THE FAR EAST:

The Far East as development priority

© Yuri Smityuk/ TASS

The Far East Federal District of Russia unites  9 regions – the Republic of Sakha (Yakutia), which is the largest Russian region, situated in two time zones; 3 regions – Khabarovsky, Primorsky and Kamchatsky; 3 districts – Amur, Magadan and Sakhalin, the only autonomous district in Russia –the Yevrejskaya district, as well as Chukotka Autonomous Region, which was excluded from the Kolyma region.

The region of Sakhalin lacks land boundaries with other regions of Russia,  nor does it have land boundaries with the continent itself. Meanwhile, almost all territories of the region (except Amur district and Yevrejskya autonomous district) have access to seas, with Far East region bordering China and North Korea by land, and Japan and the USA – by sea.

The potential of the Far East is unique. This area concentrates the richest natural resources reserves with vast territories still unexplored. In Soviet times the Far East was tagged a “resource enclave” of the country; in post-soviet times this status was but highlighted. In those times, the competitiveness of the regional economy rested  on three pillars – centralized investment and credits, guaranteed sales markets and an atypical system of pricing and tarification. In today's  Russia  all these preconditions have been  destroyed. As a result, the economy was “simplified” to set the resource sector as a lead, often in the segments of the “first reordering”.

In practice, the investment attractiveness of the Far East federal district is hindered by an array of old and still-unresolved problems, such as:

• Difficult and even extreme climate conditions
• Poor exploration of the territories, vast distances between regions, many of which are accessible by air only
• Remoteness from industrially developed regions of the country
• Lack of transport infrastructure (except southern regions that are located along the TransSiberian and BAM rail lines)
• Desolated and outdated modes of energy industry infrastructure
• Ongoing emigrationEnviromental issues, especially in raw materials’ regional economies
• Increases in poaching, illegal commodity trafficking, and illegal logging
• Adequate  development of bordering regions of China

Territories of advanced development

It is well-known that Russia's federal districts were formed in May 2000. In Soviet times the country was provisionally divided into economic regions. It is worth noting that the Far East federal district’ boundaries fully match the former boundaries of the Far East economic region. The system of federal management of the Far East regional development that was formed during last few years, is also unique: Yuri Trutnev, plenipotentiary representative of the President of Russian Federation in the Far East federal region, is also a Vice-President of the Government of Russia; there is a functioning Ministry for the Development of the Far East, headed by Alexander Galushko. A similar system has been created in Crimea and in the Northern Caucasus.

Today there is an ongoing process of creating a series of mechanisms of state support that should stimulate the development of business on the territory of the Far East region. Among these are territories of advanced development (TADs), that are aimed at small- and medium-size businesses, the free port of Vladivostok, and support of infrastructure of large-scale investment projects. Priority is given to the extensive attraction of investors primarily from the countries of the Asia-Pacific region. “It is a task of the State to lower the costs of business. It is important to stress that we intentionally introduced the best practices that are in wide use in  neighboring countries into the TADs. We understand that we have not  internal, but external competition, since  we are likely to compete not with Ryazan or Kaluga, but with Hong Kong, Singapore, China, Japan and Korea”, - noted Presidential Plenipotentiary and Deputy Prime Minister of Russia Yuri Trutnev in his interview to TASS news agency.

All this goes to show  that for the federal government the Far East is never a farther region, but an important priority “development point” - or, as President Vladimir Putin has declared, “a national project of XXIst сentury”.

From dynamo-machines to giant hydro-electric stations

The construction of Zeyskaya hydropower station dam, Amursky district, 5 August 1975
© RusHydro

Before the Russian Revolution 

At the end of the XIXth and the beginning of the XXth century the development of the energy industry in the Far East primarily relied on economic grounds. However, it was the military who first started illuminating their sites : in 1885 Russian military engineers set up powerful electric arc searchlights on the coastal batteries of Vladivostok in order  to enable night shooting in case of emergency. Afterwards, large industry enterprises and trade centers took the lead in this process, as they started setting up power generators to illuminate production facilities and trade centers.

The process of building power stations for national use began only in the XX century. In October 1906 the first city power station with electric capacity of 120kWt in Khabarovsk was set up (it served city lights and incandescent lamps in private households), with the Blagoveshensk station following in 1908 (its electric power capacity was set at 250 kWtt). In February 1912 the most powerful city electric station of the beginning of the XXth century was put into operation in Vladivostok (with 1350 kWtt capacity). The power it generated was used by almost all agencies, shops, theatres and cinemas, banks, restaurants and hotels, as well as households. By 1916, its power capacity was successfully increased to 2850 kWtt. It is noteworthy that this station is still in use – now it is called “CHP-1” of Vladivostok (however, today it is not coal, but natural gas that is in use at the power station). August 14, 1914 became a birthdate of power industry in Kamchatka – that day Petropavlovsk has seen a ceremonial opening of the city communal power station with 12 kWtt power capacity, the first one in the history of the peninsula.

According to the GOELRO plan

During the civil war the power industry in the Far East was devastated: private power stations were nationalized, stopped or  ruined. The machinery was never repaired and thus was in a grievous condition. Cities faced an acute deficit of lighting. For example, by December 1918, power loss at the Vladivostok city power station exceeded 25% as a result of lack of necessary materials for repairing of power distribution grids.

In 1920, a state electrification plan was introduced in the USSR, but the Far East was not included in it. However, this mistake was soon fixed, and since then the construction of energy objects in this macroregion were followed by national industrialization programs that envisaged “5-year plans”. In 1930s, several key sites  were simultaneously put into operation – Artemovskaya district power station in Primorje region, Dalnevostochnaya special-purpose power station in Sovetskaya Gavan (known as Mayskaya district power station from 1971), Yakutskaya central power plant (built in permafrost conditions ) and Komsomolskaya CHP-2 at the Amursky shipbuilding plant #199 (still functioning). Also, 1932-1933 has seen the increase of Vladivostok city power station capacity to 11000 kWtt. In 1934 Khabarovsk communal power station was launched, later to be united with the city power station (since 1960 this station, known as Khabarovskaya CHP-2 provides heat to the central districts of the city). In 1931 the most powerful station of the Kolyma region was put into operation: the power facility  that was constructed on the shore of the Nagayev bay had an power capacity of 18 kWtt.

During World War II almost the entire energy sector of the Far East region supplied power for  military factories. Even then, at those testing times the construction of a new Chaunskaya power station was started; today this station provides power to the Chukotka region of Pevek. The machinery for the station, that was put into operation in 1944, primarily consisted of foreign machines that were captured during the World War II, with several parts  being imported from the USA.

It is noteworthy that many new power facilities  that were built at that period, started producing heat as well as power. At the same time regional energy systems and regional dispatcher units started to form, and stations in isolated energy systems were united into power plants, with Chaunsky plant being the pioneer one. They were responsible both for operation of the power generation facilities and  electric grids infrastructure that united them.

Post-war rise

In the 1950s all construction sites in the Far East that had been suspended because of war were resumed. First of all, the construction of the Khabarovskaya and Komsomolskaya CHP-1 restarted. As soon as CHP-1 was launched in 1954, the oldest Khabarovskaya power station was reorganized as a large-scale heating boiler, and central heating was introduced to the city for the first time. In 1953 the Raichikhinskaya CHP was launched – it became the first large power generation facility in the Amur region.

New energy hubs were continuously brought into unified energy systems. In 1956 Central electric grids (now operated by “Magadanenergo” joint stock company) were set up in Kolyma region. In 1957 similar processes took place in Khabarovsk region, as well as Amur and Sakhalin districts. As a result of electric grid expansion and the increase of the number of substations, joining electric grids of communal sector and agricultural industry, new power grid enterprises were created to support their construction and maintenance.

Cliff cleaning team on main facilities of the Burejskaya hydro-electric station
© RusHydro

The 1960-1990s saw a period of rise of the power industry of the Far East region. During these years, more than 20 major power facilities which  often required unique engineering solutions, were launched. For example, the Sakhalinskaya district water power station, set up in 1965, uses sea water for cooling. The cascade of Viliujsk hydro-electric power stations in Yakutiya had to be built in permafrost conditions  and severe climate, in which the majority of technical, transport and economic issues were being dealt with for the first time ever , as this types of facility had never been created in world history before. The uniqueness of the construction of Yakutskaya hydro-electric station, which started in 1968, was the setting of  pile foundation and the deployment  of turbine units in the conditions of the high North. Nerungri hydro-electric power station was built amid marshes. Experimentally, in 1966 what is now the oldest geothermal power station in Russia – thePauzhetskaya GeoHP in Kamchatka – was launched. It is still in the operation, using the geothermal energy of theKoshelev and Kambalny volcanoes at  10 productive wells, thus supplying energy to the settlements of Ozernovsky, Pauzhetka, Shumniy and Zaporozhje and the local fisheries. In 1973 the first polar atomic station – Bilibinskaya – was launched.

1968 has seen another important event – the Far East unified energy systems dispatcher control centre was founded. It unified previously segmental energy systems of the whole region. The unification of energy systems of the districts of Amur and Khabarovsky district (including Yevrejskaya autonomous region)  was completed only by 1970.

At the same period of the 1960s, the Far East saw the beginning of construction of giant hydro power stations. The first construction site was initialized in 1960 to build the Vilujskaja hydro power station to provide heat for the development of diamond deposits. In 1964, the construction of Zeyskaya hydro power station started. At that time no one could have predicted that it would take almost 20 years to build it. 1981 was marked by the initial start of the first hydro energy facility of the Kolyma HPS. It was only in 1994 that  the station successfully reached its planned full capacity of 900 MWtt, and since then it has supplied 95% of the power needed in the Magadan district. In 1986 Anadirskaya HP was launched – it permitted the closure of numerous boilers that polluted the air of Chukotka with smog.

New Times

In the 1990s with the dissolution of the USSR, the energy industry of the Far East plummeted into a devastating recession. In 1990s only the Verkhne-Mutnovskaya GeoES in Kamchatka and the Noglikskaya HP in Sakhalin were built. Finally, the results of post-soviet desolation were entrenched, with the energy system reorienting primarily to serve only communal needs and  substantial simplification of the structure of the economy and the collapse of the industrial sector.

The corporatization of the energy industry within RAO “EES Russia” concluded with the formation of unified companies on the basis of isolated regional energy systems. However, the reform of RAO, which was undertaken during 2002-2008, did not include the Far East – all state packages of companies were transferred to “RAO Energy systems of the East” - which has, since then, united generation, sales and distribution of electric and heat power. Parts of the generating assets were transferred to the structure of the future “RusHydro”. From 2011 onwards, this state holding received a controlling stake in “RAO EES of the East”. Since then the power industry of the Far East region’s economy is administered by a unified large-scale operator.

Mutnovskaya Geostation-1
© RusHydro

By and large, the beginning of the XXI century became the time of another rise in the energy industry of the Far East federal district. In 2003 Burejskaya hydro power station was launched (its construction had started in 1976). It reached its planned power capacity by 2009. In 2016, with the launching of its counter-regulator, the Nizhne-Burejskaya HPS, there will finally  be a cascade of hydro-electric plants on the river Bureya. In 2003 the largest Russian geothermal power station of Mutnovskaya was also launched. In 2013 the first two hydroelectric units with 168 MWtt power capacity were put into operation at Ust-Srednekanskaya hydro-electric power station, with the second one functioning in a cascade on the Kolyma river. Extensive gas-conversion of coal power stations also started – new hydrotechnical nodes were built at the Yuzhno-Sakhalinskaya HPS-1, and gas power was introduced both to Vladivostok and Petropavlovsk-Kamchatsky. Today there is an ongoing construction of four heat power stations in Sakhalin, Yakutsk, Blagoveshensk and Sovetskaya Gavan. The construction of HPS “Vostochnaya” in Vladivostok has been  completed. Overall, the power industry plans to put into operation about 4 GWtt of new capacity by 2025, with more than 2.6 GWtt of this set to substitute the outdated capacity. 

The energy industry in isolation

Kolymskaya HPS
© RusHydro

During the USSR period the development of the energy industry of the Far East followed a certain paradigm, that aimed at providing for the needs of industry  being created within the framework of industrialization, as well as for numerous military facilities. Efficiency, ecology, or interests of the population – all of these remained unprioritized with the tasks of the state scale being put to the forefront of development, in the  sense that they were understood in those times of 5-year planning. In post-soviet times the consumption structure changed significantly; today in several regions, i.e. Sakhalin, major power customers are represented by the local population and the communal sector, and not the remaining  industry.  Meanwhile, the military industry of the soviet period left its legacy in the region in the form of stations that function on naval heavy fuel oil (like Mayskaya hydro power station in Sovetskaya Gavan).

Vast distances between the regions, and the similarly great distances within these regions between cities and settlements resulted in another particularity of the Far Eastern energy industry – the isolation of territories. A unified energy system was absent in the Far East – unlike European part of Russia or even the bordering region of Siberia. Only in the south of the region (Khabarovsk and Primorsky regions, the Yevrejskaya autonomous region and the south of Yakutia) the power generation operates within the framework of a unified energy system of the East, with 5 isolated energy systems covering all other areas, including 2 in Yakutia. At the same time, the unified energy system of the East is itself isolated from the unified energy system of Siberia and thus is isolated from the rest of the country (intrasystem power transfers are provided by the low-220kW voltage electric transmission lines); within the system diverse technologies are at use, while they differ greatly technically (there is a predominance of electric transmission at different rates of voltage, different types of power generation and etc.) and administratively in the forms of approaches towards customers.

In the risk zone

As a result some regions suffer from an electricity deficit, while others are energy-excessive. However, there are no opportunities for electric power transmission because of the vast distances that cannot be covered by any kinds of power grid. Otherwise, the grids are so outdated that even during a 100km transmission power losses exceed all permissible limits. The problem of power reserves is also acute. “On the one hand, there are severe climate conditions – heavy winds, floods and forest fires abound. This predetermines high standards in reserving power – we should always be ready to provide our customers with light and heat on a reserve system, should the main one break. On the other hand, vast distances precondition high losses in transmission and significant costs of fuel because of the envisaged transportation costs. Add to this the issue of outdated equipment – we never had any mass renovation of machinery since Soviet times, the poor payment discipline of customers, and one gets the overall picture of conditions that we have to work in”, - explained Sergey Tolstoguzov, CEO of “RAO EES of the East” in his interview to “Gazeta.ru”

According to RAO’s experts, starting from 2020 the Far East will see massive decommissioning of outdated power facilities amounting  to more than 2 GWtt. More than 80% of power generation facilities in the region have exceeded their normative period of use; right now, 20% of turbines, with an overall capacity of 1600 MWtt and 21% of boiler units ( with steam output of 7400 tons per hour), require replacement. 80% of electricity transmission lines require urgent replacement as well. These numbers reveal real dramas, and sometimes even potential tragedies: in majority of cases the condition of power generation facilities and grids is a question of life or death for the population and for those few industrial customers that are functioning in regions with isolated energy supply. For example, before the launching of the first two hydro-electric power facilities of Ust-Srednekanskaya HPS the whole Magadan area lived in a high risk zone. Until 2013 the only power generation facility that remained in this area  was the Kolymskaya HPS, and in case of emergency there would be 150 000 people to be urgently evacuated from the region to the “greater land” (in order to decrease this risk energy experts had to keep an outmoded Arkalinskaya HPS in cool reserve before the second HPS was launched in a cascade on Kolyma river).  And this does not even begin to mention  territories, where even more outdated heating stations remain the main sources of power generation.

Ineffective tariff regulation

The Far East remains within the zone of total tariff regulations, as market mechanisms for other regions’ systems are not applicable here. Regional energy commissions usually annually set the tariffs below economy-preconditioned values. Along with state subsidies the tariff-generated revenue covers only basic repairs. Thus, the prime energy holding constantly has to borrow money from banks and from the head company of “RusHydro”. It is useless to discuss either any potential of a stable profitability or any large-scale development. Ineffective tariff creation and regulation and high debt load of “RAO EES of the EAST” are the grim realities of the Far East energy industry.

At the same time, the tariffs are hindered by  fuel costs (they constitute of up to 70% of the costs of power production). For example, it takes two years to transfer costly diesel fuel to the farther settlements of Yakutia (with account of all necessary open tender procedures and difficult logistics). The isolation of energy-consuming centers from sources of power generation is also noteworthy. For instance, Vladivostok receives power from Burejskaya HPS with the use of 500 kW transmission lines that transits many hundred kilometers from the station to reach its customers. Grids had to be constructed even along the oil pipeline “Eastern Siberia –  Pacific Ocean”. With low population density in majority of territories, network infrastructure maintenance costs are a heavy burden on the final price of electric power.

A Paradoxical Region

Alongside, the Far East is home to huge energy potential, the most important  of which is concentrated in the hydro-electric power sector – the use of water resources today does not exceed 4%. “To me, the Far East is a paradoxical region. It is both a source of many problems and a territory with a colossal growth potential. Vast distances, severe climate, floods, outdated infrastructure or even total lack of it, low population density concur with the richest reserves of oil and gas, and gold. 96% of our hydro-electric potential is unexplored and undeveloped , and if we take our industry, sea resources, as well as large-scale sales market in close vicinity to the region with a potential supplier of machinery and technology, and possibly a source of investments – represented by the countries of the Asia and the Pacific Region”, - said CEO of RusHydro Evgenij Dod to “Gazeta.ru”.

The region also boasts high potential in  other renewable energy sources – wind, sun, bio-resources, even sea tides and etc. In Soviet times Kamchatka became a real development area  for the use of volcano energy, with several geothermal stations still functioning today. It is important to know that in case of the Far East power generation based on  renewable energy sources may become a significant solution to the “fuel problem”: setting up wind turbines and solar batteries at the diesel stations that are functioning in isolated settlements helps to lower the consumption of imported fuel, thus saving on its costs.

Territory of active ongoing construction in energy industry

The construction of Nizhne-Burejskaya HPS
© RusHydro

Today the Far East region is a territory of active ongoing construction of various energy industry facilities.. Apart from the four priority projects that are currently under construction in the heating energy sector in accordance at the orders of Russian President Vladimir Putin,  the “RusHydro” group is engaged in several other construction projects in the Far East region, financed from a 50 billion rubles targeted federal budget resource package. 

All these projects aim at fulfilling both local and strategic tasks. For instance, a new HPS “Vostochnaya” is planned to meet about 20% of Vladivostok’s needs in power. Nizhne-Burejskaya HPS is to become not only the counter-regulator of the Burejskaya station, but also the prime power supplier for the Vostochny cosmodrome.

Overall, by 2025 the Russian Far East will require about 4 GWtt of new power capacity. The majority of new stations’ capacities – accounting for about 2.5 GWtt – will substitute for the outdated facilities.

© RusHydro, RAO ES of the EAST

Under united management

Burejskaya HPS
© RusHydro

The “Rushydro” group is currently developing the so-called “National Project of the XXI century”, which constitutes several projects in power energy infrastructure development. In the Far East region this group embraces the holdings of the mutual joint stock companies “RAO Energy systems of the East” and “RusHydro”. Both companies were set up as a result of reorganization of RAO “EES Russia”. The structure of the former includes the majority of hydro-electric power stations in Russia with the latter supplying the entire energy sector of the Far East, including isolated energy systems of several regions of the Far East.

In 2011, “RusHydro” became a shareholder of “RAO EES of the East” with its share of the capital increasing up to the control package of 88.8% afterwards.

As stated by “RusHydro” CEO Evgenij Dod, there will be no major new construction in the hydro-electric power sector in the European part of the country, or in Siberia. “Right now there is no need for this. We have excess hydro-electric power capacity in Siberia. When there is available unfrozen water, the price in the Siberian area drops to half of that of the winter period. We need to develop large-scale energy-consuming enterprise”.

“The use of hydro-electric power resources in the European part of the country amounts up to 80%, and in Siberian part – up to 20%, while  in the Far East – it is less than 4%. Clearly, this shows potential areas of growth and construction”, - Mr Dod  affirmed in June. Moreover, electric power from the Far East can be exported to the countries of the APR, which is also of great commercial  interest for the state-owned holding.

On hydro-electric and volcanic power

The established power generating  capacity of all the power stations of the “RusHydro” company today amounts to more than 38 GWtt. These capacities include the power capacities of “RAO Energy Systems of the East”, as well as the Boguchanskaya HPS (built within the framework of a collaborative  project with the “Rusal” United Company).

The energy facilities of “RusHydro” company functioning in the Far East region of the country account for a total estimated power capacity of 4419.2 MWtt. The state holding directly controls almost all renewable energy facilities  in the Far East region. These include:

• The Burejskaya (2010 MWtt) and Zejskaya (1330 MWtt) HPS in Amur region on the Amur river tributaries – Bureya and Zeya. Today these are the most powerful stations in the Far East. It is important to highlight that both HPSs are included in the unified energy system of the Far East
• The Kolymskaya HPS (900 MWtt) on the Kolyma river in Magadan district, which is the most productive power source for the isolated energy system of the region. In October 2013 two first hydro power facilities of the Ust-Srednekanskaya HPS (168 MWtt), which is the second one in this cascade. Annually, these have produced 361.3 mln kWT per hour of power, which accounts for more than 15% of the total consumption of Magadan district (although it had a low load within the diapason of 26 to 46 MWtt);
• The cascade of the Tolmachev HPS in Kamchatka which includes three stations with a total established capacity of 45.2 MWtt, built on the Tolmachev river.  Today they entirely fulfill the demand for energy supply for the Ust-Bolsheretsky district of Kamchatka, which permitted the decommissioning  of  diesel power. After the end of construction works on the Hydro Power Station-2 and expansion of transmission lines to reach the central power generator of the district energy system the cascade of these HPSs will  be used to level the daily and weekly fluctuations of the load chart;
• Geothermal power stations that are unique for Russia, situated in Kamchatka with total established power capacity of 74 MWtt. Among these – the oldest Russian Pauzhetskaya GeoPS which  fully meets the demand of the isolated Ozernovsky energy node, the Mutnovskaya and Verkhne-Mutnovskaya GeoPS that use heat energy of the steam-water mixture of the Mutnovsky geothermal well, situated at the bottom of Mutnovsky volcano.

In all power industry sectors

The mutual joint stock company “RAO Energy systems of the East” owns the overwhelming majority of heating stations (both coal- and gas- stations) in the Far East, which  operate both within unified energy systems of the East and isolated energy nodes of the Far East. The established power capacity of all power stations of RAO “ES of the East” totals  8982 MWtt; heat capacity accounts for 17947 Gkal\hour; total length of all electric transmission lines of all voltage classes is estimated at more than 102 000 km.

The structure of the holding also includes the cascade of the Vilujskaya HPSs in Yakutia (it includes two stations with a total estimated power capacity of 680 MWtt), power and heating distribution grids, and sales companies that sell heat and power both to households and enterprises. RAO “ES of the East” is in fact a monopoly in the Far East energy industry – in other parts of Russia production, distribution and sales have long ago been divided between different owners within the framework of RAO “EES of Russia” reform.

The “RAO EES of the East” holding includes:

• Mutual joint stock company “Far East Energy Company”;
• Stock company “Far East Generating Company” and stock company “Far East Distribution Grids Company” (these two manage the generation, distribution and sales within the EES of the East structure in Khabarovsky, Primorsky, Amursky regions, Yevrejskaya autonomous district and the southern energy district of Yakutia);
• Mutual joint stock companies “”Yakutskenergo”, “Kamchatskenergo”, “Magadanenergo”, “Sakhalinenergo” (these manage the isolated energy systems of the regions);
• Mutual joint stock company “Mobile energy industry” (develops the use of wind energy sector);
• Several companies that manage the facilities of the renewable energy sector, and so on.

Thus, “RusHydro” is present in all power industry sectors of the Far East, as it operates in production of power and heat, electric power distribution, sales of power to the customers, both individually and through its subsidiary holding company. This suggests that the power industry infrastructure of the Far East has a sole large-scale operator that views the Far East as its real and priority development point for the next decades.