BMI View: The Russian power sector is expected to continue to face severe challenges in 2017, amid a persisting global oil glut, a weak economic return to growth, rising political tensions that further undermine investor sentiments and a depreciated rouble. Following four consecutive years of falling consumption levels, further issues of over-capacity leave little incentive for growth i n the power market, leading to a muted outlook for the sector in our ten-year forecast.
|e/f = BMI estimate/forecast. Source:EIA, UN, BMI|
|Generation, Total, TWh||981.000||988.000||999.000||1,001.000||1,015.000||1,020.000||1,043.000|
|Consumption, Net Consumption, TWh||851.0||850.0||861.0||870.0||881.0||889.0||901.0|
|Capacity, Net, MW||242,442.0||246,351.0||247,313.0||249,637.0||253,090.0||255,269.0||259,723.0|
Latest Updates And Structural Trends
Ongoing economic and political tensions continue to play a crucial role for our 2017 outlook of Russia's power sector. The annexation of Crimea and the Russian military intervention in Syria have increasingly been perceived as Russian belligerence towards the West and thereby shattered investor confidence, deterring significant foreign investment. Meanwhile, global oil prices continue to be affected by a global oil glut with prices of about USD50/bbl in late 2016, and expected to continue in early 2017. These developments in combination with tight credit conditions and a depreciated rouble have made the government's budget assumptions untenable, which will necessitate further spending cuts.
While these fiscal pressures in Russia appear to be accelerating the privatisation of stakes in state-owned companies, including state-owned oil giant Rosneft, we are sceptical this will play out according to plan, given deep suspicion among the Russian population of privatisations following the experience of the 1990s, as well as the reluctance of President Vladimir Putin to relinquish control over strategic assets, and in particular at severely discounted valuations.
Weak electricity demand is resulting in overcapacity and feeding into lower capacity payments in some of Russia's wholesale electricity pricing zones - weighing on the margins of utilities. Russia awards capacity payments to existing power plants through competitive auctions to ensure plants remain capable of dispatch during periods of high electricity demand. Capacity auction payments in 2016 in Russia's first pricing zone (spanning European Russia and the Urals) fell 15.3% y-o-y on account of overcapacity amid weak demand.
In October 2016, Rosneft bought a controlling stake of 98% in India's Essar Oil and its port facilities at Vadinar for USD12.9bn. The deal is furthering cooperation between the two countries as Russia is seeking new markets amid Western sanctions.
Georgia, Iran, Armenia and Russia agreed in April 2016 to create a joint electricity market by 2019. The market will initially be open for large-scale users who use high-voltage networks. Following a successful first stage, the market may be liberalised for small and medium power users.
We have largely retained our forecasts for sluggish growth in thermal-fired power generation over our 10-year forecast period on account of generation overcapacity in some of Russia's electricity pricing zones, weak electricity demand and a deteriorating economic environment. We expect gas-fired electricity generation to register muted annual average growth of 1.07% between 2016 and 2025 - and maintain a steady 45% share of the generation mix over the next decade amid limited expansion in renewables and nuclear capacity.
The Russia Power Report features BMI Research's market assessment and independent forecasts covering electricity generation (coal, gas, oil, nuclear, hydro and non-hydro renewables), electricity consumption, trade, transmission and distribution losses and electricity generating capacity.
The Russia Power Report also analyses the impact of regulatory changes, recent developments and the background macroeconomic outlook and features competitive landscapes comparing national and multinational operators by sales, market share, investments, projects, partners and expansion strategies.
- Use BMI's independent industry forecasts for Russia to test other views - a key input for successful budgeting and strategic planning in the power market.
- Target business opportunities and risks Russia's power sector through our reviews of latest power industry trends, regulatory changes, and major deals, projects and investments in Russia.
- Assess the activities, strategy and market position of your competitors, partners and clients via our Competitive Landscape analysis.
BMI Industry View
Summary of BMI’s key industry forecasts, views and trend analysis, covering power markets, regulatory changes, major investments, projects and company developments.
Industry SWOT Analysis
Analysis of the major Strengths, Weaknesses, Opportunities and Threats within the power sector and within the broader political, economic and business environment.
BMI’s Power Forecast Scenario
Forecasts to end-2024 for all key indicators, supported by explicit assumptions, plus analysis of key downside risks to the main forecasts:
- Generation: Electricity generation total, thermal, coal, natural gas, oil, nuclear, hydropower, hydro-electric pumped storage and non-hydropower renewables.
- Transmission and Distribution Losses: Electric power transmission and distribution losses.
- Trade: Total imports and exports.
- Electricity Consumption: Net consumption.
- Electricity Capacity: Capacity net, conventional thermal, nuclear, hydropower and non-hydroelectric renewables.
BMI’s Power Risk Reward Index
BMI’s Risk Reward Indices provide investors (power companies, service companies and equity investors) looking for opportunities in the region with a clear country-comparative assessment of a market’s risks and potential rewards. Each of the country markets are scored using a sophisticated model that includes more than 40 industry, economic and demographic data points to provide indices of highest to lowest appeal to investors,
Structure, size and value of the industry sector; overview of the industry landscape and key players; an assessment of the business operating environment, sustainable energy policies, pricing and the latest regulatory developments.
Key Projects Database
Details and analysis of all current and planned developments (new ventures, capacity expansion and other investments) across the sector broken down by location, sector type, capacity, value, companies and operational status.
Illustration of the power industry that exploits our data-rich, in-depth analysis of the leading players in the sector and examination of operational results, strategic goals, market position and the potential for investment.
Power Outlook long-Term Forecasts
Regional long-term power forecasts covering electricity generation, consumption and capacity for thermal, hydroelectric and nuclear power. These are supported by a country specific overview, alongside an analysis of key downside risks to the main forecasts.
Providing BMI’s near-term economic outlook for the region as a whole, as well as taking a close look at countries of particular interest and the latest trends and developments.
The Power Market Reports draw on an extensive network of primary sources, such as multilateral organisations, government departments, industry associations, chambers and company reports, including Energy Information Administration (EIA), World Bank (WB) and United Nations (UN).