A launching pad for megawatts in the South Urals

15.12.2011 — Analysis

Government officials in Chelyabinsk are making a serious effort to attract investment to the region. This would include money to both construct new facilities as well as to revive "dormant" businesses. But these plans cannot be implemented without energy. Experts estimate that the Chelyabinsk region will need facilities able to provide at least an additional 10 GW of power over the next decade in order to maintain a steady level of development. This correspondent for RusBusinessNews discovered that several major projects are being launched right now, including some with foreign investment. The trend toward small-scale power generation is gaining momentum at the same time, which will help the region avoid falling into a "black hole" of energy shortages and help it implement the investment projects that have been created.

According to data from the Joint Dispatch Office for Urals Energy Systems, the installed capacity of the South Urals energy system is 5,233.3 MW. The largest generating facilities are the Troitskaya regional power plant (OGK-2) and the South Urals regional power plant (OGK-3), as well as generating facilities owned by Fortum, OJSC (the Russian division of the Finnish energy corporation Fortum) - the Argayash thermal power station and Chelyabinsk thermal power stations nos. 2 and 3.

The region is currently approaching its historical peak of power consumption - 5,949 MW recorded in 1989. According to Aleksandr Bondarenko, the director of technical development for ChelyabEnergo, a subsidiary of IDGC of the Ural, OJSC, the industry has begun to pick up steam again after the economic instability of the 1990s and the decline in production during the first wave of economic crisis. As a result, consumption in the Chelyabinsk region reached 5,500 MW in 2011.

According to Maksim Zagornov, the president of the Urals Association of Small-Scale Power Generators, energy consumption rose 3% per year during the economic crisis, and during more prosperous periods it occasionally reaches 8%.

Since the region is home to many power-hungry industries, the problem of energy shortages is nothing new. According to data from the Chelyabinsk regional Ministry of Industry and Natural Resources, the South Urals region currently produces about 25% less electricity than it needs. Energy transfers from neighboring regions help make up the shortfall.

In addition to the need to build new facilities, the existing plants are also fairly run-down and cry out for attention. Most of the electricity in the Chelyabinsk region comes from power plants that were introduced in the mid-20th century, with the exception of Chelyabinsk thermal power station no. 3, which was built in 1996. According to Konstantin Zakharov, the chairman of the regional branch of Business Russia, energy facilities - both those that generate and those that distribute power - are in some cases 60-70% outdated, which means that some of them will have to be withdrawn from the system.

New grids with new megawatts

To solve its energy problems, officials in the South Urals have decided to plan the comprehensive construction of new generating facilities and grids. The goal is to bring new power plants with a total capacity of 1,860 MW online by 2014.

New generating units will be installed at the Troitskaya and South Urals regional power plants. In June 2011, the Fortum power company introduced a third unit at Chelyabinsk thermal power station no. 3, with an installed electrical capacity of 225.5 MW.

Cooperation with the Finnish investor will continue. In October it was reported that Fortum had asked the Russian Ministry of Energy for permission to invest 20 billion rubles to move the construction of two 225-MW power plants from the Tyumen region to Chelyabinsk. The government of the South Urals supported this initiative, since the region has a guaranteed market.

Fortum plans to install new units at the Chelyabinsk regional power station, which is the region's oldest electric plant, built in 1930. At a meeting with Governor Mikhail Yurevich, Fortum's general director, Aleksandr Chuvaev, stated that the company had received all the required permits and that now the design and technical documentation was being prepared and early next summer work would begin at the construction site.

But producing electricity is only half the battle - it must also be delivered to the consumer. The regional government has agreed to a long-term investment program by two electricity-distribution companies - ChelyabEnergo (a subsidiary of IDGC of the Ural) and MES (Backbone electric grids) of the Ural (a subsidiary of FGC UES, OJSC).

FGC's program for 2010-2014 includes investment totaling about 15 billion rubles. MES of the Ural is planning to implement two major projects to create a system to distribute power from the new unit no. 10 at the Troitskaya regional power plant and South Urals regional power plant no. 2. The first project includes the construction of a 240 kilometer, 500 kV transmission line, called the Troitskaya Regional Power Plant - Privalovskaya, by 2014. According to preliminary estimates, approximately 7.7 billion rubles will be spent to construct this electric transmission line.

In order to utilize all the power from South Urals regional power plant no. 2, there are plans to construct infeeds in 2012 to the switchgear, the 220 kV YUUGRES-2 line, the 220 kV South Urals Regional Power Plant-KS-19, and the 220 kV South Urals Regional Power Plant - Shagol 3 line, with a branch line to the Isakovo substation, and by 2013 to build a 500 kV infeed, called the Troitskaya Regional Power Plant - Shagol. The plan is to allocate about 130 million rubles for this project.

In addition, MES of the Ural is continuing with its comprehensive renovation of the 500 kV Zlatoust substation that is so important to the industrial Gornozavodsky district of the Chelyabinsk region, as well as the 220 kV Novometallurgicheskaya substation that supplies electricity to the Metallurgichesky district of Chelyabinsk. Work on these power plants should be completed in 2013, and FGC's investment in the renovation of the substations is estimated to total 1.82 and 2.12 billion rubles, respectively.

In 2014, MES of the Ural planned the completion of the renovation of yet another important source of electricity in Chelyabinsk - the major 500 kV Shagol tie station. The cost of that project was estimated at 2.92 billion rubles. Between 2013 and 2015, there are plans to renovate the outdoor 500 kV switchgear of the 500 kV Kropachevo substation - one of the strategic switching centers for the grid belonging to United Energy System of the Urals - which, along with the 500 kV Zlatoust and Chelyabinskaya substations, ensures the transmission of electricity between Siberia and central Russia. The approximate cost of that project is estimated to be 130 million rubles.

The total cost of the government-approved investment program of IDGC of the Ural to develop the region's electric grid between 2011 and 2015 is estimated at about 17 billion rubles, based on the RAB financing model.
"The program was developed in light of the confirmed development plans of the major energy consumers - the industrial sector and the construction companies that build high-rise buildings and villas - while also taking into account both requests from small businesses as well as the forecasts for the natural increases in the energy consumption of existing customers," claimed Igor Butakov, the director of ChelyabEnergo, a subsidiary of IDGC of the Ural, OJSC.

At the request of the major energy consumers, the five-year program includes projects to construct 445 MW of transmission facilities, as well as 300 MW for more modest consumers (the public and small businesses). The results of the investment program will allow energy consumption in the Chelyabinsk region to grow from 5,416 MW in 2010 to 6,161 MW in 2015.

The director of ChelyabEnergo emphasizes that the investment program targets several important areas that are experiencing power shortages. Over the next five years in particular, plans were created at the request of the major energy consumers to build 154-MW facilities in the northern part of the region, plus a 39-MW plant in the Gornozavodsky district, a 76-MW plant in the southern areas, a 96-MW station to the northwest and in the downtown areas of Chelyabinsk, a 44-MW facility in the Traktorozavodsky district and part of downtown Chelyabinsk, and a 36-MW plant in the Sosnovsky district.

Igor Butakov noted that the program may be expanded to include projects that will require functioning transmission facilities with total capacity of 548.7 MW, but those have not yet been confirmed.

Small for the small

Bringing huge new generating facilities online mostly solves the problem of how to provide electricity to the big industrial behemoths, but energy is still too expensive for small businesses.

Maksim Zagornov, the president of the Urals Association of Small-Scale Power Generators, notes that small businesses pay proportionately far more money per kilowatt of electricity than do big companies. The fact is - big businesses can generate their own power and also have access to the wholesale energy market.

The solution to this predicament might be the development of small-scale power generation. "The cost of electricity from the grid continues to go up. Businesses are increasingly feeling the need to consider providing their own energy," agrees the governor of the region, Mikhail Yurevich. "We calculated that in 2010 it would take a business seven years to see a return on the cost of its own power-generating facilities. But in 2011, the increase in the electric rates meant that it will only take three to five years for various businesses to recoup their investment. This means medium and small businesses need to really think about whether they're going to connect to the power grid or generate their own energy."

According to the head of the region, when companies are proposing a new project, they can not only choose to install their own sources of power, they can plug into the electrical grid as well. Any surplus energy can be directed into the grid or sold through an operator, because generating power is no longer the exclusive province of those who sell and supply that electricity. This gives independent producers of electricity the chance to sell their power to the grid. Incidentally, this position was supported by Russian Prime Minister Vladimir Putin.

Less than 1% of the electricity in the Chelyabinsk region comes from small-scale power generators - only about 50 facilities currently operate in the region. But big businesses are beginning to shift towards generating their own power. These include Mechel, OJSC, Magnitogorsk Iron & Steel Works, OJSC, and Magnezit Group - they use gas-powered generators. The quickening pace of the transition to this type of power supply in the South Urals is impressive - every year the number of applications doubles from companies wishing to connect to small-scale energy sources.

The Chelyabinsk region will need to increase its generating capacity by 30% over the next decade if the region is going to grow economically. The governor, Mikhail Yurevich, oversees the implementation of the projects, and he is confident that this approach will yield jobs for the residents of the South Urals, as well as significantly increase the proceeds to the regional treasury.

Maria Khudovekova