Economic and environmental impacts from the China-Korea power grid interconnection

Abstract

China and Korea have planned a substantial power grid interconnection project, driven by a shared commitment to achieve their respective policy goals. This paper analyzes the economic and environmental impacts of this cross-border power grid interconnection and presents a comprehensive financial analysis of the project. We formulate a power system model that includes a planned submarine HVDC transmission line between two countries and study various scenarios by using hourly data. Our results demonstrate that the interconnection line operates with a remarkably high utilization rate, ranging from 98.90 % to 99.95 % across all analyzed scenarios. This high utilization rate suggests that the project holds significant economic potential, with estimated net present values ranging from $1,786 million to $3,019 million at a discount rate of 7 %. Furthermore, from the sensitivity analysis on carbon price, discount rate, and transmission capacity, we show how the financial outcome of the project is affected by the change in these parameters. Finally, we discuss the consequence of imposing an additional constraint on the carbon emission to our model and then, minimizing the overall carbon emissions subject to keeping the overall cost without the interconnection. In both variations, we show that the two countries can achieve their policy goals without increasing carbon emission.