1. 1 Modeling of Future DPRK Energy Paths (Draft) Dr. David F. Von Hippel Nautilus Institute Senior Associate DPRK Energy Expert Study Group Meeting Prepared for the “DPRK Energy Expert Study Group Meeting”, Stanford University, California June 26 - 27, 2006

2. DPRK Energy Expert Study Group D. Von Hippel 6/2006 DPRK ENERGY PATHS: OUTLINE OF PRESENTATION 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

3. DPRK Energy Expert Study Group D. Von Hippel 6/2006 DPRK ENERGY PATHS: 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, and Next Steps in Analysis of Energy Futures for the DPRK

4. DPRK Energy Expert Study Group D. Von Hippel 6/2006 PREPARATION AND ANALYSIS OF DPRK ENERGY PATHS 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) relative energy security implications of different paths, including implications of NEA energy sector cooperation  Use energy paths as focus, starting point for discussions of how regional/other actors might assist in sustainable re-development of DPRK energy sector

5. DPRK Energy Expert Study Group D. Von Hippel 6/2006 PREPARATION AND ANALYSIS OF DPRK ENERGY PATHS 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

6. DPRK Energy Expert Study Group D. Von Hippel 6/2006 PREPARATION AND ANALYSIS OF DPRK ENERGY PATHS Overall Approach in Paths Preparation/Evaluation  Start with DPRK LEAP dataset that includes several paths evaluated briefly in previous work  Update data set to reflect most recent Nautilus estimates of 1990 - 2005 DPRK energy use (overall analysis period for paths, 1990 to 2030)  Develop overall “themes” for several (4 -5 or more) paths to be evaluated  Identify specific assumptions for use in implementing the themes within LEAP  Modify paths so that all paths have the same 2006 energy picture

7. DPRK Energy Expert Study Group D. Von Hippel 6/2006 PREPARATION AND ANALYSIS OF DPRK ENERGY PATHS 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

8. DPRK Energy Expert Study Group 8 D. Von Hippel 6/2006 DPRK Energy Paths Considered POLITICAL STALEMATE IS…. NOT RESOLVEDRESOLVED “RECENT TRENDS” CASE: Economy opens a very little, aid flows modest, infrastructure erodes “COLLAPSE” CASE: Economy and regime fails (not quantitatively modeled) “REDEVELOPMENT” CASE: Revitalization, re- mechanization, infrastructure upgraded “SUSTAINABLE DEV.” CASE: Redevelopment plus emphasis on energy efficiency, renewables “REGIONAL ALTERNATIVE” CASE: Redevelopment plus regional projects

9. DPRK Energy Expert Study Group D. Von Hippel 6/2006 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 heavy industry sectors  Industrial restructuring, with emphasis on industries such as textiles, fertilizer  Natural gas begins to be used in industry ~2015

10. DPRK Energy Expert Study Group D. Von Hippel 6/2006 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 Commercial sector expands rapidly Transport sector, particularly personal transport, expands markedly

11. DPRK Energy Expert Study Group D. Von Hippel 6/2006 DPRK ENERGY PATHS CONSIDERED “Redevelopment” Path (continued) Investment in new electricity infrastructure  New coal, gas combined-cycle, small hydro  Some rehabilitation of older plants, particularly hydro; existing coal plants retired over time  Simpo reactors completed 2013 (export power) Re-investment in East Coast refinery Natural gas, first as LNG, begins to play a role in powering industry, electricity, cities starting ~2012  Smaller LNG terminal built (Nampo?), part of output exported

12. DPRK Energy Expert Study Group D. Von Hippel 6/2006 DPRK ENERGY PATHS CONSIDERED “Recent Trends” Path Assumes that current political difficulties remain, or are addressed only very slowly DPRK economy opens a very little, aid flows modest, infrastructure erodes Very gradual increase in industrial output Transport activity increases slowly  Civilian auto transport grows most Residential energy demand increases slowly  Electricity gradually more available Some agricultural re-mechanization, incr. inputs

13. DPRK Energy Expert Study Group D. Von Hippel 6/2006 DPRK ENERGY PATHS CONSIDERED “Recent Trends” Path (continued) Transmission and distribution losses remain high 10 MW of small hydro power plants added/yr Total capacity at existing hydro and oil-fired power plants changes little over time  Coal-fired capacity meets net electricity demand after hydro, oil-fired plant output factored in Simpo nuclear reactors not completed Oil/oil products imported (except HFO) at year 2000 levels West Coast refineries continue to operate

14. DPRK Energy Expert Study Group D. Von Hippel 6/2006 DPRK ENERGY PATHS CONSIDERED “Sustainable Development” Path 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

15. DPRK Energy Expert Study Group D. Von Hippel 6/2006 DPRK ENERGY PATHS CONSIDERED “Sustainable Development” Path (continued) Costs  Cost estimates included for all demand end- uses, transformation processes, and fuels whose use changes relative to the Redevelopment case

16. DPRK Energy Expert Study Group D. Von Hippel 6/2006 DPRK ENERGY PATHS CONSIDERED “Regional Alternative” Path 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 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  Larger LNG facility installed (also shared with ROK)  Power line from the Russian Far East through the  Participation in regional cooperative activities in energy

17. DPRK Energy Expert Study Group D. Von Hippel 6/2006 DPRK ENERGY PATHS CONSIDERED “Regional Alternative” Path (continued) Transformation-sector Modifications (continued)  Cooperation in renewable energy technologies yield earlier deployment,10% reduction in cost of wind, small hydro technologies  Last of existing coal-fired plants retired by 2020 Sustainable Development/Regional Alternative Path Costs  Cost estimates included for all demand end-uses, transformation processes, and fuels whose use changes relative to the Redevelopment case

18. DPRK Energy Expert Study Group 18 D. Von Hippel 6/2006 DPRK ENERGY PATHS: SELECTED DRAFT RESULTS

19. DPRK Energy Expert Study Group 19 D. Von Hippel 6/2006 DPRK ENERGY PATHS: SELECTED DRAFT RESULTS

20. DPRK Energy Expert Study Group D. Von Hippel 6/2006 DPRK ENERGY PATHS: SELECTED DRAFT RESULTS

21. DPRK Energy Expert Study Group D. Von Hippel 6/2006 DPRK ENERGY PATHS: SELECTED DRAFT RESULTS

22. DPRK Energy Expert Study Group D. Von Hippel 6/2006 DPRK ENERGY PATHS: SELECTED DRAFT RESULTS

23. DPRK Energy Expert Study Group D. Von Hippel 6/2006 DPRK ENERGY PATHS: SELECTED DRAFT RESULTS

24. DPRK Energy Expert Study Group D. Von Hippel 6/2006 DPRK ENERGY PATHS: SELECTED DRAFT RESULTS

25. DPRK Energy Expert Study Group 25 D. Von Hippel 6/2006 DPRK ENERGY PATHS: SELECTED DRAFT RESULTS

26. DPRK Energy Expert Study Group 26 D. Von Hippel 6/2006 DPRK ENERGY PATHS: SELECTED DRAFT RESULTS

27. DPRK Energy Expert Study Group 27 D. Von Hippel 6/2006 LESSONS LEARNED/NEXT STEPS IN PATHS ANALYSIS Lessons learned:  Significant cost, environmental benefits to helping DPRK achieve sustainable development/regional alternative-type paths Next Steps  Comprehensive energy security analysis  Evaluate alternative nuclear energy paths  Engage DPRK delegations in modeling exercises (requiring capacity and database building….)

28. DPRK Energy Expert Study Group 28 D. Von Hippel 6/2006 THANK YOU!