Increasing the supply of electric power to other countries is possible, in particular, to Germany, Romania, and Bulgaria.

Russia has vast capability in exporting electric power, as its resource base is quite solid and many of its neighboring countries are not able to meet fully their domestic demand for power. Meanwhile, at present, the bulk of Russia’s electric power exports falls on Finland, with some power volumes also supplied to countries of the Commonwealth of Independent States (C.I.S.), the Baltic states, and China, among others. Analysts say Russia could expand its power supplies to more countries, but note that extra power grid capacities are needed for this task. Analysts also believe that Russia’s exporting electric power doesn’t affect domestic consumers, as power plants in some Russian regions produce more power than is consumed by their inhabitants. Moreover, power exports are claimed to help reduce power prices for domestic producers.

The majority of Russian power export and import operations are carried out by electric power company Inter RAO UES. The surveyed analysts point out that other Russian companies are also able to carry out these operations, but Inter RAO UES is maintaining a de facto monopoly. For instance, power producer Territorial Generating Company-1 (TGC-1) is independently exporting electric power to Finland and Norway. “There are already no barriers for other companies to make contracts for power exports,” said Vasily Konuzin, head of an analytical department at A’lemar Investment Group. Inter RAO UES doesn’t have a monopoly on power exports by law, and some power volumes are being exported by TGC-1 plants, said Ivan Rubinov, an analyst covering the electric power sector at the Bank of Moscow. “At the same time, Inter RAO UES is de facto maintaining a monopoly, because sales of cross flows require close cooperation with system operators of neighboring countries and the development of quite complicated information systems,” he said.

In 2010, Russia exported 19.011 billion kilowatt-hours (kWh) of electric power, according to the data from the Federal Customs Service. The share of exports made by Inter RAO UES in 2010 is not available, as the company has not yet released its export volumes for this period. In 2009, Inter RAO UES exported 15.77 billion kWh of electric power, while Russia’s total exports were at 17.90 billion kWh in that period. More than half of Russian electric power exports falls on Finland. In 2009, exports to Finland accounted for 68 percent of total exports made by Inter RAO UES, while exports to Belarus, the second largest importer of Russian electric power, accounted for 18 percent. Russia’s power export destinations also include Azerbaijan, Georgia, Ukraine, Latvia, Lithuania, Mongolia, China, Kazakhstan, and Norway. Moreover, in August 2010 Inter RAO UES started exporting electric power to Turkey.

Analysts believe Russia could expand electric power exports to other countries. “Yes, prospects for expanding power supplies to other countries exist, in particular, to Germany after the construction of the Baltic nuclear plant in the Kaliningrad region, to Romania and Bulgaria with the underloaded Moldavskaya GRES power plant belonging to Inter RAO UES,” Rubinov from the Bank of Moscow said. However, he pointed to some difficulties with expanding power supplies to more countries. “There is a chance that (power) supplies can get stuck mainly on technical restrictions for transmission,” Rubinov said, adding that current frequency standards used by E.U. countries differed from those used in Russia. “That’s why any construction of new capacities should be based on improvements in the infrastructure for (power) transmission,” he said.

Finland remains the main export destination, with the majority of Russia’s power exports falling on it, Konuzin from A’lemar said, adding that power exports to other markets were unlikely. However, Russia could increase power exports to the Baltic states, especially to Lithuania, where the Ignalinskaya nuclear power plant was shut down in late 2009, he said. But there are insufficient power grids for exports to Lithuania, he added. “Potentially, Russia could export electric power to Poland and Germany,” Konuzin also said, adding that a number of power plants, including the Baltic nuclear plant and the Kaliningrad TETs-2 thermal plant, were currently being built in the Kaliningrad region. It is expected to be “a serious region for power capacities,” Konuzin said. However, power grids need to be built to facilitate power exports from these plants, he said. Electric power produced by nuclear plants is cheap, and power produced by the future Baltic plant is to be in demand in foreign countries, but if one takes into account all capital expenditures, including those for the construction of power grids, the project is to have quite a long recoupment period, ranging from 25 to 30 years, Konuzin said.

The surveyed analysts also believe Russia’s electric power exports do not affect domestic consumers. The share of power exports in the country’s total power output is not very big, Konuzin from A’lemar said. For comparison, Russia’s power exports amounted to 19.011 billion kWh in 2010, while electric power output was at 1.036 trillion kWh, as reported by the Energy Ministry. Moreover, exports come mostly from power plants that are oriented only to exports, Konuzin said.

Analyzing the effect of Russia’s power exports on domestic consumers, Rubinov from the Bank of Moscow said that “exports and imports are very profitable for both sides, as they allow reducing power prices and loading capacities more equally, which prolongs their operating durability.” Power plants in the Russian Far East produce more power than is used by local consumers, and exports to China are among the most important factors that could in future allow for reducing power prices, he said.

Russia halted power supplies to China in 2007 as a result of disagreements over prices and resumed exports in March 2009. Eastern Energy Company (VEK), a subsidiary of Inter RAO UES supplying power exports to China, said earlier it planned to supply 1.2 billion kWh to China in 2011, up 20 percent from 2009. Generating capacities in the Amur region allow significantly increasing power exports to China, but this is not yet possible due to the insufficient throughput capacity of power transmission lines linking the region with China. The construction of a 153-kilometer power transmission line linking the Amurskaya substation with the Chinese border is to be completed by early 2012. It will allow power supplies to China to be increased to 4.5 billion-5.0 billion kWh per year, the company said earlier. The project is being implemented by the Federal Grid Company of Unified Energy Systems (FGC UES) and is estimated at 11.5 billion roubles.

Prices of power exports to China are reportedly lower than prices for Russian power consumers, but power exports are necessary as power plants in the Russian Far East produce more power than local consumers have the demand for, as claimed by the analysts. Moreover, it is not reasonable to compare wholesale prices of power supplies to China with retail power prices in Russia, as compensation for losses in power grids and payments for transmission via power lines with low tension account for half of the retail price in Russia, Rubinov from the Bank of Moscow said.

Meanwhile, power exports to the Baltic states are being provided at competitive prices, Konuzin from A’lemar said. Prices for domestically-produced power in the Baltic states are quite high, and supplying power to those countries would be lucrative, he said.

Besides exporting electric power, Inter RAO UES is engaged in power-import ing operations, but the volumes of imported power are not high. According to the data from the Federal Customs Service, Russia’s electric power imports stood at 1.644 billion kWh in 2010. Inter RAO UES imports electric power from Kazakhstan, Azerbaijan, Georgia, Mongolia, Lithuania, and Ukraine. Imports from Kazakhstan accounted for 70 percent of Inter RAO UES’ total power imports in 2009, as provided on its website. The bulk of Russia’s imports come from Kazakhstan, from the Ekibastuz GRES-1 and GRES-2 power plants in northeastern Kazakhstan, built in the Soviet era and initially intended for supplies to Russian consumers, according to Rubinov from the Bank of Moscow. Power produced by these plants is now supplied to Russia’s Kemerovo region and the southern part of the Urals federal district, according to Konuzin from A’lemar.

The Russian government is also expected to consider importing electric power from Kyrgyzstan, a spokesperson for the Kyrgyz government said in February. If such a decision is made, it will be a cross-border trade, with Kyrgyzstan’s supplying power to Kazakhstan and Kazakhstan’s directing supplies to Russia, Konuzin from A’lemar said.

“I think that it is about some future projects to build new capacities, at present there are no notable cross-border flows between our countries,” Rubinov from the Bank of Moscow said. Kyrgyzstan is now facing an electric power shortage, and even introduced phased blackouts of power supplies, as the level of water in the reservoir of its largest Toktogul hydro-power plant is now inadequate, the analyst said.