The Urals Hit The Gas

11.01.2010 — Analysis

The Sverdlovsk Oblast is striving to increase the share of gas in its fuel and energy balance. Neither the counteraction from Moscow nor the alternative projects being developed are going to stop this drive. The RusBusinessNews observer has established the objective economic preconditions for the transition of the Mid Urals' energy generation to gas.

The issue of ensuring the region's energy security has revealed serious contradictions between the federal centre and the leadership of the Sverdlovsk Oblast. According to Alexei Sokolov, the Head of the Energy Department of the Ministry of Energy and Housing & Utilities of the Sverdlovsk Oblast, the energy sector of the region at the moment uses roughly equal proportions of coal (predominantly from Ekibastuz in Kazakhstan) and natural gas.

"We have developed the scheme for gas supply within the Oblast and wanted to add another 10 billion cubic metres of gas to the 20 billion consumed annually. We have, however, encountered the most fierce resistance at the level of GAZPROM and the Russian Ministry of Economy: Moscow has calculated all the gas for many years ahead", Alexei Sokolov stressed.

Instead of the Urals projects the federal centre has approved the scheme for the location of generating capacities in Russia. According to this scheme the share of coal burning power stations in the Sverdlovsk Oblast should increase to 80%.

Should this happen the region may encounter a whole range of economic and technological difficulties connected, first of all, to the limited capacities of the transport logistics. "If the number of coal burning power stations grows, what would they burn when there are difficulties with the coal deliveries?" - is how Alexei Sokolov spelled the problem out.

The Urals officials, energy sector professionals, ecologists and economists have been considering involving renewable sources into the economy as an alternative for gas, these include waste of the timber processing and other industrial waste, peat, solar and wind power

None of the Urals experts, however, are harbouring any illusions that the broad use of renewable sources would significantly change the fuel and energy balance established in the region. The energy alternative may be used as a reserve energy source for industrial, social, and housing facilities in case of outages at large generating sites (we should not forget the disaster at the Sayano-Shushenskaya hydropower station). This would allow supporting the production and living activities, though temporarily and at minimal levels.

Renewable energy sources are sometimes simply irreplaceable in remote settlements of which there are great many in the Sverdlovsk Oblast. It is extremely unprofitable to build gas pipelines many tens of kilometres long to villages with small population, the same as building a coal boiler the fuel for which would take several hours to be transported along a bumpy country lane. In these conditions it would be more logical to use resources which are literally under your feet, peat, for instance.

According to the information provided by Arkady Shamparov, the Director of the Local Fuel Types Institute "Uralgiprotorf", the area richest in peat is in the north of the Sverdlovsk Oblast, the peat belt crosses the region between Nizhny Tagil and Ivdel. "Peat is one of the key resources which might help the development of the economy of these territories and the wellbeing of the local population," Mr Shamparov claims. "Reserves of this peat belt amount to 1.5 billion tons. If we were to produce 1.5 gigawatts of electricity (25% of the established energy balance of the Sverdlovsk Oblast), these reserves will last us for 200 years. Especially if we take into account that peat is a renewable source of energy, its reserves are constantly regenerated."

These good aspirations have to match the profound economic calculations, though. "In early nineties there was an attempt to establish the production of peat briquettes," Galina Pakhalchak, formerly First Deputy Minister of Natural Resources of the Sverdlovsk Oblast, points out. "Unfortunately this project crashed, the company went bankrupt. Moreover, we had a hard time proving that we did not have inappropriate spending of funds. Now we have to develop this sector but the economics issues must be studied in a more in-depth manner. In addition to that, there has to be a political will for the solution of these issues and legislation which would lay down the incentive mechanisms."

Municipalities and companies which decide to start developing the alternative energy encounter serious financial difficulties. "Foreigners are prepared to provide cheap credits for purchases of energy generating units abroad," Aleksey Rodin, the Deputy Director of the Investment Support Fund of the Sverdlovsk Oblast, stresses. "However, construction and installation work, VAT, customs duties, connection to the grid etc. has to be paid out of own pocket. This is why those small scale power engineering projects which we encountered have, as a rule, got stuck at the process organisation stage. The Italians, for instance, are prepared to invest within the Sverdlovsk Oblast large-scale, but nothing come to fruition due to our inability to find the money for the construction and installation work and other expenses our side must bear. If we talk of the sources of funding for the domestic developments in the sphere of the small scale power engineering then we do not know any."

As they overcome financial difficulties, several Urals enterprises and organisations are making equipment for the alternative power engineering at their own risk regardless. It is worth mentioning here the production of timber waste fueled heating boilers by "Termaks", a Ekaterinburg company; the production of solar collectors at the Kamensk-Uralsky Metallurgical Works; as well as the experimental production of the power generating wind turbines on the basis of the Urals State Technical University - UPI. These wind turbines are specially designed for the climate of the Mid Urals. According to the data provided by Serghey Shcheklein, the Head of the Department "Atomic Power Stations" at USTU-UPI, despite having extremely continental climate conditions in the region the value of annual average wind speed here reaches only 3 metres per second. Wind used for power engineering must have speed twice that at least. The USTU-UPI wind turbines, however, are capable of working at wind speeds of 3 m/s and more.

Even if we find the investment required, efficient power generating units, good professional economists and maintenance engineers, in the best case scenario the alternative sources would provide no more than 5% of the fuel and energy balance of the Sverdlovsk Oblast.

"Heat power plant is a boiler and a steam turbine," Vladimir Munts, the Head of the Department for Industrial Heat Power Engineering at the Ural State Technical University - UPI, points out. "When we talk of burning gas then we need nothing else. If we use solid fuel then to the main production we add several facilities for the fuel preparation (handling and milling), and for the capturing and utilisation of ashes. These are very high capital and maintenance costs."

Experts point out that due to purely economic reasons the share of gas in the energy sector of the Sverdlovsk Oblast will be increasing. Today gas is supplied to the region both through state-approved quotas and at market prices. At the time of the current crisis the difference between these two prices is not that large, only about 20%. Therefore power generating companies in the Mid Urals do not have to limit themselves in their drive towards the "gasification". Even in case of serious growth in the global prices for gas its use in power generation will still be more profitable in comparison to other types of fuel.

"Translated into standard fuel equivalent local coals (peat, firewood, slates) are more expensive than gas. Once the transportation cost is added to the price the use of these energy sources becomes unprofitable as they are of low heating value," - Vladimir Munts stresses. "Trying to argue against economy is useless. Loads of state programmes might be approved; however, if they are not supported by the economic viability the ideas for alternative energy sources will be all still born."

Today we can only name one project where the use of coal is envisaged, being developed in the large scale power engineering sector in the Sverdlovsk Oblast. The Ural Mining and Metallurgical Company has plans for the construction of a 300 MW coal burning power plant in the village of Staroutkinsk. However, due to the current crisis this investment project has been shelved until better times.

On the other hand the future for gas looks much better. In early December 2009, for instance, Russia's first fourth generation gas turbine unit from General Electric has been delivered to Sredneuralskaya SDPP. In the end of 2010 it is planned to start up a 410 MW combined cycle unit worth 350 million Euro here.

Using the combined cycle units increases the electrical efficiency of gas burning heat and electricity power stations from the usual 35-37% to 57-59%. After reaching the pay-back point of the expensive equipment the energy generated at the state of the art gas burning SDPPs becomes the cheapest.

Experts point out that at the end of the day the Sverdlovsk Oblast, with 11 gas pipeline mains going through its territory, must take advantage of the situation.

Pavel Kober