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Interview

with Evgeny Dod, Chairman of the Management Board, RusHydro

23.11.2012 / Energyboardroom

The global energy mix is changing. The world is diverting from oil and gas and increasingly focusing on cleaner and renewable sources of energy. How do you now see the global perception towards hydropower and what do you identify as the current trends in the sector?

The global hydropower sector is experiencing a number of interesting trends. I am convinced that hydropower plays a very important role within our global society. Lately, numerous experts have stated that the construction of large hydropower plants (HPPs) and the use of renewables will play a key role in the 21st century. It is important that during the 6th International Water Forum the World Bank – which is one of the main partners in hydropower – underlined the role of new hydropower projects as the basis for sustainable development.

One cannot look at hydropower in a vacuum; it is not a matter of energy alone. For instance, the construction of large

hydropower facilities is also important from the point of stable water supplies, which are crucial for instance in regions like Africa and Central Asia. Moreover, large water basins and water course regulation also offer security, and may protect against floods. The hydropower sector can provide comprehensive solutions to develop the living environments of people around the world.

One should also be aware of the fact that hydropower is not only about HPPs; there are also other sources such as tidal energy and pumped storage. Technological progress in these areas has now reached the state-of-the-art level. Moreover, capital expenditures (CAPEX) levels in hydropower have now decreased which made such projects more viable from commercial point of view.

You took over the leadership of RusHydro together with a number of top managers from INTER RAO UES at the end of 2009, when both Russia and the world were going through a transitional phase. Internationally, the world was facing the midst of the global financial crisis while in Russia, the power sector was still going through a phase of transformation. At the same time, your arrival took place only a few months after RusHydro experienced a serious incident at its Sayano-Shushenskaya HPP. Have these first three years been an opportunity for RusHydro to have a new start?

Exactly after three years, we can certainly draw a number of conclusions today. Our main task in November 2009 was to deal with the consequences of the Sayano-Shushenskaya HPP incident, a task that has been carried out successfully. We have set a fast pace of reconstruction and renovation of the plant. It will be accomplished in 2014. The number of new projects is also unprecedented: 4,000 MW of new capacity will be commissioned in 2012, and 10,000 MW more – by 2015. These are unique volumes for the hydro sector in Russia as well as in the Soviet Union.

We are also carrying out successfully a program of modernization of our existing plants. We are planning to invest roughly USD 10 billion in this program with expected dates of completion within the next ten to fifteen years. This modernization process is unique in the world. It allows a full renovation of all RusHydro HPPs and enhances the reliability and efficiency of our plants. I am convinced that our company will complete this task fruitfully.

Considering that only 20 percent of Russia’s hydro resources have been developed to date, the potential for the future is significant. HPPs can be considered as a stimulus for growth of regional industrial clusters. For example, we are now at the commissioning stage on Boguchanskaya HPP with installed capacity of 3,000 MW. It is the basis of the Angara river region development. Now we are working closely together with Rusal on the construction of aluminum plant with the capacity of 600,000 tonnes of aluminum. For certain regions such as Northern Russia, Northern Canada, Brazil’s Amazon region, Central and Western China, low cost energy through hydropower can certainly be the engine of industrial development.

To investors you have announced great potential for the Far East of Russia. Can you elaborate on the expansion strategy of RusHydro there?

RusHydro’s expansion strategy is mainly focused on Russia. When the government decided to provide us the assets of RAO UES of Far East, around 9,000 MW of installed capacity and several networks in that region were added. We are working at synchronization of our investment programs with the construction of comprehensive infrastructure in Siberia and the Far East. We now have expansive investment projects towards the modernization of the energy sector and the construction of new facilities in that region.

While our priorities clearly focus on Russia, we do have some international projects too. Today, we own the 561 MW cascade HPP in Armenia and also have a cascade project lined up in Naryn, Kyrgyzstan. Our project institutes are also working on projects in India, Vietnam and Africa. We also believe in significant potential for tidal energy in Chile and Argentina. Whereas we would be keen on working in Europe, the limited potential there has urged us to look at other parts of the world, such as Africa and Latin America. We are now analyzing different opportunities outside Russia first of all as a contractor. When doing so, we will carefully enter those projects taking all possible risks into consideration. Our construction experience in Russia and our background at INTER RAO UES will enable us to be very competitive.

Anyone looking at Russia may first think of oil and gas rather than hydropower. How difficult is it for a Russian flagship company to sell the idea of clean energy abroad?

Russia is a unique country and we are fortunate to have such large reserves of hydrocarbons. As a nation, we are certainly focused on using oil and gas as energy sources. These hydrocarbons are cheaper to use and consumers are still unwilling to pay for more expensive energy from wind, solar and biofuels. Our consumers are not yet ready to pay these higher tariffs simply for the sake of the environment. As a result, the returns for companies operating in such sectors have also not been attractive. The Russian government has now put programs in place to increase the share of renewables up to 4 percent soon. We now also have programs in place for the construction of smaller distributed energy from wind energy or HPPs with installed capacity under 25 MW for instance.

As a company operating in the area of renewables, we try to effectively push these initiatives in Russia. This does not only include hydropower, but also geothermal and solar energy. While this is not easy, Russia is also not an island: the global trend will soon arrive in Russia too.

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