The Russian electric power grid complex requires large-scale modernization, and with government officials calling for the modernization to be innovative, projects to integrate smart grid technologies have already started in Russia. While some analysts say these technologies will allow grids’ economic life to be extended and their efficiency to be increased, others say that the need for a simple renovation of facilities is more acute at the moment.

The current state of the Russian electric power grid complex raises concerns due to its high worn-out level, which leads to power losses in grids and disruptions of power supplies. “At present, the worn-out level of Russian power grids amounts to around 70%,” said Vladimir Sklyar, an analyst covering power utilities at Renaissance Capital. Of the total 2.5 million kilometers of power lines in Russia, 1.5 million kilometers have already worked out their economic life, he said.

“The current condition of Russian power grids is very poor,” said Vasily Konuzin, head of an analytical department at A’lemar Investment Group. The average worn-out level amounts to 70%-80% and reaches 95% in some regions, he said.

The Federal Grid Company of Unified Energy Systems (FGC UES), which manages Russia’s electric power grids, also said the grids’ current state “didn’t meet modern requirements for ensuring the reliability of power supplies and increasing the economy’s energy efficiency.” Moreover, FGC UES complained about the outdated information systems and systems of technological management used in the sector.

Power companies and top Russian government officials have been calling for large-scale modernization of the grid complex for a long time, and projects to upgrade and renew grids are already being implemented. Energy Minister Sergei Shmatko said in mid-2010 that the modernization should be innovative and envision a switch to innovative energy technologies of the 21st century.

The integration of smart grids is regarded as being one of the most promising ways of development. Pilot projects to build smart grids are already being implemented in the U.S., China, Canada, the E.U., India, and Japan.

Smart technologies are expected to allow grids to independently control their state and the operations of consumers, power producers, power lines, and substations. Special smart meters are expected to define the peak burden on grids and the volume of consumed power, making grids capable of distributing the burden in a way that is to allow disruptions of power supplies to be avoided. The grids would be able to automatically reveal the poorest sections or elements that could lead to accidents, and make rearrangements to avoid breakdowns.

So, power grids should be flexible to forecast possible changes and problems and react to them; affordable, so that all power producers operating on renewable energy sources can connect to grids; and reliable, to ensure safety and good quality of power supplies.

Steps to integrate smart technologies into the grid system are also already being taken. The development of smart grids in Russia is one of the priority projects of the presidential commission for modernization and technological development of the Russian economy, presidential aide Arkady Dvorkovich said in June 2010.

The creation of smart grids is strategically important for FGC UES, the company’s CEO Oleg Budargin said in June 2010. In 2010, FGC UES approved a 5-year program to create a technological platform for building smart grids. Specifically, the company plans to form a technological platform and a legal basis for smart grids over the first three years and carry out pilot projects during the subsequent two years, Budargin said then.

FGC UES is already implementing a number of projects in this field. It is now integrating a back-to-back station at the 220-kilovolt (kV) Mogocha substation in the Zabaikalsky region, which would allow the power systems of Siberia and the Russia’s Far East to be united.

Analysts do not have a consensus on whether it is necessary to form smart grids in Russia. “The integration of smart grid technologies will allow grids’ economic life to be extended and their efficiency to be increased,” said Sklyar from Renaissance Capital. In Russia, there are currently no technologies for defining troubled segments of power grids, and the level of servicing is low, Sklyar said.

Meanwhile, Konuzin from A’lemar said he believed that a simple renewal of power grid facilities was more important at the moment. “The integration of smart grids is reasonable, however, the replacement of worn-out cables is more acute,” Konuzin said. In rural areas, smart grids are not necessary yet, he added. The analyst, however, supported the use of modern technologies. “If modernization of the Russian power grid complex is to be carried out, then it is reasonable to use modern technologies, not those of the Soviet Union,” he said.

Konuzin also said it was profitable to use smart technologies, as they ensure correct metering of transmitted power, monitor the technological state of grids, and allow quick responses to accidents such as ruptures of power transmission lines. Moreover, the use of all possible data transmitters is not so expensive, he said.

FGC UES expects upgrades of grid facilities and the integration of smart grids to reduce power losses in grids by around a quarter. Power losses in Russian grids, both main and distribution, currently stand at 13%-15%, as estimated by Sklyar from Renaissance Capital. As a comparison, losses in U.K. grids amount to 7%-9%, the analyst said.

Sklyar was not able to estimate by how much smart technologies could reduce technological losses in grids, but said that a renewal of power grids was necessary to reduce the losses. The analyst noted that there were also commercial losses in grids, or simply thefts, and smart grids could solve this problem. An operator can watch all power transfers from power producers to consumers and will immediately see all violations, he explained.

At present, power losses in grids are estimated at 12%-15%, Konuzin from A’lemar agreed. “If all of the country’s grids are renewed, the loss level could be reduced to 4%,” he said. “But it is necessary to understand that the renewal of all lines is not realistic, as this requires trillions of roubles,” he added. The current investment programs of FGC UES and IDGC Holding allow reaching a less significant result, he said.

The surveyed analysts also agreed that foreign participation is required to create smart grids in Russia. “Foreign equipment is definitely necessary to build smart grids in Russia,” Sklyar from Renaissance Capital said. Foreign equipment is more efficient than domestic equipment, there are no such technologies in Russia, he said. FGC UES buys 60%-80% of equipment abroad and has the resources for such purposes, the analyst also said.

Konuzin from A’lemar said he believed it was reasonable to attract foreign technologies. It is necessary to buy all tech-nologies abroad, as technical solutions have already been developed there, or  organize their production in Russia, he said.

Commenting on whether foreign investors could take part in the creation of smart grids in Russia, Sklyar from Renais-sance Capital said that attracting foreign investors was a strategic issue for the sector. President Dmitry Medvedev recently ordered to speed up work to either privatize distribution grid companies included into IDGC Holding or transfer them for management to private investors, including foreign ones. IDGC Holding recently signed a final agreement to transfer the management of Tomsk Distribution Company to Electricite Reseau Distribution France (ERDF), 100%-owned by French electric power utility Electricite de France (EDF). If the right economic conditions are created, then foreign investors may show interest in IDGCs, Sklyar said.

The system of rate calculation for Russian power grids is quite currently favorable, and foreign investors are likely to be interested in them, Konuzin from A’lemar said. The arrival of foreign investors could become a stimulus for the development of smart grids in Russia, he also said.

The surveyed analysts believe the project to build smart grids in Russia is quite realistic. The project is part of a 952 billion ruble investment program of FGC UES by 2015 and is also included into the capital expenditures of interregional distribution grid companies. However, Sklyar noted that the government was now aiming to curb power rates growth, which is to lead to lower revenues for companies. “If the government agrees to allow hikes in rates and companies fulfill their investment programs, then the project to build smart grids is realistic,” he said. Sklyar also noted that the formation of smart grids was possible only in the mid-term and should not be expected in the near future.

Smart grid development is realistic in those localities where there is a sufficient personnel resource and infrastructure, said Konuzin from A’lemar. Talking about Russia as a whole, the need to renew the equipment is more acute, he said.