EVALUATION OF ENERGY PATHS FOR THE DPRK

EVALUATION OF ENERGY PATHS FOR THE DPRK Asian Energy Security (AES)/East Asia Energy Futures (EAEF) Project Fifth Asian Energy Security Workshop 12 to 14 May, 2004, Beijing, China David Von Hippel, Senior Associate Nautilus Institute for Security and Sustainable Development

OUTLINE OF PRESENTATION: • Background to DPRK Energy Analyses • History and general analytical approach • Preparation and Analysis of Energy Paths for the DPRK—National and Regional • Goals and philosophy in preparing paths • Overall Approach and Scope • Descriptions of Paths Considered • “Recent Trends” Path • “Redevelopment” Path • “Sustainable Development” Path • “Regional Alternative” Path

OUTLINE OF PRESENTATION: • Selected Details of Modeling Approach by Path • Selected Draft Results of Analysis of Future Energy Paths for the DPRK • Energy Demand • Fuel Supply/Transformation • Energy Imports and Exports • Costs • Environmental Emissions • Initial Lessons Learned from Analysis • Next Steps in Analysis of Energy Futures for the DPRK

PREVIOUS AND ONGOING NAUTILUS INSTITUTE DPRK ENERGY WORK • 1986-94: Nuclear Weapons/Proliferation Issues • 1992-97: UN Energy-Environment Missions • 1995: DPRK Energy Supply/Demand and Energy Efficiency Study • 1996: KEDO-HFO Supply and Demand Study • 1997: Supply and Demand for Electricity in the DPRK--1990, 1996, and Future Paths • 1997: Spent Fuel Scenarios for East Asia • 1997-02: DPRK Village Energy Project, Study Tours, and Proposal Collaboration • 2002: Update to 2000 base year

PREVIOUS AND ONGOING NAUTILUS INSTITUTE DPRK ENERGY WORK • OVERALL APPROACH TO DPRK ENERGY SECTOR ANALYTICAL WORK • Obtain as much information as possible about the DPRK economy and energy sector from media sources, visitors to the DPRK, and other sources • Use available information, comparative analysis, and judgment to assemble a coherent and consistent pictureof the DPRK energy sector • Think about possible future paths for DPRK energy sector and economy, what changes (national, regional, global) might bring those paths about, what changes might mean at end-use, infrastructure levels

PREPARATION AND ANALYSIS OF ENERGY PATHS FOR THE DPRK • Goals of Paths Analysis • Assemble plausible, internally-consistent alternative energy paths for the DPRK, based on the best information available • Explore, in a quantitative manner whenever possible (but not exclusively) the relative energy security implications of the different paths, including the implications of energy sector cooperation between countries of Northeast Asia • Use energy paths as focus, starting point for discussions of how regional/other actors might assist in sustainable re-development of DPRK energy sector

PREPARATION AND ANALYSIS OF ENERGY PATHS FOR THE DPRK • Philosophy in Paths Preparation/Evaluation • Design paths that are plausible, and, under the right conditions, potentially achievable • At the same time, paths shown are not intended in any way to judge what should happen • Paths are built upon best, most internally-consistent DPRK information we can find, but there are undoubtedly many inaccuracies in the analysis • We look forward to working with DPRK colleagues to improve analysis, make more applicable • Paths are therefore a starting point for further discussion and analysis

PREPARATION AND ANALYSIS OF ENERGY PATHS FOR THE DPRK • Overall Approach in Paths Preparation/Evaluation • Start with older DPRK LEAP dataset that includes several paths evaluated briefly in previous work • Update data set to reflect most recent Nautilus estimates of 1996 and 2000 DPRK energy use (overall analysis period for paths, 1990 to 2025) • Develop overall “themes” for several (4) paths to be evaluated • Identify specific assumptions for use in implementing the themes within LEAP • Modify paths so that all paths have the same 2005 energy picture

PREPARATION AND ANALYSIS OF ENERGY PATHS FOR THE DPRK • Overall Approach in Paths Preparation/Evaluation • Prepare demand-side data entries (and document assumptions in Excel workbook) • Enter demand-side assumptions in LEAP • De-bug demand-side datasets • Prepare approximate supply-side data entries (and document in Excel workbook) • Enter supply-side assumptions in LEAP, calculate, and modify parameters so that supply and demand balance • Enter cost and environmental data for all paths • Run all paths, check results, debug, re-run, and evaluate relative demand, transformation, cost, environmental results of paths

DPRK ENERGY PATHS CONSIDERED “Redevelopment” Path • Used as National Reference path for DPRK • Current political stalemate solved within next few years, DPRK receives international assistance/cooperation in redevelopment • Industrial sector is revitalized, but mostly not rebuilt as it was before • More iron and steel from scrap, efficiency improvements in iron and steel, cement • Most industry 50% of 1990 output by 2015, growth at 1.5%/yr thereafter; textiles, fertilizer higher • Natural gas begins to be used in industry ~2015

DPRK ENERGY PATHS CONSIDERED “Redevelopment” Path (continued) • Considerable increase in new light-industrial production (IT, auto parts, joint ventures…) • Increase in diesel, electricity use for light industry • Agricultural sector re-mechanized • Cropped area decreases, but electricity, oil use in agriculture increases (coal/biomass use decreases) • Increase in residential electricity consumption • Fraction of population in urban areas increase • Consumption of electricity, LPG, kerosene increase, NG use begins, coal use declines • Commercial sector expands rapidly

DPRK ENERGY PATHS CONSIDERED “Redevelopment” Path (continued) • Transport sector, particularly personal transport, expands markedly • Civilian auto, plane, train, bus transport per person rise • Efficiency improvements in road, rail transport modes • Military ground forces activity decreases • Energy efficiency in military sector improves • Investment in new electricity infrastructure • New coal, gas combined-cycle, some rehabilitation of older plants, particularly hydro, new small hydro, existing coal plants retired over time, KEDO reactors completed 2013 (export power)

DPRK ENERGY PATHS CONSIDERED “Redevelopment” Path (continued) • Re-investment in East Coast refinery • Back on line by 2012, expanded 2015, with power plant expanded as well • Oil products imported as needed to meet demand above domestic refining output • Natural gas, first as LNG, begins to play a role in powering industry, electricity generation, urban residences starting in about 2012 • Smaller LNG terminal built (Nampo?), part of output exported • Coal/Coke Exports/Imports at 2000 levels

DPRK ENERGY PATHS CONSIDERED “Recent Trends” Path • Assumes that current political difficuties remain, or are addressed only very slowly • DPRK economy opens a very little, aid flows modest, infrastructure erodes • Very gradual increase in industrial output relative to 2000 (after 2005) • Industrial energy intensities remain high • Other Minerals (magnesite) production increases • Transport activity increases slowly • Civilian auto transport grows most

DPRK ENERGY PATHS CONSIDERED “Recent Trends” Path (continued) • Residential energy demand increases slowly • Continued emphasis on coal, but electricity gradually more available • Some modernization/re-mechanization of the agricultural sector • Fertilizer, oil, electricity use up slightly over time • Cropped area doesn’t change • Fisheries effort increases slowly • Military sector energy use, activity change little • Commercial sector floorspace, electricity/coal use grow somewhat

DPRK ENERGY PATHS CONSIDERED “Recent Trends” Path (continued) • Transmission and distribution losses remain high through 2015, decrease slightly after 2015 • Fraction of fuel inputs to coal-fired power plants as HFO declines with end of KEDO oil deliveries • 10 MW of small hydro power plants are added each year from 2005 on • Total capacity at existing hydro and oil-fired power plants does not change over time • Coal-fired capacity meets net electricity demand after hydro, oil-fired plant output are factored in. • KEDO nuclear reactors not completed

DPRK ENERGY PATHS CONSIDERED “Recent Trends” Path (continued) • Imports of heavy fuel oil via KEDO cease in 2003. • Other oil products (and HFO from elsewhere) continue to be imported at year 2000 levels • West Coast refineries continue to operate • Output increases slightly over time to cover demand net of imports • Coal and coke imports and exports remain the same as in 2000 throughout the period modeled.

DPRK ENERGY PATHS CONSIDERED “Sustainable Development” Path (National Alternative Path) • Provides the same energy services as “Redevelopment” Path—with same demographic assumptions, economic output—but… • Applies energy efficiency, renewable energy, other measures, in an aggressive fashion • Upgrading of industrial infrastructure goes above average standards to high-efficiency international standards • Rapid phase-out of existing coal-fired power plants. • Earlier addition of LNG (liquefied natural gas) terminal and gas CC (combined cycle) generating plants

DPRK ENERGY PATHS CONSIDERED “Sustainable Development” Path (continued) • Industrial sector modifications • Industrial boiler improvements (25 percent by 2025) • Improvements in motors and drives/motor systems • Substitution of gas (15% by 2025) for coal to produce process heat in most industries • Transport sector modifications • Diesel/gasoline truck/bus efficiency, diesel train efficiency, improved 25% by 2025 • Improvements in electric rail efficiency (27% by 2025) • Introduction of gasoline, CNG, hydrogen hybrid vehicles (starting in 2010/2015/2020) in civilian autos

DPRK ENERGY PATHS CONSIDERED “Sustainable Development” Path (continued) • Residential sector modifications • Domestic coal boiler/stove/heater improvements • In urban subsector, more switching from coal to natural gas and district heat. • Urban/Rural residential building shell improvements, resulting in savings of coal, coal and biomass fuels • Electric lighting and appliance efficiency improvements • Agricultural Sector modifications • Improvements in efficiency of diesel fuel use per hectare of land cropped; improvements in boilers used to produce heat for processing of farm products, electric pump/machinery improvements

DPRK ENERGY PATHS CONSIDERED “Sustainable Development” Path (continued) • Fisheries Sector Modifications • Improvements in efficiency of diesel fuel use per unit of fisheries effort; improvements in electric motor/drive systems used in fisheries products processing • Military Sector Modifications • Improvement in efficiency of land vehicles, diesel-fueled naval vessels • Improvement in coal-fired boilers, electric motors and drives in Military Manufacturing subsector; improvement in coal-fired boilers, building envelopes, electric motors and drives Buildings/Other subsectors

DPRK ENERGY PATHS CONSIDERED “Sustainable Development” Path (continued) • Public and Commercial Sectors Modifications • Improvement in coal-fired boilers, building envelope improvements, and overall electricity use improvement • Electricity Generation Modifications • Accelerated phase-out of existing coal-fired generating capacity (all 2005 capacity retired by 2025) • The addition of an integrated-gasification combined-cycle (IGCC ) generating plant in 2020 (300 MW) • Aggressive wind power development, new small/ medium hydro, focus on refurbishment of existing hydro • Less new coal-fired and gas combined-cycle capacity is built, especially in the years 2015 to 2025

DPRK ENERGY PATHS CONSIDERED “Sustainable Development” Path (continued) • Other Transformation Modifications • Additional district heating capacity is built to provide for expanded residential sector use • LNG capacity is built earlier (first phase started in 2010, and second and third phases brought on line one year earlier) than in the Redevelopment case, but the same final capacity is in place by 2025 as in the Redevelopment path • Costs • Cost estimates included for all demand end-uses, transformation processes, and fuels whose use changes relative to the Redevelopment case

DPRK ENERGY PATHS CONSIDERED “Regional Alternative” Path • Follows modifications identified for the DPRK in Regional Alternative paths document • Demand-sector Modifications • As a result of regional cooperation, efficiency improvement targets reached two years earlier at costs 10% less than in Sustainable Development path • Costs of cooperation reflected as module cost • Transformation-sector Modifications • Gas pipeline from RFE begins operation in 2011; 3% of gas used in DPRK initially, 10% by 2020, 15% by 2030 • DPRK gets $10 million/yr “rent” for hosting the pipeline

DPRK ENERGY PATHS CONSIDERED “Regional Alternative” Path (continued) • Transformation-sector Modifications (continued) • LNG facility roughly 3 times larger than in Redevelopment case starts operation in 2012; most output exported to the ROK • A power line from the Russian Far East through the DPRK to ROK is modeled as importing 100 MW of power to DPRK at discounted price of $0.02/ kWh • Participation in regional cooperative activities related to nuclear research and to nuclear waste handling, with annual costs (most possibly in-kind) to the DPRK from 2006

DPRK ENERGY PATHS CONSIDERED “Regional Alternative” Path (continued) • Transformation-sector Modifications (continued) • Cooperation in renewable energy technologies with annual costs to the DPRK from 2007 on, earlier deployment,10% reduction in cost of wind, small hydro technologies • Some changes in the schedule of additions of new coal-fired plants and gas-fired plants occurs • Last of the coal-fired plants existing as of 2005 are retired in 2020

DPRK ENERGY PATHS: SELECTED DRAFT RESULTS

DPRK ENERGY PATHS: INITIAL CONCLUSIONS FROM RESULTS • Sustainable Development Case indicates significant reductions in energy use, emissions, are possible relative to Redevelopment Case, and… • Net costs of those reductions may be relatively small or even negative • May offer opportunity for application of Clean Development Mechanisms to share costs, carbon credits • Regional Alternative Case offers similar benefits, but net costs very dependent on resource prices

NEXT STEPS IN DPRK ENERGY PATHS ANALYSIS • Next Steps on DPRK Paths Analysis • Refine and improve reference cost and performance assumptions, particularly on the demand side, but for transformation, resources as well (Regional Alternatives) • Additional debugging of dataset • Sensitivity analysis (key costs, prices) • Consideration of non-quantitative impacts on energy security • Consideration of other path variants • Work with DPRK Colleagues to Improve Analysis, Fully Implement in DPRK

EVALUATION OF ENERGY PATHS FOR THE DPRK