Changes afoot in russian electricity market

Paul Boughton

Following the fall of the Soviet Union in 1991the Russian economy slumped into deep decline and the demand for electricity and gas plummeted.

While the economic recovery that began in the late 1990s has led to a steady growth in demandaccording to a new report from independent market analyst . The years of neglect have affected the infrastructure of the Russian industry to the point that without private investmenta lack of capacity may effectively place a cap further economic growth.

The Russian power market is dominated by former monopoly RAO UES (Unified Energy System)which in 2004 accounted for 72 per cent of the installed capacity69 per cent of power production and 71 per cent of end-user sales. The Federal Network Company (FSK)owner of the high-voltage gridis also a RAO UES subsidiary.

RAO UES is 52.7 per cent owned by the Russian statewith a further 10.3 per cent owned by the state-controlled Gazprom. However under the industry restructuring and liberalisation plans to 2008the state will concentrate its ownership in the high-voltage grid (increasing its share to 100 per cent)while non-nuclear generating assets on the one hand and regional distribution companies on the other will eventually be privatised.

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