Next Stop: Russia
Our blog series reports on the electricity markets of the world. Our next stop is Russia – Tobias Weghorn, International Business Development Manager at Next Kraftwerke, explored the country’s VPP potential.
Table of Contents
Kerstin Eiwen: You recently attended a trade fair in Russia. What was it all about?
Tobias Weghorn: Exactly, I was at the 3rd World Smart Energy Summit Russia; for the first time, Next Kraftwerke was represented there as a VPP partner of the event. In a total of six panels on the topics Digitalization, Distributed Energy, Industrial Energy, Energy and Utilities, Smart Cities and Buildings and Energy Tech Hub, the fair was primarily aimed at players in the Russian energy market, including network operators, energy suppliers, plant operators, and service providers.
Kerstin: How is Russia positioned in regards to renewable energies?
Tobias: Renewable energies still play a subordinate role in Russia. Although Russia promotes solar plants and wind farms, and wind in particular has great potential for the country, even if capacities are to be increased to 2.4 GW by 2019 and to 9 GW by 2035, this plays a rather minor role compared to the share of energy generated from conventional sources, especially and above all gas. And although plants for generating electricity from renewable sources are locally decentralized, they are not economically decentralized - large plants are predominantly built by large utilities.
One reason why the Russian energy sector is still highly exciting is that demand side management projects are gaining ground in Russia. Unlike in Germany, for example, these are not being created as a reaction to the volatility of renewable energies, but with the aim of ensuring greater efficiency in the generation system. Partly obsolete and inefficient gas-fired power plants that only serve peak generation - i.e. run when electricity consumption is extremely high - can ultimately be taken off the grid through intelligent demand side management, which saves costs and also reduces emissions.
Kerstin: I see. How does the Russian electricity market work? Is there an exchange?
Tobias: As in Germany, the energy market is divided into wholesale (for power plants and industry) and retail (i.e. the marketing and supply of small plants and households). Unlike many European markets, Russia has no energy-only market. Instead, there is a capacity market or a central dispatch system that is centrally managed by the grid operator. Each market participant sends their schedule to the network operators, who adjust them if necessary on the basis of a central optimization of network utilization and frequency regulation. The wholesale customer is obliged to transmit a schedule and they pay a penalty in addition to the energy provided if they deviate from the schedule. Smaller producers normally participate in retail and therefore have less strict obligations; the limit for being a "smaller producer" has now fallen from 25 MW to 5 MW.
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Kerstin: What about liberalization?
Tobias: If you measure liberalization by whether the energy market is unbundled, you can clearly say for Russia: grid operation and generation are decoupled, so it is a liberal market. Nevertheless, system services such as balancing energy for the stable operation of the electricity grid are almost exclusively provided by conventional power plants. A larger flexibility market for decentralized generation and consumption plants is likely to develop over the next years.
Kerstin: What about balancing reserve services in Russia?
Tobias: Russia is not connected to the European interconnected grid, but has its own grid - although its frequency is 50 Hertz as in Europe, the grid is not synchronous with ours. Russia therefore has to compensate for all fluctuations with its own power plants. As mentioned above, balancing services are supplied by large power plants and are significantly influenced by transmission system operators. In addition, demand side management is now being introduced, where the "balancing energy demand" is planned in 2-hour and 4-hour blocks on the previous day. As both the grid frequency and the capacity utilization of individual power lines are taken into account by the grid operator, the individual asset plays a greater role; the dispatch is, so to speak, plant-specific.
Kerstin: And what else did you take home from your trip?
Tobias: In Russia and even in Moscow, distances are definitely measured differently than here - which is understandable in such a large country! I had been booked a hotel room for the fair, which, according to the organizers, was very close to the fair. Shortly before my arrival, I checked again - "very close" in Moscow still meant more than three quarters of an hour by public transport!
Overview of Russia's energy sector:
| Power Consumption: | 1,073 TWh (2017) |
| Electricity mix* **: | Coal: 15.71 % Oil: 1 % Gas: 47.83 % Nuclear: 18.02 % Hydro: 17.11 % Wind: 0.01 % Solar: 0.04 % Geothermal: 0.04 % Biomass: 0.23 % |
| Percentage of Renewable Energies: | 0.1 % |
| INDCs in the Paris Agreement: | "Limiting anthropogenic greenhouse gases in Russia to 70-75% of 1990 levels by the year 2030 might be a long-term indicator, subject to the maximum possible account of absorbing capacity of forests." |
| * 2016 | ** numbers are rounded to second decimal place |
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Kerstin Eiwen
Student Assistant