The state energy policy must be amended to take into account the real conditions the energy sector is developing in

18 august 2016

The Analytical Center held a discussion about the strategic priorities for the development of Russia’s electric power sector, the development plans of power companies as well as the development targets and obstacles the sector will be facing in the long term. Participants in the discussion included representatives of federal executive authorities, energy companies, expert organizations and the academic community.

Speaking about the state of the long term development of Russia’s electric power sector, the experts said the state policy for the industry, including its long term planning aspects and the approaches it relies on to improve the functioning of the wholesale electric power and capacity market and retail electricity markets must be amended.

“With the current prices of fuel, construction and maintenance costs, it is easier to keep the existing excess capacity around in anticipation of future demand rather than to build new generating capacity,” believes AO SO UES’s director for energy markets Andrey Kataev. The expert is sure that an economic mechanism needs to be created that would guarantee that the temporarily mothballed equipment is brought back online. The specialist is of the opinion that a mechanism like that would help create long term reserve capacity that could then be used, for example, as replacement in the event some equipment goes offline for a long time.

The deputy chair of the management board of the Market Council Association Vladimir Shkatov defined the electric power system as the national grid comprising all the power stations, power transmission lines, and consumer substations all of which use the same processes for producing, converting, transporting, distributing and consuming electric power. “This system does not meet modern requirements because our specialists cannot anticipate how the electric power industry is going to develop. So our job today is to redesign our national grid to bring it into alignment with the new state of power generation,” Mr. Shkatov believes. In his opinion, the current situation needs to be thoroughly analyzed before any development targets can be set. “When creating new documents, we need to appoint those in charge of projects, decide on the deadlines the projects must be completed by, assign oversight authorities, and allocate financing. Mr. Shkatov believes that a clear and precise sequence of actions is needed and that is exactly what is not found in the current strategic documents. 

OAO Fortum’s Director for Sales of Electric Power and Capacity Alfred Yagafarov believes that state regulation is preventing the market from generating market signals and attracting private investors. “Under these conditions, the only way private capital can be attracted is through a mechanism of guaranteed investments that would offer two sectors: the market sector and the non-market sector,” the expert said. According to the official statistics of Russia’s Ministry of Energy over 50% of Russia’s TPPs are over 30 years old and 22% are over 50 years old. “As thermal power plants are getting older, increasingly more boiler stations are being opened around the country and the utility bills are going up in price,” Mr. Yagafarov explained. The required development of thermal power generation is only possible with private investments; in other words, under market conditions, the expert is sure.