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Intergovernmental/Multilateral Arrangement for

Power Interconnection - A Korean Perspective -

The 4th Northeast Asia Energy Security Forum

Seoul, Korea

December 15, 2016

Ji-Chul Ryu, Ph.D. jcryu53@gmail.com

Contents

1. Review on Multilateral Mechanism for Regional Energy

Cooperation/Power Interconnection in Northeast Asia (NEA)

2. Survey on Experience in Other Region and Implication for

NEA

3. Towards Multilateral Framework for Power Interconnection

in NEA

• Agenda and Tasks Ahead

Power Interconnection

Power interconnection: Electricity grid at a regional scale or greater that operates at a synchronized

frequency and is electrically tied together during normal system conditions.

Benefits of power interconnection include pooling of generation, resulting in lower generation costs;

pooling of load, resulting in significant equalizing effects;

common provisioning of reserves, resulting in cheaper primary and secondary

reserve power costs;

opening of the market, resulting in possibility of long term contracts and short

term power exchanges;

and mutual assistance in the event of disturbances.

Many power interconnection systems established and operated in Europe, North

America, and Africa.

However, in NEA, there are only limited power interconnection systems

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Source: http://en.wikipedia.org/wiki/Wide_area_synchronous_grid

Multilateral Framework for Energy Cooperation in NEA

Inter-governmental Collaborative Mechanism for Energy Cooperation in

Northeast Asia (2005 – 2015) Created in November, 2005 at the first session of the Senior Officials Committee (SOC) with

the Membership of 4 countries (DPR Korea, Mongolia, the R. Korea, and the Russian

Federation) and an observer (China)

Two working groups: Working Group on Energy Planning and Policy (WG-EPP, Korea)

plus WG-Coal (Russia)

Secretariat (interim): UNESCAP

Activity:

• Implement joint studies and develop a common energy database: Energy Policy Survey

and Energy Statistics Data Base, Regional Energy Outlook for Northeast Asia

• Government – Business Dialogues (GBD)

However, the SOC meeting in 2015 decided to change this Mechanism into a non-

government network of research institutes in NEA.

Accordingly, the Northeast Asia Energy Cooperation Forum was established in 2016.

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Multilateral Framework for Energy Cooperation in NEA

The Greater Tumen Initiative (GTI)

Intergovernmental cooperation mechanism, founded in 1995 with support by UNDP

Four member countries: China, Mongolia, R. Korea, Russia

Objectives for the GTI Energy Cooperation

• Enhance energy policy coordination and cooperation;

• Reduce non-physical barriers for energy trade and investment in the GTR; and

• Promote exchange of information on energy among GTI member countries.

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Approaches (the GTI Strategy Action Plan for the years 2012 – 2015)

• Develop the GTI Energy Board as an effective cooperative

mechanism for coordinating energy policies in the region;

• Create a cooperation network among governments, the

private sector, think tanks, financial institutions, etc. through

the establishment of a regional Energy Forum;

• Promote human capacity building on energy through the

organization of education and training programmes, joint studies and

workshops;

• Support transparency in the institutional environment to

reduce non-physical barriers; and

• Develop a GTR region-specific database on energy resources,

and supply and demand to share information among regional

stakeholders.

Review on Power Interconnection in Northeast Asia

Power Interconnection between Russia and China

Agreement for FS between the RAO UESR in Russia and the State Grid Corporation in China in 2006:

China-Russia back-to-back connection project was completed in 2011

The long term contract for 25 years signed in 2012 by the Vostok Energy Ltd, the subsidiary of RAO UESR

International, and the State Grid Corporation of China

Power Interconnection between Mongolia and Russia

Mongolia imports electric energy from Russia through transmission lines of 110, 220 kV and 380 km long

between two countries.

Power Interconnection between Mongolia and China

Mongolia – China power interconnection by constructing mine-mouth power plants

Russia – DPR Korea – R. Korea: Russia's Initiatives for Power interconnection Projects in NEA

A joint research of the Skolkovo Technology Centre for Energy Systems with the KEEI in 2014.

Memorandum signed with Skolkovo Tech, En+Group and KEPCO in 2013.

• Transmission line from Vladivostok transit through DPR Korea to Seoul;

• Transmission line from Chita and Blagoveshchensk transit through China (Harbin, Shenyang) and DPR Korea to Seoul;

• Transmission line from Chita and Blagoveshchensk transit through China (Harbin, Shenyang, Dalian) and then an undersea cable to

Seoul.

Gobitec and Asian Super Grid Construct high-voltage transmission lines to interconnect the national grids of Japan, Korea, China,

Mongolia and Russia

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Source: GTI Regional Energy Cooperation Programme in Northeast Asia, 2015. GTI

Review on Other Region’s Experiences

Mechanism for the regional energy cooperation

Policy cooperation with the public interest

• data/information exchanges, enhancing energy conservation and renewable energy

development/deployment, and capacity building

• non-binding cooperation mechanism vs policy-binding mechanism with the membership

obligations.

Business cooperation for the regional energy projects

• Power Pool, power interconnection grid systems

Surveyed Organizations

Policy cooperation body

• Latin America Energy Organization (OLADE)

• ASEAN

Policy coordination body

• Energy Community in EU + Europe

Business cooperation for the regional energy projects

• East Africa Power Pool (EAPP) & South Africa Power Pool (SAPP)

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Source: GTI Regional Energy Cooperation Programme in Northeast Asia, 2015. GTI

Review on Other Region’s Experiences – Latin America: OLADE –

Energy-Economic Information System

(SIEE)

Legal Energy Information System

Database (SIEL)

OLADE Energy Training Program

(CAPEV)

OLADE Renewable Information

System

Latin America and Caribbean Energy

Efficiency Seminar

Power Generation and

Interconnection Planning Model

(SUPER)

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The Latin American Energy

Organization (OLADE,

Organización Latino-americana de

Energía)

Intergovernmental organization for

the regional energy cooperation in

Latin America

Establishment Background

Lima Agreement in November 2,

1973, ratified by 27 countries in

Latin America and the Caribbean

Members:

Member Countries of the OLADE:

27 members plus one participant

country (Algeria)

Secretariat: Quito, Ecuador

Source: OLADE Homepage, http://www.olade.org/en

Review on Other Region’s Experiences – Southeast Asia: ASEAN –

Activity for Power Interconnection

HAPUA: Heads of ASEAN Power

Utilities/Authorities (HAPUA)

ASEAN Power Grid Projects: ASEAN

Interconnection Master Plan (AIMS)

a. Renewable energy;

b. Power interconnection;

c. Research, development and engineering;

d. Human resources management and

development;

e. Geothermal energy;

f. Rural and urban electrification;

g. Electric Power Information Centre;

h. Use of combined cycle power plants; and

i. Deregulation and reform of power utilities.

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Establishment Background

ASEAN Declaration (Bangkok

Declaration) in August 1967

Members:

Ten Countries in Southeast Asian

Region

ASEAN+3: China, Japan and RO

Korea

Source: ASEAN Homepage, http://www.asean.org

Review on Other Region’s Experiences – EU: Energy Community –

Function in legally binding by Treaty

Attract investment in power

generation and networks in order to

ensure stable and continuous energy

supply

Create an integrated energy market

allowing for cross-border energy trade

and integration with the EU market;

Enhance the security of supply;

Improve the environmental situation

in relation with energy supply in the

region;

Enhance competition at regional level

and exploit economies of scale.

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Establishment Background

Established by an international law

treaty in 2005 and entered into force

in Jul 2006.

Members:

European Union and 8 contracting

Parties (Albania, Bosnia and Herzegovina,

Kosovo, Macedonia, Moldova, Montenegro,

Serbia and Ukraine)

Source: http://www.energy-community.org/

Establishment Established in 2005 by Inter-

Governmental MOU, by seven Eastern

Africa countries

Permanent Secretariat in Addis Ababa,

Ethiopia

Mission: Interconnect all the Countries of

Eastern Africa Region,

Optimize Power Generation Resources

Development

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Review on Other Region’s Experiences – East Africa: Eastern Africa Power Pool (EAPP) –

Organizational Structure

The Conference of Ministers

The Steering Committee: CEO’s of EAPP

Members

Independent Regulatory Board

Technical Sub-Committees in charge of

specific issues

The Coordination Center: Handle, on a real

time basis, collection of technical and commercial

information necessary for operation and

exchanges of power between EAPP members.

Projects

Master Plan Update (Under the Planning

component in the twining program

Pilot Project for Market Operations

Renewable Energy Integration into EAPP

Master Plan

Capacity Building and Training project

Source: http://eappool.org/

Review on Other Region’s Experiences – Southern Africa: The Southern Africa Power Pool (SAPP) –

Establishment: Established in 1995 and

governed by four agreements

• The Inter-Governmental Memorandum of

Understanding

• The Inter-Utility Memorandum of

Understanding

• Agreement Between Operating Members

• Operating Guidelines

Mission

to provide the least cost, environmentally friendly

and affordable energy and increase accessibility to

rural communities.

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Source: http://www.sapp.co.zw/

Lessons from Other Regions’ Experiences

Enhancing mutual understanding

Reaching a consensus on regional cooperation on power interconnection

In Northeast Asia, joint efforts to improve mutual understanding is a high priority agenda for the regional

energy cooperation.

Creation of an institutionalized multilateral mechanism

SAPP & EAPP by the Inter-Governmental Agreement/Institutional Framework

In Northeast Asia, strong need s to create a concrete type of institutionalized multilateral mechanism for

energy or economic cooperation at the regional level.

Strong leadership

Leadership is not only based on the political power but also strong economic values

Full participation/membership of the countries in the region

plus open regionalism to the outside of the region and Industry/Private sector’s involvement

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Proposal for Promoting Regional Energy Cooperation in NEA

Roadmaps towards for multilateral energy cooperation in NEA

The short term agenda, to be implemented urgently as soft policy agenda in non-binding

manners, include:

• Establishment of policy dialogues channel between governments in the NEA region for creating

confidence building environment

• Promotion of information/data exchange and sharing mechanisms

• Joint research/study with identification of possible cooperative energy projects: power

interconnection,

• Capacity building projects for developing countries in the region

• Encourage energy expert/business dialogues & participation

• Assistance to/cooperation with the DPR Korea for resolution of energy shortage problem

The long term agenda, which require a consensus as well as more preparatory joint efforts

between the countries in NEA, include:

• Creation of institutionalized frameworks for multilateral regional energy cooperation by enacting

a treaty,charter, regional energy community at the regional basis

• Introduction of policy coordination functions with the established institutional arrangement

• Development of joint policy agenda for common goals/task sharing

• Address on an intra-regional energy financing mechanisms

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Tasks Ahead

Agenda: Enhancing Mutual Understanding and Consensus on Power Interconnection

Required Tasks

Task 1: Promote policy dialogues to enhance mutual understanding among the NEA

countries

• Policy exchange communication on energy planning and policies and regional energy

projection promotion

Task 2: Creation of working groups with targeted objectives and tasks, as necessary

• Undertake in-depth study on some feasible specific cooperative activities

• Members: Government officials, research professionals and industry experts

Task 3: Facilitate research activity for regional energy cooperation

• DB, construction of cross border infrastructure, renewable energy, energy conservation, etc.

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Tasks Ahead

Agenda: Design Power Interconnection in the Region

Required Tasks

Task 1: Creation of the ‘Energy Trade and Transit Security Dialogue’ mechanism

• Information sharing for cross-border power interconnection system construction and operation

• Improvement of governances of cross-border energy transport network

• Develop fast-track pilot projects for energy cooperation projects

Task 2: Study on ways to reduce the barriers, but to increase trade and investment in the

energy sector, especially for energy interconnection with business sector participation.

• Collect data regarding financing and investment arrangements in NEA countries for the financing

of the construction, operation and maintenance of energy grids

• Study business practices in NEA countries and determine ways to facilitate cross-border trade

especially energy interconnection.

Task 3: Creation of the NEA Research Consortium to study issues on cross-border trade

such as taxation and tariff, regulatory and legal frameworks, institutional and contractual

arrangement for energy trade.

• Create an ad hoc Task Forces, on a temporary basis, for specific power interconnection cooperative

projects in NEA

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Tasks Ahead

Agenda: Creation of Power Interconnection Pool in the Region

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Project Consensus • Signing of MoU (Memorandum of Agreement) to commence the project

Feasibility Study • Joint research work on designing the power interconnection system

Commercial

Negotiation

• Signing of HOA (Head of Agreement), SPA (Sales and Purchase

Agreement)

Risk Identification and

Hedging

• Arrangement of financing and pricing mechanism,

• Signing of IGA (Inter Governmental Agreement) among the related

governments plus

• HGA (Host Government Agreement) between government and system

operator, and

• PSTA (Power Supply and Transmission Agreement) between operators

Construction

• FS (Feasibility Study),

• FEED (Front End Engineering Design),

• EPC (Engineering, Procurement & Construction), Commissioning

Operation • Commencement of Power Pool System

Challenges

Geopolitics

Political instability around the Korean Peninsula

Involvement of the DPR Korea in the project

Market Compatibility among the countries

Diversity of market system and structures, capacity of financing investment

Creating favorable environment and market-friendly policies for attracting

foreign investment in hosting countries of energy development

Multilateral mechanism for regional energy cooperation in NEA

Unilaterally or bilaterally approaches → Problems in financing, securing an

export market, and addressing regional security issues

Establishing inter-governmental committees for supporting energy

infrastructure

Project Uncertainty

Consensus on removing political risks associated with energy projects

Decoupling the energy project from the geopolitics

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Thank you very much

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