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What will happen to Russia in the dark?

What will happen to Russia in the dark?

23.09.2010 — Analysis

The national trend toward energy efficiency could face opposition from power companies in the Russian regions. According to a number of experts, large-scale energy conservation would lead to the underutilization of generating capacity, making the state regional power plants and thermal power plants work less efficiently. This correspondent from RusBusinessNews gave this some thought. Would the owners of the power companies really torpedo this new national idea? Or would they simply make up for their financial losses by raising prices? But of course, those in favor of energy conservation have already thought about how to protect consumers from hikes in utilities prices. 

Who's afraid of the dark?

One of the first statements made by Valentin Ivanov, a representative of the Committee on Energy Policy of the Russian Union of Industrialists and Entrepreneurs, was about the danger posed by energy conservation to power-generating capacity. This is an idea that was first voiced during Soviet times. "Imagine if all consumers started to cut back on their energy use. Demand would decline sharply. If a power company couldn't find a use for its ‘surplus' energy, the plant would begin to operate inefficiently. The owner would do everything he could to prevent large-scale conservation of resources, because otherwise he would be forced to raise prices. Any plan for energy conservation has to take into consideration the risks for the energy producer, the distribution systems, and the consumer," he noted.

Vladimir Begalov, the deputy director of the Energy Conservation Institute of the Sverdlovsk region, partially agrees with Valentin Ivanov. He believes that if declining demand for energy lowers the load demand on state regional power plants and thermal power plants, this will lead to an increase in the cost of the resources. And consumers will feel this in their wallets. This expert emphasized that a wide range of interests need to be taken into consideration when developing an energy conservation program, because these programs are frequently of a "corporate" nature.

The Ministry of Energy and Public Utilities in the Sverdlovsk region is confident that energy conservation poses no danger to power plants. In the next ten years, the region expects to save about 40 billion kilowatt-hours of electricity and 58.8 million gigacalories of thermal energy (233,337,258 million BTUs). But at the same time, demand for electricity should increase from 42.5 billion kilowatt-hours per year to 60 billion by 2020, according to the most conservative estimates.

According to data from the Regional Dispatch Administration of the Central Urals, in the first 8 months of 2010, the appetite for energy in the Sverdlovsk region increased by 7.2% in comparison with the same period from last year. But don't forget that 2009 was a disaster. For example, demand for electricity in May was 18.7% lower than in May of 2008. If consumption increases to at least its level before the onset of the economic crisis, there will be no "underutilization" of existing capacity. In fact, new power plants will have to be built. The region intends to provide an additional 3,500 megawatts of capacity by 2020, while at the same time retiring some aging equipment.

Crawling out of the graveyard of the Soviet energy industry

The Russian (formerly Soviet) energy industry's biggest problems are their decrepit, aging, power-generating facilities. If new plants aren't built, the country will begin to fall into an energy abyss. "Aging equipment added to an increase in consumption is bad for budgets. There won't be any energy ‘surplus' unless they speed up the development of new power facilities, but that's still far off," confidently claims Artem Bartenev, branch director of the public corporation, System Operator of the Unified Energy System of the Regional Dispatch Administration for the Sverdlovsk region. "Assuming those power-generating facilities appear, power plant owners, by agreement with System Operator, will begin to speed up the decommissioning of their aging and inefficient equipment."

Igor Bashmakov, the director of the Center for Energy Efficiency, agrees that the hypothetical "surplus" (which includes extra energy available because of conservation) would benefit the power companies. According to him, the company owners would then be spared the necessity of building new power-generating facilities. "It costs about $2,000-$3,000 to provide an additional kilowatt of electricity in Russia. And the consumers will eventually find themselves paying for what the power companies have to spend," he cautions.

Artem Bartenev believes that the financial crisis, which led to the decline in demand, gave Russia several years of breathing space to compensate for the delays in implementing the GOELRO-2 plan (the State Commission for the Electrification of Russia). According to data from the Russian Ministry of Energy, in the next 5 years, 2-3 times less capacity might be introduced than what is envisioned in the master plan for the development of electrical energy in Russia. However, there are plans to invest a serious amount of money in the construction and modernization of electric plants, 11,616 trillion rubles by 2020.

Nor do power company representatives see a threat from energy conservation. According to Aleksei Dyskin, the deputy chief engineer of the Sverdlovsk branch of the public corporation Territorial Generating Company 9, conservation is unlikely to have a dramatic effect on the load demand on power plants. "People use so many household appliances, plus they're transitioning from gas stoves to electric ones, so that's going to keep demand from falling very much. Anyway, residential energy use only accounts for about 8% of total consumption. Most of the energy supply is used commercially, and the industrial appetite for energy is growing. If existing customers begin to use substantially less energy because of conservation efforts, that will just give us the opportunity to supply new customers," he claimed.

Plus, the level of power generated obviously has to be higher than the level of demand. The electric plants in the Sverdlovsk region have an installed capacity of 9,600 megawatts and an operational capacity of 7,400 megawatts. Consumption between January and August of 2010 reached 28,959 billion kilowatt-hours (a 7.2% increase over the same period in 2009), and the electric plants produced 34,144 billion kilowatt-hours (a 13.3% increase).

"Thermal power plants are not always prepared for the installed load for a number of reasons, technical, temporary, seasonal, and ecological. Plus, electric plant equipment has to be periodically serviced, which means a temporary shutdown of some of the turbines and boilers. In order to ensure the region's energy security, we need to be ready to launch new power-generating facilities and retire worn-out, obsolete equipment. We have to be proactive and make sure we have more than enough. We might only require the maximum electrical load once a year or once a month, but if the capacity isn't there, we'll have to place restrictions on consumers," explained Aleksei Dyskin.

One might add that the Central Urals power system serves more than local consumers - some of the energy is transmitted to other regions. In the first eight months of this year, 5,185 billion kilowatt-hours were diverted beyond the borders of the Central Urals.

Energy outlook

Experts are dubious that the idea of energy conservation will thrive. "Energy conservation is just getting started in Russia, so we can't expect immediate results. The conservation program is designed for an almost ten-year period, and it will take our citizens longer than that to change their attitudes toward saving energy," thinks Dmitry Baranov, the leading expert at the management firm Finam Menedzhment.

And the idea of an energy efficient future for industrial power consumers looks murkier than the Thames. Ruslan Pakhomov, the executive director of the Russian subsidiary of General Electric Energy, thinks there are three basic incentives for the adoption of energy-saving technologies: energy costs, economic incentives (such as tax breaks), and regulatory restrictions.

But the government is in no hurry to brandish any of these sticks. Thus, experts are confident that there will be plenty of work for all the power plants in the coming years.

Marina Sirina

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