Latest development of Russian electricity market liberalization

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Latest development of Russian
electricity market liberalization

April 22, Copenhagen
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What was before the start of liberalization
Generation
Distribution
Infrastructure
Transmission
RAO UES of Russia 72 RosEnergoAtom
20 Independent generators 8
RAO UES of Russia
RAO UES of Russia
RAO UES of Russia (through subsidiaries)
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What is now
Generation
Distribution
Infrastructure
Transmission
RAO UES of Russia 72 RosEnergoAtom
20 Independent generators 8
Federal Grid Company (100 subsidiary of RAO UES
of Russia)
ATS (market place owned by suppliers
and consumers) System Operator (100 subsidiary
of RAO UES of Russia)
RAO UES of Russia (through subsidiaries) Independe
nt distributors
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What will be in the future
Generation
Distribution
Infrastructure
Transmission
6 wholesale thermal GenCos 3 wholesale hydro
GenCos 1 wholesale nuclear GenCo (RosEnergoAtom)
20 regional GenCos
Federal Grid Company (75-100 owned by State)
ATS (power exchange owned by suppliers
and consumers) System Operator (100 owned by
State)
Independent distributors
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Russian Wholesale Power Market at the moment

• Only European part of Russia and Ural have
  deregulated sectors
• Up to 15 of generation or up to 30 of
  consumption should be traded on ATS (market
  place)
• Price at the deregulated sector is determined by
  demand and supply curves
• Price at the regulated sector is determined by
  the State on cost based principles
• Deregulated sector
• Participation threshold is 5MW of installed
  capacity
• Only day-ahead spot market
• Prices are calculated in more than 5,000 nodes
• Participants have to submit bids in every node or
  group of nodes of expected trades
• Only three levels of price setting are allowed in
  bids
• Bilateral contracts are now allowed but only
  through ATS and subject to approval of
  SO
• No balancing market all imbalances are resolved
  on the regulated sector

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Administrator of Trading System (ATS) Russian
Power Exchange

• Nonprofit partnership
• Owned by 15 producers and 15 consumers in equal
  shares
• Handling day-ahead trading
• Publishing system price ATS-100 index
• Handling all bilateral contracts
• Handling all the routines (billing, invoicing,
  collateral calculations, etc.) for day-ahead
  trading
• Handling all the routines at the regulated part
  of the Power Market
• Handling balancing routines
• Licensing of market participants

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First results - 3 months of trading
EUR/MWh
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First results - 3 months of tradingshort
analysis
EUR/MWh
Regulated tariff
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First 3 months of tradingsome figures

• Already 85 participants at the deregulated
  sector
• 16 of them are not subsidiaries of RAO UES of
  Russia
• 11 TWh turnover
• Average daily volume 130 000 MWh 7 of
  total consumption in European part of Russia
• 10 of deregulated sector bilateral deals
• Average ATS-100 12,33 EUR/MWh
• Average market price was 13,6 lower than
  regulated tariff

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Price nodes price differencesMarch 2004
EUR/MWh
Maximum price difference 2,87 EUR/MWh Minimum
price difference 2,22 EUR/MWh Average price
difference 2,69 EUR/MWh Mainly, the most
expensive nodes are situated in the areas of
Moscow, Saint-Petersburg and large industrial
centers
Maximum Hourly price
ATS-100
Minimum Hourly price
Average price curves for one month
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Price nodes closer to Europe
There is one of the most expensive areas in
Russian Market nodes near the Russian-Finnish
border Prices here are fluctuating between 13 and
15,5 EUR/MWh
Finland
Russia
Prices in rubles/MWh, 1EUR34,5 RUR
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Prospects of Russian-Finnish cross-border
trading a glance from Finland

• Could be a problem
• Non harmonized day-ahead nomination routines on
  RU-FI border will not allow for short-term
  optimization of deliveries to Finland
• Uni-directional scheme of Vyborg DC link doesnt
  allow export to Russia
• At the same time
• Quite attractive price level in Russian Market
  at the moment
• There are no restrictions for foreign companies
  to participate
• Possibilities for any company to buy electricity
  on the market place and sell it on
  Russian-Finnish border in 2-3 years time

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Financial Market Short Prospect or Far Future

• Could be a problem
• No real price indicator yet too small liquidity
• More than 5 000 price nodes
• Technical unavailability to launch financial
  market at the moment
• At the same time
• Huge potential volumes of the market
• Big hedging interest
• A lot of potential investors from Russian
  commodities market with huge amounts of free
  money

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Thank you for your attention

• Alexander Dorofeev
• Trading department
• RAO Nordic Oy
• Tammasaarenkatu 1, Helsinki 00180 Finland
• 358 10 771 55 00
• a.dorofeev_at_raonordic.com