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We will take a different approach. Russia will invest into modernization of power plants and not in green energy

After New Year holidays Minister-Counselor for energy and coal industry of Ukraine, Maksim Belyavskiy, declared that in 2018 Ukraine “will increase annual green energy output by 20%”. This statement is well in line with global trends. According to the forecast, development of renewable sources of energy will trend in the nearest decade not only in developed nations but in a number of emerging countries. Russia, on the contrary, will take a different approach, aiming at modernizing old power plants. “Forpost” found out if refusing windmills and solar cell batteries will be a “step backwards”.

Last year Vladimir Putin approved the proposal of Ministry of Energy to launch a 10-year investment program aimed at modernization of old power plants. It is anticipated that the overall scale of 40 GW renovation expenditures will cost around 1, 5 trillion rubles. Specialists have no doubt that these investments are necessary. After all, 60 % of total energy operational capacity in the country is over 30 years old and its modernization is now a necessity.

It is even more relevant since 2014 major investments into construction of new generating plants in framework of CDA (Capacity Delivery Agreement) started to decrease. According to the Ministry of Energy by the end of 2017 about 95% of facilities built according to the program were already operational. Total investments added up to 4 trillion rubles. However, the proportion of units returned to service within CDA constitutes only 15 % from total energy generation.

Market players had different views on the future of the field. Thus, generating companies (Inter RAO, RusGidro and others), who are accustomed to high returns, were concerned with possibility of losing comfortable conditions of price formation, as, at times, they would overrate the price of energy capacity by 10-15 times when compared to market rates. Their representatives suggested prolonging the CDA program by modernizing old plants instead of building new units. Major consumers, on the other hand, discussed that due to generating capacity surplus in Russia, it was time to stop subsidizing the generating companies and take the financial load off businessmen.

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According to VYGON Consulting Director for Energy, Aleksey Zhikharev, the reason behind heated discussions about the practicality of extending the investments program for development of fuel and energy sector is that consumers are displeased with the surge of energy prices. This happened as the result of switching from the projects of CDA system to the stage of rapid return on investments.

Russia chose a different development path founding a large-scale project of “Modernization of power stations”. A number of experts have already questioned the relevance of that decision and declared that the course of energy industry growth in our country does not meet global trends. First and foremost the trend of developing renewable energy sources (RES).

Most countries have “high hopes” for RES. However, according to many specialists, appropriate conditions allowing to successfully implement such approach haven’t been created in Russia yet. There is a number of difficulties hindering this process. Firstly, rare earth metals resource base necessary for production of “green” power equipment, although abundant (globally Russia ranks # 2 in REE reserves), is still majorly underdeveloped. Secondly, nowhere in the world, the issue of accumulating and storing renewable energy has not been solved, hence, decreasing its competitiveness.

Thirdly, environmental conditions for generating alternative energy (such as sunlight, wind, etc.) are impermanent and unstable creating an obstacle for building required assets in Russia. Fourthly, despite the common belief, the usage of RES results in many environmental problems, such as land pollution and perishing of fauna and flora. However, as a matter of fact, such damage mainly occurs in the areas where rare earth metals necessary for manufacturing the RES infrastructure are mined and not where wind turbines and solar cells are located (nowadays 95% of RES market is occupied by China).

The above-mentioned suggests that development “green” energy must be approached rationally. At the same time the necessity of power plants modernization in Russia presents a pressing issue since abandonment of power plants reconstruction program will consequently result in putting some of them out of service increasing risks of energy shortage and decreasing investment potential of the sector, which among other things is necessary for its reforming.

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“New technologies are actively introduced worldwide both in coal and oil and, of course, gas industry minimizing environmental damage. For instance, coal power plant “Neurath” with capacity of 4GW (Germany, North Rhine-Westphalia) even has no flue-gas stacks for steam and carbon dioxide are fully utilized… Russian companies work under rigorous ecological standards. Announcing a shutdown of all power and nuclear plants and starting using just the sunlight would be a foolish thing to do. That is why I like Russia’s position on the issue. This is shrewd reasoning”- noted the chairman of International Committee on “Global Energy” Award, NET POWER LLC chief Technology officer Rodney John Allam (Great Britain) as interviewed by “Rossiyskaya Gazeta” reporter Irina Fursova.

Vladimir Putin generally approved the program of industry branch modernization submitted by the Ministry of Energy. At the same time he appointed the Ministry to examine this program in detail by March 1, 2018 regarding optimal combination of thermal energy generation with nuclear and renewable energy, as well as keep track of consumers’ interests.