4 Oct 2018 14:52

Energy Ministry submits objections over selection of generating facilities for modernization

MOSCOW. Oct 4 (Interfax) - The Russian Energy Ministry has submitted to the government its position containing objections to the idea of selecting facilities for power sector modernization for one year, the Deputy Energy Minister Vyacheslav Kravchenko said.

"We are opposed. We prepared a response and sent it to the government," he said.

At a meeting in late September, Deputy Prime Minister Dmitry Kozak previously gave instructions to ministries following the meeting to look, for example, into shortening the process for selecting projects to modernize the power industry to one year with an upper limit of 3 gigawatts. The Energy Ministry, Economic Development Ministry and Industry and Trade Ministry must work in this issue in conjunction with Russian Steel, which has estimated the modernization of thermal power generation would cost steel producers 260 billion rubles.

Kozak's instructions speak about "conducting just one-year selections with a combined volume up to 3 GW in 2018." An energy market source with knowledge of the position of the steel companies said this meant the selection would not be made all at once, but in stages, in order "to see what the results are, what prices are announced, what the yield is." On the basis of this "pilot selection" it will be clear what adjustments are needed, the source said.

The instructions also call for reflecting the additional revenue from the sale of heat in the cost of the capacity at the plants to be modernized, and for including an installed capacity utilization factor and specific fuel consumption in the criteria for selecting projects.

Kozak's meeting followed a letter that Vladimir Lisin, the owner of Novolipetsk Steel , wrote to the deputy prime minister in August, mentioning the fact that the tariff and tax burden on the industry had grown, and that the industry faced new ecological and construction-related charges.

It was initially expected that the first selection of modernization projects - totaling 11 gigawatts in the 2022-2024 period - would be selected all at once, with 3 GW being modernized in 2022 and 4 GW each in 2023 and 2024.

Contracts will be concluded on those projects selected that provide a guaranteed yield for the investor and stipulate fines for failing to fulfill the terms of the contract, as is the case with Capacity Delivery Agreements.