Russian State Duma hosts roundtable on hydropower development
Roundtable meeting ‘Hydropower development in the Russian Federation: opportunities and concerns’ was held in Russian State Duma in Moscow on Monday, July 2. Representatives of the federal and regional authorities, power generation companies, industry associations, scientific institutions and non-governmental organizations were among the attendees. Nikolay Shulginov, Chairman of the Management Board – General Director of PJSC RusHydro, made a keynote presentation.
RusHydro operates 64 hydropower and pumped storage plants with total capacity of 30 GW in Russia, which represents 58% of the country’s total hydropower capacity. The Company’s hydropower plants produce 61% of the country’s green energy – an amount that would require burning of over 55 million tonnes of fossil fuel harmful to the environment. Hydropower plants play a vital role in the power system of Russia and its neighboring countries providing 95% of the peak-load regulation capacity. Hydraulic facilities are key elements in protecting population and industry against flooding. As the lowest-cost sources of energy production in the country, hydropower plants constrain energy price growth and improve competitiveness of the Russian manufacturing sector.
The roundtable panel resulted in an in-depth discussion on the current state of the Russian hydropower industry and challenges hindering its rapid development.
Russia is home to 9% of the world’s hydro resources. Even though it ranks second in hydropower potential after China, surpassing the US, Brazil and Canada, the country does not utilize it enough with current degree of development at a mere 10%. By comparison, the same figure in Canada, China, Brazil and the US stands at 32%, 41%, 48% and 53%, respectively.
Despite the potential appeal, investors show little interest in the sector in absence of a sound regulatory policy and excess influence from regulatory authorities.
Legal status of the hydropower reservoirs prior to filling as well as construction and financial regulations remain the core issues identified at the roundtable.
According to the Water Code, a filled reservoir is considered federal property. Prior to the first filling, in accordance with the Town Planning Code, the reservoir is not classified as major construction, which brings considerable difficulty in its engineering, construction and commissioning as well as budgeting.
Amendments to the Town Planning Code are necessary to resolve the issue. Decision-making process has to be transparent and clear for all parties involved in construction, financing, engineering and commissioning the reservoirs.
Risk of hazard category reassessment of hydropower facilities during operations by the regulatory authorities remains another challenge for the hydropower sector. Raising the hazard class of operational hydropower facilities not only brings along additional financial expenses measured in millions of rubles but, in some instances, a complete liquidation of a facility in the event of engineering incapability to carry out required measures.
Solution of this problem requires changes in legislation on safety of hydrotechnical facilities linking criteria and procedures for assigning and changing hazard category of a particular facility in order to reflect its specifics and conditions of exploitation of the hydrotechnical complex.
In addition, it is necessary to rationalize territories’ development in the tailrace of hydropower plants. In the absence of due local regulation volumes of housing construction in the tailrace zones – subject to flooding risk – keeps rising.
Roundtable participants stressed that local authorities should prevent construction in the zones with risk of flooding.
Another current problem is excessive requirements in the area of security and anti-terrorist protection of the hydropower plants. The legislation compels owners of the facilities to implement complicated and costly measures aimed at development of engineering security systems in lieu of more efficient and simple solutions. In addition, utilities companies have to bear costs related to security of transportation infrastructure facilities, running through the dams.
Representatives of hydropower industry think that cheaper and more efficient up-to-date engineering methods can achieve required level of protection, while it is the responsibility of the owners to provide for the security of the infrastructure.
Finally, an acute issue for the hydropower industry is assessment of damage to aquatic biological resources from construction and exploitation of hydropower plants as well as calculation of fair compensation of the incurred damage. Today clear and adequate methodology for evaluation of environmental impact does not exist. Application of the obsolete methodology, not taking into account specifics of the hydropower plants – utilization of water without withdrawal – leads to significant increase of the damage appraisal and imposes unjustified liabilities of hydropower plants owners.
Improvements in methodology of damage evaluation and respective regulation will reconcile disagreement between owners of the hydropower plants and the regulators.
The roundtable participants also have discussed prospect for construction of small hydropower plants and pump storage hydropower plants. The participants stressed high potential existing for construction of the small hydropower plants and pointed to the need of refining requirements for investment projects in order to make them more attractive for the wholesale market of electricity and capacity. The experts paid special attention to prospects of increasing share of pump storage plants in the generation mix as the most maneuverable type of generation allowing the system to mitigate intra-day peak loads.
Opinions presented by the roundtable participants will form basis for recommendations aimed at improvement of the legislation regulating various aspects of hydropower plants construction and exploitation. Such steps will allow to reduce administrative barriers and to increase appeal of the hydropower sector for investors.
The information in this press release may contain projections or other forward-looking statements regarding future events or the future financial performance of RusHydro. You can identify forward looking statements by terms such as "expect," "believe," "anticipate," "estimate," "intend," "will," "could," "may" or "might," the negative of such terms or other similar expressions. We wish to caution you that these statements are only predictions and that actual events or results may differ materially from these statements. We do not intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in our projections or forward-looking statements, including, among others, general economic conditions, our competitive environment, risks associated with operating in Russia, rapid technological and market change in our industries, as well as many other risks specifically related to RusHydro and its operations.
Shares / ADR