Russian electricity market:Current state and perspectives

The Russian electricity market is currently in transition. The restructuring of the sector has been completed and former public vertically integrated monopolies have been unbundled and partly privatised. The government retained control in all the network companies, the system operator, nuclear generation, and hydro generation. The state retains control also via owner-ship in several TGCs and WGCs in the strategic regions of Moscow and Saint-Petersburg via the state owned gas monopoly Gazprom. The liberalization takes place within two price zones, Europe and Siberia, where more than 90%, 913 TWh in 2007, of Russian electricity consumption takes place. In the rest of Russia, e.g. the Far East and isolated areas like Kaliningrad, electricity is supplied at regulated rates. Only a minor part of electricity in the price zones is currently traded at free prices. The share of electricity traded at free market prices will increase according to the liberalization schedule, reaching ca 90%, all except households, by 2011. Wholesale electricity market bids are aggregated in a detailed power system model of the Russian power grid, taking into account the physical locations of the facilities. The resulting 7700+ nodal market prices, scattered across the 7 time zones of the Russian market area, capture costs of congestion and load losses in the grid. The price level of electricity seems to be rather low at a glance - about 21 and 15 per MWh in Europe and Siberia respectively. On the other hand, wholesale market buyers have to pay for capacity availability, on average around 3000 /MW monthly. With greater share of electricity traded at free prices there will be an increased need to hedge price risks. For this reason a financial market is planned. There are also plans for support schemes for renewable generation and to limit environmental pollution as well as ancillary services markets. Some areas do not experience a likewise opening of the competition in Russia, for example the fuel markets. Almost all natural gas is supplied by a single vertically integrated company, coal markets are local and oil has always been used only as a back-up fuel