11 th Prague International Energy Conference Prague , 24-26 September 2009

1. Strategic Development of Power Generation in the Context of “Energy Strategy of Russia for the Year 2030” Alexey Gromov PhD Deputy Director Institute for Energy Strategy 11th Prague International Energy Conference Prague, 24-26September 2009

2. Energy Strategy 2030 in the System of Documents of the Strategic Development Long-term forecast of the development of Russian economy for the years 2009-2030 Conception of the long-term development of the Russian Federation for the year 2020 ES-2030 General scheme of development of the gas industry for the year 2030 General scheme of allocation of power generating facilities for the year 2020 General scheme of development of the oil industry for the year 2030 State program of energy saving Eastern Gas Program Conception of the state program for exploration and exploitation of the continental shelf of the Russian Federation Program of long-term development of the fuel and energy complex of the Russian Far East Strategy of development of the power generation in the Russian Far East Investment programs of energy companies

3. Aim and Goals of the ES-2030 Innovative and efficient energy development Aim Stable institutional environment in the energy sector Modernization and construction of new energy infrastructure Goals Energy and ecological efficiency of the national economy and energy sector Efficiency of reproduction, extraction and processing of energy resources Further integration of the Russian energy sector into the global energy system Aim of the ES-2030 remains stable despite consequences of the global economic crisis

4. Energy Saving as Priority Direction of State Energy Policy Expected results of energy saving and increase in energy efficiency in Russia Potential of energy saving in Russia is estimated at level of 45%of the current consumption of energy resources Saving of 240 bln. cub. m of natural gas, 340 bln. kilowatt-hour of electric power, 90 mln t of coal and 45 mln t of oil and oil products 1 Improvement in competitiveness of national economy under conditions of growing tariffs for energy resources 2 Consumption of energy resources can be reduced by: Increase in revenues from extra export of oil and natural gas: 84-112 bln. USD 3 20% in heat supply 30% in power generation 40% in industry and transportation 50% in living apartments Decrease in governmental expanses: 3-5 bln. USD 4 Reduction in CO2 –emissions: 790 mln t/y Improvement in ecological situation in the country 5

5. Basic Forecasted Characteristics of the ES-2030(Electricity Production and Consumption) years years

6. Power Generation Results of ES-2020 Problems Completion of the structural reform of the Russian power generation Deficit of generative and circuit capacities in some regions Lack of peak and semi-peak capacities Creation of the wholesale competitive market of electric power and capacity High runout of basic production assets Low energy and economic efficiency of power generation Tendencies High dependency on natural gas Shift of electric power consumption into Eastern regions of Russia and cities of the Central part of the country Absence of retail market of electric power and capacity Lack of investment resources Increase in seasonal and daily peak loads in the UES of Russia Cross-funding between different groups of consumers and between electric power and heat in domestic market

7. Development of Power Generation Strategic aims Energy security of the country Complete satisfaction of country’s needs in energy (capacity) at reasonable prices Safe and secure work of power supply system under normal conditions and in case of emergency Innovative renovation Principles and mechanisms of realization Balanced development of generative and circuit capacities Development of environmental friendly technologies of coal burning, steam-to-gas plants with high coefficient of efficiency, power circuits of new generation, etc. Further development and enlargement of the UES of Russia Containment of prices by means of reduction of costs in construction of generative and circuit capacities, encouragement of competition and creation of state system supervising power generation Modernization of the basic production assets Development of competitive markets of electric energy and capacity Development of “small power generation” in regions with decentralized power supply Accelerated development of nuclear, coal power generation and renewable energy; diversification of the fuel and energy balance of the country Reliability and controllability of power supply systems Reduction of negative environmental impact of power generation

8. Power Generation and Consumption Power generation Power consumption and export Prospective levels of power generation will be determined by growth of domestic demand, which will substantially exceed the growth rate of demand for primary energy

9. Power Consumption and Specific Electro-capacity of GDP • By 2030 power consumption will increase 1,9-2,3 fold, compared with the level of 2005,while specific electro-capacity of GDP will decrease 1,6-1,7 fold.

10. Installed Capacity of Power Plants By 2030 total installed capacity of Russian power plans will increase 1.6-2 fold, compared to 2005 level (mostly due to condensate plants)

11. Investment in Power Generation Power generation demands 572-888 bln USD investment for the year 2030. Share of the industry in total investment in Russian FEC equals 24-32%

12. Long-term State Tariff Policy Basic Principles Expansion of market principles of pricing and mechanisms of self-regulation Improvement in quality of life of the Russian population and competitiveness of Russian industry Investment attractiveness of projects in power generation and transmission Predictability and transparency of long-term state tariff policy and its coordination with other components of the state energy policy Till 2030 average selling price for electric power (at 2007 constant prices) won’t increase more than 2-fold and won’t exceed 9-10 US cent/kW

13. Stages of Realization 1st Stage • Modernization of gas-fired power plants • Decommissioning of old-fashioned and depreciated equipment • Creation of legal frameworks for attraction of investment in power generation • Realization of state program for construction of nuclear and hydro power plants • Creation of domestic competitive market of electric power and capacity • Development of public assistance in supplying electric power at social norms 2nd Stage • Large-scale renovation of basic production assets • Development of power circuits and proper infrastructure in the Eastern Siberia and Far East • Putting into operation new nuclear power plants • Development of renewable energy 3rd Stage • Active development of non-hydrocarbon power generation (nuclear, renewable, etc.) • Technological improvements in coal-fired power generation • Construction of major hydroelectric power stations in Eastern parts of Russia • Development of “small nuclear power generation” in the Russian North and Far East • Development of modular high-temperature nuclear reactors, able to produce electric power, heat and hydrogen

14. Development of Non-fuel Energy Forecasted development of renewable power generation Priority development: POWER GENERATION Nuclear Hydro Renewable Putting into operation installed capacity of 23-33 GWt will increase the share of renewable energy in power generation from 0,5 to 4,5%

15. State Policy in the Sphere of Renewable Energy and Local Power Supply Sate support of Russian industry and science supplying power generation on the basis of renewable energy with equipment and technologies Attraction of investment, creation of special venture funds Support of small service enterprises, operating in the sphere of renewable energy Support of utilization of industrial and communal waste for the purpose of power generation Informational support Technical and technological control of security of renewable energy Support of utilization of local power supply in remote regions

16. Strategic Indicators of Development

17. Heat Supply Results of ES-2020 Problems Runout of basic production assets increased up to 65-70% Lack of reliability of heat supplying systems Coefficient of utilization of installed heat capacity of power plants decreased to the level below 50% High loss rate High negative impact on environment Extension of heat distribution network decreased by 5% (more than 10 000km) Lack of investment and necessity to restrain the growth of tariffs Loss rate in heat distribution increased from 14% to 20% Organizational disconnection of objects and systems of heat supply Power consumption for transportation of heat carrier increased substantially (up to 40 kWt-h/hcal) Urgent necessity of institutional reform in the system of heat supply

18. Heat Supply Strategic aims High level of comfort in residential and industrial buildings, increase in quality of service of heat supply, provided at reasonable prices Modernization of heat supply systems on the basis of innovative high-efficient technologies and equipment Decrease of unproductive loss of heat and fuel consumption Controllability, reliability, security and economy of heat supply Decrease of negative impact on environment Principles and mechanisms of realization Priority development of cogeneration-based heat supply Utilization of geothermal energy Combined operation of different sources of heat for a common heat transporting network and optimization of their functioning Development of heat supply on the basis of steam-turbine, gas-turbine, gas-piston and diesel plants in the sphere of middle and small heat load Optimization of regimes of thermoelectric plants Optimal combination of centralized and decentralized heat supply Rational combination of system and elemental reservation, transition to independent scheme of connection to heat supply and closed system of hot water supply Creation of legal framework, guaranteeing effective interaction between producers, distributors and consumers of heat

19. Technological Structure of Heat Supply • Main growth will be provided by power plants • Share of geothermal, solar and biomass sources of heat will be increased • Share of boiler-houses by 2030 will be decreased

20. Heat Consumption and Loss • Loss of heat will decrease 2-3 fold (equivalent to economy of fuelof no less than 40 mlntc.e.)

21. Investment in Heat Supply Heat supply demands 150-153 bln USD investment for the year 2030. Share of the industry in total investment in Russian FEC equals 5-6%

22. Stages of Realization 1st Stage • Optimization of centralized and decentralized systems of heat supply • Modernization of basic productive assets and transport network • Equipping of heat consumers with systems of control and regulation • Attraction of private investment • Optimization of tariffs (transition to two-part tariff) • Increase in energy efficiency of buildings 2nd Stage • Large-scale modernization of basic productive assets and transport network • Rapid development of decentralized heat supply and heat supply on the basis of renewable energy • Creation of market of heat • Further increase in energy efficiency of heat supply 3rd Stage • High level of comfort in residential and industrial buildings • Utilization of non-fuel sources of heat • Spread of high-tech automatic systems of heat supply

23. Strategic Indicators of Development

24. Thank you for your attention!