DPRK Energy Security and US Policy Options

Briefing to US-DPRK Next Steps Workshop

January 27, 2003

Peter Hayes

www.nautilus.org

SCOPE OF PRESENTATION

1. DPRK Energy Status Update

3. Six Policy Options for “No Rewards” DPRK energy development and assistance

Truck with Coal Gasifier

Truck with Gasifier

Jan 8-03 Next Steps, Jan 27-03 5

Frequency&Voltage Fluctuation

Voltage and Frequency in Nampo Hotel

0

50

100

150

200

250

9/18/98 12:00AM

9/20/98 12:00AM

9/22/98 12:00AM

9/24/98 12:00AM

9/26/98 12:00AM

9/28/98 12:00AM

9/30/98 12:00AM

10/2/98 12:00AM

Date and time

volt

age

and

fre

qu

ency

Voltage (V)

Frequency (Hz)

Unhari Village Voltage and Frequency

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50

100

150

200

250

9/25/9812:00 AM

9/25/9812:00 PM

9/26/9812:00 AM

9/26/9812:00 PM

9/27/9812:00 AM

9/27/9812:00 PM

9/28/9812:00 AM

9/28/9812:00 PM

9/29/9812:00 AM

9/29/9812:00 PM

9/30/9812:00 AM

Date and timevo

ltag

e an

d f

req

uen

cy

Series1

Series2

Nampo Hotel Unhari Village

Frequency 50 Hz +/- 4 Hz

Voltage 230 V +/- 35%

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DPRK ENERGY BALANCE UPDATE: OTHER SUPPLY DATA/RESULTS

ESTIMATED DPRK ENERGY SUPPLY BY

TYPE: 2000

REF. PROD

5 %

HYDRO/NUCL.

5 %

CRUDE OIL

3 %

W OOD/

BIOM ASS

4 2 %

COAL & COKE

4 5 %

Jan 8-03 Next Steps, Jan 27-03 7

DPRK ENERGY BALANCE UPDATE: ELECTRICITY SECTOR RESULTS

Gross Generation in the DPRK, 1990, 1996, and 2000

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5

10

15

20

25

30

35

40

45

50

1990 1996 2000

Te

raw

att

-ho

urs

COAL-FIRED

HFO-FIRED

HYDRO

Jan 8-03 Next Steps, Jan 27-03 8

DPRK ENERGY BALANCE UPDATE: KEDO HFO AND LWR ISSUES

• Importance of KEDO HFO to the DPRK: In calendar 2000 we estimate that KEDO HFO...– Accounted for 2.1% of total energy supply– Accounted for 28% of refined products supply (after

refinery fuel use)– Accounted for 64% of HFO supply– Fueled 6.9% of total electricity output– Supplied 31% of thermal electricity fuel input (note that

total imports from KEDO were slightly larger than estimated electricity HFO use)

– Importance of HFO as an electricity fuel in the winter was/is probably particularly significant

Jan 8-03 Next Steps, Jan 27-03 9

COORDINATED ASSISTANCE FOR THE DPRK ENERGY SECTOR

• Nature of the DPRK's energy sector problems, mean that a focus on one or several massive projects will not work– Multi-pronged approach on a number of fronts is

required; a large suite of coordinated, smaller, incremental projects addressing needs many areas

– External experts working shoulder-shoulder most effective

– DPRK engineers learn fast and best by doing

Jan 8-03 Next Steps, Jan 27-03 10

ASSUMPTIONS

• Pu and Enriched Uranium Proliferation Moving to Resolution to IAEA standards

• Not substituting for LWR 2GWe of power which would subsidize DPRK by ~$0.2b/y

• Size energy aid to substitute for US HFO valued at about $100m/y and 500000 T of thermal energy equivalent of HFO = 20.5 PJ/year

• Time horizons for aid flow: 5 years

Jan 8-03 Next Steps, Jan 27-03 11

• PRIORITY #1: ENERGY SECTOR PLANNING AND TRAINING:

Assistance for Internal Policy and Legal Reforms to Stimulate and Sustain Energy Sector Rebuilding in the DPRK (APEC EWG; bilaterals; IBRD, ADB)

• PRIORITY #2: REHAB GRID + piecemeal eg Mines for Missiles (Who? IBRD with Japanese reparations and ROK financing, possibly implemented by KEDO)

• PRIORITY #3: REHAB COAL--Coal Supply and Transport Systems WHO: JAPANESE REPARATIONS, ADB/IBRD, ROK

• PRIORITY #4: REHAB DPRK POWER PLANTS THE DPRK DOES NOT NEED NEW COAL-FIRED POWER PLANTS

WHO REFURBISHES? ROK, IPPS

• PRIORITY #5: REDUCE THE VAST WASTE OF SUPPLIED ENERGY DISTRICT HEATING SYSTEM EFFICIENCYWHO? Technical assistance from China, ROK, Japan, financing IBRD/AD

• PRIORITY #6: SMALL-SCALE RENEWABLE ENERGY AND ENERGY-EFFICIENCY WHO: bilaterals, NGOs

Jan 8-03 Next Steps, Jan 27-03 12

DPRK ENERGY SECTOR PLANNING AND TRAINING: PRIORITY 1

• Assistance for Internal Policy and Legal Reforms to Stimulate and Sustain Energy Sector Rebuilding in the DPRK– Reform of energy pricing practices, and the physical

infrastructure to implement them– Careful energy planning to base aid on need and

rational objectives – Training for energy sector actors – Strengthening regulatory agencies and

educational/research institutions in the DPRK– Involving the private sector in investments and

technology transferWho: APEC EWG; bilaterals; IBRD, ADB

Jan 8-03 Next Steps, Jan 27-03 13

PRIORITY 2: WHAT WILL IT TAKE TO REHAB THE GRID?

– New conductors, substation equipment, switching equipment

– Modern control facilities– New towers or poles in many existing right-of-ways– Labor, rebar, channel iron, cement can be supplied

locally, but grid-quality conductor, even nuts and bolts may be unavailable in the DPRK without significant retooling of manufacturing industries

Estimated overall cost of grid reconstruction: $3 to 5 billion

Who? IBRD with Japanese reparations and ROK financing, possibly implemented by KEDO

Jan 8-03 Next Steps, Jan 27-03 14

PRIORITY #2: START REBUILDING THE T&D SYSTEM PIECEMEAL NOW

1. Work with DPRK engineers to identify and prioritize list of T&D sector improvements and investments2. Provide limited funding for pilot installations in a limited area—perhaps in the Tumen River area2. Engage the World Bank as a leader in DPRK power sector refurbishment (with Japanese funding?)3. Focus on projects that would help the DPRK earn foreign exchange in acceptable manner, such as grid repairs to allow key mines to operate

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In 1995, the DPRK

provided the USG with a list of 8

mining investment &

development opportunities

Mines-for-Missiles?

Jan 8-03 Next Steps, Jan 27-03 16

PRIORITY #3: HELP TO REHABILITATE COAL SUPPLY AND COAL TRANSPORT SYSTEMS COAL IS IN SCARCE SUPPLY WHEREAS COAL FIRED POWER PLANTS ARE NOT

1. Boiler rehabilitation, especially small-medium sized boilers that keep people warm in winter

2. Assist with evaluating and upgrading coal mines in the DPRK, including:-Improvements in mining technologies-Evaluation of coal resources-Mine ventilation systems, mine safety-Rehabilitation of the coal transport network:-Rail infrastructure/parts, fuel supply for trains

WHO: JAPANESE REPARATIONS, ADB/IBRD

Jan 8-03 Next Steps, Jan 27-03 17

DPRK ENERGY SYSTEM PRIORITY #4: DPRK POWER PLANTS

– Total installed capacity ~10 gigawatts, approximately half hydroelectric, half thermal

– Except for one 200 MWe HFO-fired plant, essentially all of the thermal power is coal-fired

– About 10 large thermal plants and 20 large hydro plants account for over 60 percent of capacity

– Lack of spare parts, maintenance difficulties, T&D constraints, fuel supply constraints, and damage from natural disasters have reduced actual operable capacity to ~2 to 3 GWe at present leaving 7-8 GWe to be refurbished THE DPRK DOES NOT NEED NEW COAL-FIRED POWER PLANTS

WHO REFURBISHES? ROK, IPPS

Jan 8-03 Next Steps, Jan 27-03 18

DPRK ENERGY SYSTEM PRIORITY #5:REDUCE THE VAST WASTE OF SUPPLIED ENERGY

• Domestically-produced electric and electronic devices often use 1940s, 50s, and 60s; modern alloys and casting methods for motors lacking

• Coal-fired boilers efficiency less than 50 percent• Industrial plants are even less efficient than Soviet

counterparts on which they were based• Steam distribution systems likely porous

THE FASTEST WAY TO INCREASE EFFECTIVE POWER AND COAL SUPPLY

IS BY REDUCING WASTE, eg DISTRICT HEATING SYSTEM EFFICIENCYWHO? Technical assistance from China, ROK, Japan, RFEFinancing: PNL, IBRD/ADB

Jan 8-03 Next Steps, Jan 27-03 19

Priority #5: Increase end use efficiency

1. Improve efficiency in industrial boilers, and smaller boilers to conserve coal, reduce pollution, improve reliability2. Provide training, materials, assistance to set up and finance energy efficient manufacturing concerns3. Focus on humanitarian applicationsfor example, electricity for urban sewage systems4. Weatherize DPRK building stock, especially hospitals, schools, orphanages

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Priority #6: Alternative Sources of Small-Scale Renewable Energy and Energy-efficiency Measures

1. DPRK has a keen interest in renewable energy, and energy-efficiency technologies2. Focus on fast, small and cheap technologies that couple appropriate technology with humanitarian assistance, provide services in areas of the DPRK poorly served by existing systems

Example: Tractor diesel use and lack of starter motors

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Tackle the Link between Rural Energy and Famine

Priority #5: Alternative Sources of Small-Scale Energy, Energy-efficiency Measures– Small hydro turbine-generator manufacturing

• Suits both DPRK topography and government instructions for local authorities

– Wind power: dissemination of wind turbines• National goal, and of keen interest to individuals, but

DPRK technology is inadequate. First phase might be manufacture of water-pumping windmills

– Agricultural equipment efficiency measures to help North Koreans to feed themselves

– Who? EU aid program; NGOs

Jan 8-03 Next Steps, Jan 27-03 23

ROUGH SUMS TO ITERATE

• Energy planning and capacity building: $5m/y• Rehab grid: $30m/y (~0.6GWe/y avoided G or

about 6PJ/y)• Rehab coal supply $10m/y (~ to 2.1PJ/y)• Rehab generation: $20m/y (~ to 4.2 PJ/y)• Reduce enduse waste: $20m/y (~ 4.2 PJ/y)• Small-scale, rural and renewable energy: $15m/y

(3.2 PJ/y) (1/2 million T/y HFO = 21 PJ/y)

Jan 8-03 Next Steps, Jan 27-03 24

REALISM

• Cooperate DPRK energy insecurity without rewarding bad behavior

• Size it to HFO

• Terrorist listing

• Licensing private firms in JVs

• DPRK absorptive constraints (institutional and material)

• Diminishing returns