Chinese to Rescue Electricity Plans

MTUES chief Anatoly Chubais visiting the Shatura power station, which has gas- and coal-fired turbines, in August.
Chinese engineers are coming to the rescue of the electricity sector, as outgoing President Vladimir Putin backs a five-year expansion plan that will rival Lenin's drives to electrify the nation.

An estimated 41,000 megawatts of new generating capacity is to come on line by 2011, much of it coal-fired rather than gas, a goal that is way out of reach for Russian machine builders, and even threatens to swamp the order books of global giants such as General Electric and Siemens.

In search of an alternative supplier, power producer OGK-2 turned to a consortium of Chinese engineering firms, led by Harbin Turbine Co., granting them a tender to build two 660 megawatt-hours coal-powered turbines by 2012. It was the first such deal in the sector between Russian and Chinese firms.

"It is simply a necessity for us to work with the Chinese. We will not get the capacity built otherwise," said Stanislav Neveynitsyn, executive director of OGK-2, the country's third-biggest fossil fuel-run generator.

Power producers TGK-12 and TGK-13, which are together installing 2,200 megawatt hours of capacity by 2011, have also visited engineering plants in China.

"I can tell you they liked what they saw," Neveynitsyn said. "Our colleagues are watching our experience with the Chinese very closely."

Former electricity monopoly Unified Energy System designed the ambitious growth program for the sector, which it says needs $135 billion of investment by 2015 if the country is to avoid a critical shortage of power.

The sector has not seen such an overhaul since Soviet leaders Vladimir Lenin and Josef Stalin pushed to industrialize the country in the 1920s, '30s and '40s with little foreign help.

UES, the Soviet-era power monopoly they envisioned, is being split up and sold off by this summer to help pay for the new construction.

The investors buying up UES assets are committing to fulfill these expansion plans, meaning there are hundreds of construction tenders in the pipeline.

"The engineering firms that win these tenders will be those that give the best quality and price," said Boris Vainzikher, UES' chief technical officer.

"But another factor is speed. If someone offers to build cheap and build well, but only by 2015, that won't work. So in this case, the Chinese won the tender."

Going forward, speed could indeed become the main factor, as Russia plans to install some 280 turbines by 2011. Only Chinese engineers have proven capable of commissioning one per week, the pace Russia will require if it is to stave off a power crunch.

Both Russia's and China's electricity policies stand out from the West in their increasing use of coal-powered generators, whose emissions of greenhouse gases have made most Europeans move toward cleaner energy, such as nuclear and hydroelectric.

But in China, more than 80 percent of power output came from coal-fired turbines in 2007, and Russia is pushing to make coal account for 37 percent of the sector's fuel balance by 2015, up from 28 percent today.

"There will be parallel growth in the use of all other fuel types, so of course the coal will have to outpace the amount of gas, nuclear and the other types of fuel being used," said Dmitry Akhanov, head of Rosenergo, the sector's chief regulator.

He said 7,000 MW of coal-run capacity will be installed by 2012, and that by 2020 the sector's coal consumption will rise to 300 million tons per year from 130 million today.