By Troy Stangarone
At North Korea’s recent Party Congress, Kim Jong-un laid out a five-year plan to boost economic growth in North Korea. As part of his plan, Kim Jong-un raised the need to address North Korea’s chronic energy shortage by increasing North Korea’s energy production, including the production of nuclear power. While addressing the North Korean economy’s need for reliable sources of energy would be a key part of any economic revival in North Korea, the emphasis on nuclear power suggests that the North Korea is less interested in economic development than the rhetoric might indicate.
A number of issues hold the North Korean economy back. While North Korea’s “one percenters” live a fairly upscale life increasingly filled with Western luxury goods, the North Korean economy faces a series of constraints. To increase economic growth, Pyongyang needs to implement a series of wide ranging reforms. A few examples include reforms to the money and banking system, a loosening of labor markets, and measures to strengthen investor confidence in the private sector. These prospective reforms don’t even address the larger issue of sanctions and denuclearization that hinder the economy. In the absence of a deal with the international community to address its nuclear program, international sanctions will continue to be a constraining force on economic growth in North Korea. While Iran reached this conclusion and sought out a negotiated solution, North Korea has resisted a similar course.
Why Increased Economic Activity in North Korea Requires More Power Generation
If North Korea is to develop its economy, a significant increase in power generation will be required. According to estimates, North Korea generates about the same amount of power on an annual basis as Cuba, Puerto Rico, the Dominican Republic, Tajikistan, and Iceland,or, about 3.6 percent of the power generated in South Korea.
All of those countries, South Korea excepted, and Puerto Rico, have populations less than half the size of North Korea. Only Iceland and Tajikistan have smaller economies, but both also have significantly smaller populations. Looked at in terms of per capita income at purchasing power parity, all are better off than North Korea by a significant amount, other than Tajikistan which still has a per capita income $1000 more than North Korea. In a relative sense, North Korea is clearly under-generating the power needed to drive its economy.
Problems with Power Generation in North Korea
While North Korea uses a mixture of thermal power, largely from coal, hydropower, biomass, and petroleum, much of the infrastructure dates back to the 1950s and 1960s for the thermal plants and many of the hydroelectric plants date back to prior to 1945. As a result, plants often run below operating capacity and in some cases parts for maintenance are no longer produced.
Even when North Korean has attracted attract foreign investment, the North has had to rely on foreign power to run factories. In the case of the Kaesong Industrial Complex, to ensure a stable power supply that would not damage equipment electricity was provided by a power plant in South Korea. In the case of Rason, an obsolete power plant in Sonbong was being utilized, but it limited investment capacity and China had agreed to build a new plant to provide power.
However, North Korea faces problems beyond generation capacity and the degradation of facilities. The country also has two antiquated electrical grids that are deficient in three ways. First, they are of differing voltages which creates compatibility issues. Second, they do not cover the whole country, so there are areas that are not on the main grid. Lastly, because of their age and disrepair 20-30 percent of the power that is generated is lost.
Fixing North Korea’s Power Problems
Kim Jong-un has suggested increasing North Korea’s nuclear power capacity as one solution to North Korea’s energy needs. Setting aside the issue of the international concerns that the construction of additional nuclear power plants in North Korea would raise, nuclear power would not be an ideal method for rebuilding North Korea’s economy.
Nuclear power plants require significantly more upfront costs to construct than other sources of power and take longer to build. In light of leaks in a quickly constructed hydropower dam in North Korea, the words “North Korea,” “nuclear power plant,” “construction,” and “quick” are likely not a combination anyone would like to hear soon.
If North Korea were serious about trying to improve the energy infrastructure in the country to grow the economy, nuclear power is not the route anyone would take. Instead, North Korea should turn to either coal thermal plants or natural gas plants, with an increasing degree of renewable sources in the mix, something North Korea is trying to do. A mix of source makes sense for North Korea as LNG plants for baseloads would be the quickest to build, while the usage of renewable energy could help bring basic services such as hot water and power to charge phones and other electrical equipment to areas cut off from power much more quickly. LNG could be supplied to baseload plants from Russia as part of a deal that has been on the table to supply South Korea via a pipeline for years.
Of course, all of this suggests that North Korea is more interested in expanding the options for its nuclear weapons program than generating the power needed to revive the economy. Any effort to build additional nuclear plants would not only delay the economic benefit but might also lead to deeper economic sanctions on the economy.
Troy Stangarone is the Senior Director for Congressional Affairs and Trade at the Korea Economic Institute of America. The views expressed here are his own.
Photo from sharkhats’ photostream on flickr Creative Commons.