Electric Power Grid Interconnection in Northeast Asia

29 Pages Posted: 7 Apr 2005

See all articles by Won-Cheol Yun

Won-Cheol Yun

Hanyang University - Economics and Finance

ZhongXiang Zhang

Tianjin University - Ma Yinchu School of Economics

Date Written: February 2005


Despite its regional closeness, energy cooperation in Northeast Asia has remained unexplored. However, this situation appears to be changing. The government of South Korea seems to be very enthusiastic for power grid interconnection between the Russian Far East and South Korea to overcome difficulties in finding new sites for building power facilities to meet its need for increased electricity supplies. This paper analyzes the feasibility of this electric power grid interconnection route. The issues addressed include electricity market structures; the prospects for electric power industry restructuring in the Russian Federation and South Korea; the political issues related to North Korea; the challenges for the governments involved and the obstacles anticipated in moving this project forward; project financing and the roles and concerns from multilateral and regional banks; and institutional framework for energy cooperation. While there are many technical issues that need to resolve, we think that the great challenge lies in the financing of this commercial project. Thus, the governments of the Russian Federation and South Korea involved in the project need to foster the development of their internal capital markets and to create confidence with international investors. To this end, on energy side, this involves defining a clear energy policy implemented by independent regulators, speeding up the already started but delayed reform process of restructuring electric power industry and markets, and establishing a fair and transparent dispute resolution mechanism in order to reduce non-commercial risks to a minimum. The paper argues that establishing a framework for energy cooperation in this region will contribute positively towards that end, although views differ regarding its specific form. Finally, given that North Korea has a crucial transit role to play and faces a very unstable political situation, it is concluded that moving the project forward needs to be contingent on a resolution of the North Korea's nuclear crisis.

Keywords: Electric power grid interconnection, Northeast Asia, Energy Charter Treaty

JEL Classification: Q48, Q41, Q43

Suggested Citation

Yun, Won-Cheol and Zhang, ZhongXiang, Electric Power Grid Interconnection in Northeast Asia (February 2005). Available at SSRN: https://ssrn.com/abstract=684423 or http://dx.doi.org/10.2139/ssrn.684423

Won-Cheol Yun

Hanyang University - Economics and Finance ( email )

17 Haengdang-dong, Seongdong-gu
Seoul, 133-791
Korea, Republic of (South Korea)
+82-2-2220-1028 (Phone)
+82-2-2296-9587 (Fax)

HOME PAGE: http://myhome.hanyang.ac.kr/wcyun

ZhongXiang Zhang (Contact Author)

Tianjin University - Ma Yinchu School of Economics ( email )

92 Weijin Road, Nankai District
Tianjin 300072
+86 22 87370560 (Phone)

HOME PAGE: http://ideas.repec.org/f/pzh243.html

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