Energy sector needs an industry-wide development strategy

30 april 2019

The energy sector needs an industry-wide development strategy. That was the conclusion drawn by the participants of the round table discussion titled "Key Problems and Mechanisms for Solving Them: an Overview of Opinions in Energy, Heat Supply, and Renewable Energy Industries" that was held at the Analytical Center.

Analytical Center experts presented a report which compiled comments by major industry players on the current situation in the heating, electric power, and renewable energy sectors. The survey polled utility companies, grid companies, industry associations, regulators, and energy consumers.

Victoria Gimadi, head of the Department for Fuel, Energy, and Housing Utilities, Analytical Center, commented that the industry players identified a number of market problems, such as overlapping subsidies, endemic payment delays and non-payments among the consumers, and lack of coherent planning and forecasting. However, on the whole, the study found that the energy sector as a whole did not have consensus regarding how the industry should develop moving forward.

"We are at a regulatory dead-end at the moment," believes Alexey Khrapkov, Deputy Head of the Department for the Development of Electric Power Industry, Ministry of Energy of Russia. "This can be seen in how completely different the proposals are that we get about the heating sector; they range from complete liberalization and cancellation of any and all regulations to introducing ever more detailed regulations."

The participants in the round table discussion concluded that in order to remove the contradictions between various industry players, a long term strategy should be developed on the basis of clearly defined priorities.

Alexander Kurdin, Head of Research at the Department for Fuel, Energy, and Housing Utilities, proposed four possible energy sector development scenarios. "The first scenario is called Affordable Energy. It postulates that the main job of the energy sector is to minimize energy spending by both households and industrial companies because the energy sector is part of the service infrastructure," Mr Kurdin explained. "The second scenario is called Effective Market, and its idea is that only the market can determine what the fair price is. To achieve that, we need to ensure effective functioning of the power and heating sectors, reduce and, where possible, eliminate regulatory barriers, promote competition, and generally operate on the assumption that an effective market will in the long term improve the situation for both consumers and producers."

The third scenario, according to Mr Kurdin, can be based on the strategic goal of revamping and upgrading the industry. Investments in the energy sector and emergence of a large number of modern facilities should enable companies to produce cheap energy thus ensuring energy security of the country, the expert believes. Another possible scenario prioritizes sustainable development and thus focuses on promoting renewable energy and energy conservation.

Participants in the discussion highlighted the potential of each of the scenarios and stressed that in the end, any strategy must seek to balance interests of all parties involved and aim to promote economic growth and improvements in the standards of living of the general public.