Project Background
International trading of electricity is not a new concept. International power grid networks already exist in many regions including Europe, North and South America, and South Asia. These cross-national border interconnections were developed for various reasons, and designed to provide benefits such as lowering of electricity production costs among the regional trading partners, increasing the quality and reliability of electricity service, reduction of the level of required reserve capacity in the connected grids, and improvements in national energy security.

To date, however, there have been few practical collaborative regional investigations into the potential for regional power grid interconnection among the countries of Northeast Asia. Despite the various probable benefits of connecting the electricity grids of the countries of the region, equal participation in the trade of electricity by all countries in the region faces a number of obstacles. The countries of Northeast Asia that might host portions of a regional grid-including China, the Democratic Peoples' Republic of Korea (DPRK), the Republic of Korea (ROK), Russia, and possibly Japan-vary widely in geographical size, population, economic strength and structure, and political structure and philosophy. A few preliminary studies on the issue of grid integration in Northeast Asia have been done, including studies by APERC (the Asia Pacific Energy Research Center), KERI (the Korean Electrotechnology Research Institute), the Siberian Energy Institute of Russia and other regional/international organizations. These reports identify the potential benefits and barriers to the grid interconnection, but do so mainly from a pure research point of view.

Nautilus Institute intends to approach the issue of Northeast Asian grid integration from a different perspective, one that uses a more pragmatic and collaborative approach than the previous studies described above. The Nautilus Northeast Asia Regional Grid Project aims to examine the feasibility of grid interconnection on a real and practical level, including taking full account of the actual local energy and political situations in the countries of the region. Under the East Asia Energy Futures (EAEF) Project, another initiative carried out under the Nautilus Energy and Environment Program, many collaborative activities in the region have already been completed (with others underway). In addition, as a part of the EAEF project and related projects, Nautilus and its collaborating institutions from around Northeast Asia have collated a significant amount of local energy information pertaining to the countries of the region, and have created databases that describe the energy systems of each of the countries of the region in significant detail. These energy information and database resources provide Nautilus and its collaborating institutions in the region with much of the background necessary to take the next step in assembling and evaluating grid interconnection options for Northeast Asia. This next step, and the goal of the grid interconnection project, will include exploring in some detail with collaborators from each of the countries of the region the many practical and implementation-phase aspects of creating power grid interconnections in the Northeast Asia. These analytical explorations will need to consider the impacts of the security, environmental, and political situations in each country on any regional grid (and vice versa), along with more quantitative elements such as future scenarios of electricity demand and supply in each of the countries of the region, the timing (seasonality) of electricity availability by country, the status, technical parameters of, and plans for the electricity grids in each country, models and arrangements for pricing of electricity transfers, and computer modeling of the operation of potential regional grid designs. The project will culminate in one or a set of serious proposals for grid interconnection, proposals backed by collaborative and interdisciplinary analysis.

Some of the regional energy characteristics that motivate Nautilus' grid project are as follows:

Energy Security in the Region
One of the major driving forces for the interconnection of a power grid in Northeast Asia would be the improvement of the energy security in the region, including enhancing the reliability of electricity supply in each country by making available an international source of emergency backup power. Despite the recent Asian economic crisis, the electricity demand in Northeast Asia is expected to grow rapidly. As the region as a whole (excluding the Russian Far East) has relatively small oil and gas reserves, the region is projected to become the world's largest oil and gas importer early in the next century. This import dependence would result in the economic growth and stability of the region relying heavily upon the oil supply and political situation in the Middle East, which will be the major source of the oil consumed in Northeast Asia. Oil import projections have made energy security a serious concern of regional energy researchers. The Nautilus EAEF project collaborators from China, the DPRK, the ROK, Japan, and the Russian Far East have already discussed the inevitability of improving regional energy networks, including building one or more gas pipelines, in order to make the region's energy situation more secure. A power grid network could be discussed in this context.

Environmental Issues and Climate Change
Air pollution is a significant concern in Northeast Asia at both the local and trans-national-boundary levels. The rise in CO2 emissions from Northeast Asia in recent years has caught the attention of not only environmental scientists but also energy policy makers in the region. Environmental considerations such as there provide an inducement for those planning the power sector in the countries of the region to seek alternative, "cleaner" sources of electricity. Importation of "clean" electricity is attractive because carbon emissions could be greatly reduced (for example, through importing electricity to the Koreas or China generated in the Russian Far East's large hydro power stations). In addition, various financing mechanisms for climate change mitigation now under discussion or development could potentially be used for the development of a power transmission network.

Political Security
Grid connections between the countries of Northeast Asia could improve the political security situation in the region. Arrangements for the pricing of internationally-traded electricity, for example, could catalyze the improvement of political security, since pricing is generally based on information provided by both parties and on considerable negotiation. Trust and the extensive exchange of detailed information about generation, transmission, and distribution costs would be required for the fair trade of electricity. Through the pricing negotiation process, the political security between the trading countries may be improved. Other collaborative efforts for developing and modeling the power grid infrastructure and implementing power exchange procedures and protocols could potentially also serve to render the regional political situation more secure.

Project Objectives
The Nautilus Northeast Asia Regional Grid project has several key objectives:

• Through collaboration with energy policy researchers, power system experts, and engineers from the Northeast Asia region and elsewhere, identify the potential benefits of, constraints to, and barriers in implementing electric power grid interconnections in the Northeast Asia region. In this activity, national researchers will be commissioned to present each nation's perspective regarding power grid connection to neighboring countries.
  
  
• Through the activity above, establish open means of communication and a clear understanding between national researchers in the region, Nautilus researchers, and others, in order to assist the process of collaborative work for the regional grid interconnection.
  
  
• Work collaboratively with researchers in the region to develop consistent scenarios for electricity supply and demand in each of the countries of the region and in the region as a whole, and to evaluate these scenarios to establish the range of costs and benefits of potential regional grid integration. The costs and benefits of grid integration will be defined broadly to include economic, environmental, and security impacts.
  
  
• Identify and discuss practical procedures for achieving the regional grid interconnection, such as identifying practical financing mechanisms and setting up the necessary institutional structure. Risks likely to be incurred or reduced as a consequence of electricity trading will be also discussed.
  
  
• Train energy experts from the region in general subjects related to the international trade of electricity and energy economics. The topics for training will likely include electricity pricing principles (including the concepts of avoided cost), structuring of contracts for electricity trading, and energy economics. This type of training will both build local capacity and help to build a common consensus regarding international trading of electricity.