CROSS-BORDER WIND POWER PLANNING: A CASE STUDY OF THE

SOUTHERN KURIL ISLANDS

Dissertation in partial fulfilment of the requirements for the degree of

MASTER OF SCIENCE WITH A MAJOR IN WIND POWER PROJECT MANAGEMENT

Uppsala University Department of Earth Sciences, Campus Gotland

Tamara Oshkaderova

2020

CROSS-BORDER WIND POWER PLANNING: A CASE STUDY OF THE

SOUTHERN KURIL ISLANDS

Dissertation in partial fulfilment of the requirements for the degree of

MASTER OF SCIENCE WITH A MAJOR IN WIND POWER PROJECT MANAGEMENT

Uppsala University Department of Earth Sciences, Campus Gotland

Approved by:

Supervisor: Johanna Liljenfeldt, senior lecturer/associate professor at the Department of

Earth Sciences, Wind Energy

Examiner: Andrew Barney, Junior Lecturer at the Department of Earth Sciences, Wind

Energy

2020

iii

ABSTRACT Combating climate change has become the key objective of the 21st century. Energy transition, with the intensive introduction of the renewable energy sources to the world’s energy systems, is one of the biggest driving forces in stimulating global sustainable development. Growing shares of renewables, including wind power as a major player (35% of the world’s electricity needs by 2050 raised the issues of grid stability and supply/demand balancing (IRENA, 2019). A popular view on solutions for these issues lies with global energy interconnections, which could support grid stability and let the countries trade green electricity between themselves, creating big regional or even global electricity markets. These interconnections would call for close cooperation between the states, not only in the sphere of transmission, but in generation as well. The cross-border character of such projects would bring new aspects and nuances to the wind power developer’s work, making it more complex and politically sensitive. The potential planning process of such wind power projects has not been investigated before. Therefore, in order to fill this research gap, a cross-border wind power environment analysis framework was developed on the basis of the reviewed literature to assist a wind power developer in a potential planning process of a complex cross-border wind energy project in a sensitive setting. The developed framework was then used to evaluate an empirical case of an assumed offshore wind park on the Southern Kuril Islands, a disputed territory between Japan and Russia. The results showed that introduction of the cross-border factor makes permitting and coordination of projects more challenging and confusing. In addition to that, the wind power developer might have to contribute to the development of improved wind power regulations and norms. Moreover, coordination of such projects would not involve only the developer, but most likely representatives of the involved countries and regions, and possibly mediating organisations; the developers’ work would take place in a multicultural environment with people of various traditions, values, economic backgrounds and interests, which would complicate balancing the stakeholders’ interests during the planning phase. iv

ACKNOWLEDGEMENTS I would like to thank my thesis supervisor Johanna Liljenfeld for her amazing guidance, understanding and support during the course of this thesis. I am also grateful to the Department of Earth Sciences, Wind Energy for the insightful and meaningful work they do to ensure the best study experience for their students at Campus Gotland. Special thanks to Keith Lynch from Ørsted for the telephone interview, which provided valuable input to my work. Finally, I would like to thank my mother, without whom neither my studies in Sweden nor this thesis could be possible. v

NOMENCLATURE ASG – Asian Super Grid CBC – Cross-border Cooperation CRESS – Capacity-based Renewable Energy Support Scheme EEZ – Exclusive Economic Zone EIA – Environmental Impact Assessment EU – European Union FIT – Feed-in-Tariff GEI – Global Energy Interconnection GHG – Green House Gasses GIS – Geoinformation Systems HVDC – High Voltage Direct Current Hz – Hertz IEA – International Energy Agency IRENA – International Renewable Energy Agency IUCN – International Union for Conservation of Nature kWh – Kilowatt-hour LIDAR – Light Detection and Ranging LNG – Liquified Natural Gas MW - Megawatt NGO – Non-governmental Organisation PPA – Power Purchase Agreement PPP – Public-Private Partnership RES – Renewable Energy Sources RUB – Ruble SDG – Sustainable Development Goal SODAR – Sonic Detection and Raging UN – United Nations WTG – Wind Turbine Generator WWII – World War II

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TABLE OF CONTENTS

ABSTRACT ...... iii

ACKNOWLEDGEMENTS ...... iv

NOMENCLATURE ...... v

LIST OF FIGURES ...... viii

LIST OF TABLES ...... ix

LIST OF APPENDIXES ...... x

CHAPTER 1. INTRODUCTION ...... 1

CHAPTER 2. LITERATURE REVIEW ...... 8

2.1 Cross-border Infrastructure Projects ...... 8

2.2 Wind Power Planning Process ...... 13

2.3 Wind Power Cross-border Environment Analysis Framework ...... 19

CHAPTER 3. MATERIALS AND METHODS ...... 22

3.1 Case Background ...... 22

3.2 Case Study Method ...... 24

CHAPTER 4. RESULTS OF THE CASE STUDY ...... 29

4.1 Geographic Accessibility ...... 29

4.2 Socio-cultural Proximity ...... 30

4.3 Institutional Context Conditions ...... 31 4.3.1 Economy ...... 31 4.3.2 Laws and Regulations ...... 32 vii

4.4 Cross-border Integration ...... 33

4.5 Governance ...... 35

4.6 International Support and Mediation ...... 37

4.7 Policy Mix ...... 39 4.7.1 Wind Power Policy in Russia ...... 39 4.7.2 Wind Power Policy in Japan ...... 40

4.8 Wind Resource and Area Specifications ...... 41

4.9 Permitting and Coordination ...... 43

4.10 Local Communities...... 45 4.10.1 South Kuril Islands’ Community ...... 46 4.10.2 Nemuro Community ...... 46

4.11 Electricity Trade ...... 47

4.12 Case Study Summary ...... 50

CHAPTER 5. DISCUSSION AND CONCLUSION ...... 52

REFERENCES ...... 56

APPENDIX ...... 73

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LIST OF FIGURES Figure 1 Wind power planning process ...... 19 Figure 2 “The Northern Territories” and their EEZ ...... 23 Figure 3 Kurilskiy Nature Reserve ...... 42 Figure 4 Asia Super Grid initiative map ...... 48

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LIST OF TABLES Table 1 Ten conditions for assessing the cross-border environment ...... 12 Table 2 Wind Power Cross-Border Environment Analysis Framework ...... 20

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LIST OF APPENDIXES Appendix 1 An official reply from the Southern Kuril Islands Municipality ...... 73 Appendix 2 Mean Wind Speed on the Southern Kuril Islands ...... 74 Appendix 3 Seafloor depth around the Southern Kuril Islands...... 75

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CHAPTER 1. INTRODUCTION The concept of energy transition and active penetration of technologies involving renewable energy sources has been a trending and intensively discussed topic over the past decades. Given the negative climate change impacts, governments of many countries have made a decision to face the challenge of transition to the renewables, mainly in the electricity production sector. The United Nations’ Paris Agreement of 2015, which involved the majority of the world’s countries in combating climate change and enhancing sustainable development, established 17 sustainable development goals (SDGs). Goal number 7 “Affordable and Clean Energy” entirely rests on the energy sector and its transformation, as well as being a big share of goal number 13 “Climate Action” (DSDG, 2015). SDGs can only be reached if the global community acts together. In order to support the means of the SDGs’ implementation, goal number 17 “Partnerships for the Goals” was introduced. Among the available economically feasible and rather mature technologies, wind power is to play a significant role in the dramatic changes the world’s energy system is experiencing. The International Renewable Energy Agency (IRENA) forecasts the wind industry becoming the leading producer of electricity, covering around 35% of the world’s electricity needs by 2050 (IRENA, 2019). Rapid introduction of wind and other renewables into the countries’ energy systems makes the problem of grid stability more relevant than ever. One of the views for tackling the issue lies with the electrical regional and global interconnections, which stimulated the emergence of international initiatives such as Asian Super Grid and Global Energy Interconnection. Supporters of these initiatives see the future of the regional and global energy system as balancing supply and demand between the countries in a united electricity market, with partnerships taking place not only in the interconnection, but in the generation as well, creating a need for joint cross-border projects. Such examples can already be found today in hydro energy production, when countries jointly build the infrastructure and share the output from the dams on cross-border rivers. 2

The need for renewable energy infrastructure, which should serve as a foundation for implementation of the numerous sustainable development objectives, has become obvious over the past years. The International Energy Agency (IEA) claims that around $44 trillion is required to build such infrastructure (IEA, 2016). An investment of that scale will transform not only the energy sector, but also has the power to modify as well as create new economic models and political outcomes (Bridge, Özkaynak, Turhan, 2018). Historically, energy has been a central driving force in shaping forms of economic organisation and stimulating economic growth. Having such an important role, access to energy sources (fuels) and infrastructure have become essential to guarantee countries’ prosperity and economic growth (Smil, 2008). Hence, the question of energy security has become one of the biggest objectives for almost any government in the world. The quantity and quality of available internal natural resources, as well as potential transportation routes have been determining countries’ geopolitical role and power. These are represented by the scale and type of their dependence on other geopolitical actors (Austvik, 2018). The access to fossil fuels (mostly oil, gas and coal) as well as global transportation routes have become the cornerstones of geopolitical policies and the reason for conflicts all over the globe (Månsson, 2014). However, energy transition’s take-off, with world governments aiming to tackle climate change as well as improve their energy security by introducing more domestically produced renewable energy in their energy mixes, cannot help but challenge and dramatically change the existing geopolitical and geo-economic organisation of the world. Reusswig, Komendantova and Battaglini (2018) picture energy transition as one of the historical and order changing forces and compare its potential effects to those of the industrial revolution and abolition of slavery. The authors highlight, that the transition to renewable energy sources (RES) will result in a fundamental socio-technological shift, which in turn will bring significant changes in existing business and governance models, as well as related worldviews and values. Despite the evident changes RES are bringing to life, there has been little work done on researching the new geopolitics of energy (O’Sullivan, Overland, Sandalow, 3

2017). German and Dutch researchers have taken the lead in investigation the emerging geopolitics of renewables, with the scholars from the Netherlands having done the most meaningful work (O’Sullivan, Overland, Sandalow, 2017). Bosman and Scholten (2013) perform a thought experiment, trying to portray a world which runs on 100% renewable energy. The authors come to a conclusion that the governments of the future will most probably have to find a balance between national energy security of supply and cost benefits that the electricity trade with other countries in the interconnected grid could bring. Rapid development of renewables will significantly lessen the role of the fossil fuel-centred traditional geopolitics, since the transition is likely to increase the overall availability of energy and make it less exposed to political tension (Kostyuk et. al., 2012). Freeman (2018), having explored the renewables’ development in China, comes to a conclusion that RES present a major challenge to the existing geopolitics of energy (oil and gas centred). Moreover, in the relatively near future production capacities, Research and Development, and technology markets are going to be just important as geopolitics. Scholten and Bosman (2018) state, that renewables are to bring substantial changes, shift dependencies and ease tensions, especially the ones related to fossil fuels. However, the transition is going to bring new challenges to the world. But why are the renewables about to transform the geopolitics of energy as we know it? The answer is very obvious: the renewables are different in their nature from fossil fuels, which means that the new geopolitics they bring with themselves are different as well (Bosman and Scholten, 2013). Recognising the major changes, the renewables are bringing and will bring in the upcoming future to the world’s political system, IRENA issued a “New World: The Geopolitics of the Energy Transformation Report” in 2019. The Agency points at the importance of understanding the growing role of the renewables and proactively preparing for “the new energy age and its geopolitical consequences”. IRENA highlights the 4 major characteristics of RES which have significant impact on politics: • RES are available almost in all countries; 4

• RES mostly take the form of “flows”, not “stocks”; • RES can be deployed at various scales in a decentralised pattern, which in turn has a “democratising effect”; • RES have an almost non-existent marginal cost. Scholten, Bazilian, Overland and Westphal (2020) sum up the key geopolitical characteristics of renewables based on their previous work and the IRENA report (IRENA, 2019b). They emphasize that RES inevitably will transform the existing partnerships and disputes between the countries, which are mostly based on the geographical characteristics and technical specifications of fossil fuels. O’Sullivan, Overland and Sandalow (2018) draw the attention to the fact that the deployment of RES means an increased need in stabilising the grid due to the disruptive nature of the primarily energy sources (i.e. wind and sun do not always blow/shine with the same intensity) and need to balance supply/demand in real time. Energy storage and grid interconnection between countries is one of the real solutions to the issue. The importance of interconnection becomes apparent when one sees the number of various proposed interconnection initiatives: from very ambitious global proposals, such as the Global Energy interconnection (GEI), to regional supergrids, for instance the Desertec project, Asia(n) Super Grid (ASG), North Sea Offshore Grid, TenneT North Sea Interconnection project etc (O’Sullivan, Overland and Sandalow, 2018). Smith Stegen (2018) predicts the emergence of new forms of interstate relations to emerge and deepen the regional integration. She also highlights the mutual nature of benefit between the interconnected states, which could ensure more stability and trust. The former executive director of the IEA Nobuo Tanaka expresses his belief that supergrids (for example ASG) have the potential to “inspire partnerships” between the countries as well as smoothen the existing oil and gas disputes (Yu, 2016). The supergrids’ vision has many associated advantages, e.g. possibility to deploy RES in the best suited locations, cost optimisations, easing of political tensions (Reusswig, Komendantova and Battaglini (2018). However, the appearance of regional super grids, established on bases of geographical location, economic blocks or centred around a local 5

“great political power” is definitely likely, while a global grid not as much, since the existing rivalry and tensions between the world’s superpowers are unlikely to disappear easily (Scholten, Bazilian, Overland and Westphal, 2020). In the new coming geopolitical world of eased tensions and smart super grids, RES projects have a possibility to go beyond national borders to serve renewable energy interests of the world’s regions and take advantage of the generous “supply” of renewable sources in remote or difficult to access areas. Chatzivasileiadis, Ernst and Andersson (2014) explore the potential process of the global grid interconnection. The authors highlight the tremendous benefits of harvesting remote renewable resources and call them the “driving force” of integration. Areas such as the Gobi Desert (Gobitec Initiative), Sahara Desert, Greenland, Indian Ocean shore and deep-water offshore locations will have to be exploited in search for more green electricity for regional and/or global supergrids. Implementing such projects will require intensive international cooperation between the states (Chatzivasileiadis, Ernst and Andersson, 2014). However, aiming for energy megaprojects, according to the analysis of European and Asian projects by Van de Graaf and Sovacool (2014), could be very challenging, as they are prone to failure due to fragmentation of stakeholders, and often social injustice, which can result in producing “winners and losers” situations. Sovacool and Cooper (2013) mention that most “megaprojects”, i.e. projects which transit at least 3 countries and require an investment of a least $1 billion dollars, have a tendency to failure, since they involve too many stakeholders, who are determined to fulfil their own agenda. However, reducing the number of governments involved to two main parties could make the project implementation less challenging and more likely to succeed. Therefore, cross-border cooperation projects have been more common and could be the beginning of international renewable energy generation projects. The potential planning of joint cross-border wind power infrastructure projects has not been investigated before. It could become a very relevant area in light of the increasing importance of sustainable energy infrastructure, its’ globalisation and need for joint global action to tackle climate change. Thus, many of such projects could be likely located in 6

cross-border on-land and offshore zones, which are often the objects of political tensions and territorial disputes. Geopolitical conflicts, especially between neighbouring countries, could slow down if not cancel opportunities for further integration and RES electricity trade/inter-reliability. Therefore, the cross-border character of such projects would bring new aspects and nuances in the wind power developer’s work, making it more complex and politically sensitive. The developer might need to operate in a reality of a very big number of involved stakeholders and interests on the international level, while accounting for existing geopolitical issues and differences in cultures, economies and legislative frameworks. In order to fill in this research gap, the present study aims to develop a cross- border area analysis framework to assist a wind power developer in a potential planning process of a complex cross-border wind energy project in a sensitive setting. The developed framework is then used to evaluate an empirical case of an assumed offshore wind park on the Southern Kuril Islands, a disputed territory between Japan and Russia, located in the Russian Far East Pacific region. This area specifically is of interest for this thesis due to its geopolitical position and the existing objective for establishing joint cross- border economic activity between the countries on this territory. Moreover, the Asian Super Grid initiative includes a direct interconnection between Russian Far East and Northern Japan, which supports the idea of joint renewable energy activity on the islands, with prospects of supplying the locally produced green electricity to the ASG. The central research question of the thesis is: How would a cross-border wind power planning process differ from a typical one? In order to answer the main research question the following sub-questions should be answered: - What are the typical structure, traits and planning features of cross-border infrastructure projects? - What does the typical wind power planning process look like? - What are the key conditions for wind power cross-border environment analysis? - How are these conditions reflected in a case of the Southern Kuril Islands? 7

Exploring the case could help in understanding the additional challenges and areas of concern which should be dealt with during the project’s planning due to its placement in a cross-border reality.

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CHAPTER 2. LITERATURE REVIEW The literature review chapter looks into the best practices from the international cross-border projects as well as the wind power planning and conflict management process. The analysis of these sections is a necessary part for the partial fulfilment of the research objective of the thesis, as they form the basis for the proposed Wind Power Cross- Border Environment Analysis Framework.

2.1 Cross-border Infrastructure Projects

Establishment of a stable, cost-competitive and sustainable energy supply is one of the key objectives of our time. Wind power-based electricity generation is forecast to play a role of paramount importance in this process (IRENA, 2019a). By 2050, the reference year of many sustainability goals, wind is projected to account for around 35% of the world’s electricity supply (in IRENA’s climate-resilient pathway (REmap Case) scenario). The rapid transition to RES will have a significant impact not only on the energy system as we know it today, but also on the whole world order of the future as well as its values. We can already see how the sustainability framework and climate change issues change societies, people’s lifestyles and their treatment of nature. In this emerging world, a wind power developer will have to face new, previously unknown challenges as well as work in new economic and political environments. Cross-border cooperation (CBC) between countries is the key aspect of international relations aimed at promoting growth, supporting integration, smoothing social and economic dissolution. Lina and Bedrule-Grigoruta (2009) mention that cross- border cooperation becomes more and more strategic, since it allows employment of resources and knowledge from both sides for the benefit of everyone as well as holding the states together and preventing conflict, especially in cases of shared infrastructure projects. There are various types of cross-border cooperation in many spheres: policy and security (Silvers, 2020), banking (Everett, McQuade, O’Grady, 2020), education (Sánchez, Viera and Rodríguez-Mena, 2017), tourism (Makkonen, Williams, Weidenfeld 9

and Kaisto, 2018), energy (Fuel Cells Bulletin, 2020) etc. However, transport infrastructure seems to be one of the biggest areas of international cooperative work, since it builds the very means for international logistics, which ensures the functioning of the modern globalised economic system. Helble (2016) in his analysis of needs, facts and challenges of cross-border infrastructure connectivity, estimates more than a doubling of trade and tourism between directly interconnected countries. Europe is the world’s leader when it comes to constructed joint infrastructure (Durà, Camonita, Berzi and Noferini, 2018). The European Union promotes cooperation between the so-called Euroregions by employing the INTERREG tool for support and funding of cross-region cooperation projects (INTERREG, 2020). The Union believes that the continent’s strength lies with its integration for “pooling” the countries’ resources in order for everyone to benefit (European Commission, 2015). The all- EU-scale Trans- European Transport Network is a transport infrastructure megaproject, which consists of 9 “corridors” with the goal of creating an even more coherent and integrated Europe. TEN- T consists of smaller, often cross-border projects, which are to build all the corridors by 2050 (European Commission, 2020). TEN-T has already become a treasury of successful CBC projects, some of them becoming world-famous for their outstanding management and benefits, among them Øresund fixed link (priority project 11), high-speed railway axes Paris-Brussels-Cologne-Amsterdam-London (priority project 2) and the ongoing Fehmarn belt rail and road link (priority project 20) (INEA, 2020). The key to Europe’s project success, as suggested by Müller (2012) lies with the aligned legal frameworks, common sub-national regulating and governing bodies (EU level) and access to EU and private funds (Connecting Europe Facility (CEF)). Müller’s (2012) ideas are supported by Melecky, Goswami, Okamura and Overfield (2018) in their empirical analysis for better understanding of the cross-border transport infrastructure corridors in South Asia. Exploring the example of a failed cross- border waterway infrastructure project in the Balkans, the authors highlight the importance of stable and capable governance and coordination over the project region by the authorities during the planning, preparation and implementation phases. In addition to 10

that, they emphasise how crucial it is for the established joint project coordination unit to agree on the financial and technical sides of the project as well as institutional responsibilities. Another group of researchers, Castanho, Loures, Fernández and Pozo (2016), identify the most relevant factors for CBC projects’ success based on a large scale survey among actors involved in European CBC development projects. They mention political will and commitment as well as common objectives and masterplans as vital for projects’’ success. CBC infrastructure projects are characterised by each projects’ uniqueness and complexity. Helble (2016) looks into needs, facts and challenges of cross-border infrastructure connectivity and determines the following peculiarities of CBC projects: need for strong motivation and benefit, need for flexibility, harmonisation of regulations, need for a sub-regional mediator. He argues that the key opportunities of this type of infrastructure project are that they can bring larger payoffs, more transparent procurement and access to two or more markets. Nevertheless, CBC infrastructure projects are associated with many challenges in their planning, development and implementation phases. The author identifies varying laws and regulations, political sensitivity, asymmetric distribution of economic gains and complex financing and procurement as the main challenges the cross-border infrastructure projects face. The Public-Private Infrastructure Advisory Facility (2007) sees a raise of political and geopolitical tension, due to anticipated feeling of weakened sovereignty, large number of stakeholders and actors involved, need for coordination between national and local authorities, distribution of costs and benefits and need for external financial support as main CBC infrastructure projects’ obstacles. Opportunities mentioned by the Facility include the spread of knowledge, transfer of technology, enrichment of cultural capital, building of trust and communities’ integration. In order to be able to cope with the vast spectrum of risks involved in CBC projects, a proper continuous risk assessment is of crucial importance. Li, Zhang and Suo (2019) focus their attention on the risk assessment of cross-border transport infrastructure projects 11

and mention complexity, difficulty and uncertainty as common phenomena that accompany them. They also point out the significant effort needed to conduct a proper risk assessment for managing the cross-border transport projects’ implementation. Sovacool and Cooper (2013) blame the inability to adequately manage risks, due to getting projects approved based on underestimated costs, too optimistic estimated revenues, without proper EIA assessment and overestimated economic effects, as the main reasons for project failure. They argue, that the best way to succeed is to pragmatically “plan for failure”, i.e. choosing among the values and trade-offs, which determine a project. The authors also remark, that “open” projects, i.e. the ones that involve all types and levels of stakeholders into decision making process, have better chances to succeed than “closed” projects. The importance of CBC work has been getting more recognition and attention over the past years. The Organisation of Economic Co-operation and Development (OECD) issued a practical guidance “Region and Innovation: Collaborating Across Borders” report in 2013. The guide gives constructive advice, based on the analysis of 6 real CBC cases, on how to plan, develop and manage the process of cross border innovation collaborations. OECD repeatedly mentions the importance of trust between governments as well as long- term commitment. Another important point highlighted by OECD is that collaboration should only take place when it makes sense which means that the regions should be sure that conditions and opportunities are functionally relevant for the proposed project. In order to do that, the general conditions of the potential cross-border area should be carefully analysed as well as existing and/or potential linkages. The organisation proposed the following conditions for the cross-border environment assessment (Table 1): 12

Table 1 Ten conditions for assessing the cross-border environment (Source: OECD, 2013)

An analysis based on the proposed conditions provides certain evidence to regional planners whether there is potential for cross-border innovation collaboration between the neighbouring areas. The framework offers both physical factors (geographical accessibility) and various proximity conditions (policies, culture, economy, pre-existing infrastructure etc.), which together determine whether the area is favourable for potential cross-border innovation work. The report also points out the public-private character of such collaborations, as the local private sector should be a member of consultation meetings, working groups as well as involved in the project’s financing and implementation. Indeed, infrastructure CBC projects, transport, as well as energy very often have Public-Private Partnership (PPP) nature. Indeed, the energy sector best thrives in Public-Private Partnerships, since exportability of energy means bankability, state Fujimura and Adhikari (2010) on the example of Theun-Hinboun hydropower project. In cases of political tension regional development agencies (e.g. Asian Development Bank) should get involved and play a mediating role. One of such potential mediators, Economic and Social Commission for Asia and Pacific (ESCAP, 2017) examines the possible contributions of PPPs to cross- border infrastructure development and reviews the existing examples in transport, 13

telecommunication and energy sectors. It states that the energy sector has very good potential for international PPP projects, since there is already experience of such in a form of Power Purchase Agreements (PPAs) signed between authorities and private sector in order to guarantee the project cash flow. Cross border situations may take place when the resource (and electricity generation) is located not in the country where it is sold. The implemented cross-border PPA energy projects so far are mostly represented by hydro power in Asia (e.g. Dagachhu Hydropower Plant (Bhutan/India), Nam Theun 2 (NT2) Hydropower project (Lao PDR/Thailand), Paravani Hydro Power Plant Project (Georgia/Turkey)). To conclude, the CBC international projects are highly complex, politicly sensitive enterprises associated with a lot of risks and need for external financing and sub-regional mediators. However, these projects bring larger payoffs and benefits for the involved communities, have transparent procurement and have potential to enhance further cross- border cooperation, stimulate integration and coherence of the neighbouring regions.

2.2 Wind Power Planning Process

Planning is a vital part of any wind power project, without which the possibility of project implementation would not be achievable at all. Planners are responsible for economic competitiveness and environmental protection during the project implementation and operation phases (American Planning Association, 2011). Without proper planning, any project is more prone to failure. Wind power developers are usually the ones responsible for the planning procedure, which might slightly vary from country to country and from developer to developer (Jahanarai, 2010). The planning activities can be grouped by their nature forming “the 5 cornerstones of wind power development” (Clausen, 2013). These include planning for: • Wind resource; • Environmental impact; • Public acceptance; • Grid connection; 14

• Project economy The key objectives of the wind power planning process are to create a “best practice wind farm” which should have the following attributes: safety, social sustainability, economic sustainability, environmental sustainability, reliability (Clean Energy Council, 2018). Identification of suitable locations for wind power development is the first step and the ultimate basis for any further project developments. This process involves a lot of work with Geoinformation Systems (GIS). According to the Department of Housing, Planning and Local Government of Ireland (2019) the following steps should be undertaken in order to identify the optimal location for wind power development: 1. Assess the area’s wind potential; 2. Perform the landscape analysis and its sensitivity to wind energy development; 3. Overlay the wind resource data with the landscape analysis, protected areas should be avoided/excluded or treated in a special way during the further project development for the identification of the the ‘acceptable in principle’, ‘open for consideration’ and ‘not normally permissible’ areas for a wind farm; 4. Integrate the areas from step 3 with the information of available infrastructure in the area (e.g. roads, ports, transmission lines, substations etc.) The next step in development is getting in touch with the owners of the land, where the park is planned to be build (onshore). While arranging land lease agreements, developers should start the extensive community and area study for further work as well as perform deeper analysis of the wind resource by running simulations. Installing a met mast/LIDAR/SODAR for a further wind resource measurement campaign is also essential (Danish Energy Agency, 2018). Once the lands lease contracts are signed, it is time to start reaching out to the local community. In order to successfully plan and implement a wind power project, in a democratic and sustainable way, community engagement from the early stages of planning is of paramount importance (CanWEA, 2017). Usually local communities have strong historical, cultural and emotional connections to the area, which should be taken into 15

account by developers to avoid tough opposition to the project as well as gain more knowledge about the area from the locals (CanWEA, 2017). To assist and guide project developers, best practice guides for community engagements are published by various research institutions, programmes and public authorities. Aitken, M., Haggett, C., and Rudolph, D. P. (2014) conducted a real-cases’ review with project developers in several European countries. Having analysed a large number of interviews, a list with the crucial elements for successful local involvement was formed. It includes early establishment of community engagement, cooperation with the local authorities, being open, easy-to-access and honest about the project, addressing expressed concerns and giving feedback, ensuring the community’s involvement and shaping it depending on the local’s peculiarities and needs. These findings align with another best practice report from GP Wind (Good Practice Wind, 2013), EU project, that’s goal was to investigate the main challenges for wind power development by sharing best practices from a number of real European cases. The final report recommends that all the necessary information on permitting, managing and impacts of the project as well as possibilities for financial participation and benefits be proactively provided to the local community. The latest, as was stated by Klain et. al. (2017) after having performed an analysis of the community engagement in offshore wind projects in the United States, is one of the two central elements for proper and satisfying local involvement. The studied cases showed that satisfaction from communication between developers and locals was reached when mutual and intended knowledge exchange took place between all the concerned stakeholders as well as community specific benefits were introduced, based on the developers’ pre-studies and the locals’ comments and feedback during the consultation meetings. Ejdemo and Söderholm (2015) analyse the past experiences of wind power development in Northern Sweden and highlight, that developers mention the economic involvement of local communities as one of the key factors behind projects’ success. Canadian Wind Energy Association (CanWEA, 2017) in its best practice guide discusses the significance of learning about the local community at the earliest stages of project development. The guide highlights that becoming familiar with the locals is the first step of their engagement, which can help project developers to 16

determine possible concerns of a given community, the manner the project might affect it as well as obtain data on possible past experiences with analogous projects. Developers are recommended to keep the public constantly updated on the project as well as be open for communication with the locals via mail, email, phone and drop-in office hours. According to Khan (2003) there are 4 main arguments “for” the locals’ participation in the decision-making process: 1. Increase of democracy of the process; 2. Contribution to better decisions by considering more perspectives; 3. Improvement of acceptance and legitimacy of decisions; 4. Development of the participants’ personal skills. The Department of Housing, Planning and Local Government of Ireland (2019) states, that the majority of best practice guides on wind power community engagement recommend employing a collaborative/participatory planning approach to the process. Newig et. al. (2018) mentions that collaborative participation in a form of consultation meetings is a necessary tool in cases with a big number of stakeholders and opinions involved. It allows for more efficient and democratic decision-making and an essential part of stakeholder communication and conflict management. The method allows equal opportunities to all stakeholders to participate in the project-related discussions. However, the inclusiveness can only occur when the stakeholders are also willing to take active part and make their opinions heard. Khan (2003) mentions 3 major issues for wind power planners when it comes to project planning: 1. Conflict between public and private interests; 2. Conflict between national and local interests; 3. Conflict between economic growth and protection of the environment. As described by Johansson (2011), the first concern occurs when a private landowner wants to install wind turbines when faced with public opposition. The second issue takes place almost in all cases of wind power projects, since the development of wind power is often a national-level interest and the positive results can be seen on this 17

level as well, while the majority of negative effects (noise, shadows, habitat destruction etc.) are seen on the local scale. The third issue concerns the environmental improvements brought with wind power on the national level and development opportunities for the area, while being potentially hazardous for the local biodiversity. Aitken, M., Haggett, C., and Rudolph, D. P. (2014) argue, that the fact any wind power project proposition is debatable by nature, inevitably causes opposition and resistance from the locals. Consequently, conflicts of interests always occur, with many of them voiced during consultation meetings. Conflict is a natural phenomenon for human interaction, which originates from the pluralism of views and opinions of individuals and groups they form (Hallgren, 2016). Conflict can be defined as an interaction with decreased trust. According to Johansson (2011), difficulties with trust building between wind power development actors (developers, public agencies and local community) are often viewed as one of the biggest challenges of the project planning and development. Hallgren (2016) mentions, that the key precondition for actors’ successful communication is to know and believe there is a possibility to understand and be understood. That is why it is of immense importance to build trust with the local community by providing them with the information and updates on the project, stakeholder meetings and the communication opportunities in order to create a common ground for understanding each other, which is beneficial for future discussions of conflicting interests. According to the author, strategic risk assessment is one of the tools to prepare for potential conflicts and their mitigation. This is where the information about the local community and its prior experiences with various projects can be very useful. Hallgren, Bergeå and Westberg (2018), analyse disagreements in natural resource management, which results in the authors’ understanding of the importance of dialogue as a contribution to a constructive development of conflict situations. Dialogue requires the willingness of all of the parties to discuss the disagreements and to find solutions. Developers, as mentioned by Hallgren (2016), should not try to avoid conflicts completely, as they also have “constructive” characteristics, i.e. they might help to resolve 18

disagreements in a creative way, which may help to create a “win-win” resolution of a conflict for everyone. The next phase of the project planning is obtaining a building permit usually from a local municipality, which requires performing an Environmental Impact Assessment (EIA) (Jahanarai, 2010). An EIA is a necessity to ensure the project is environmentally sustainable, which implies meeting a number of local, national, sub-national (e.g. EU level) and global (e.g. UN) requirements and regulations (Danish Energy Agency, 2018). An EIA is required almost in all cases of industrial scale wind parks. An EIA is crucial for wind power development as it is a crucial permitting document in most countries, without which a project cannot be implemented (Department of Housing, Planning and Local Government of Ireland, 2019). An EIA is usually carried out by the project developer or/and a hired professional environmental consultancy for the further submission to the responsible permitting authorities. According to United Nations Development Programme (2010) a typical EIA for wind farms must include: 1. Information on the developer; 2. Description of the project development site; 3. Description of the project; 4. Overview of the considered project alternatives; 5. Overview of the site’s environment and its surroundings; 6. Description of the potential environmental impact; 7. Impacts assessment in case of an incident; 8. Mitigation and compensation measures; 9. Monitoring measures/programme. Obtaining the permit can take from months to years, depending on the country and the project (Jahanarai, 2010). According to EWEA (2009), waiting time is usually used for financial planning, which includes decommissioning of the park, exploring funding options, reaching out to turbine suppliers and construction subcontractors as well as the grid operator. Once the permit is granted, the developer has another stakeholder meeting, while arranging and finalising the contracts with a WTG supplier, a subcontractor and the 19

grid operator. Then, the construction and operation project plans are created with a fully operational wind park as the result of the developer’s and subcontractors’ work (Danish Energy Agency, 2018). To sum up, the wind power planning process can be described with the following model (Figure 1):

Initial Planning Permitting and Contracts Finance

•Wind potential •EIA •Contracts with assessment and •Application to the WTG site selection the relevant supplier and •Local permitting subcontractor(s) community authority •Grid connection study •Project finance agreement •Land lease agreements

Figure 1 Wind power planning process (Source: author) The focus of this thesis mostly lies with developers’ work with the local and national authorities of the involved countries as well as the local communities, since these are the main planning areas which experience substantial effects with the introduction of the international context. Some areas crucial for wind power technical planning, such as grid connectivity and cross-border electricity trade, are touched upon as well.

2.3 Wind Power Cross-border Environment Analysis Framework

In section 2.2 the OECD’s “10 conditions for assessing the cross-border environment” framework (Table 1) was introduced for innovation cooperation. Adding crucial parts relevant for CBC international infrastructure projects in general and adapted in accordance with the wind power planning model (Figure 2), a Wind Power Cross - border Environment Analysis Framework was proposed below (Table 2). Environmental analysis is a necessity for assessing the potential of cross-border cooperation between two countries. Understanding the existing geographical, institutional and political contexts is crucial for the initial evaluation of a possible collaborative work. The presented cross- border analysis framework has the wind power developers as the target audience, as it can 20

help in shaping projects as well as giving them the fundamental guidance for potential planning and development. Moreover, it can also help the governmental bodies in understanding what are the crucial pre-conditions for a successful cross-border wind power collaboration and adjust their policy and regulations accordingly, as it is impossible to implement such projects successfully without strong governmental commitment and support from both sides of the border.

Table 2 Wind Power Cross-border Environment Analysis Framework (Source: author)

Project Conditions Geographic accessibility Internal and external accessibility of the cross-border area/integration Socio-cultural proximity Similarities in language, culture, practices and values as well as a sense of shared identity Institutional context conditions Level and degree of similarity in regional competences for economic development and in laws and regulations Cross-border integration Flows of workers, goods, FDI across the area, as well as harmonisation of price levels, production costs Governance and Policy Context Governance Degree, longevity and institutionalisation of political and financial commitment to cross-border collaboration International supporting and mediating An outline of available for political and/or organisations financial support organisations Policy mix Orientation of wind power policy Best Practice Wind Energy System Conditions Wind resource and area specifications Favourable wind conditions, avoidance/distancing from protected areas, proximity to the existing infrastructure Permitting and Coordination Institutions Required permits, responsible permitting and coordination authorities (local, national, sub-national) Local community(-ies) Intensive study of the affected by the wind park community (-ies), prediction of potential concerns and ways of their addressing, key benefits’ offers 21

Electricity trade Prospects and specifications of electricity interconnection, potential electricity trade options and conditions.

The presented framework is put into practice on the case study of a potential cross- border wind power project on the Southern Kuril Islands.

22

CHAPTER 3. MATERIALS AND METHODS

The presented study is of a qualitative research design as it aimed at collecting, analysing and interpreting non-numerical data (Hammarberg, Kirkman and Lacey, 2016). In the literature review, the discussed CBC infrastructure projects’ planning peculiarities as well as best planning practices from the wind energy industry resulted in shaping a Cross-Border Environment Analysis Framework (Table 2). The developed framework was then applied to a real-life case of the Southern Kuril Islands in order to evaluate the potential wind power planning process.

3.1 Case Background

The Southern Kuril Islands (Iturup, Kunashir, Shikotan, Habomai Archipelago) is a southern part of the Kuril archipelago, a volcanic island chain located in the Russian Far East, which stretches from Northern Hokkaido (Japan) to The Kamchatka Peninsula and separates the Sea of Okhotsk and the Pacific Ocean. Historically, the archipelago was inhabited by the Japanese indigenous folk ainu and was controlled by Japan till 1945. In August 1945 the USSR army joined the war against Japan with prospects of returning the Southern part of Sakhalin Island and gaining the Kuril Islands (Gavrilov, 2016). In late August-beginning of September 1945, the Soviet army occupied the Kuril Islands and deported the Japanese population and authorities. Since the 1950s Japan has been claiming the southern islands (Kunashir, Iturup, Shikotan and Habomai archipelago), which are referred to as “the Northern Territories” (Figure 2). According to the San Francisco Peace Treaty (1951),which put an end to the US - Japan conflict, Japan agreed to give up Sakhalin Island and the Kuril Islands, with the exception of the 4 nearest to Japan islands, which can be observed from Hokkaido and are claimed to be historically Japanese (Kaczynski, 2007). The USSR did not accept the conditions and never signed the peace treaty. Since then, the Southern Kuril Islands territorial dispute has been ongoing between the Soviet Union and Japan, and since 1991 between the Russian Federation and Japan. 23

Figure 2 “The Northern Territories” and their EEZ (Source: Gorenburg, 2012) The counties have been continuously trying to ease the geopolitical tension around the islands and build trustworthy and positive relationships. However, both countries continue to stand their ground on the issue of the island’s “ownership”, i.e. Russia continues to govern the islands as a part of Sakhalin Oblast’ (Southern Kuril Municipality, 2020), while Japan considers them as a part of Hokkaido prefecture, Nemuro subprefecture (Hokkaido Prefecture, 2020). Years of fruitless effort to settle the dispute finally have resulted in some progress in December 2016, when the countries agreed on trying out a “new approach” (Tajima, 2018), i.e. expanding cooperation, tourism, investments and discussion of a possibility of establishing joint economic activities on the Southern Kuril Islands (RIA Novosti, 2017). 24

Bilateral cooperation in a wide range of spheres has been mentioned as one of the main options for building “good neighbour relationships” as well as easing the tension (Gavrilov, 2016). Having had 3 business visits of Japanese business delegations to the islands, in 2019 the sides agreed on starting investigations for pilot projects in the spheres of aquaculture, waste recycling, greenhouse agriculture, tourism and wind energy (TASS, 2019). In 2020 the countries planned to continue working on their cooperation: in May a visa-free islands visit programme was to start for Japanese citizens and a regional cooperation year was to be opened in Sapporo on the 16th of May. However, the global Covid-19 virus crisis slowed down the progress and postponed these planned events (Norisada and Kobayashi, 2020).

3.2 Case Study Method

Yin (2014) states that a case study is a preferred method when the “how” and “why” questions should be answered concerning some real-life context situation/anomaly/event/phenomenon i.e. “a case”, as well as when the questions require extensive phenomenon descriptions. Case studies are a widely used method in modern science, applicable in a broad spectrum of disciplines: from business and medicine to political science and sociology (Silva, Healey, Harris, van den Broek, 2014). Gerring (2007) highlights that a very big share of empirical knowledge about the world was indeed obtained through conducting case studies and they still represent a significant portion of research within social sciences. The case study method has always been a widely used scientific method in energy studies. Paullillo, Striolo and Lettieri (2019) perform a comprehensive life cycle assessment of the Hellisheiði geothermal plant in Iceland in order to identify its environmental impacts and carbon intensity. By placing the research cases in 3 different countries (Finland, France, China), Dong et. al. (2018) strived to demonstrate the technical and geographic difference in their assessment of waste-to-energy technologies of gasification and incineration. An entirely methodologically different case study was 25

performed by Çolak and Kaya (2020) for Turkey in order to evaluate various energy storage technologies by employing Multi-Criteria Decision Making. Several renewable energy scenarios for energy policy in the case of Jeju Island were proposed by Nam, Hwangbo and Yoo (2020) by exploring the deep-learning forecasting model for RES scenarios. Prabatha et.al. (2020) analyse energy options for small scale off-grid communities in a case in Canada, while Ratio, Gabo-Ration and Fujimitsu (2020) use the case study method to explore the public acceptance and social engagement in the example of the Makiling-Banahaw Geothermal Complex in the Philippines. There are two main types of case studies: within-case analysis of a single case, which is used in this dissertation, and comparison case studies, which strive to analyse the behaviour of a single or several variables under study. It is quite rare that either of the types is used alone, as even single-case studies often involve comparisons with other related cases (Bennett, 2012). Despite the popularity of the method, case studies still face a lot of criticism in the academic world. Many case-study researchers (Bennet (2012), Gerring (2007), Yin (1994)) mention selection bias and case generalisation as the main “trade-offs” and reasons for scepticism towards the method. Selection bias is more common in medical studies, when research participants differ from the relevant for the study population, while case generalisation implies application of the findings to other cases beyond the category in conditions under study. To cope with generalisation, it is recommended to apply the results of this study only in relation to similar cross-border wind power cases. Wind Energy researchers do actively employ both in-case and case comparison methods as well, looking into all the aspects of the industry: from technical and environmental to social and economic. Schallenberg-Rodríguez and Montesdeoca (2018) explore a spatial GIS-based planning method for offshore wind potential in isolated regions/islands on a case study of Canary Islands. In a Nigerian case study, Ayodele, Ogunjuyigbe, Odigie and Munda (2018) employ a multi-criteria GIS model for wind farm site selection, while Saeed, Salam, Rehman and Saeed (Abid) (2019) compare six different Weibull distribution methods for wind power assessment on a case study area in Northern 26

Pakistan. Case studies are perfect tools for researching social acceptance and justice issues related to wind power development, as they allow key barriers to be derived as well as good practices to guide wind power policies and developers. These case studies research the impacts of concrete projects, the communities and their attitudes in a variety of geographic settings, application of new policies etc. Results of multiple case studies allow researchers and policy makers to compile and analyse large quantities of data in order to determine best practices and improve existing policies (Ellis and Ferraro, 2016). For example, Zaráte-Toledo, Patiño and Fraga (2019) explore unsuccessful wind power development policy in a case from Isthmus of Tehuantepec, Mexico, focusing on the social exclusion issues. In a different case in Brazil, Frate et. al. (2019) apply the Q- method, a research method that allows for the investigation of the participants’ subjectivity on a certain matter by asking them to sort and rank a series of statements. Frate et. al. use the method to investigate the correlation of social perspectives and procedural and distributive justice of wind power in Rio Grande do Norte. However, researchers are not the only ones to use the case study method in their work. Many wind power organisations/associations all over the world collect and attentively study primarily and secondary data on the real cases in order to derive best practices for wind power developers in various cultural and social contexts. The Intelligent Energy Europe Programme co-founded and sponsored a research Good Practice (GP) Wind Programme, whose goal was to investigate the main obstacles for wind power development and create a good practice guide and toolkit for wind power developers in Europe, by analysing numerous European cases. The results of the work were presented in GP Wind Final Report (2013), which now is open-source and available for everyone interested in wind power development. Another example, A Canadian Wind Energy Association Best Practice Guide (2017), based on local cases and stakeholder interview analysis, focuses on indigenous peoples’ and public engagement in wind power development. Unlike cross-case analysis in best practice guides, a single case analysis can also be a source of unique knowledge, especially if such a case can be viewed as “deviant”. 27

Gerring (2007) highlights the importance of in-depth learning from specific, unusual cases, which can bring broader and deeper understanding of a theory, idea, branch and help to derive new, better strategies and policies for other cases in the same research field. Indeed, the unique due to its layout offshore Lillgrund wind park in Sweden has become a tremendously significant case for wind power studies, mostly covering layout specifications, offshore installations and wake modelling/assessment. Habakurama and Baluku (2016) in their master’s thesis looked into Lillgrund case to identify the challenges of offshore installations. Turbulence characteristics based on LES simulations in the case of Lillgrund were studied by Früh, Creech and Maguire (2014), while Langhamer, Dahlgren and Rosenquist (2018) looked into environmental effects of the wind farm on the viviparous eelpout. The presented “unique” case study of a cross-border wind park on the Kuril Islands is explored by analysing various secondary data, which seemed to be the best choice for handling data about an assumed wind park in a given actual setting. The case study inquiries usually deal with many variables and, therefore, rely on multiple sources of evidence (Yin, 2014). The collected sources of evidence for the present case are compiled of secondary data, which include: • Research papers focused on the Southern Kuril Islands territorial dispute, energy system of the islands, Russian and Japanese renewable energy policies; • Policy documents, including: o Russian Ministry of Foreign Affairs and the President’s Office official statements; o Japanese Ministry of Foreign Affairs official statements; o Official statements and websites of the local municipalities; o Russian Federal Information Agency (TASS) articles; • Russian, Japanese and other international journalist articles on the Islands’ dispute, cooperation initiatives, economic and social state of the cross- border region; 28

• Reports and websites of statistical agencies, research institutions, permitting authorities and related international organisations; • Global Wind Atlas and Google Earth resources. Validation of the proposed analysis framework as well as valuable additional comments were obtained from the telephone interview with an experienced Project Manager from Ørstedt, Keith Lynch, on the 16th of April 2020 11:30-12:30 CET. Interviews are one of the basic data collection tools in qualitative research. Telephone interviews present a cost-effective and efficient interview option as an alternative to face-to-face interviews (Farooq, 2015). However, this type of interviews faces a certain level of criticism for not being able to support visual contact, depict gestures, body language etc., as well as being unsuitable for data collection in research where the interview setting is also of academic interest (Farooq, 2015). The setting, as well as emotional condition of the interviewee were not of relevance for the presented research, as the goal of the interview lay with obtaining professional opinion, comments and expertise in regard to the proposed framework. The carried-out telephone interview had a semi-structured nature, i.e. only some of the main interview questions had been prepared in advance, the interviewee had a lot of freedom to discuss various aspects around the topics he found relevant. The interviewee received a draft of the proposed framework a week before the interview and was asked to review it, give his opinion on the structure and contents as well as suggest improvements. The rest of the interview took a form of a professional discussion, with some of the expert’s points becoming valuable additions to the case study and discussion sections. 29

CHAPTER 4. RESULTS OF THE CASE STUDY

The “Results of the Case Study” chapter explores the planning process of a potential wind power project on the Southern Kuril Islands as a cross-border project between Russia and Japan. The proposed cross-border environment analysis framework in the subchapter 2.3 is used to evaluate the study case.

4.1 Geographic Accessibility

Geographic accessibility in the framework context is understood as the “internal and external accessibility of the cross-border area/integration. The Southern Kuril Islands are located far off the Russian mainland, making them difficult to access. The closest big Russian island Sakhalin is more than 600km away from the islands, while the distance from Japanese Hokkaido to Kunashir is only 25km and 6km from Cape Nosappu to the Habomai archipelago. The 4 Southern Kurils Islands are not the easiest to reach: the two biggest islands Iturup and Kunashir have small airports, used for domestic flights between the islands and Sakhalin Island; passenger ferries run 5 times a week from Sakhalin (Korsakov port) to Iturup and Kunashir, which take around 20 hours (SKR, 2015). Due to harsh weather conditions during wintertime, the islands might be unreachable (Azar and Artemjeva, 2019a). In the interview, the expert also recommended that availability of WTG installation vessels was an important factor of geographic accessibility for a developer. He highlighted the emerging character of the vessels’ market in East Asia, including Japan (Lynch, 2020). Such Japanese companies as Shimizu, Penta-Ocean construction and NYK are expecting their own first vessels to be ready for installations in 2022 (Durakovic, 2020; Skopljak, 2020). This means that in the near future Japan will be able to directly supply the installation vessels to the project. In relation to the framework, the case study area is difficult to access from the Russian mainland, especially during wintertime. Proximity to Japanese Hokkaido as well as potential future availability of Japanese installation vessels makes it more reasonable 30

to establish the logistics and supply point in one of the Northern Hokkaido’s most suitable ports, e.g. port of Nemuro or Rausu some 50 km away.

4.2 Socio-cultural Proximity

This section examines similarities in language, culture, practices and values as well as a sense of shared identity of the cross-border area. The southern Kuril Islands are not densely populated, Iturup, Kunashir and Shikotan have a population of round 18,000 people (Rosstat, 2019), while the Habomai archipelago only serves as a base for the border control patrol. The modern population of the islands predominantly consists of Russians and other Russian speakers. The original for the inhabitants of the islands Ainu language has left several of toponymic traces, e.g. the names of the islands. Hokkaido Prefecture is mostly represented by the Japanese-speaking Japanese and Ainu population. The northern Nemuro subprefecture has a population of 48,000 (Statistics Bureau Japan, 2019), of which 4.7% are Ainu (Ainu Association of Hokkaido, 2013). Russian and Japanese belong to different language families, which makes it impossible for the southern Kuril Islands’ region population to understand each other without using a lingua franca, or an interpreter. Nevertheless, Hokkaido inhabitants have historically had close cultural and economic relationship with Russia, which made Russian culture and language popular with the locals. Today, Russian is taught in 10 schools, 13 universities and multiple language courses on the island (Podalko, 2016). Hokkaido Prefecture administration always has Russian speaking staff, which is responsible for contacts with Russia and development of the Russian version of the prefecture’s website (Hokkaido Prefecture, 2020). The central town of Nemuro subprefecture – Nemuro has signs in Russian for the visitors, mostly Russian fishermen (Azar and Artemjeva, 2019b). The southern Kuril Islands’ inhabitants, in their turn, also actively studied the language of their neighbours: since the 1990’s the Japanese Ministry of Foreign Affairs has been sponsoring the Japanese language courses in Sapporo for the Southern Kuril 31

citizens, which take place every year and last for a month. However, there is only a handful of the islands’ inhabitants, who have managed to master Japanese to a significant level (Kiselev, 2019). Japanese and Russian cultures differ significantly, with the Japanese being highly organised, disciplined and reserved collectivist people; in contrast the Russians tend to be more open, straightforward and a bit more individualist (Ralston et. al., 1995; Vorobjova, 2002). However, taken the specific European-Asian cultural mix position inherent to Russia, it shares more common cultural practices with Japan than the majority of the “Western world” countries. Both peoples are more traditionalist, with strict vertical work hierarchies and highly context-driven communication cultures, which means that the meaning of verbal and non-verbal messages are defined by the cultural context (Ralston et. al., 1995; Vorobjova, 2002). The majority of the displaced persons and their descendants from the Kuril Islands still live in Nemuro and the other neighbouring Hokkaido subprefectures. They still harbour a “nationalist feeling” towards the islands and see them as their original home (Azar and Artemjeva, 2019b). The Islands’ local population, in its turn, has high mobility due to the Kurils’ isolated location and limited access to basic necessities and services. Only a few families have been living on the islands for generations (Kiselev, 2019).

4.3 Institutional Context Conditions

The institutional context conditions section looks into the level and degree of similarity in regional competences for economic development and in the laws and regulations of the collaborating countries.

4.3.1 Economy During the Soviet period, the Southern Kurils were the leading supplier of canned fish and sea products. The earthquake of 1994 significantly damaged the Islands’ infrastructure and, together with the long Russian economic crisis throughout the 1990’s, almost destroyed the fish industry on the Islands and forced people to look for better opportunities on the mainland. Many, however, took advantage of the lack of control at 32

that time and sold illegally poached fish to Japan. Nevertheless, fishing and food processing remains the Islands’ key economic activity (Azar and Artemjeva, 2019a). Nemuro, in its turn, is a major producer of processed seafood in Japan. However, this business is highly dependent on the fish supplied from the Southern Kuril Islands, as the Japanese territorial sea in the area is very limited. Just like the Kurils, Nemuro has been experiencing an economic recession over the past years mostly due to the declining supplies of fish from the Kurils. Therefore, the locals hope for the establishment of the joint economic activity with the Kurils in order to improve the economic situation in the whole region (Azar and Artemjeva, 2019b). Some of the proposed activities, such as fishing and aquaculture, can take advantage of the areas’ shared economic competence and help establish a more secure and sustainable economic environment in the cross- border region. As can be seen, both areas have been experiencing an economic decline in the recent years and need each other in order to boost the economic development of the cross- border region as a whole.

4.3.2 Laws and Regulations Russia has a civil law system, which includes codified laws and other laws, consistent with relevant codes. International law is seen as a part of the Russian legal system. The main sources of law include the Russian constitution, federal laws, federal constitutional laws, decrees of the president, resolutions of the government, legal acts of authorised state bodies (Konyushkevich, Rubashevskiy and Bazurin, 2019). In Sakhalin Oblast, the highest local legislative power belongs to the local regional Duma (Parliament). The Japanese legal system is also based on a civil law system, which was formed under the strong influence of European law with inputs from the US system and Japanese traditions. The key sources of law are the constitution, treaties and international agreements, codes and laws/well-established customs, cabinet orders, ministry ordinances, ministry notifications (The Library of Congress, 2015). Local governments, on both prefecture (Hokkaido prefecture) and municipal (Nemuro Municipality) levels 33

have legislative power within the confines of the law. The authority in the sphere of public works, including urban planning and constructions, belongs to the municipality (Sasaki, 2014). Despite the fact that the described law systems seem to share common structure, it does not necessarily mean that the establishment of a common legal framework for the project would be a simple task, since the laws within the systems can vary greatly.

4.4 Cross-border Integration

Cross-border integration in this section is treated as flows of workers and goods, Foreign Direct Investment (FDI) across the area, harmonisation of price levels and production costs. As has been mentioned earlier, fishing and sea products manufacturing are the major economic activities in the cross-border area. The industry makes up 84.8% (2015) of the Kurils’ economy (Institute for Complex Strategic Studies, 2015), which represent only 1% of the total Russian production of fish products. Most of the caught fresh Kuril fish are sold to Japan, China and South Korea (Azar and Artemjeva, 2019a). The biggest share of raw seafood in Nemuro, especially crabs and sea urchin, is imported from the Kurils and Sakhalin. After the easing of the border laws and start of the visa free exchange programme in 1992, about 2000 Russian fishery ships annually docked in Nemuro (Suzuki, 2003). The cost of the same locally produced fish products varies greatly on the opposite sides of the border. For example, the biggest seafood producer Maruzin in Nemuro sells its gutted cod (imported from Russia) for 6 EUR per kilogram, while the Yuzhno-Kurilskiy seafood production facility sells the same for 2 per kilogram (Maruzin, 2020; Yuzhno-Kurilskiy seafood production facility, 2020). Before the introduction of the tougher regulations for fishing and car industries in 2008, Nemuro had been thriving on the connections with the Russians: buying the primary fish commodities from the Kuril fisheries as well as selling higher quality groceries, chemicals and electronics to the fishermen and other visiting islanders (Inukai, 2017). In addition to fish and basic commodities’ exchange, cross-border cooperation in the sphere of energy has always been one of the key priorities for both countries, with 34

Japan importing around 7% of its oil and 10% of liquified natural gas (LNG) from Russia (Minami, 2014). Japan’s presence is significant in the Russian Far-East’s LNG plants; Japanese companies have production sharing agreements of 30% of Sakhalin-1 plant, 22.5% of Sakhalin-2 plant, plans for involvement in Dalnevostochniy LNG and an LNG loading facility in Kamchatka (Savosin, 2020; Administration of the President of Russia, 2018). The overview of the price levels for the studied area specifically has proved to be challenging, due to the lack of information available on the prices in Nemuro and the South Kuril Islands. In order to get a picture as close as possible to the actual in the area, the price levels of the regional centres Sapporo and Yuzhno-Sakhalinsk are used. On average, grocery prices are 107.36% higher in Sapporo than in Yuzhno-Sakhalinsk. For example, a loaf of bread costs 1.22 EUR and 0.56 EUR, a 1.5 litre water bottle 1.4 EUR and 0.73 EUR and a package of 12 eggs 1.55 EUR and 1.07 EUR, respectively. At the same time, the average rent prices in both Sapporo and Yuzhno-Sakhalinsk differ insignificantly, varying between 300 and 500 EUR per 1 bedroom flat, while the average monthly salary after tax is 179.81% higher in Sapporo, with 1,659 EUR versus 593 EUR (Numbeo, 2020). Diesel prices on Hokkaido averaged 0.95 EUR per litre (April 2020 exchange rate) in March 2020 (Statista, 2020), while the Russians paid 0.73 EUR per litre for the domestically produced fuel in Sakhalin Oblast (Erofeev, 2020). The difference between the countries’ purchasing power can be assessed using the Purchasing Power Parity (PPP) index, which represents the relationship of the national currencies’ purchasing power of a basic food basket and services in relation to the basic value of 100 expressed in the US dollar. In 2019 Russia had a value of 25.701, while Japan scored 101.474 (OESD, 2020). This shows a significant purchasing gap between the countries, where the same goods in Russia are around 4 times cheaper than in Japan.

The presented data shows that the cross-border areas do have close economic relationship, despite the harsher customs regulations introduced in the recent years. The 35

price levels and the purchasing power, however, differ significantly and do not show signs of harmonisation across the border.

4.5 Governance

This section gives an overview of the degree, longevity and institutionalisation of political and financial commitment to cross-border collaboration of the countries. Russia has experience with direct cross-border projects, mostly with the European Union member states. Russian border regions participate in 8 out of 16 cross-border EU programmes, with the majority of projects implemented on the Finnish, Estonian, Polish and Latvian borders. The majority of the projects cover culture, education, tourism, environment and infrastructure, e.g. improving the customs area layout, road quality, transport links, mostly within TEN-T programme and European Neighbourhood Instrument. Cooperation programmes are designed and implemented in accordance with the EU legislation. However, all the initiatives as well as most of the funding come from the EU, with the resulting new infrastructure mostly located on the Russian side (Russell, 2017). China is the main partner for cross-border collaboration in the Russian Far-East, which are mostly based on the Treaty for Good Neighbourliness, Friendship and Cooperation from 2001. The key collaboration areas are trade, energy, research and infrastructure (Carlsson, Oxenstierna and Weissmann, 2015). There is a certain level of CBC with Kazakhstan and Belarus as members of the Eurasian Economic Community. However, the poorly established institutional environment does not let the neighbouring areas to successfully develop together as cross- border regions (Ablazhey and Vodichev, 2018). As can be seen, Russia has sufficient experience of cross-border collaborations, however, lacks commitment as well as established legislative framework and financial instruments for such type of projects. Japan, as an island country that does not share onshore borders with any other country, has mostly been focusing on the active global transnational and interregional 36

cooperation through its specially established unit Japan International Cooperation Agency (JICA) (JICA, 2020). As has been mentioned earlier, Russia and Japan have a history of contacts and cooperation. From the visa-free visits programme for the expats from the islands established in 1992, giving the Japanese an opportunity to visit their ancestors’ graves (should be done annually, according to a Japanese tradition), and the Russians to become acquainted with the Japanese ways of life and learn the language (annual courses in Sapporo); to fishing agreements, which have, unfortunately, become stricter, depriving both areas of sufficient income. The visa-free exchange programme enables not only cultural education, but also professionals’ exchange, in spheres of nature preservation, ecology, history and medicine (RIA Novosti, 2017). In addition to that, local agreements on medical services has been valid since the 1990’s for the Kurils’ inhabitants, due to a lack of medical staff and facilities on the islands, and the significant distance to the domestic high-level medical services on Sakhalin (Aksenov, 2017). The absence of the peace treaty after the WWII between Russia and Japan does have a negative influence on the countries’ relationship. However, the mutual desire for cooperation has been constantly improving the situation. The Russian-Japanese Action Plan adopted in 2003 and later supplemented by the 2009 agreements, set the basis for the two countries’ active joint work in the spheres of trade, energy, culture, tourism as well as the agenda to find the solution to the Kurils’ issue (MOFA, 2020). For more efficient interregional collaboration, the Government of Hokkaido has opened an official representative office on Sakhalin. The proposed joint economic activities on the South Kuril Islands, as was stated by the president of Russia, are likely not to have any established general legal framework or financial instruments but will have them designed for each and every accepted project separately (TASS, 2019). Moreover, according to the official response from the Southern Kuril Islands administration, they have no power over the proposed joint economic activity, including wind power, as the matter is under the jurisdiction of the Ministry of Foreign Affairs of the Russian Federation (Appendix 1). 37

The question of governance and juridical authority over the planned joint economic activities on the islands remains one of the biggest issues in the countries’ negotiations. After several visits of representatives of the Japanese governmental bodies and businesses to the Southern Kurils islands, the question has been raised many times, but the countries have failed in finding a solution so far (Norisada, 2020). The Japanese side has been lobbying for a “special system”, which would not hinder both countries’ jurisdiction over the projects on the islands (Norisada and Kobayashi, 2020). The planned for May 2020 Japan’s delegation visit to Moscow, where the issue of the activities’ governance had been planned to be one of the main discussion topics, was cancelled due to the global Corona virus pandemic, postponing any advances towards finding a solution for an unknown period (Norisada and Kobayashi, 2020).

4.6 International Support and Mediation

The complexity, cross-border character and political sensitivity of the project require involvement of the sub-national actors, that could help with coordination, mediation of conflicts and possibly project funding (OECD, 2013). The presented further organisations might take a role of such support within their agenda and resources. Asian Development Bank (ADB) is an international financial institution, which promotes social and economic sustainable development in Asia and the Pacific. The bank assists its members with loans, grants, equity investments and technical assistance. ADB has a long track record of co-financing infrastructure and energy projects, e.g. Gujarat Solar Power Project in India, Energy Absolut Green Bond for Wind Power Project in Thailand, Triconboston Wind Power Project in Pakistan, Regional Cooperation on Increasing Cross-border Energy Trading within the Central Asian Power System, etc. Japan has been a member since 1966 and may have potential to get ADB support for a cross-border renewable energy project (ADB, 2020). However, it might be challenging, since Russia is not a member of ADB. Asia-Pacific Economic Cooperation (APEC) is a regional economic forum of 21 countries, which goal is to stimulate sustainable growth by enhancing regional cooperation between the member states. Both Russia and Japan are members of the organisation. 38

APEC provides funding for projects from their sub-funds, depending on the project type. The South Kuril Islands project could potentially get funding from the Energy Efficiency and Low Carbon Measures sub-fund, even though it would be a first cross-border project in APECs portfolio. The wind power project could also receive coordination support and expertise from the APEC’s Expert Group on New and Renewable Energy Technologies (EGNRET) (APEC, 2019). APEC countries can also get policy support from International Energy Agency (IEA, 2020) in promoting regional energy co-operation. The Asian Infrastructure Investment Bank (AIIB) is an international development bank aimed at facilitating social and economic development by investing in sustainable infrastructure. Since its foundation in 2015, the bank has mostly funded and co-funded projects in the energy sector (30%). Russia has been a member since the AIIB’s foundation and could apply for funding from the bank’s Project Preparation Special Fund (AIIB, 2020). However, whether a cross-border project would be eligible for funding is unclear. The Global Wind Energy Council (GWEC) is a member-based organisation representing the world’s wind industry. As a part of its activity, GWEC works on international, national levels with the governments and international agencies to give guidance, educate about wind energy and ensure emergence of a better wind power policy globally. GWEC is already working with Japan Wind Power Association (JWPA), with the sides having establish a joint Japan Offshore Wind Task Force in February 2020 (GWEC, 2020). The Organisation for Economic Development (OECD), as they mention in their own “Region and Innovations: Collaborating Across Borders” report reviewed in the Literature Review section, is a perfect organisation to mediate institutional distances, assist policy bridging as well as project coordination (OECD, 2013). UN Economic and Social Commission for Asia and the Pacific (UN ESCAP) is a regional intergovernmental platform, which promotes regional cooperation for sustainable development. This organisation recognises the energy sector’s potential for cross-border cooperation and is ready to assist governments and organisations with normative work, e.g. PPPs, and knowledge sharing (ESCAP, 2017). 39

The Global Energy Interconnection Development and Cooperation Organisation (GEIDCO), an organisation inspired by the Japanese ASG initiative, pursues the idea of the Global Interconnection and power from clean energy. GEIDCO unites global energy institutions, research facilities, NGO’s and enterprises who share the same interconnection initiative. The organisation has a Project Pushing Mechanism, which supports projects, that could contribute to the initiative implementation, by creating a “Project Library” as a platform for project planning, negotiating and finance cooperation. Moreover, GEIDCO promises to promote its member projects internationally in order to help them gain more recognition and support (GEIDCO, 2019).

4.7 Policy Mix

This section examines orientation of wind power policy in the collaborating countries. 4.7.1 Wind Power Policy in Russia Russian energy sector has historically been dependant on fossil fuels, due to availability of rich reserves, their accessibility and affordability. Despite that, Russia cannot afford to keep ignoring the global shift toward decarbonisation, since it represents a direct and very serious risk to the country’s hydrocarbon economy. The decreasing demand for fossil fuels due to the development of RES and penetration of electrical vehicles, makes the future of the Russian economy look gloomy: the prognosis is that the energy sector’s share in the country’s GDP might fall from its 31% in 2015 to 13%-15% in 2040 (Proskuryakova, L. and Ermolenko, G., 2019). For the first time in 2009 a renewable electricity generation goal was set – 4.5% by 2020. To enhance the renewables’ development, a capacity-based renewable energy support scheme (CRESS) was introduced. CRESS means giving financial guarantees to a maximum installed MW of wind, solar and small hydro projects on the electricity wholesale market by organising tenders for the projects in the upcoming 4 years. The cheapest projects within the annual capacity limit receive guarantees for selling their electricity at a certain price for 15 years, which would ensure a 14% investment return. In addition to that, each of the projects has to satisfy a local content requirement (LCR), 40

which sets an obligatory percentage of the Russia-manufactured project components. LCR differs between the energy sources and increases over time. For wind, LCR of 35% was set for 2014, 55% for 2015, and 65% for 2016-2020. Due to the almost unreachable LCR requirements, many wind power projects could not be implemented due to lack of domestic wind power production facilities. Moreover, many projects designed for the isolated and remote regions of the country could not participate in the tenders, as the wholesale electricity market covers only European Russia and Western Siberia (Smeets, N., 2017). Therefore, Russia failed to meet its intermediate 2015 goal of 2.5% of RES- based electricity production (Smeets, N., 2017). The 2020 goal of 4.5% was postponed to 2024 (Lanshina, T. et. al., 2018). In order to meet this goal, in December 2019 the Russian Government decided to favour potentially more efficient wind over solar and small hydro, by increasing the investment threshold from 9.25 billion to 231.25 billion RUB. In addition to that, the CRESS scheme, which had been initially supposed to last only till 2024, was extended to 2035. In addition to that, in November 2019 the Russian Ministry of Economic Development published a draft law concerning the introduction of the Green Electricity Certificates, which can become the first market-driven measure for stimulation in the RES growth in the country (Analytical Centre for the Government of the Russian Federation, 2020).

4.7.2 Wind Power Policy in Japan Nuclear power with its low GHG emissions and high energy production was viewed as the main source of energy and the main energy policy orienteer for a poor in fossil fuels Japan. The situation has changed dramatically after a nuclear catastrophe at Fukushima in 2011, which drove the people’s approval of nuclear power to historically low levels and made the Japanese government rethink the country’s energy policy and its future development; rapid penetration of renewables, especially wind power, has become a central idea. Starting with the 3,653 MW of installed capacity in 2018, which was responsible for only 2% of the country’s electricity supply, the goal is to reach 9% by 2030 and 20% by 2050 (JWPA, 2017). In 2012, a completely new energy policy was established: its main objective is to decrease CO2 emissions and improve the country’s 41

energy security by introduction of more renewable energy capacity and further development of energy efficiency technologies. According to the Japan’s last Strategic

th Energy Plan (5 edition, 2018), its goal lies with reduction of CO2 emissions from 1.24 billion tonnes (2013) to 90 million tonnes (2030), mostly by meeting the newly established 2030 energy mix, which should include 22-24% of energy coming from the renewable sources. In order to stimulate RES growth, the country’s government decided to follow European example and introduced the Feed-in-Tariff (FIT) scheme in 2012 (METI, 2018). The FIT has already shown its first results: a good growth of RES share in Japan’s energy mix in 2018 up to 17.4%. For further stimulation of wind and solar industries’ growth the Japanese government plans to replace the FIT system and introduce a Feed-in-Premium (FIP) scheme in April 2022, which will enable producers of renewable electricity to receive premiums on top of the market price of their production (The Japan Times, 2020). However, the FIP scheme will only cover industrial-scale wind power and solar, while the other types of RES will continue to be supported by FIT (Hasegawa, 2020).

4.8 Wind Resource and Area Specifications

This subchapter examines favourable for wind park construction preconditions and key siting factors. According to the data from Global Wind Atlas, the South Kuril Islands excellent wind resource varies between a mean wind speed of 7-9 m/s onshore and 6-14 m/s offshore at 100m height (Global Wind Atlas, 2020) (Appendix 2). The onshore relief is mountainous, with multiple volcanoes (several are active) and hot springs. The archipelago is seismically active due to its location in the north- western part of the Pacific Ring of Fire. The islands can be characterised by cold humid sea climate, with strong winds from North-West and South. Typhoons are a common phenomenon for on the islands (Ivanov, 2016). The Kurilskiy nature reserve covers around half of the Kunashir island, large portions of Shikotan and the uninhabited Habomai archipelago with the nearest sea zones. The nature reserve is meant to protect the unique landscape and ecosystems of the Kurils with around 100 protected bird species; among 42

them several birds of prey prone to collision with wind turbines, such as the golden eagle and the white-tailed eagle. The Kunashir part of the reserve belongs to the IUCN1 Ia class – strict nature reserve, while the rest is defined as “zakaznik”, which correlates with the IUCN VI class – protected area with sustainable use of natural resources (Kurilskiy nature reserve, 2020; Figure 4).

Figure 3 Kurilskiy Nature Reserve (Source: Kurilskiy nature reserve, 2020; the colour explanation by the author)

The biggest part of the islands’ population is centred in 3 towns: Yuzhno-Kurilsk on Kunashir, Kurilsk on Iturup and Malokurilskoe on Shikotan. Two operational airports

1 The International Union for Conservation of Nature (IUCN) – an international membership union, working in the fields of nature conservation and sustainable natural resources management. The Protected area categories classify the areas by their management objectives; there are 6 such categories in total (IUCN, 2020). 43

are located on Kunashir and Iturup, as well as military bases in Lagunnoe and Goryachiye Klyuchi respectively. Offshore areas of the South Kuril Islands are deep, with seabed depth around land varying between 50m in the near coast locations to 500m in the exclusive economic zone (EEZ) (Google Earth, 2020; Appendix 3). The presented data give a planner the initial idea about the potential park’s siting and specifications: 1. Good wind resource, with high typhoon risks, which would require typhoon-resistant WTGs for both onshore and offshore; 2. Kunashir island is unlikely to be a construction site due to the strict nature reserve, a military base and an airport located there; 3. In case of offshore siting, the floating technology should be used in order to exploit the EEZ locations. 4. Due to lack of land, combined onshore and offshore micro-siting could be the best siting strategy.

4.9 Permitting and Coordination

This Section performs an overview of the required permits, responsible permitting and coordination authorities (local, national, sub-national) needed for the project’s fulfilment. As was mentioned by the president of Russia, the potential cooperation projects are most likely to follow Russian regulations (TASS, 2019). The wind power project will have to go through the process of obtaining the necessary permits at the Russian legal bodies, which, unfortunately, is not a straightforward or transparent procedure (Lighthouse Russia B.V., 2013). In order to be able to build a wind park, a developer should obtain 2 main permits: a building project expertise permit from Glavgosexpertiza, which checks the quality of engineering work, accordance with ecological, health and safety, and building standards and requirements of the Russian Building Code (Glavgosexpertiza, 2020); following after Glavgosexpertiza, a permit from the Building 44

Authority of the federal state, where a potential park is planned to be built. In case of the Kuril Islands, which are a part of Sakhalin Oblast, it is the Ministry of Architecture and Building of Sakhalin Oblast. However, before submitting the application to Glavgosexpertiza, the project should be approved by the Federal Service for the Oversight of Consumer Protection and Welfare (Rospotrebnadzor) and the Federal Agency for Fishery (for offshore) (Arctic Centre, 2020). For offshore projects, the procedure might look similar, with the addition of the State Ecological Expertise of Rosprirodnadzor, which can be conducted on either federal or regional levels (Arctic Centre, 2020). It should be noted, that Russia has no experience with offshore wind installations, which means that there is no regulative framework developed for offshore wind power on either federal, or regional (Sakhalin Oblast) levels. Based on the rules applicable to any offshore installations in Russia, it can be assumed that the seabed geological survey as well as met mast building permit are also issued by Rosprirodnadzor (Rosprirodnadzor, 2020). The public consultations are only conducted for projects requiring State Ecological Expertise, which means that only in cases of offshore development should such consultations be carried out. Public hearing protocol is a necessary part of EIA, which should be submitted by the developer to Rosprirodnadzor in order to obtain a permit. Only private entrepreneurs or legal entities certified and recognised by the Federal Environmental, Industrial and Nuclear Supervision Service of Russia (Rostechnadzor) can conduct the project’s EIA (Arctic Centre, 2020). It is unclear how the military interests (radars) can be communicated and incorporated in the EIA and project documentation. The inexperience and lack of transparency in Russian permitting process might cause doubts in its quality and standards from the Japanese side, which has already been mentioned on the earlier stages of the negotiations on the joint economic activity (TASS, 2019). The Japanese have more wind power experience in general, as well as strict environmental regulations and high levels of democracy in the decision-making process. Public consultations are a necessary part of any utility-scale renewable energy installations with the public and key local industries having the right to veto on a publicly unacceptable 45

project (Carbon Trust, 2014). Therefore, it is crucial to conduct public consultations not only with Russian population, which would be required in case of offshore installations, but with Nemuro locals as well. Moreover, the consent process based on an EIA is a very long and detailed process in Japan, which involves a vast range of the involved organisations. Offshore permitting process in Japan can be easily influenced by very powerful and highly protected fishing industry (Carbon Trust, 2014). In addition to that, local fishermen also have significant rights in decisions concerning sea projects. The challenging EIA process, which requires careful investigation of bird collisions, piling noise, disturbance to marine mammals and visual impact can take up to 3-4 years and cost around 100 million Euro (Carbon Trust, 2014). In the interview with the expert, he mentioned a curious aspect of the developer’s image and the negative ways it can be affected if the developer decides to work in a country, which lacks the necessary legislation and experience for sustainable construction and operation. The solution could lie with organising consultations with the authorities, for example on the regional or even federal levels to share the developer’s expertise and help develop a better framework (Lynch, 2020). A number of international organisations can also provide their guidance and support in policy and legislation building, which is discussed in more detail in subchapter 4.6. As has been mentioned above in section 4.5, the roles and applicability of Russian and Japanese norms and regulations to the joint projects on the islands are still to be determined. Unfortunately, all the planned meeting and negotiations concerning the topic of juridical frameworks applicable have been postponed for an unknown time due to the pandemic (Norisada, 2020).

4.10 Local Communities

This section contains a pre-study of the communities affected by the wind park, including their potential concerns and ways of addressing them as well as key benefits options. 46

4.10.1 South Kuril Islands’ Community The South Kuril Islands’ population, as has been mentioned before, is a quite poor and isolated from the mainland Russia community. The main economic activity of the locals revolves around fishing and canned fish production, which is most probable to become a cornerstone of the locals’ attitude toward offshore wind installations. The majority of the other sectors in area (transport, construction, hotels) as well as several big fishing factories belong to “Gedrostroy” holding. This makes the company an important stakeholder in the decision-making process (Institute for Complex Strategic Studies, 2015). The islanders do not have any previous experience of wind power installations and have little knowledge of the wind power industry and technology. Considering the novel character of such development in Russia in general, it creates a need for the developer to provide relevant education on the matter. The issue of the local’s cultural and historical attachment to the area might not be of major significance mostly due to the high mobility of the local population as well as a limited history of the Russian permanent presence on the islands. As has been mentioned earlier, the South Kuril Islands are an economically depressed area, which requires substantial political and financial efforts from the government (e.g. strategic development plan “Socio-economic development of the Kuril Islands 2016-2025”) to keep it “running” and developing (Ministry for the Development of the Russian Far East, 2020). Introduction of a renewable energy industry can boost the local development by creating construction and maintenance jobs as well as attract investors and researchers. Hence, the local population is highly likely to value potential job opportunities, which would naturally require special trainings.

4.10.2 Nemuro Community Just as the neighbouring islands, Nemuro’s economy is based on fishing and fish products manufacture. Special attention should be paid to the fishing industry as the main economic branch of the area during the offshore siting and decision making. 47

In 2017, several Hokkaido municipalities, including Nemuro, expressed their hopes and wishes for the joint economic activity with Russia to the Japanese government. The locals hope that active cooperation and creation of a special cross-border economic zone can help the stagnating economy of Northern Hokkaido (Inukai, 2017). Therefore, the locals might have a positive view towards the project, especially in the context of employment. However, the Kurils’ displaced natives’ attachment to the islands should be carefully considered during the layout planning. There are 2 old wind farms located in the area: Nemuro wind farm (1 turbine) and Hanasaki wind farm (1 turbine). Despite the modest wind power development in Nemuro, many other Hokkaido areas have wind parks ranging from 1 to 57 turbines in Soya Misaki wind farm (The Wind Power, 2020). In 2012 a wind farm was proposed in Fureshima area near Nemuro, which is famous for its rich environment and biodiversity, including the Steller’s sea eagle and white-tailed eagle. The Wild Bird Society of Japan (WBSP) bird survey and modelling did not align with the developer’s EIA. The WBSP discovered a significant threat to the birds in the area and appealed to the authorities to change the park’s layout. The public reacted with a major movement for changing the layout, but the developer suddenly cancelled the intended park in July 2014 (Matsumoto, Tajiri and Ura, 2015). Therefore, it may be assumed that the locals are to a certain extent acquainted with wind power, however, educational meetings, with the special attention to the responsibly conducted EIA still can be beneficial.

4.11 Electricity Trade

Prospects and specifications of the electricity interconnection, potential electricity trade options and conditions are discussed in this section. Local electricity demand on the South Kuril Islands is low, the most populous island of Kunashir’s demand is covered by the Mendeleevskaya geothermal station, Iturup and Shikotan by diesel-powered electro stations. The Okeanskaya Geothermal station on Iturup was shut down in 2016, due to irreversible damage (Azar and Artemjeva, 2019a). The islands, together with the Northern part of the archipelago and Kamchatka peninsula 48

have major geothermal resources, which could potentially be exploited and developed. That could turn the area into an electricity supplying region, covering not only the local demand, but also exporting electricity to Japan, creating a Russian-Japanese energy bridge (Tsumamist, 2017). On the regional level, the islands could become a part of the Japanese Asian Super Grid Initiative (ASG), proposed in Japan by the SoftBank company and actively developed by the Renewable Energy Institute, proposes the establishment of an integrated electrical transmission grid between Japan, Russia, South Korea, China and Mongolia, in order to enable mutual renewable energy exchange by 2050 (Figure 3).

Figure 4 Asia Super Grid initiative map (Source: Renewable Energy Institute, 2020) A connection between Japan and Russia is proposed in the “Power Bridge Project”, which suggests a Hokkaido-Sakhalin undersea HVDC link (Renewable Energy Institute, 2020). The South Kuril Islands have potential to contribute to the ASG initiative, by supplying clean wind and even geothermal energy (TASS, 2019; Tsumamist, 2019). Annually, the South Kuril Islands spend around 200 million RUB on the fuel to power the electricity production stations (without considering military needs), which results in high local electricity prices 4.24 RUB/kWh, the same as in big Russian cities 49

(Golubkova, 2016; Yasko, 2019). Electricity generation and distribution on the islands is entirely isolated and privately owned by small companies. The potential wind farm could cover the needs of Iturup and Kunashir, as well as the Northern part of the Kuril Archipelago, while exporting most of the produced electricity to energy-hungry Japan. Interconnection issues in Russia, including export of electricity, are regulated by bilateral agreements on parallel work of electric energy systems established between the market infrastructure bodies of Russia and the respective country (Josefson, Rotar and Lewis, 2019). In the case of the Kuril Islands there is no respective market infrastructure body from the Russian side, as the islands have an isolated privately-owned electricity system. This issue might be handled by RusHydro, which operates in a big part of Russian Far East, including Sakhalin Island (RusHydro, 2020). The Japanese energy system is very complex: the country is split in Western and Eastern parts that operate on 60 and 50 Hz respectively, and 10 service areas, which is operated by its own Electric Power Company. Hokkaido has the frequency of 50 Hz and is operated by Hokkaido Electric Power co. The company has the following requirements to a potential supplier of electricity: • Compliance with Laws, Regulations and Social Customs (meaning Japanese law, the connection of the case wind park should be separately discussed on the intergovernmental level); • Exclusion of the antisocial power, which might pose threat to the order and security of the society; • Ensuring public and working safety; • Consideration for environment; • Appropriate price, quality and technologies; • Compliance with contracts and fulfilment of contracts; • Management and protection of information; • Fulfilment of after-sale service; • Open and frank communication (Hokkaido Electric Power co., 2020). 50

From the experience of the cross-border Hydro projects in Asia (e.g. Dagachhu Hydropower Plant (Bhutan/India), Nam Theun 2 (NT2) Hydropower project (Lao PDR/Thailand)) and South America (Itaipu Dam (Brazil/Paraguay), Yacyretá Dam (Argentina/Paraguay)) the best way to ensure a cross-border project’s revenue and bankability is signing a PPA. In this case, the wind park’s owner would sign a PPA agreement with Hokkaido Electric Power co.

4.12 Case Study Summary

The Southern Kurils Islands as a potential cross-border area has good conditions for future wind power development. Good wind conditions and a relatively small local population are very promising conditions for a profitable wind park. Certain future technological and market advances, including floating storm-resistent wind turbines and further development of the Japanese wind power market, can make such a wind power project possible. Both Russian and Japanese sides of the cross-border area need each other and share the common economic need for cooperation. The locals see the necessity of establishment of exclusive economic partnerships and inter-reliability in different sectors in order to ensure future development and growth of the region. The local communities themselves, however, differ significantly in their attitudes, knowledge and experience in relation to wind energy. The developer’s work lies with studying these communities more in depth in order to be able to propose best solutions and options for the successful development of the project, the cross-border area and its inhabitants. The permitting part of the cross-border wind power project seems to be complicated and unclear, mostly due to Russia’s lack of experience and knowledge of developing RES, including wind power. The Japanese side is highly likely to demand revision of the existing procedures, potentially in cooperation with the developer and other international wind power policy organisations, in order to ensure high permitting standards and transparency of the process. Whether the project could be supported with Russian CRESS scheme or Japanese FIT is unclear, as well as if a high local content 51

requirement for wind power in Russia would be applicable taken the international character of the enterprise.

52

CHAPTER 5. DISCUSSION AND CONCLUSION

As a result of the study, a wind power cross-border environment analysis framework was developed and used to evaluate the case of the Southern Kuril Islands. In order answer the main research question the following sub-questions were answered: - What is the typical structure, traits and planning features of cross-border infrastructure projects? As concluded in the subchapter 2.1 of the literature review, a typical cross-border infrastructure projects have an extremely complex and politicly sensitive nature. They involve a lot of risks and need external financing and mediation. Nevertheless, if these projects succeed, they bring larger payoffs and benefits for the involved communities. Moreover, they are associated with more transparent procurement and can potentially stimulate further cross-border cooperation, integration and coherence of the neighbouring regions. - What does a typical wind power planning process look like? As shown in Figure 1 in the literature review, a typical wind power planning process consists of initial planning, permitting and contracts and finance. Initial planning involves wind resource estimation, site selection, local community study and land lease agreements. Permitting usually consists of an EIA and an application to a responsible authority(-ies) for obtaining a building permission. Contracts and finance include ensuring a project’s finance and signing the necessary construction and electricity concession agreements. - What are the key conditions for wind power cross-border environment analysis? From the literature review the necessary derived analysis conditions include geographic accessibility, socio-cultural proximity, institutional context conditions, cross- border integration, governance, international supporting and mediation organisations, policy mix, wind resource and area specifications, permitting and coordinating institutions, local communities and electricity trade. - How are these conditions reflected in a case of the Southern Kuril Islands? 53

Having collected the listed conditions in the proposed cross-border environment analysis framework data on the potential cross-border wind power project in the South Kuril Islands, it appeared to be a very complex and highly demanding enterprise. From the natural wind power conditions point of view, it has an excellent wind resource, it has a low population and with proper technology for storm-resistant floating turbines in the near future, the project could be a success. However, the sides of the project brought with its international character does bring high risks and require additional effort from planners. The proposed project would be highly dependent on the commitment of the involved countries and very sensitive to political fluctuations. The developer would face the previously little-known matters of having to coordinate the project between two countries, each with its specifications and ambitions. The planning phase would have additional complications, mostly on the political and legislative levels, as the Russian and Japanese wind power policies and experiences vary greatly. The permitting process of the Russian side looks very unclear and undefined, especially for the offshore wind sector. For a more sustainable and transparent permitting process in the project’s case an establishment of a committee, which could include experts from Russia, Japan, NGO’s, the developer and representatives of international organisations might be of necessity. Clarity in the legislation and permitting is one of the most crucial aspects in planning and coordinating a project, as has been mentioned by the expert informant (Lynch, 2020). If the project were to entirely follow only the Russian normative framework, the developer would have to propose policy and regulations improving consultations, in order not to lose its possibly established working reputation. However, the way the potential joint projects would be governed, and which laws and regulations would apply has not been yet finalised. The cross-border character of the project will require more than just supervision and accountability to the local authorities. The developer needs to work closely with two countries’ national representatives as well as local authorities. Usually, in cases of cross- border infrastructure projects, a joint coordination unit is established, which includes 54

appointed supervisors from the involved counties, local authorities, the development company’s and involved pan-national organisations’ representatives. The mentioned challenges and risks, as well as additional effort from the developer’s side could be awarded with good potential income as well as generous first market entry benefits (Lynch, 2020). For the cross-border region the project would mean employment, beginning of recovery from economic stagnation and stimulation for the further cross-border partnerships and projects. The whole Kuril Islands archipelago together with the Kamchatka peninsula have a potential of becoming a major renewable electricity exporter to Japan, if its geothermal and wind resources are smartly exploited. The project has an advantage of the countries having decided to establish joint economic activity on the disputed islands, including wind power. It could potentially become a stimulating incentive for further wind power development not only on the islands, but in the other cross-border areas in the world. However, the political and institutional constraints do have a lot of weight in the matter, therefore it could be assumed, that the developer would find it more efficient to plan and implement projects in countries with more similar wind power policies and experiences, as well as legislative frameworks. Permitting process and its standards are another issue, which, in best case scenario, should be standardised on the regional or even global levels, if cross-border RES projects become a trend. The answered sub-research questions allow for the main research question to be answered. - “How would a cross-border wind power planning process differ from a typical one?” The introduction of the international factor brings higher risks for the developer: the project becomes politicly sensitive; involvement of at least 2 local communities requires even more effort to balance multiple stakeholders’ interests. Permitting and coordination might be challenging and confusing, as the relevant for the project laws, policies and sustainability standards of the countries in question are not identical. The developer might have to contribute to the development of improved regulations, possibly 55

with representatives of relevant international organisations. Coordination of such projects would not involve only the developer, but most likely representatives of the involved countries and regions, and possibly mediating organisations. All of the developers’ work would also take place in a multicultural environment with people of various traditions, values and economic backgrounds, which would add additional complications during the planning phase. The answered research question allows for a deeper understanding of the cross- border environment and peculiarities a wind power planner would have to face and work with. The thesis, however, has its limitations: the work covered only the initial planning aspects of wind power project development, without deep evaluations and analysis of the technical and financial sides of the matter. In addition to that, the framework presented in the literature review framework is theoretical and needs further expertise check and application on an actually implemented cross-border wind power project. Further studies could cover financial, technical and political aspects of cross-border wind power projects in depth. A study on the potential of establishment of universal global permitting requirements and procedures for cross-border cases could also be of interest. My hope is that this thesis would be of use to wind power planners and policy makers as well as inspire other renewable energy students to explore the cross-border potential of renewable energy and other opportunities that a changing renewable geopolitical reality could bring.

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APPENDIX

Appendix 1 An official reply from the Southern Kuril Islands Municipality (Source: an email from the Southern Kuril Islands Municipality received on the 6th of April 2020) 74

Appendix 2 Mean Wind Speed on the Southern Kuril Islands (Source: Global Wind Atlas, 2020) 75

Appendix 3 Seafloor depth around the Southern Kuril Islands (Source: Google Earth, 2020)