Electric Power in Russia [Gri 102–6]
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Strategic report Sustainable Development Report Corporate Governance Report Appendix ELECTRIC POWER IN RUSSIA [GRI 102–6] Regulation The market price for capacity is based on a competitive capacity auction (CCA) that is conducted according to pricing zones based on the model Russia currently operates a wholesale electricity and capacity market (WECM)1 of elastic demand. Payment must be made regardless of the results of CCAs and a retail electricity and capacity markets in pricing and non-pricing zones. for capacity provided under CDAs, contracts with new NPPs and HPPs A regulated market has been set up in the non-pricing zones. Two types that are similar to CDAs, contracts for the provision of capacity by qualified of products are traded on the wholesale market – electricity and capacity. generating facilities that run on renewable energy sources, sale and purchase Capacity is a special product whose purchase grants a wholesale market (supply) contracts for the capacity of modernized generating facilities player the right to demand that the capacity seller ensure the availability as well as generating facilities whose operation is essential to maintaining of generating equipment to produce electricity of a specific quality the operating schedules of the power system or the supply of thermal power in the amount required to meet said player’s electric power needs. (mandated generators). On the Russian electricity and capacity market, Inter RAO trades electric power These market segments operate using the unified computing model and capacity on the WECM using regulated contracts and also at unregulated of the Unified Energy System of Russia (UES of Russia). Calculations (flexible) prices. The price of electric power on the market is determined of the physical and cost indicators of trade operations by players by the competitive selection of price bids from buyers and suppliers conducted on the electric power and capacity market are carried out by a number a day before the start of delivery. In addition, in order to ensure a balance of infrastructure organizations: JSC SO UES, JSC ATS, JSC CFR, in the production and consumption of electric power, prices are also and PJSC FGC UES). determined by the competitive selection of applications from suppliers and participants with regulated consumption that are conducted no later than Major regulatory and structural changes have occurred in the Russian electric one hour before the delivery of the electric power (balancing market). power industry over the ten years that Inter RAO has been implementing its Strategy. During this period, the liberalization of the wholesale electricity market was completed (with the exception of deliveries to the public) and the mechanism of capacity delivery agreements (CDAs) was introduced, which secured investments for the construction of 30 GW of new heat generating capacity and mechanisms for the development and modernization of network infrastructure. 1 The principles used for the functioning of the wholesale market are determined by the Rules for the Wholesale Electric Power and Capacity Market approved by Resolution No. 1172 of the Government of the Russian Federation dated December 27, 2010. 33 Annual report 2019 STRATEGIC REPORT Capacity market Heat market Electric power Electric power market transmission The liberalization of the capacity market began on July 1, 2008, which resulted in some capacity being sold at unregulated prices: under flexible contracts for the sale of electricity and capacity, under contracts A competitive capacity for sales from HPPs and NPPs, auction (CCA) was carried or based on the results out for the first time of competitive capacity for 2011. The CCA carried auctions (CCAs). out by the System Operator CDA projects started being serves as the foundation implemented for a total volume of the capacity market of 30 GW, which ensured and determines what investments in new generating capacity will be paid facilities with a guaranteed for on the wholesale market. Completion of the transitional return on investment Until 2015, CCAs were carried period for the reform in 10 years (20 years out only one year in advance of the electric power industry. for the CDAs of NPPs/HPPs). (for the next year). Launch of the CDA program. 2008 2010 2011 2012 2013 Start of the liberalization Since 2010, relations associated The wholesale electricity ‘Targeted’ rules for the retail Competitive auctions of the wholesale electricity with development planning, market has been market are approved. begin for investment market. connection to heat supply fully liberalized since projects to build systems, the supply of thermal January 1, 2011, except generating facilities energy (capacity) and coolant, for deliveries to the public, that run on renewable except for hot water supply using for which tariffs have been Establishment of JSC Rosseti. energy sources (RES). closed hot water supply systems, maintained. Up to 35% The auctions are carried have been regulated by Federal of the electric power Transition out for four years Law No. 190 FZ dated July 27, production and capacity of network organizations in advance separately 2010 “On Heat Supply”. of generating facilities to the RAB-regulation for each type are contracted of tariffs and the development of generating facility. under regulated contracts. (modernization) of network infrastructure. 34 Strategic report Sustainable Development Report Corporate Governance Report Appendix Since 2017, competitive auctions have been carried Resolution No. 43 out for investment projects of the Government to build generating facilities of the Russian Federation that run on production dated January 25, 2019 Starting from 2016, capacity and consumption waste approved the parameters is annually auctioned (municipal solid waste). of the National Program for the year starting three The Republic for the Modernization calendar years after of Buryatia is included of the Generating Facilities the year of the CCA. in the list of territories of Thermal Power Plants. where all electricity The first long- Since January, fines April – initial term competitive and capacity is sold selection of projects at tariffs under regulated for the short supply auction for capacity of capacity are calculated for the modernization is carried out based contracts (RC) (the of thermal generation Republics of Dagestan, using a differentiation on the model of elastic ratio that directly facilities for the three-year demand with the supply Ingushetia, North Ossetia- period of 2022-2024. Alania, Tuva, Chechnya, depends on the demand period starting from 2017, and reliability factors August – a long-term CCA 2018, and 2019. Kabardino-Balkaria, and Karachay-Cherkessia of generating equipment was held to determine The list of thermal had previously been of companies working the price of capacity power plants to be built included in the list of zones on the wholesale electricity for existing power plants in the Kaliningrad Region with special wholesale market. for the period of 2022-2024. Starting from 2020, is approved. market operation). A CCA is held September – facilities to be a transition to long-term Capacity starts being The Republic of Karelia was for the construction modernized were selected CCAs for a year is envisaged delivered for the first RES later assigned to the special of new energy facilities with the start of capacity starting five calendar years facility. regions in 2018. on the Taman Peninsula. supply in 2025. after the year of the CCA. 2015 2017 2018 2019 2020 Amendments were Since January 1, 2018, price regulation made to the Federal Law was fully discontinued for thermal power “On Heat Supply” to make (capacity) as steam and coolant in the form it possible to classify of steam as well as for thermal power settlements and urban (capacity) and coolant supplied by a heat districts as heat supply supply organization to the individual pricing zones with regulated collectors of consumers. This liberalization relations for the supply in regulation does not affect relations of heat energy using associated with the supply of thermal power the ‘alternative boiler house’ (coolant) for the public and equivalent method (maximum price categories of consumers. level for thermal power). 35 Annual report 2019 STRATEGIC REPORT Russian electric power industry indicators Change in the volume of electric power generated at various types of power plants vs. 2010, bln kWh Electricity consumption and generation in the Unified Energy System of Russia has been growing steadily over the past ten years. Compared with 2018, production increased by 0.9% in 2019 to almost 1,081 bln kWh, while 3.5 32.3 consumption grew by 0.4% to just over 1,059 bln kWh. 38.5 2019 1.6 5.4 Electricity generation and consumption, bln kWh 25.7 34.1 2018 1.0 1,080.6 1,070.9 -5.1 20.9 1,053.9 1,059.4 2017 32.6 1,048.5 0.7 1,032.3 1,026.9 1,055.6 1,024.9 -2.7 1,019.4 1,023.5 1,039.9 20.3 1,004.7 2016 26.1 1,026.9 0.1 1,013.9 1,015.7 1,009.8 989 1,008.3 1,000.1 -5.0 2.2 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2015 25.0 0.0 Total generation Electric power consumption 0.9 9.1 Source: Reports on the operation of the UES of System Operator 2014 10.3 0.1 Despite the large-scale program for the construction of new facilities (CDA 16.7 projects), the volume of electricity generated by thermal power plants has 2013 2.0 not increased significantly over the last decade (an increase of 3.5 bln kWh in 2019 compared with 2010). This is due to the substantial decommissioning 23.1 -2.6 of the obsolete facilities of TPPs as well as reduced production at inefficient 2012 7.1 TPPs. The biggest increase in production has been seen at NPPs and HPPs.