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Chinese Electrical Equipment Enterprises are Expected to Join the Reconstruction of Russian Electricity Grids

www.shcri.com – Russian largest electricity grid company – Russian Electric Grid Co., LTD will sign the Memorandum of Cooperation in Economy and Trade with China Guangcai Program Group on July 9th of 2009. They will invite together Chinese electrical equipment enterprises to join the reconstruction of Russian electricity grids. The reconstruction of Russian electricity grids will last for 10 years with a total investment of nearly 100 billion USD.

According to the Memorandum of Cooperation in Economy and Trade, Russia and China agreed to raise fund in the form of export credits of Chinese banks. Russian government and banks will provide guarantees for the loans. These loans will be employed in acquiring Chinese electrical equipment and reconstructing Russian electricity grids.

Russian Electric Grid Co., LTD is a state-controlling company, occupying more than 85% of Russian electricity grids. The existing lines are over 2 million kilometers. But 60% to 80% of these lines are severely aging ones and need to be upgraded and replaced at once. It is estimated by Russia that it will need as high as 100 billion USD to replace all these lines and equipment.

China Guangcai Program International Investment Group said that the memorandum laid the foundation of the cooperation of the two groups. Russia has confirmed the total scale and prospect of export credits.

Features of Russian electrical grids

  (1) The main grid structure is almost the same as China. Russia has 77 regional electricity grids. Among them, 68 regional electricity grids constitute 7 united electricity grids. They are central electricity grids, central Volga electricity grids, Ural electricity grids, northwestern electricity grids, northern Caucasus electricity grids, Siberia electricity grids and Far Eastern electricity grids.

Beside Far Eastern electricity grids, the other six united electricity grids can run in parallel but the exchange capacity is very small, less than 5% of the dispatched capacity of the whole electricity grids. Most of the major electricity grids employ the voltage of 220-500kV, and only the northwestern and central electricity grids employ the voltage of 330-750kV.

 (2) There is a weak connection among the united electricity grids. Russian electricity grids have a large distance of electricity transmission and a small conductor cross-section area of electricity transmission lines in the grid structure. This has limited the exchange capacity of interconnecting ties and can’t carry out the economic operation in the whole grids. The most typical case is Siberia electricity grids. The rich water and electricity resources can’t be sent to Ural united electricity grids in the high flow period and they have to give up generating electricity.

The deficiencies of Russian electricity grids

(1) The serious deficiency of the investment. Since 2000, Russia has seen a rapid growth of economy with a continuous growth rate of 5% to 8%. The demand for electricity has continued to increase. But because the construction of electricity is seriously backward, the contradiction between supply and demand has intensified. From 1992 to 2006, the capacity of electricity only increased 3 million kilowatts. The annual growth rate of the construction of electricity grids was only 0.4% and the project costs were twice those of other countries. Therefore the electricity equipment had become severely aged and about 2/3 of the electricity equipment had worked over 30 years. The line loss rate was above 12%. The hours of generating electricity had increased from 5,600 in 1995 to 7,100 in 2007, which had approached the limit of electricity equipment.

 (2) The electricity companies face financial problems. The financial index of most electricity companies has become worse and worse. For many years, large quantities of users have owned a total of over 125 billion RBI (almost the same with the annual income of a holding company) of electricity bills. Many electricity users have to pay for bills with products, making the financial situation of electricity companies much worse.

 (3) The reliability of the electric system has fallen down. The controllability and validity of the functions of the electrical system have reduced greatly, because the crisis of financial settlement among electricity companies (united electricity grids) often happens and this results in an unreasonable and uneconomical pattern of management and operation of the united electrical system. It is estimated by World Bank that Russian electricity industry loses over 1 billion USD annually because of this.

 (4) The level of technology has fallen down. The potentiality and the level of technology of the manufacture of electrical equipment and the construction of electrical projects have fallen down. The electricity industry doesn’t have enough software and hardware systems to manage electricity enterprises effectively.

Many Chinese electrical equipment manufacturers have worked in the electrical fields with a low pressure of 35KV. There is surplus productivity and a low rate of gross profit. Because Chinese manufacturers can assimilate the techniques quickly, the competition has been expanded to the electrical area of middle pressure. We can observe 252 KV GIS which has a comparatively high level of technology. Chinese equipment is sold at a price of 1.2 million USD to 1.3 million USD per space, while foreign-funded products are sold at a price of 1.3 million USD to 1.5 million USD per space. The price of domestic equipment has a obvious advantage.

At present, China has been able to develop and produce the important equipment of extra-high voltage such as transformers of extra-high voltage of 1,100KV, reactors of extra-high voltage of 1,100KV and direct valves of 800KV. According to the extra-high voltage modeling projects which are under operation and the direct electricity projects which are under construction, the rate of localization has reached above 90% and the equipment has a high rate of reliability of operation.

Source: China Research and Intelligence

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About the Author

Based on the database, Interviews and research methods from China Research and Intelligence, CRI analyzes the development and opportunities in this industry clearly.
Contacts:
Eileen Gu
China Research and Intelligence
www.shcri.com
Email: eileen@shcri.com
TEL: 86-21-6852-1029
86-21-5842-6733

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