VITALY KOROLEV: APPROACHES TO REGULATING ELECTRIC POWER MARKETS ARE CHANGING CONSIDERABLY

According Deputy Head of FAS, old and new generation facilities will compete for consumers

After a lengthy discussion on various sites, the parameters of a programme for modernizing heat generation are determined. In H1 2019, there will be the first competitive selection of investment projects. The concept of digital transformation began in the power grid. These and other general industry trends were discussed at a conference organized by the Vedomosti newspaper: “Russian energy industry: a new investment cycle”. Deputy Head of FAS Vitaly Korolev took part in the event.

“The facilities to be modernized must be determined through competitive procedures. We believe that this is a correct solution that ultimately will lead to a common mechanism when the old and new generation will be competing for consumers”, said Deputy Head of FAS. “In FAS opinion, only facilities in demand can be modernized as well as those facilities that will improve their efficiency in case of modernization”.

He explained that at the initial stage a new facility under modernization must ensure higher profitability, thus attracting the maximum number of participants to the market at the first competitive selection.

“Thus, we show that the developed mechanism is quite interesting for market participants. We expect that at the first stage there will be considerably more participants that the scope of traded capacity. On the other hand, making decisions the cost of electric power and tariff indexing must be formed no higher than the range approved by the Government of the Russian Federation, i.e., no higher than inflation”, reported Vitaly Korolev.

Deputy Head of FAS also talked about production localization. Modernization will take place on the basis of domestic equipment. This way we will support Russian producers maintaining the focus on import substitution.  The Ministry of Industry and Commerce takes an active stand on the issue.

Regarding further performance of the electric power market, Vitaly Korolev pointed out that the market is rather efficient and overall covers the needs of end consumers.

“We live in a changing world, however, where approaches to regulation are transforming fast and dramatically. It is worth giving and example, here that large consumer have already formed their generation at around 5 GW. The figure is rather high, it accounts for several percents of electric power consumption in Russia in general. In a particular period own generation can be less efficient but in the long run, in view of technological development, it can compete  in terms of efficiency with centralized generation, including all market and non-market mark-ups in the final prices on electric power for consumers”, concluded Vitaly Korolev.