RusHydro Modernization Quest Faces Challenges in Volga-Kama Basin

By Lada Ponomareva, January 26, 2013

In October 2012, the Russian Federal Tariff Service stated that the average tariff on electric power companies in 2013 will increase to approximately 15 percent. Tariff increases occur every year and, according to the opinion of industry analysts, power generation in Russia is still a profitable business. However, power companies’ infrastructure is out of date and requires a significant overhaul or, in some cases, complete replacement of equipment. This will in turn require significant investment that will result in an increase in electricity rates for the population over time, as power generation companies pass the higher cost of producing electricity on to consumers.

Speaking on radio station “City-FM”, the Chairman of the State Duma Committee on the energy sector, Ivan Grachev, indicated two possible ways of addressing the issue of rising electricity costs: “Either people themselves pay for the whole modernization of the system, for all of the accumulated problems, or the state will defray a significant part of these costs. For the time being, the dominant viewpiont in the government and in the state power (the governing party) is that this burden should be placed on people. <...> However, the attempts to throw everything on the population, resulting in the steady rise of electricity rates are doomed to failure. Consequently, the system will continue degrading.” Russia’s power generation sector faces not only a lack of funding for modernization, another problem has unexpectedly appeared.

Moratorium on HPPs?

As market prices for oil and gas grow steadily, a particularly valuable characteristic of the hydropower industry is that it uses water – a renewable and clean natural resource. Hydropower plants (HPPs) don’t produce ash, or discharge greenhouse gases like sulfur or nitrogen oxides into the atmosphere, as happens, for example, at thermal power plants. However, there is a problem with being “environmentally friendly”. Most ecologists are actively supporting a moratorium on construction of new HPPs on lowland rivers, as well as on modernization of existing plants. This radical position is explained, according to Sergei Simak, an ecologist and a member of the Public Chamber, by the fact that “for realization of any commercial project, it is necessary to determine the benefit and cost balance of this project. Global practices prove that hydropower plants' construction on lowland rivers provides much less benefits than costs”. Among other hindrances to the development of the hydropower industry, environmentalists note such things as deforestation, flooding of both agricultural and residential territories, appearance of an immense number of swamps in the HPP’s area of operation and many others.

As an alternative solution to this problem, environmentalists suggest building HPPs on mountain rivers, which would add increased transportation costs to the electric power price, and as a result these power stations might be unprofitable from the start. “Water storage reservoirs are required in residential areas,” thinks Alexander Remezentsev, General Director of Povolzhye Power Engineering Center (general designer of the Cheboksary hydroelectric generating system). Mikhail Fedorov, a member of the Russian Academy of Sciences, is of the same opinion: “We should not