Power engineering, including such contractors as transport companies, is now living through its golden age: mandatory investment programs of generating companies provide the industry with plenty of orders. But there is a high risk that rich years will be replaced with lean ones, when power industry will not be able to keep up current pace of new generation construction.
Unfortunately, the kinetic energy charge obtained by the industry from RAO UES is not endless. Orders are enough for everybody while engineering is booming, and one of the most common complaints of the market participants has recently been lack of available manpower resources. But in the future, the industry will face the “problem of 2015”. By this year, almost all new primary generating capacities, included into mandatory WGC and TGC investment programs, will be put into service. But it is not quite clear who will provide the market with new orders, what will be the volume and how many companies will be able to get adjusted to new conditions.
Given the monopoly in the sector – in 1990s and 2000s – the quantity of new built thermal power units was next to none. “The situation became a little bit better in 2000-2008 with CCGTs becoming operational at North-Western CHP, Sochi TPP, Kaliningrad CHP-2, Ivanovo GRES-CCGT, CHP-1 – Belgorod, CHP-27, CHP-23 Mosenergo,” Valery Korobov, Head of ZAO Energoproekt construction operations HQ, names the RAO epoch milestones.
New investors were successfully allured by generating companies put on sale, and the only actual condition for new owners was mandatory investment programs: within several years, WGC and TGC were to put new power units into service. In return, PSA (power supply agreements) were promised to the power industry representatives: according to them, new generation was to obtain higher income which guaranteed payoff of investments.
The prospects of multi-billion orders cheered up engineering branch, which had been in the anabiosis before, and a number of adjacent branches. But the peak of construction will definitely finish by 2015 – and what’s next? “In accordance with the RF Government Decree dated August 11, 2010 on commissioning of generating facilities which will be used to supply capacities as per PSA, 134 units with an overall installed capacity of 25.2 GW are targeted to be commissioned in the period of 2010-2017, clarifies Valery Korobov. – Commissioning will be almost completed by 2015 (in 2016 and 2017, one unit will be put into service each year).”
Such ideas as DPM-shtrikh (barcode) program, i.e. new tools for investment guarantee, are sometimes discussed by officials, but there are still no real programs of this kind. “Judging by records of meeting of Sergei Shmatko, the Minister of Energy, with managers of generating, grid and power supply companies, we can see that upon PSA expiration, the issue of further commissioning of capacities is not resolved,” says Mr. Korobov. According to the expert, the market itself is not able to guarantee payback of new capacities. Therefore, any time soon (two, maybe three years) the key question will be: who will provide engineering, production and transport companies with the next stock of orders?
But commissioning of new capacities will not resolve the issues of power industry ageing in the last years. “Thus, 25.2 GW of latest equipment will be added to 216 GW (current capacity as of the beginning of 2009 – BG) – 11.68%, says Valery Korobov. – However, operating TPP equipment will be seven years older, inevitably reaching the line of expected avalanche-type breakdown or its forced decommissioning due to depletion of its economic life.” As counted by the manager, “operating TPP equipment which was commissioned till 1970 – and this is 38% (82 GW) of installed capacity – will reach the age of 47-60 years by 2017.”
The hope is that the need for a new wave of major energy construction will become imminent by 2018-2020, when the time will come to substitute main equipment at many large plants in Russia. The majority of plants – GRES – were built in the second half of the 60s and 70s of the last century. It means that by 2020 these power facilities will be 50 years old and they will reach the end of their economic life. Extension of service life of such plants is possible for several more years, but it is mostly related to the need of reducing initial parameters (temperature, pressure), and consequently it will lead to lower efficiency and increase of fuel consumption.
Even the Ministry of Energy admits that old capacities will anyway have to be closed; state forecasts, programs and general schemes of industry development imply rapid increase of decommissioning the obsolete generating capacities.
“By 2030, more than 50 GW of obsolete and inefficient TPP capacities will be decommissioned, and these capacities need to be substituted in any case, as the power consumption in the country is rising,” believes Timur Avdeenko, OAO EMAlliance President. But the power demand is increasing rather slow at the moment, by a couple of percent annually on average, notes Sergei Pikin. “This entails that old, not really efficient but operating power plants can cover the current power consumption, and demand for new capacities is not growing,” he adds.
In this respect, it is expected by many that the role of investment driver will traditionally be taken by the government. The market itself is not able to guarantee return on new capacities. “Association of engineering companies shall raise the issue with the Ministry of Energy on establishment of the action taskforce to prepare proposals and let them be reviewed by the government in order to adopt a program on annual commissioning of new capacities in the period from 2018 till 2030 in the amount of at least 6-7 GW,” believes Mr. Korobov.
Main players of the industry expect the sector to experience a number of difficulties. “Suspension of commissioning new capacities at TPP will inevitably lead to breakup of groups in the project sector which has recently been struggling to rise from ashes, and also to loss of specialized installation subdivisions and significant drop of production at power equipment factories. There will be other social consequences,” warns Valery Korobov.
Editorial note. One can easily guess that transport companies will also have tough times after 2014. There is also the “problem of 2020” when it is planned to fully complete rehabilitation of Russian refineries. Oil refining and power industry are the two primary markets which have been providing jobs to the Russian companies involved in the extra heavy lift and oversize freight market for the last few years. Hopefully, these basic branches for the country’s economy will not be neglected by the state, and a new and similar efficient investment-attracting tool will be found.
Adapted from Vedomosti newspaper
As of today, the average age of equipment at thermal power plants (TPP) makes 30 years. Way over the limit is the age of generating equipment: under 30 years – 41%; from 31 to 50 years – 52%; above 50 years – 7%. About 60% of TPP steam turbines have depleted their economic life. Average age of hydropower plants (HPP) is 35 years. Service life of equipment here is as follows: under 30 years – 22.3%; from 31 to 50 years – 56.8%; above 50 years – 20.9%. Half of the hydraulic turbines are already through with their service life. Forecast for the near future is harsh. Most of operating power units will deplete their economic life by 2020. On top of that, the age of all 150-160-MW units and about one third of 200-210-MW units will exceed 50 years.