Chinese Play Big Role in Russian Power Plans Order for Coal-Powered Turbines is Large

By Simon Shuster and Jacqueline Cowhig

Chinese engineers are coming to the rescue of the Russian electricity sector under a five-year expansion plan that will rival Lenin’s and Stalin’s efforts to electrify the Soviet Union.

An estimated 41,000 megawatts of new generating capacity is expected by 2011, much of it powered by coal rather than natural gas. This goal is way out of reach for Russian machine builders and even threatens to swamp the order books of global companies like General Electric and Siemens.

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

“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 Russian power producers TGK-12 and TGK-13, which are together installing 2,200 megawatts 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.”

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

The sector has not undergone such an overhaul since Lenin and Stalin pushed to industrialize the country from the 1920s to 1940s with little foreign help.

Unified Energy System, the Soviet-era power monopoly they envisioned, is being split up and sold off by this summer to help pay for all the new construction. The investors buying Unified Energy System’s assets are committing to fulfill these expansion plans, meaning that 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, chief technical officer of Unified Energy System. “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.”

Russia plans to install about 280 turbines by 2011. Only Chinese engineers have proven capable of commissioning one per week, the pace that Russia will require if it is to stave off a power crunch.

Russia’s and China’s electricity policy stand out from that of much of the West in their increasing use of coal-powered generators, whose emissions of greenhouse gases have made most Europeans move toward cleaner energy, like nuclear and hydroelectric.

But in China in 2007, more than 80 percent of power output came from coal-fired turbines, 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, who heads Rosenergo, the sector’s chief regulator.

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

With one of the largest reserves of coal in the world, Russia, unlike China, will not need to import it but will need to import much of the technology to build its turbines.

“The domestic metallurgical and parts market simply cannot provide what we need,” said Yuri Lastochkin, general director of NPO Saturn, a leading Russian turbine maker.

Lastochkin also conceded that Russian technology would need time to compete with foreign power engineering companies.

“The process of designing the turbines, and I’m talking about a quality product which will not lose out to foreign competitors, will require a lot of time and a lot of money,” he said.

With Russian machine builders increasingly squeezed by foreign competition, some lawmakers have floated the idea of passing laws to protect them. But Yuri Lipatov, chairman of the Russian Parliament’s energy committee, said his main protectionist fears were directed not at Asian competitors but at Europeans.

“The aim of the Europeans,” he said, “has always been to bury the competitors on the markets they enter.”

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Jacqueline Cowhig reported from London.

Originally published by Reuters.

(c) 2008 International Herald Tribune. Provided by ProQuest Information and Learning. All rights Reserved.