Smart Grids Russia and NW Russia

Heat and Power: FinNode project results

available

Eco-Russia Seminar 1.11.2012

Hannu Kivelä, Leading Consultant

1.11.2012

FinNode

• FinNode is a global network of Finnish innovation organisations.

• Operating via nodes in global innovation activity, FinNode actively

reveals new openings for Finnish business and research

organisations and supports their internationalisation.

• It connects Finnish and international experts and the know-how

required to promote innovation.

• As FinNode represents the Finnish innovation system in the countries

where it operates, foreign partners can engage with Finland’s central

public innovation organisations.

• The FinNode network operates in the United States, China, Russia,

Japan and India.

1/11/2012 3 © Finpro

Introduction

• FinNode published during the spring 2012 two major environment

and energy related projects on Russia:

• Smart Grids Russia

• NW Russia Heat and Power

• These projects were prepared by Finpro Russian offices

• This presentation concentrates on the main findings of the two

reports. The report summaries are available for free on request.

1/11/2012 4 © Finpro

Russian Smart Grids

Energy Consumption in Federal Districts

(FDs) of Russia

1/11/2012 6 © Finpro

Power consumption in the principal economic sectors by Federal districts of the Russian Federation (pie charts

scaling reflects the power consumption by each federal district respectively), %

Southern FD

North-Western FD

Center FD

North-Caucasus

FD

Volga FD Ural FD Siberian FD

Far-Eastern FD

Industry

Communal/Population

Services

Others

Legend:

Unified National (All-Russia) Electric Grid is synchronized with Ukrainian,

Kazakh, Belorussian, Baltic countries Electric Grids

Pricing policy

• Electricity prices for private and public category users offered by the

electricity supplier can not exceed the tariff limits prescribed annually by

the Regional Energy Commission. The latter pricing is based on the

average prices of wholesale market and middle-income of regional

population.

o Currently, two tariffs are used all over the country - day and night

rates (4 times for Moscow).

o In the future, more than two types of tariffs will be applied, such as

day-time tariff range between 10 -18, peak 18 -22, reduced tariff 2 -

5 and the rest time would be charged by night tariff* (*the electricity

provider does not want to use such a gradation because it would reduce his profit

and because electricity consumers cannot change suppliers, only the Government

can set up one or another tariff system)

1/11/2012 7 © Finpro

• This brings up the question how big the share of the regulated market is. According to the slide 8, less than 30% of

all consumed energy is sold at regulated prices. In other words, most sales are carried out in the free market.

• 1 – price zone 1 – European part and Ural

• 2 – price zone 2 – Siberia

• A-1 – 1st non-pricing zone North-West and

Kaliningrad Region

• A-2 – 2nd non-pricing zone Far East

• B – areas in which the price of electricity

is set by regional energy companies,

combining generation, distribution and

sale

• Wholesale market prices

o Price (Cost) estimated Zones

Short Term Contracts based (defined) on demand and supply

Long Term Contracts between Supplier and Consumer

o Non-price Zones

Short and Long term Contracts based on price forecast or the

previous year pricing and costs

Federal Grid Company is responsible

for normal operation, development and

maintenance of the Unified National

Electric Grid (Wide Area Grids). The

Company includes 7 branches, i.e.

Inter-systems electric grids of North-

West (1), Center (2), South (3), Volga

(4), Ural (5), Western Siberia(6),

Siberia (7) and East (8) (U>110 kV)

Structure of Russian Grids

1/11/2012 8 © Finpro

Electricity distribution is realized by

two companies: the first one is the

MRSK holding covering about 60%

of Russian territory and 96% of

population and RAO UES Vostoka

(40% territory and 4% of population).

U = 0.4 … 110 kV

System Operator of the

Centralized Dispatching

Administration

• Real-time monitoring and control of

all components of the Unified

National Electric Grid;

• Frequency and voltage (power)

control;

• Relay protection;

• Dispatching of generation and

consumption

1 2

3

4 5 6 7 8

MRSK

RAO UES

Vostoka

Analyzing the application of Smart Grids Concept in Russia, the following will be taken into account: structure

of energy transmission and structure of ownership of three main players

State Company

State Company

Set of JSCs

Set of JSCs

After the reform of Russian UES, power grids were divided into two categories – main grids (wide area grids) and

distribution grids.

Russian Grids – Challenges and Problems

1/11/2012 9 © Finpro

According to the most pessimistic

estimates, both generation and

consumption 50% growth in Russia is

expected by 2030* Average losses in electric networks in Russia are about 14% compared

with the usual 4-9% in Europe***

Operation time**

Above

permitted

standards (25

years)

Stand-by (more 35 years

for substations and 40

years for overheads)

Substations 47% 17%

Overhead lines 67% 26%

*Taras Kupchikov, 2009 , **Yuri Dementyev, Federal Grid Company, 2010*** Elena Petrova, Russian Business Newspaper 03-2011

Electrical grids as a “bottleneck” between

supplier and consumer

Equipment** Domestic Western

Gas Insulated

Switchgears

Obsolete design of

actuators, large

dimensions and

weight,

Dimensions and weight

are 20-30% lower, cost of

maintenance is 20% less

Transformers,

shunt-reactors

Low quality of

magnetic cores, oil

leakages, high

vibrations and

corrosions of tanks

Magnetic losses are 20%

lower, good gaskets and

seals no leakages,

galvanized tanks

Map of the Smart Grids projects

1/11/2012 10 © Finpro

Intellectual Grid

of the East

Intellectual Grid

of the West

Saint Petersburg’s Energy

Clusters: the Small Ring

(2012) and the BigRing (2014)

“Kola” Energy

Cluster (2013)

“Komi” Energy

Cluster (2014)

“Elga Ugol”

Energy Cluster

(2012)

“Vanino”

Energy Cluster

(2013)

“Vanino”

Energy Cluster

(2013) Goals of North-Western Projects

• Increased reliability of power

supply to Megalopolis

• Improvement of power

transmission system

Goals of Eastern Projects

• Increased energy supply quality

for new mineral deposits

• Reservation

• Reliable power supply for South

and Vladivostok Intellectual Grid of

the Russkiy Island

New equipment and software based on

the Smart Grid Platform (digital

substations, reactive power control)

allow to increase reliability and capacity

of grids

By: Oleg Budargin, FSK UES Chairman, 16.06.2011

Smart Grids for “East” interconnected

power system – the integrated pilot project

1/11/2012 © Finpro 11

The “Eastern” project includes several separate smart grids projects to test hard-and

software for large projects in all-Russian dimensions

Pilot Projects for the North-Western Energy

Clusters

1/11/2012 12 © Finpro

The Western Smart Grids Projects includes organization of 3 energy clusters

Potential customers for Finnish companies

• The most attractive customers for Finnish (and other foreign)

companies are the two largest players in the Russian market:

• FGC UES

• MRSK Holding.

• Federal authorities with a strong link to Smart Grid

o Commission for Modernization under the President of Russia

o Ministry of Regional Development and

o Ministry of Energy

However, the Federal authorities are much more difficult to do business

with.

1/11/2012 13 © Finpro

Main differences compared to the

development in the West

oThe unified energy system of Russia covers 8 time zones and unites

approximately 230 GW of generating capacity

oThe share of renewable electricity is less than 0.5% and even in 2020 it

won’t exceed 4%.

oConsumption of electricity by population – one of the key target groups

of smart grids programs is on average only 14% of total consumption -

much lower than in the western countries.

oRussian legislation on energy is controversial and disconnected.

oExisting Russian laws side-step an issue of obligatory connection of

generating capacities (facilities) to grids. However, in reality a private

power plant can connect to the grids of the Unified Energy System (and

sell electricity) only upon agreement with the System Operator. The

minimum capacity where such an agreement is not necessary is only 5

MW.

1/11/2012 14 © Finpro

Opportunities in Russian Smart

Grid

We can certainly conclude that elements of smart grids technology

will be actively used in Russia.

As estimated by the Institute for Energy Strategy, consumption of

electric energy in Russia will increase about 2.5 times by 2050.

FGC UES is implementing the concept of active and adaptive grids.

The company interest lies in:

• Application of equipment on modern technological principles e.g.

FACTS (Flexible AC Transmission System)

• Automatics

• Software

MRSK is actively developing projects connected with introduction of

Smart Metering concept and with the possibility to widen equipment

functions

• Intellectual metering = equipment and technologies

1/11/2012 15 © Finpro

Power and Heat in Russia

Power generation in the North-Western

Federal District

• Power plants over 25 MW can sell energy on the

wholesale market. All other can sell electricity only

for retail contracts.

1/11/2012 © Finpro 17

F I N L A N D

Nuclear Power Plants

CHP plants

State District Power Station

Hydropower plants

Small CHP-plants

Small Hydro-power plants

2

1

i 1

2 6

Territorial Generation Company TGK-1

Territorial Generation Company TGK-2

InterRAO UES

Wholesale Generation Companies OGK-2, OGK-6

1

2

6

i

2

2

• The market of high power is well structured. In the

study area are working

• two Territorial Generation Company - TGC-1

and 2,

• Electricity company InterRAO UES

• Wholesale generating companies OGK-2,

OGK-6

• and one nuclear power station owned by state

company Rosatom.

• All other power plant (less than 25 MW) are owned

by companies that use electricity produced mainly

to meet their own needs.

• The market (wholesale) price of electricity is based

on the equilibrium of supply and demand. However,

the Arkhangelsk region is an exception because the

existing electrical grids can not provide the free

flowing of energy to the consumers of the

Arkhangelsk region from other ones,

1

2

i

2

6

Companies

Small CHP in the study area

The investigated region is very heterogeneous in industrial

capacity and population. The map shows that the main power

plants and power stations are grouped into industrial zones.

The most developed region is Leningradskaya Oblast with

19 small CHP plants between 5 – 55 MW of installed power.

The main consumer of electricity is St. Petersburg city. Other

industrial centers are Pikalyovo, Boksitogorsk, Volkhov,

Tikhvin and Vyborg.

In the Vologodskaya Oblast there are 17 small CHP plants

with installed power from 0,5 – 10 MWh. In Vologodskaya

region there are three mani industrial areas - Cherepovets,

Vologda and Sokol . The Severstal in the town of

Cherepovets generates a prevalent share of the Oblast’s

economy.

The least amount of power sources is in the Arkhangelskaya

Oblast with 6 small CHP varying from 6 – 353 MW. These

include two large CHP boilers, one in Arkhangelsk PPM /

Severodvinsk and another in Kotlas PPM / Korjazhma.

The total number of stations operating in the wholesale market is

20; number of block stations is 42, some of them have rather large

power capacity.

Most of the power plants use other fuels than fuel oil (mazut) as

the main fuel. 1/11/2012 18 © Finpro

Statistical base of the study – heat

boilers

1/11/2012 19 © Finpro

• 3 initial data sources were in use:

• An official State Statistics

information ;

• Industrial directories

• Results of previous studies carried

out by Finpro and special agencies

• Data from different sources is a bit

contradictory. However, it gives clear

indication of the number and level of heat

generation capacity

• Total 1959 companies in 3 studied oblasts

were found

• Interviewing them we got information from

528 companies with about 1551 boiling

houses (66.5% of the official data)

F i n

l a

n d

Thus, we have received quite a representative sample for the search for the most

attractive projects

Oblast

Number of studied

companies

Number of companies got info about BHs

Number of boiling houses according to

replies

Total number of boilers (replies)

Arkhangelskaya 380 149 381 1231

Vologodskaya 768 180 388 1178

Leningradskaya 811 199 782 2149

Total 1959 528 1551 4558

Fuel mix in heating

1/11/2012 20 © Finpro

Oblast

Total number of companies

(boilers’ operators)

Number of companies using boilers running on:

Gas Diesel/ Fuel Oil

Coal Firewood,

chips Other

Arkhangelskaya 149 16 6 23 54 10

Vologodskaya 180 32 3 19 63 1

Leningradskaya 199 105 39 32 11 13

Total 528 153 48 74 128 24

Gas 36%

Diesel/fuel oil

11% Coal 17%

Wood/chips 30%

Other 6%

Share of companies using boilers on different types of fuel

Fuel mix is different in the studied areas: for Vologodskaya and Arkhangelskaya Oblasts leading position has

wood/chips, for Leningradskaya Oblast the leader is gas

Consolidated data

Gas 15%

Diesel/Fuel Oil

5%

Coal 21% Wood/

Chips 50%

Other 9%

Arkhangelskaya Oblast

Gas 27%

Diesel/Fuel Oil

3%

Coal 16%

Wood/Chips 53%

Other 1%

Vologodskaya Oblast

Gas 52%

Diesel/Fuel Oil 19%

Coal 16%

Wood/Chips 6%

Other 7%

Leningradskaya Oblast

Companies planning boiler investments

1/11/2012 21 © Finpro

Oblast Replacem

ent Further

operation Repair Total

Replacement

Further operation

Repair

Arkhangelskaya 34 29 10 73 47% 40% 14%

Vologodskaya 33 33 16 82 40% 40% 20%

Leningradskaya 44 42 50 136 32% 31% 37%

Total 111 104 76 291 38% 36% 26%

0%

10%

20%

30%

40%

50%

Replacement Further operation Repair

Arkhangelskaya Vologodskaya Leningradskaya

• Share of companies that are planning to replace

existing boilers is rather big (about 40%).

• These companies are candidates for the opportunities

study

0%

10%

20%

30%

40%

50%

Replacement Furtheroperation

Repair

Total

Further operations in existing boiler houses (based on the processing of interviews’ memos)

Search for opportunities – potential

companies planning investments

3 groups of potential end-users that are in interest to improve existing power/heat supply system and

could be the customers of Finnish products and services in power and heat supply.

1/11/2012 22 © Finpro

Group 1 – owners of CHP

plants, both large and small

They need to decrease cost of

power/heat

All of them were identified above

• We carried out the desk-study

• Excluded companies having

boilers running on natural gas

• Interviewed to identify interest

to Finnish technologies or

services

Group 2 – owners of boiling

houses

They need to decrease cost of

supplied heat

• All of them should be identified and

prioritized during desk-study and

interviews

• Then the most interesting

companies should be interviewed

in details to identify interest to

Finnish technologies or services

and financial resources

Group 3 – Regional and

municipal authorities

• They are responsible for

reliable heat supply to the

voters and Federal Government

• They have to spend budgets for

subsidies for heating

• They are actual owners of

hundreds of municipal boilers

• Responsible persons were

identified and interviewed

during field study

Summary of identified opportunities

The study focused to identify projects which substitutes oil with wood and peat,

reconstruction of old wood and peat plants as well as building of new wood and

peat firing plants in NW Russia

The study identified and described the following projects:

• 5 projects with existing financing to be realised in 2012 – 2014

• 12 projects, which should be financed during 2012

• 3 case studies

• Upgrade of district heating of the City of Arkhangelsk

• Upgrade of district heating system in several districts of the

Arkhangelskaya region

• Building of a new peat power plant and reconstruction of boiling houses in

the Chadoga district

• The opportunities are described in detail in the report, which is available on

request

1/11/2012 23 © Finpro

Conclusions

• The NW Russian heating facilities are obsolete and in need for major

investments.

• The heat reform has not been finished and, thus, the applicable heat

tariff levels do not yet support wide scale commercial investments to

the municipal sector

• Thus, still the most lucrative clients for Finnish technology are the

private companies, sawmills, pulp and paper mills and other industrial

producers

• However, the municipal sector represents huge potential with

hundreds of boiler houses and DH networks in desperate need for

replacement and / or renovation

1/11/2012 24 © Finpro

Hannu Kivelä

Leading Consultant,

Energy, Environment and Forestry

Porkkalankatu 1, FI-00180 Helsinki

Mobile: +358 40 343 3354

hannu.kivela@finpro.fi

www.finpro.fi

Contact:

Thank you!