Power engineers go into failure – Kommersant

Generating companies, faced with a sharp increase in equipment prices, asked the Ministry of Energy to allow them to abandon thermal power plant modernization projects without paying fines. Energy companies already want to abandon the modernization of 13 facilities by 1.5 GW, the cost of which has increased by 79% from the original. Consumers fear that companies will later re-compete the same properties at a higher price. The Market Council believes that this idea will reduce the liability of generating companies and create incentives for dishonest participation in the selection.

Energy companies want to abandon projects for the modernization of old thermal power plants without fines and have made such a request to the Ministry of Energy, Alexandra Panina, chairman of the Supervisory Board of the Council of Energy Producers (CPE, unites generating companies), said at a meeting in the ministry. She noted that in order to be exempted from fines, companies may be required to provide documents confirming force majeure circumstances.

Now the generating companies are considering abandoning 13 modernization projects with a total capacity of 1.5 GW. The reason is a sharp rise in prices for basic equipment (boilers, turbines, etc.). Thus, at the time of tenders, generating companies estimated the CAPEX of such projects at 27.3 billion rubles, but due to a surge in inflation and rising prices for metals and equipment, their cost increased by 79%, to 48.9 billion rubles. The penalty for refusing them is 11.8 billion rubles. Ms. Panina did not name the planned dates for the launch of abandoned projects. The POC did not provide further comments.

After the outbreak of hostilities in Ukraine, the government of the Russian Federation, as part of support measures, granted power engineers the right to announce a shift in the launch of TPP modernization projects by the end of 2022. Last year, gencos took advantage of the non-penalty deferment for 12 GW projects (46% of selected projects), according to the PPA. However, companies cannot completely abandon projects without paying a fine.

Ms. Panina suggested that the right to refuse projects without a fine is “positive for consumers: they will not pay for this capacity.” “On the other hand, generators will not incur costs that are not economically viable for them. Especially for RES, such a right was granted: in 2022, about 400 MW of RES took advantage of this right,” she noted. In 2022, Fortum (controlled by the Finnish Fortum) refused 460 MW of wind power plant (WPP) projects: the company won them in 2021 for 1.72–1.99 rubles. for 1 kWh. Then the volume of wind farms had to be played again: the quota was taken by Uralenergosbyt (JV Fortuma and JSC EC Vostok) already at 5–5.6 rubles. for 1 kWh. Since the price has risen, the volume of wind farms has decreased to 55 MW.

The Energy Consumers Community believes that a non-penalized waiver of obligations is a way to shift the risks of power engineers to the economy with the ability to re-announce the same projects later with an increase in cost. “This approach encourages irresponsibility and will lead to a marked deterioration in the current business environment,” they say.

The Market Council (energy market regulator) told Kommersant that the exemption from the fine creates conditions that reduce the liability of suppliers, create incentives for dishonest participation in selections and the impossibility of achieving the goals of the TPP modernization mechanism. When considering the initiative, it is necessary to take into account the unconditional need to ensure the reliability of the energy system, they added.

Sergei Sasim of the HSE Institute for Economics and Regulation of Infrastructure Industries believes that the possibility of waiving obligations without cost implications and retaining the right to participate in selections in the future will undermine market confidence and create conditions for unfair price manipulation. According to the analyst, the government could give companies the right to refuse projects, but on the condition that neither these companies nor their affiliated organizations will participate in the next tenders with the same objects. “If they want to have the right to return to the competition, then this right should be available only if a fine is paid,” he believes.

Polina Smertina