Russian Electricity Reform 2013 Update

Russian Electricity Reform 2013 Update: Laying an Efficient and Competitive Foundation for Innovation and Modernisation Douglas Cooke 2012 The views expressed in this IEA Insights paper do not necessarily reflect the views or policy of the International Energy Agency (IEA) Secretariat or of its individual member countries. This paper is a work in progress and/or is produced in parallel with or contributing to other IEA work or formal publication; comments are welcome, directed to OECD/IEA [email protected]. © © OECD/IEA, 2013 INTERNATIONAL ENERGY AGENCY The International Energy Agency (IEA), an autonomous agency, was established in November 1974. Its primary mandate was – and is – two-fold: to promote energy security amongst its member countries through collective response to physical disruptions in oil supply, and provide authoritative research and analysis on ways to ensure reliable, affordable and clean energy for its 28 member countries and beyond. The IEA carries out a comprehensive programme of energy co-operation among its member countries, each of which is obliged to hold oil stocks equivalent to 90 days of its net imports. The Agency’s aims include the following objectives: n Secure member countries’ access to reliable and ample supplies of all forms of energy; in particular, through maintaining effective emergency response capabilities in case of oil supply disruptions. n Promote sustainable energy policies that spur economic growth and environmental protection in a global context – particularly in terms of reducing greenhouse-gas emissions that contribute to climate change. n Improve transparency of international markets through collection and analysis of energy data. n Support global collaboration on energy technology to secure future energy supplies and mitigate their environmental impact, including through improved energy efficiency and development and deployment of low-carbon technologies. n Find solutions to global energy challenges through engagement and dialogue with non-member countries, industry, international organisations and other stakeholders. IEA member countries: Australia Austria Belgium Canada Czech Republic Denmark Finland France Germany Greece Hungary Ireland Italy Japan Korea (Republic of) Luxembourg Netherlands New Zealand Norway Poland Portugal Slovak Republic © OECD/IEA, 2013 Spain International Energy Agency Sweden 9 rue de la Fédération 75739 Paris Cedex 15, France Switzerland Turkey www.iea.org United Kingdom Please note that this publication United States is subject to specific restrictions that limit its use and distribution. The European Commission The terms and conditions are available online at also participates in http://www.iea.org/termsandconditionsuseandcopyright/ the work of the IEA. © OECD/IEA 2013 Russian Electricity Reform 2013 Update: Laying an Efficient and Competitive Foundation for Innovation and Modernisation Table of Contents Acknowledgements ................................................................................................................... 3 Executive Summary ................................................................................................................... 4 1. Introduction ........................................................................................................................ 12 Page | 1 2. Wholesale Market Development ......................................................................................... 13 Wholesale market structure .................................................................................................... 13 Wholesale market arrangements ............................................................................................ 26 Wholesale energy markets .............................................................................................. 28 Wholesale capacity markets ............................................................................................ 35 Toward a long‐term wholesale market model ........................................................................ 42 Cost‐reflective pricing ...................................................................................................... 45 Financial markets ............................................................................................................. 47 Transparency ................................................................................................................... 50 3. Retail Market Development ................................................................................................. 56 Retail market structure ............................................................................................................ 57 Retail market arrangements .................................................................................................... 64 Key retail market processes and practices ...................................................................... 66 Access to information ...................................................................................................... 67 Consumer awareness and engagement .......................................................................... 69 Enabling technologies ...................................................................................................... 73 Extending customer choice .............................................................................................. 76 Cost‐reflective end‐user pricing .................................................................................................. 77 Unwinding cross‐subsidies ............................................................................................... 80 Reforming end‐user price controls .................................................................................. 88 Acronyms, Abbreviations and Units of Measure ...................................................................... 95 References .............................................................................................................................. 97 List of Tables Table 1 • Russian wholesale electricity market structure indicators ............................................. 14 Table 2 • Wholesale market structure analysis for price zone one ................................................ 17 Table 3 • Russian electricity generator ownership trends: 2008‐2011 .......................................... 20 Table 4 • Average market shares of retail suppliers in 2010 .......................................................... 58 Table 5 • Retail market structure of the Volga federal district ‐ 2007 & 2010 ............................... 59 List of Figures Figure 1 • National concentration comparisons: market share of the three largest generators ... 16 Figure 2 • National concentration comparisons: Herfindahl‐Hirschman capacity indices in 2010 16 Figure 3 • 2012 trading zones for existing generating capacity ..................................................... 27 Figure 4 • Wholesale electricity spot prices and traded volumes 2008 and 2009 ......................... 28 Figure 5 • Potential wholesale electricity capacity trading zones by 2020 .................................... 37 Russian Electricity Reform 2013 Update: © OECD/IEA 2013 Laying an Efficient and Competitive Foundation for Innovation and Modernisation Figure 6 • Peak demand and generation growth in the Australian national electricity market: 1998‐2011 ..................................................................................................................... 42 Figure 7 • Weekly volume‐weighted average wholesale spot prices for key regions in the Australian national electricity market: 2007‐2012........................................................ 44 Figure 8 • Volume of trade in Nordic electricity markets: 1998‐2011 ............................................ 49 Page | 2 Figure 9 • Organisation and content of the Texas electric choice program website ..................... 72 Figure 10 • Peak usage reductions in response real time prices: impact of enabling technologies . 74 Figure 11 • Russian end‐user electricity price trends by customer class: 2001‐12 ........................ 78 Figure 12 • International comparison of residential end‐user electricity prices in 2011 ............... 78 Figure 13 • International comparison of industrial end‐user electricity prices in 2011 ................. 79 Figure 14 • Growth in Russian household income and electricity costs: 2001‐2011 ..................... 81 Figure 15 • Key features of an effective tariff rebalancing program .............................................. 82 Figure 16 • Residential demand reductions in response to peak prices ........................................ 90 Figure 17 • Impact on residential charges of moving from flat rate to time‐varying products ..... 92 List of Boxes Box 1 • An overview of Electricité de France’s virtual power plant auction program .................. 23 Box 2 • Competition supervision case study – InterRAO acquisition of OGK‐3 ............................ 25 Box 3 • An overview of capacity mechanisms deployed among IEA countries ............................ 39 Box 4 • An overview of the Swedish strategic capacity reserve model ........................................ 41 Box 5 • Key features of the Australian national electricity market .............................................. 43 Box 6 • An overview of the Nord Pool power exchange ..............................................................

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