Grigory Vygon at SPIEF 2017: "New technologies in energy will inevitably lead to a revision of the industry regulation system"

Jun 1, 2017

VYGON Consulting Managing Director Grigory Vygon took part in the panel session "Smart Energy: how technologies affect the fuel and energy balance" as part of the business program of the first day of the St. Petersburg International Economic Forum. In his speech, he presented the impact assessment of accelerated introduction of new technologies for consumers.

Improvement of electricity production, distribution and storage technologies, introduction of smart grids and digital substations, development of consumer services and commercial accounting solutions creates the prerequisites for major changes in the global fuel and energy balance. How should Russia act with regard for these trends? How to balance the maintenance of competitiveness of conventional export energy resources with participation in the energy IT race? How to become a world leader in providing technological solutions for the Smart Energy of the future? These were the topics discussed by the panelists.

Head of the Analytical Center of the Fuel and Energy Complex of the Russian Energy Agency of the Russian Ministry of Energy Pavel Sorokin moderated the session. "Consumer habits and gadgets will determine the energy balance of the future. In this dynamically developing world, it is imperative not to lag behind the development of modern technologies. For our country – the world's largest energy player – this is critical," he said in opening the panel session.

First Deputy Minister of Energy of the Russian Federation Alexey Teksler was the first to address the panelists. "We see how intellectualization and digitalization of energy are going on. Smart grid, consumer services and demand response technologies influence the energy sector and effectively help to reduce costs. Further, these global changes will occur at a faster pace. In this situation, Russia needs to ensure its own competitiveness on the world market," he stressed the importance of the topic under discussion.

Chairman of the Management Board of RUSNANO Management Company Anatoly Chubais, CEO of En+ Group Maxim Sokov, Deputy General Director and Director of Innovation Management Unit of Rosatom Vyacheslav Pershukov, Head of Strategy and Innovation Department of PJSC Gazprom Neft Sergei Vakulenko supported the discussion of the issues of new technologies in the fuel and energy sector.

Anatoly Chubais noted that significant technological changes are already taking place in the domestic electric power industry. "For example, solar energy as a national start-up in Russia succeeded, industrial production of equipment for this industry was set up. We have learned to produce solar panels with 21% efficiency, this is the best level in the world today... Alternative energy is absolutely essential for oil and gas oriented Russia. This is a matter of the country's survival in the long term," the Head of RUSNANO summarized.

The session also featured top managers of foreign organizations and energy companies working in the fuel and energy sector: CEO of the International Renewable Energy Agency (IRENA) Adnan Z. Amin, President and CEO of Fortum Corporation Pekka Lundmark, Chairman of the Board of Saft Gilan Lekyuye, Vice Chairman of IHS Markit Daniel Yergin and CEO of ENGIE Isabel Koshe.

VYGON Consulting Managing Director Grigory Vygon told the session participants about the impact of new technologies on consumers. "Due to the development of new smart technologies, we get a more even consumption, the price of production and storage of electricity is reduced," he said.

"At the same time, the share of network tariff in the price of electricity is growing, and this causes decentralization of energy supply. Consumers connected to networks can "vote with their feet" – that is, leave the unified grid and start producing electricity independently. The most typical example of development of distributed generation is Denmark, where the share of RES today amounts to 58%, the share of the network tariff is 36%, and distributed independent generation equals 45%. For comparison: in Russia the network component in the final tariff exceeds 50%," the expert noted.

Grigory Vygon also drew attention of the session participants to the dilemma associated with the development of distributed generation. "For those consumers who leave the centralized energy supply system, the price is reduced. For the remaining ones, the network tariff may grow strongly due to the need to pay for reserve capacity," he commented.

According to Grigory Vygon, taking into account the growth of distributed generation, a huge surplus of cheap electric power will appear on the market, which will lead to withdrawal of excess capacity. In the long term, this can lead to disparity in supply and demand, shortage of capacity and repetition of high prices cycle with a greater amplitude. "The technologies that we are talking about today are, in and of themselves, good and useful. However, the possible consequences of their development, that may occur even faster than expected, can cause problems and unbalance the market. First of all, changes will affect the operations of peak gas generation. Accordingly, after a while, when the RES power generation becomes cheap and the share of distributed generation increases, the question of the need to alter the regulation system of the market and the industry as a whole will inevitably arise," the Head of VYGON Consulting summarized.

Video recording of the panel session is available from the official site of SPIEF 2017


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