Quadroopter – Newspaper Kommersant No. 36 (7481) of 03/02/2023

Energy company “Quadra – Power Generation” (controlled by “Rosatom”) fails to withdraw from the wholesale energy market Livenskaya CHPP. The company wanted to bypass the general rules to transfer the paid-off power unit to the retail market in order to sell energy at higher prices. Rosatom claims that the CHPP has become economically inefficient at wholesale due to equipment defects and the removal of old steam turbines. “Quadra – Power Generation” offered to pay the market an increased fine, but faced resistance from the Ministry of Energy and industry.

“Quadra – Power Generation” was unable to obtain permission to withdraw Livenskaya CHPP from the wholesale energy market. The Supervisory Board of the Market Council (energy market regulator) did not make a decision on this issue on February 28, sources told Kommersant and confirmed it in the regulator. Deputy Energy Minister Pavel Snikkars, according to Kommersant, voted against, while representatives of energy consumers abstained.

Kvadra has been trying to transfer the station to the retail energy market since the end of 2022, almost immediately after the completion of increased payments for energy capacity. The Livenskaya CHPP powered by a GE gas turbine and a waste heat boiler from Energomash started operating in 2013 under a program of capacity supply agreements (CDA, which guarantees the investor a return on investment). The total revenue of the CHPP for capacity during the CSA period, according to Kommersant’s sources, amounted to about 3 billion rubles.

In 2022, the power unit began to sell capacity on general terms at lower competitive power take-off (CTO) prices. The CHPP is obliged to supply power to the CHP until 2026 inclusive. It is impossible to close the CSA block: Livenskaya CHPP is obliged to operate until 2036.

Retailing of CHPPs would make it possible to sell energy directly to the consumer at a higher price than wholesale. However, according to the current rules, Quadra could not do this: Livenskaya CHPP, according to the documents, had an installed capacity of 30 MW for the entire period of the CSA, while retail facilities with a capacity of no more than 25 MW can operate. In the fall of 2022, Quadra announced a reduction in CHP capacity to 24 MW and submitted the relevant documents to the Market Council.

The System Operator (energy system manager) told Kommersant that Quadra had notified them of the change in the technical characteristics of the CHPP, and then carried out tests in which it “carried a load corresponding to the declared (reduced power)”. “The decrease in power is due to defects in the waste heat boiler identified during operation and based on the conclusion of the manufacturer,” Kommersant was told at Rusatom Infrastructure Solutions (RIR, which manages Rosatom’s non-nuclear energy assets).

The industry and the Ministry of Energy initially opposed the launch of CHPPs for retail. As a compromise, Quadra offered to pay the market higher fines for withdrawing from the KOM four years earlier. According to the usual rules, the amount of the fine would have been 80 million rubles, and the energy company offered to double the amount, Kommersant’s sources say.

“The construction of power units under CSA is expensive for consumers, so it is advisable to exclude not only their premature decommissioning, but also the equivalent transfer from the wholesale energy market to the regional retail one,” Kommersant was told in the Community of Energy Consumers. “This will encourage suppliers to more responsible operation of equipment built at the expense of consumers”.

The RIR notes that their proposals “are aimed at ensuring reliable and safe operation of the Livenskaya CHPP.” “Quadra – Power Generation” has fulfilled all obligations under the CSA and is ready to pay a fee for refusing to supply capacity to KOM. They emphasize that within the framework of the CSA, a gas turbine unit was built at the Livenskaya CHPP, which until last year was operated together with old steam turbines. Due to the withdrawal of steam turbines that have exhausted their resources, “the fuel efficiency of work has significantly decreased, due to which its operation at the opt has become economically inefficient.”

Payments under CSA and KOM differ by about six times, part of the generation in KOM becomes unprofitable, says Sergey Sasim from the National Research University Higher School of Economics. Leaving retail could be a way to minimize losses or make up for lost profits from the drop in revenues after the CSA, he continues. A retail generating company can double or triple its income, and the end user can get a 10-15% discount. Wholesale and retail generation are in unequal conditions, such distortions reduce incentives for investment in efficient generation and limit the development of competition in the industry.

Polina Smertina