Essay
Kolumnentitel
Russia: a Singular
Achievement
Russia’s huge national energy system faces remarkable
challenges, but is also a market with tremendous potential.
Former Russian Energy Minister Sergei Shmatko
analyzes the Unified Power System for Living Energy.
Text: Sergei Shmatko
Illustration: Burkhard Neie
R
ussia’s Unified Power System (UPS) is a
singular achievement without parallel in
the world, and has a remarkable history.
It is part of the Integrated Power System/Unified
Power System (IPS/UPS) energy system, a largescale synchronous transmission grid covering
15 countries, including ten CIS states, Georgia,
Mongolia, and Baltic EU member states. Finland
and some regions of China are also supplied by
the IPS. The Russian part of the IPS/UPS, the
Unified Power System, is a network with more
than 10,700 power transmission lines in the 110to 1,150-kilovolt class. The length of the power
transmission lines of all voltage classes exceeds
2.6 million kilometers, with power plants that
generate 223 gigawatts; about 700 power plants
have a generating capacity that exceeds 5 megawatts.
In comparison, the Moscow and Moscow region
power grids are about equal in length to the
entire national grids of France or Great Britain.
The Russian energy system operates continuously across a territory of 17.1 million square
kilometers. Often, the power system operates
with a power reserve margin of 30 percent.
However, the Russian national grid can get
along with a 20 percent margin on overall
capacity, since it operates across nine time
zones with different peak usage times.
In 2012, energy companies invested a total of
92 Living Energy · No. 9 | December 2013
866 billion rubles (€19.76 billion) in Russia. In
the same year, 1,911 megawatts’ worth of inefficient and outdated equipment were taken out
of operation as part of a large-scale retrofit of
power-generating equipment, while some
6,134 megawatts of production capacity were
commissioned at new facilities.
The Russian national grid consists of 69 regional
energy systems, which in turn constitute seven
united power grids: the East, Siberia, Ural,
Mid-Volga, South, Central, and North-West regions. All are interconnected by high-voltage
transmission lines, which operate synchronously at 220–500 kilovolts and higher. All
power plants together generate about 1 trillion
kilowatt-hours of electrical power annually.
Soviet Power and Electrification
Since the 1920s, more than 30 large power
plants were constructed in the shortest possible
time. Due to the regional progression of the
Russian national grid’s construction, a number
of districts were to deliver power first to the
European part of the USSR and then to the
whole country. The type of power plants constructed varied according to the resources
available (such as coal, hydropower, and later
natural gas or nuclear power).
Priority was given to local fuels in order to avoid
expensive, long-distance transport. In 1922, the u
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93
Essay
Essay
Sergei Shmatko
“Russia’s Unified Power System
(UPS) is a singular achievement
without parallel in the world.”
Background
The author served as the Minister of Energy of the Russian
Federation from 2008 to 2012.
Currently, he serves as the
Special Representative of the
President of the Russian
Federation for International Cooperation in the electric power
industry and as chairman of the
board of power company Russian
Grids. He is also on the board of
directors of national pipeline business Transneft. Shmatko studied
at Ural State University and at the
University of Marburg, Germany.
He has a degree in political economics and a PhD in technical
sciences.
Economic Strategist
Among other appointments,
Shmatko has been an adviser on
economic strategy for the Director General of the All-Russian
94 Living Energy · No. 9 | December 2013
Scientific and Research Institute
for Nuclear Power Plant Operation CERAWeek 2014 03–07,
Houston, USA (VNIIAES) and has
headed the Analytic Center for
Economic Strategy of Rosenergoatom, which operates nuclear
plants in Russia.
Nuclear Exports
As Chairman of the Conversion
State Fund, he worked on the
restructuring of Russia’s defense
industry. From 2005 to 2008,
Shmatko headed the engineering
company JSC Atomstroyexport,
which built Russian nuclear
units in India, China, and Iran.
Since 2012, he has been a member of the Russian Presidential
Commission for the Development
Strategy of the Fuel and Energy
Complex and Environmental
Safety.
country’s first power transmission line of 110
kilovolts was commissioned in Moscow. By 1935,
the Moscow power supply system had become
the largest in Europe; and within ten years, despite World War II, the USSR ranked first in
Europe and second in the world in terms of
electrical power generation. The Soviet Union at
the time was the only country that had
500-kilovolt transmission lines. That gave Russia the chance to develop not only local but also
main circuits, and gradually to establish the
Unified Power System.
The preference for centralization made it possible to construct thermal power plants with a
unit capacity of up to 3 gigawatts (such as
Krivorozhskaya SDPP-2 and others) as well as
the most powerful hydropower plants in the
world at Bratskaya (4.1 gigawatts) and
Krasnoyarskaya (5 gigawatts). An important
milestone in the development of the Soviet
Union’s power industry was the commissioning
of the world’s first industrial nuclear power
plant in 1954 with a capacity of 5 megawatts.
The Soviet Union became the first country successfully to make use of the atom for peaceful
purposes.
Nuclear Construction Boom
Development in this field continued, leading to
a construction boom for nuclear power plants
during the Soviet era. New power plants, or additional units for existing plants, were put into
operation every few years. At the time, all the
country’s efforts were focused on developing
the power and manufacturing industries. Specialized R&D institutes were established, and
dedicated professional courses were introduced
as a university discipline. The electrical manufacturing and power engineering industries
were established, based on scientific achievements.
Technical advances led to the production of
unique equipment, such as the world’s largest
radial-axial hydroturbine, with a capacity of 508
megawatts (at the Krasnoyarskaya hydropower
plant in 1964); power units with a capacity of
300, 500, 800, and 1,200 megawatts in a single
power plant; a hydropower turbine with a capacity of 640 megawatts (Sayano-Shushenskaya hydroelectric power plant in 1977); and
steam boilers with a capacity of 2,500 tonnes
per hour.
The decade following the dissolution of the
Soviet Union was as difficult for the Russian
power industry as it was for the country at large.
Production volumes shrank, which led to a drop
in energy consumption. The Soviet grid was
split into multiple parts. However, already at
the start of the 2000s, a recovery of industrial
production took off. Demand increased, and
plans were made for the power industry to provide a basis for economic growth in the most
efficient manner possible. In 2001, a large-scale
reorganization began (see below).
Remarkably, Russia managed to sustain a
Unified Power System inside the country
while simultaneously operating the Integrated
Power System with other former Soviet
republics. Moreover, one of the country’s longterm policy priorities is to continue to develop
the UPS. Demand for electric power is high
and growing, which presents new challenges
and prospects for the state and companies.
cial market operator, dozens of distribution
companies, and hundreds of territorial chain
organizations (operating primarily with 0.4- to
10-kilovolt lines).
Furthermore, the electric power transmission
function for the main circuits and distributing
mains was assigned to a single grid company,
the joint stock company Russian Grids, established in 2013. It combined management of
90 percent of the main circuits and 70 percent of
the distributing mains in the country. This ensured coherence in the implementation of technical policy and management of the Russian inte-
Market Reform and the UPS
As mentioned before, growth surged in 2000 in
Russia, bringing a marked increase in energy
consumption. Demand for electricity grew
annually by 2 to 4 percent. Between 2000 and
2007, demand grew by 15.7 percent – from 851.2
to 985.2 billion kilowatt-hours. It became clear
that Russia’s economic boom necessitated
structural and geographic reforms in the power industry.
As part of the reforms begun between 2000 and
2008, the Russian UPS was divided into naturally
monopolistic parts (such as electric power
transmission and real-time operations control)
and competitive parts (such as power
generation and the distribution, repair, and
maintenance of the plants). Instead of a vertically integrated monopoly that performed
all these functions, specialized companies were
established for each type of activity.
These included: 22 power-generating companies, one company for electric mains management (lines with voltages exceeding 110 kilovolts), 14 companies for distributing mains
management (lines with voltages of 0.4–110 kilovolts), one special company for single, realtime operation control functions, one commer-
“Demand for electric power is high
and growing, which presents new
challenges and prospects for the
state and companies.”
grated power grid. It also means lower costs
and a unified approach to investments,
financing, and economic and HR policy.
State Ownership and Private Sector
Today, power generation is handled by both
state-owned and private Russian companies
(e.g., Gazprom, Siberian Coal Energy Company
SUEK, KES-Holding, Inter RAO UES, RusHydro,
and others), as well as international companies
(e.g., E.ON, Enel, Fortum). As a result of privatization among the generating companies, the
industry attracted some €20 billion. Investors
committed to 30 gigawatts of additional generating capacities, to be delivered by 2017.
Currently, Russia has a two-tier electricity and
capacity market (wholesale and retail). The electricity and capacity wholesale market operates
in regions that are subdivided into pricing zone u
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units. The first pricing zone includes territories in the European part of Russia and the Ural
region, the second in Siberia. In non-pricing
zones (the Arkhangelsk and Kaliningrad regions, as well as the Komi Republic and the Far
East regions), where market relations have not
yet been established due to organizational matters, companies deliver electricity and capacity
under a regulated tariff system.
Within retail markets, distribution companies
that purchase electrical power on the wholesale
market, as well as those that generate electricity
but do not participate in the wholesale market,
deliver electrical energy to end users.
Distribution companies, electricity (capacity)
producers, and network organizations may purchase electrical power on retail markets for their
own needs. Pricing for the delivery of electrical
power to the population is regulated and defined by the Federal Tariff Service (FTS) of the
Russian Federation, based on the social and
economic development forecast for the Russian
Federation for the next year.
According to estimates by the government and
other experts, in 2011, prices for electrical power
reached the socially and economically acceptable limit for the current development of the
Russian economy. The tariff levels for electrical
power transfer and distribution (about €0.025/
kilowatt-hour) were close to those of Greece,
Great Britain, Sweden, and Finland. With regard
to this situation, the government of the Russian
Federation is discussing a temporary freeze on
tariff increases for the natural monopolies. This
brings new challenges to the power grid companies with regard to cost reduction and reduction of power transmission losses.
Market Regulation
Meanwhile, while restructuring the energy
sector, the state further developed laws and
regulations. Russia established a self-regulating “market council” to function as a commercial market operator. The council validates contract forms, regulates operations on the
wholesale market, performs dispute resolution,
monitors procedures, applies property sanctions for the infringement of wholesale market
regulations, and maintains a register of market
participants.
The system operator plays an important role in
regulating the power industry, by selecting
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capacity on a competitive basis and controlling
the implementation of investment programs of
generating companies. The system operator
also selects service providers that help the UPS
to handle emergencies. In addition, this entity
oversees payment for such services, including
contracts and payments for reserve capacity intended to keep power supply reliable in Russia.
The government of the Russian Federation
supervises antitrust regulation, the regulation
of connections to electric mains, and investment programs for electric power-generating
entities (natural monopolies and companies
with state-owned shares). The Russian Ministry
of Energy, together with industry players and
the Russian regions, has drawn up the general
scheme for the power industry until 2020. This
is the first time this has happened in the past
20 years.
Thus, Russia has achieved its main reform targets in the electric power industry. By establishing the electricity (capacity) market, where
players compete and reduce their costs, and
by improving the conditions for energy companies to increase their efficiency, financial
transparency is ensured and investment prospects are improved.
Powering the Future: Challenges
and Prospects
Despite the reforms and the legislation introduced, the Russian power industry faces a number
of serious challenges: First of all, the price of
electricity in Russia has reached the socially
and economically sustainable limit for the midterm; secondly, more than 50 percent of basic
infrastructure assets have reached the end of
their life cycle; and finally, energy intensity in
the Russian economy is two to three times higher than in other leading countries.
This situation requires structural change in the
industry: an increase in efficiency, reduction of
costs, increased competition, and new financing mechanisms for infrastructure modernization. To make these improvements, Russia
should mobilize all its potential and coordinate
long-term planning in construction with programs to construct new generation facilities
and new networks. Also required are incentives
Russia Electricity Statistics
Gross electricity generation (2010)
Total:
1,035 TWh
Renewables w/o Hydro
Hydro (incl. pumped storage)
166 TWh
3 TWh
Nuclear
Oil
170 TWh
9 TWh
for intense use of the newly built capacities,
reduction of excess capacities, and the development of distributed generation.
In addition, Russia needs to achieve process
optimization, enhance the efficiency of labor,
and lower electric power losses in all fields of
the country’s economy, in addition to new
energy-saving equipment. The country also
needs to stimulate the development of science
and technology that will enable Russia to become self-sufficient in the supply of modern
power and electrical equipment.
International Cooperation
Coal
Gas
166 TWh
521 TWh
Electricity total final
consumption (2010)
6,460
Population
(2010)
142
kWh per capita
million
CO2 emissions (2010)
CO2 emissions (2010)
1,624
11.4
Mt, CO2 in total
t, CO2 per capita in total
(incl. 12.481 Mt CO2 from power
sector)
(6.1 t CO2 per capita from
power sector)
Electricity price for households
(2nd and 3rd quarters 2013, Moscow, excluding community facilities)
462
kopeks/kWh (ca. US$0.14/kWh)
It will be difficult to make improvements in
these areas without foreign investments and
technologies in power generation as well as in
the production of equipment. There are a number of ways in which the state’s share in the
power grid industry could be gradually reduced
(such as through assets sales, concessions,
fiduciary management, etc.).
Cooperation with foreign investors and partners is one of the top priorities of modernization for Russia’s UPS. According to forecasts
from the Russian Ministry of Energy, by 2020,
investors will spend a total of more than
€200 billion to develop generation capacities
and the power grid in the UPS. The construction
of large-scale infrastructure and further reform
for the power grid industry will not be possible
without a multilateral program of international
cooperation and foreign investment.
Many foreign companies have already constructed
plants in the Russian Federation. The regulatory and legal basis of cooperation is continuously being developed so that companies will make
further multimillion euro investments in new
production sites in Russia. Strategic investors
require guaranteed, long-term contracts when
building production sites. Russia’s political decision makers are convinced that within two to
three years, all necessary legislative initiatives
will be adopted so that the industry can be fully
modernized. Therefore, the Russian government and Russian companies are open for discussions about cooperation, expert exchanges,
joint R&D programs, and other joint activities
that will lay the groundwork for successful international cooperation in the near future. p
Source: IEA 2012, Electricity Information, Energy Balances of OECD Countries,
Energy Balances of Non-OECD Countries
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