from attempts to provide the North with energy aid up until this point.

 

A shock to the system

Thirty miles north of the city of Sinpo, on the eastern coast of North Korea, sit the dormant foundations of two under-construction nuclear reactors. After roller-coaster confrontations with Pyongyang in 1994, the United States, along with South Korea, Japan, and the European Union (EU), agreed to provide the North with energy assistance as part of a deal to freeze its existing nuclear programs and to provide for the continuity of inspections at its nuclear facilities. Included in the October 1994 deal, known as the U.S.-North Korea Agreed Framework, was the construction of the two 1-gigawatt light water nuclear reactors and the promise to provide large U.S. shipments of heavy fuel oil (HFO). [2]

Although the framework held for eight years, the type of energy assistance that the parties settled on proved counterproductive. The North Koreans had difficulty absorbing the fuel oil, as only one large power plant in the country was designed to use HFO as a full-time fuel. The HFO sent to North Korea also contained significant amounts of sulfur and other impurities that reportedly accelerated the corrosion of heat exchangers in North Korean power plants designed to use coal, thereby reducing their generating efficiency and capacity. [3]  The North ended up dumping some of the HFO in trenches because it couldn’t store or use it all.

In late 2003, the Korean Peninsula Energy Development Organization (KEDO)–the U.S.-led consortium building the two nuclear reactors–suspended construction in response to U.S. allegations made public in October 2002 that North Korea had a secret uranium enrichment program. Yet, even if the reactors had been completed, the North Korean electricity grid could not have supported them, as the grid is far too small and simple to run such large and potentially hazardous units. [4]  During the negotiations of the Agreed Framework, North Korean grid experts warned their leadership not to accept any reactors larger than 400 megawatts. American negotiators also knew about the grid constraint but chose to ignore it. The parties were driven by irresistible political logic to proceed with a bad project that could never have worked. [5]

In order to kick-start the stalled talks, on July 12, 2005, South Korean Unification Minister Chung Dong-young announced that South Korea had offered to supply 2 gigawatts of power to North Korea if it dismantled its nuclear weapons program. [6]  (Although a gigawatt of electrical power can sustain only a small U.S. city, it would go a lot further in North Korea, where households have few, if any, appliances and perhaps one or two lights.) South Korea’s offer is benchmarked to the Agreed Framework’s energy assistance plan and is designed to substitute for the power output of the two light water reactors. Rather than building nuclear reactors on North Korean soil, the current offer entails running power lines from South Korea to the North, with delivery of electric power possibly beginning as early as 2008.

South Korea already supplies a small quantity of electricity to the Kaesong industrial zone north of the demilitarized zone, which houses South Korean industry and forms a “grid island” separated from the North’s electricity grid to ensure reliable, high-quality power.Officials from the South’s Ministry of Commerce, Industry, and Energy estimate that supplying an additional 2 gigawatts of electricity would cost a few billion dollars–about $1.5-$1.7 billion to install the new transmission lines and transformer substations between Yanju in South Korea and Pyongyang, and more than $1 billion per year for generator fuel and to operate and maintain the transmission facilities. Seoul has said that it will pay for the plan with its $2.4 billion of unspent commitments from the total $4.6 billion cost of the KEDO light water reactor budget. [7]  It is unclear who would pay for annual operation costs after South Korea funds the first year.

The plan met with immediate skepticism in South Korea. The opposition Grand National Party, concerned about upsetting consumers with prospective tax or electricity rate increases, criticized the plan’s potential cost. [8]  Indeed, the South Korean government would likely impose a tax or rate surcharge to pay for this aid, and low-income South Korean power consumers might grouse that they are paying higher tariffs to send free electricity to the North.

South Korean officials have not disclosed the specific destination of the electrical power, or even if they have discussed the relevant technical issues with the North. Given the near collapse and unreliability of the North’s power system, it is safe to assume that only large industrial plants and major cities in the Pyongyang-Nampo region–and possibly industrial cities on the east coast, such as Hamhung–could absorb 2 gigawatts of electricity within the next five or so years. This constraint implies that a transmission corridor would be set up across the DMZ north of Seoul and directed straight toward Pyongyang. It can also be assumed that South Korea would build two high-voltage transmission lines (capable of carrying either 345 or 220 kilovolts) from the DMZ to Pyongyang, so that if one line had a forced outage, the remaining line should be able to transmit 2 gigawatts of electricity.

Mismatched grids

A daunting obstacle confronting Seoul’s proposal is the significant disparity between the electrical grids of the North and South. North Korea’s unified electrical grid dates back to approximately 1958. Built to support Stalinist-style heavy industry, the grid collapsed along with the industrial economy in the 1990s when it was abandoned by the former Soviet Union.The Ministry of Electric Power and Coal runs the transmission and distribution system, as well as its 62 power plants, 58 substations, and 11 regional transmission and dispatching centers. The grid’s total reported generation capacity as of 1990 was about 8-10 gigawatts, with the higher total including numerous small power plants of uncertain operability. At present, the system operates not as a unified grid, but as a largely disconnected hodgepodge of regional and local grids running on different frequencies, with an estimated operable generation capacity of only 1-3 gigawatts. Most of the North’s main transmission lines are rated at either 220 or 110 kilovolts. Other bulk transmission lines are rated at approximately 66 kilovolts, with lower voltage lines used for local distribution.

By Western standards, the North’s system is arcane and subject to regular power outages. Voltage and frequency fluctuations within the grid are orders of magnitude greater than international standards, and electricity supplies, depending on the area, vary from nonexistent to occasionally interrupted. (Supplies in Pyongyang are the most reliable.) Making matters worse, responses to outages are cumbersome and slow, often resulting in cascading outages and further delays in restoring power.

Connections between the elements of the transmission and distribution system were, as of the early 1990s, operated by telephone and telex, without the aid of automation or computer systems. An early 1990s U.N. project installed some control equipment at select control centers and a singlepower plant in the Pyongyang area, yet few other upgrades have been undertaken.

By contrast, South Korea’s power system is roughly 30 times larger than North Korea’s current operable system. Its generating capacity is about 60 gigawatts. [9]  The South plans to increase its total installed capacity to about 80 gigawatts by 2015 through investment in new plants, including about 10 gigawatts of renewable energy (especially wind power). [10]  Moreover, the South’s transmission and distribution system is much larger and more complex than the North’s. The system includes about 25,000 kilometers of transmission lines–plus an additional 10,000 kilometers are slated to be constructed in the next decade. A network of345-kilovolt lines form the backbone of the system, while local systems operate on 154-kilovolt or 66-kilovolt lines (the latter are being phased out). A 765-kilovolt line, now under construction, will allow industry to ship bulk power from generation plants in the south of the country to Seoul and surrounding areas, which account for more than 42 percent of the total load. [11]

Due to reactive power losses and the locations of power plants, transmission lines, and demand centers within South Korea, there are physical limits on the South-North transfer of electricity by long-distance transmission lines that could have a major impact on South Korea’s ability to supply energy to the North. [12]  Exceeding these limits can trip circuit breakers and shut down the South Korean grid. In 2001, South Korean experts estimated that the maximum load that could be drawn from the South Korean grid and sent to the North was about 0.5 gigawatts, or about one-quarter of what has been offered. Although the North’s supply and demand of electric power has since grown, South Korea’s ability to transmit power to high-demand centers, such as Seoul, has not grown commensurately, making it unlikely that its grid can supply more than was estimated in 2001.

Given the vast disparity between the two grids, it is not only difficult but downright hazardous for South Korea to simply transmit pure power to the North. The two grids operate on different frequencies (in parts of the North, at least), with divergent standards, such as voltage fluctuation and reserve capacity, and with completely distinct engineering and safety cultures. South Korea cannot afford to put its own grid at risk of forced outages, operating as it does 20 nuclearpower reactors, due to instability propagated from the North Korean grid. Safety analyses of light water reactors identify forced outages as one of the main pathways to a meltdown accident.

If power is to be drawn off the South’s existing grid without putting it at risk, the South needs to either build power plants north of Seoul to better balance supply and demand in the grid or build unconnected power plants that supply power directly to the North. A third option–to free up generating and transmission capacity by reducing demand in the Seoul area–would not be politically palatable in the South.

South Korean officials told the Joong-Ang Daily on July 18, 2005 that they intend to expand power generation in the Seoul and Incheon region to achieve the necessary balance in the South’s grid and have already advanced completion of a 0.8-gigawatt generating unit at Incheon’s Yeongheung Thermoelectric Power Plant to June 2008. Officials also said that they intend to add an additional 2 gigawatts of separate generating capacity at this plant in order to supply the power needed for the North, as well as to add other capacity (such as reopening the Seoul Thermoelectric Power Plant in Dangin-dong) in order to keep up with growing demand around the capital city. However, independent Korean transmission experts have criticizedthese plans, saying that they were already under way and aimed at solving existing transmission congestion problemsinside the South. New plants are needed, they say, to supply 2 gigawatts to the North. [13]  To ensure South Korea’s grid reliability without incurring the expense of current converters that would protect it from the instability of the North’s grid, South Korea’s state-owned Korean Electric Power Corporation appears to be assuming that the two grids will be run separately for the foreseeable future.

Ground to cover

Grid interconnection is highly political and difficult to achieve between friendly neighbors, let alone enemy states divided by many fundamental issues. [14]  Before connecting their grids, North and South Korea would have to confront several potentially showstopping issues that include: the high front-end political cost of negotiating how their systems will connect; realistically funding the full cost of the 2 gigawatts; negotiating operating standards; and achieving the trust needed to share dispatch and control authority in a system that requires intimate and instant coordination. (A South Korean power authority study conducted in the mid-to late 1990s avoided these issues by assuming that the North’s grid was absorbed into the South’s by “swallowing it alive.”)

From North Korea’s perspective, an even bigger problem is that South Korea could arbitrarily shut off the supply of electricity by “flipping a switch.” Given South Korea’s notoriously volatile politics, such a fear is not irrational.  One way to ameliorate this potential would be if South Korea and Russia connected their grids by building a tie-line across North Korean territory.This would enable the North to siphon off power when and where it is needed rather than absorb a bulk power transfer on a political timeline and would buffer North Korea against South Korean political manipulation. [15]

Cost considerations could also affect the success of the South’s offer. A rough analysis suggests that the entire project will likely require far more investment than the stated ceiling of $2.4 billion. According to our estimates, the capital cost for a 2.12-gigawatt electric gas-fired power plant would be $1.1 billion; the cost for 100 kilometers of cross-DMZ and 400 kilometers of high-voltage transmission lines would be $580 million; and the cost to refurbish half of the North’s transmission and distribution system would be $1.8 billion. The total capital investment needed to produce this system, which would be able to deliver 2 gigawatts of usable power to the North, likely would be at least $3.4 billion. With fuel expenses, the subsequent annual operation and maintenance cost would be at least $1.1 billion. Hidden costs in the renovation of the North’s distribution system–including additional transmission infrastructure and an upgrade of end-use equipment–as well as increases in fuel cost (a possibility that recent increases in international oil and gas prices underscore), would likely drive annual costs closer to $1.5 billion or more. By comparison, South Korea currently invests on average about $3 billion per year in its own new generation and transmission capabilities.

South Korean officials recognize the uncertainty in theirestimates, particularly because so little is known about the North’s distribution system. [16]  But they are also aware that continued instability in North Korea threatens to undermine the South Korean economy. Even a small reduction in South Korea’s $900 billion gross national product would be far more costly than the power offer. If other countries were to offer additional investment to meet the cost of rehabilitating and reconstructing the North’s power system, it would make the South’s offer more meaningful. Japan is the only candidate for such a major role because of its obligation to pay reparations to the North, similar to those paid to South Korea in 1965, for damages inflicted during colonialism and World War II. But Japan is not about to commit any resources while its bilateral agenda with the North remains unresolved, especially in relation to the return of “abductees,” Japanese citizens kidnapped by North Korea after the Korean War.

 

Closing a deal

For any energy assistance program to succeed, continued negotiations should be based on mutual interest. South Korean and U.S. officials often assert that so little is known about the North’s energy economy that it is difficult to set priorities. Yet, North Korean energy experts have stated clearly their energy and electricity priorities in formal communications with KEDO, in EU-sponsored meetings, with officials working on energy- and grid-related U.N. projects, and through private and technical channels. [17]

North Korean energy experts maintain that it is crucial for assistance to move from short-term fixes to long-term development. They’ve explicitly stated the desire to increase the North’s energy security by decreasing its reliance on coal, diversifying resource use, exploring for crude oil, undertaking international natural gas projects, and developing nuclear power–a similar course to Japan and South Korea.

They also have a laundry list of specific energy goals: restore and repair existing thermal and hydroelectric plants; build new hydroelectric plants; repair, integrate, and improve voltage and frequency on the North’s transmission and distribution network; add modern control facilities; rehabilitate and modernize coal production; adopt energy-efficient technologies in industrial and commercial sectors; and develop renewable energy systems.

Given the North’s energy predicament, these are not irrational choices. The earliest a South-North arrangement would begin providing bulk power to North Korea is 2008, which is light-years away for Pyongyang. The trick to delivering energy aid in a meaningful time frame is to shift from large-scale, intergovernmental projects to a basket of diverse, small-scale, rapidly implemented (less than a year), and relatively cheap options that match these priorities.

South Korea should repair North Korean coal-fired power plants that can be fixed economically. More broadly, the fastest way to increase the North’s power and coal supply is to reduce waste. Improving the energy efficiency of lighting, motors, boilers, and controls in industry, and installing weather stripping and simple insulation measures in buildings,would enlarge effective supply much faster than building new power plants or running power lines to the North. [18]

Should the six-party talks lead to actual North Korean nuclear weapons dismantlement and the return of International Atomic Energy Agency inspectors, realistic energy assistance will become an imperative for nonproliferation efforts on the Korean peninsula. Projects such as South Korea’s power plan may be politically necessary for a negotiated outcome, but they are not sufficient to deliver tangible benefits to the North. To provide North Korea with energy development on a meaningful time frame, multiple small projects that offer an array of energy services are preferable to big, symbolic projects whose completion would take years to complete–if ever.

1. See Peter Hayes et al., “Light Water Reactors at the Six-Party Talks: The Barrier That Makes the Water Flow,” Nautilus Policy Forum Online 05-78A, September 21, 2005.

2. A gigawatt is a billion watts of power and can be supplied in mechanical, thermal, or electrical form. In this article, all gigawatts are in terms of electrical energy. In North Korea, more than 70 percent of the fuel energy value at the generating plant is lost in producing the electricity, and 15-20 percent (possibly more) of the power that is generated is lost in transmission and distribution.

3. North Korea has only one major power plant designed to use HFO. North Korea used HFO in combination with coal at plants initially designed to use domestic coal.

4. John H. Bickel, Evergreen Safety and Reliability Technologies, LLC, “Grid Stability and Safety Issues Associated with Nuclear Power Plants” (paper, Workshop on Power Grid Interconnection in Northeast Asia, Beijing, China, May 14-16, 2001). This and other cited workshop papers can be found online at nautilus.org/archive.

5. The KEDO reactors could only have operated by being tied into a Russian Far East-South Korean interconnection, or if the South ran two AC lines from the KEDO reactors to the South Korean grid, in effect importing the power from the North.

6. Rhee So-eui, “S. Korea Says Offered to Supply North Electricity,” Reuters, July 12, 2005.

7. Private communication with U.S. officials; Joo-hee Lee, “South Korea Offers Power Aid in Return for Nuclear Cleanout, Proposes Light Water Reactor to be Terminated for Assistance,” July 13, 2005.

8. Hae-in Shin, “GNP Split on N.K. Energy Assistance,” Korea Herald, July 16, 2005.

9. Korea Electric Power Corporation, “KEPCO in Brief,” December 31, 2004; see also Dong-wook Park, Korea Electrotechnology Research Institute, “Perspectives on Northeast Asian System Interconnection” (paper, Workshop on Power Grid Interconnection in Northeast Asia, Beijing, China, May 14-16, 2001).

10. Jungmin Kang, “Update on the ROK Energy Sector and the ROK LEAP Model” (paper, Asia Energy Security Workshop, Tsinghua University, Beijing, May 17, 2005).

11. Jong-keun Park, “Power System and Technical Issues in South Korea” (paper, Workshop on Power Grid Interconnection in Northeast Asia, Beijing, China, May 14-16, 2001).

12. Energy transmission requires reactive power to support the motors, generators, and alternators attached to the system, as well as devices such as condensers and capacitors, which normalize electric current flow by releasing energy when drops in voltage are sensed. If a system is not designed to provide for reactive power demand, then this energy will be drawn from the transmission lines and will lead to the grid being overloaded and possibly trigger interruption of supply. See Thomas C. Elliott et al., Standard Handbook of Powerplant Engineering (New York: McGraw Hill, 1989), p. 4.59.

13. Private communications with transmission specialists.

14. See Karsten Neuhoff, “Economic Considerations: An Overview and Background on Power Markets and Pricing Principles, with Focus on International Trading, Institutional Considerations for International Electricity Trade” (paper, Workshop on Power Grid Interconnection in Northeast Asia, Beijing, China, May 14-16, 2001).

15. See studies on regional and Russian Far East-South Korean grid interconnection, from the Second Workshop on Power Grid Interconnection in Northeast Asia, Shenzhen, China, May 5-8, 2002.

16. Cited in Seo Jee-yeon, “Energy Aid to N. Korea Faces Technical Hitch,” Korea Times, July 15, 2005.

17. For example, see North Korean Delegation, “Energy Sector Activities and Plans in the DPRK” (paper, Asian Energy Security Workshop 2005, Beijing, China, May 13-16, 2005); and DPRK Delegation, “Options for Rehabilitation of Energy System and Energy Security and Energy Planning in the DPR of Korea” (paper, Asian Energy Security Workshop 2004, Beijing, China, May 12-14, 2004).

18. For additional information on measures that would improve the provision of energy services in the North while reducing overall energy use, plus estimates of the North’s recent trends in energy supply and demand, see David von Hippel, Timothy Savage, and Peter Hayes, “The DPRK Energy Sector: Estimated Year 2000 Energy Balance and Suggested Approaches to Sectoral Redevelopment,” March 2003, Nautilus Institute.

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