Gavril Prokopievich Levin, Minister of Housing, Public Utilities and Energy of Sakha Republic (Yakutia): “The government of Sakha Republic (Yakutia), considering high rates of development and introduction of renewable energy sources in Yakutia, believes that further work in this area is useful indeed”

The Arctic and Northern regions of Sakha Republic (Yakutia) are considered to be the most challenging regions for power engineering due to its harsh climate, vast territory and lack of infrastructure. To provide customers an uninterrupted supply of heat and electricity, power engineers have to solve even the most unusual tasks. Today, the Minister of Housing and Public Utilities of Yakutia – Mr. Levin Gavril Prokopievich will talk about the realities, challenges and prospects of energy production in the Arctic.

- What is the current situation with energy production in the Arctic regions of Yakutia and what problems are faced by the Ministry of Housing and Public Utilities?

- Sakha Republic (Yakutia) is the largest region of the Russian Federation and covers over 3 million square kilometers (almost 1/5 of the territory of Russia).

13 out of 36 municipalities of Yakutia are considered as the Arctic and Northern regions, which occupy more than half of the territory of the republic (1,609,000 sq. km.), but only 7,2% of Yakutia’s population (68 thousand people) live here. They are engaged mainly in reindeer herding, hunting and fishing.

The power system of Yakutia is divided into 4 isolated power districts: Central and Western - technologically isolated districts, South Yakutia - the wholesale market district and the Northern decentralized power district, which includes the Arctic and Far North regions. The Northern Power District is based on small-scale local sources. The local power industry of Sakha Republic (Yakutia) comprises 144 units of power plants and 16 renewable energy facilities. The total installed capacity of power plants is 212.9 MW, and solar power plants - 1.47 MW.

As for the problems in the current moment, but we will not say that these are the problems, because Yakutia is addressing the challenges, connected with delivery of fuel and resources, as well as the provision of heat and electricity.

It is known that Yakutia is one of the most isolated and inaccessible regions of the world in terms of transport: 90% of the territory does not have a year-round transport link. Therefore, prior to winter season, during the period of navigability, annual State measures are taken to provide the Northern and Arctic regions with vital goods, primarily food and oil products.

- Please, tell us about the Severny Zavoz (Russia’s Northern Deliveries Program).

- Northern Deliveries Program is a phenomenon caused by three reasons:

1) the absence in Far North regions of local manufacturing base of most industrial and many food products;

2) the remoteness of the main industrial regions (several thousand kilometers), which makes it difficult and very expensive for legal entities and individuals to deliver goods independently, even in the summer months;

3) a total lack of infrastructure, except for air or sea traffic, in most areas of the Far North.

A more common cause is the extremely difficult natural and climatic conditions of the Far North.

The delivery is made mainly by river and sea transport, including transportation via the Northern Sea Route.

Annually for the needs of Sakha Republic (Yakutia) over 3 million tons of cargo is carried by inland water transport, of which 1.5 million tons is life-supporting cargo.

The peculiarity of the "Northern Deliveries Program" is that the bulk of cargo is transported by river transport in a short navigational period to the Bailment Points (regional centers and settlements located on waterways) for further delivery to destination by seasonal roads (Ice Roads). In some cases, life-supporting cargo is delivered to some isolated destinations within 2.5-3 years. Yakutia’s the “Northern Deliveries Program” cargoes are transported by water transport, provided natural and climatic conditions are favorable, during a navigational period from June to September according to the following scheme:

- from Suppliers, the cargo is delivered by rail to the entrance transshipment points -transshipment oil bases and ports at the railway tracks in Ust-Kut, Murmansk and Arkhangelsk;

- accumulation and formation of lots of consignments for the first round of navigation is carried out for delivery along rivers, which will become shallow very fast, losing spring high waters (so called bystromeleyushiye rivers).

- with the opening of navigation (from May to June), a cargo trans-shipment is carried out into water transport and the cargo is transported by the main river Lena, its tributaries and small rivers.

- with the opening of the Arctic navigation, the cargo is delivered along the main river Lena through the Northern Sea Route to the bar areas of the northern rivers and further along the Arctic rivers (Yana, Indigirka, Kolyma, Anabar) to destinations and bailment points.

In June, prior to the opening of the Arctic navigation, the transportation of the bailment cargoes, which were transported during the previous navigation period, begins to the destinations to the upper reaches of the arctic fairly navigable rivers Yana, Indigirka and Kolyma.

The existing scheme of logistics for the delivery of goods is characterized by the absence of a centralized system for the delivery of goods throughout the country. Obviously, to resolve these problems, it is not enough to strengthen only regional state support for the Northern Deliveries.

The existing organization of delivery is imperfect, focused mainly on the solution of current tasks. The unsettled organizational, economic and legal relations between the structures of the federal center, regional authorities, economic entities in the territories of Far North Russia in terms of delivering fuel, food, and consumer goods worsen the conditions for arranging the delivery of goods.

The provision of many settlements takes place in very difficult infrastructural and financial conditions with large transport costs, failures in the delivery organization are fraught with failures of guaranteed heat and energy supply for people and organizations. All this has an extremely negative impact on the quality of life and attractiveness for living, and also on the development of small businesses.

- How much is it spent annually for heat and energy production in the Arctic?

- In order to maintain day-to-day existence of people, the Government of Sakha Republic (Yakutia) has identified the customer enterprises for providing fuel and energy resources – they are State Unified Enterprise “Housing and Public Utilities of Sakha Republic (Yakutia)”, PJSC Holding Company “YakutskEnergo”, JSC “TeploEnergoServis”, JSC “SakhaEnergo”.

Of course, in order to ensure a guaranteed delivery, it is essential that there is a significant diversion of financial resources for purchase and delivery, often the participant companies of the delivery lack own funds, which forces them to obtain loans. Every year the volume of loans is increasing.

In order to prevent the growth of prices and tariffs, the Government of Yakutia renders state support to the delivering enterprises. In 2017, a total fuel costs were 31 billion roubles, and 16.7% of which was provided from the State budget, the rest was covered by credits and loans (in 2017, about 20 billion roubles).

- It is known that the share of fuel accounts for 60% of the generated electricity. And what work is being done to optimize the costs of fuel and energy resources?

- Fuel is imported from outside the republic, so the price is not regulated by the Government, but regulated by market relations. Accordingly, the costs are increasing, and in conditions of rising prices, we have prohibitive prices, therefore, in order to reduce the growth rates of prime costs (production costs), work is constantly being done to optimize fuel consumption.

Since 2000 the power industry has been carrying out organizational and technical measures, which reduced the physical volume of fuel use. A lot of work is done for transition into new technologies. For example, the transition from bare wires to aerial bundles cables (ABC) with a voltage of 0.4 kV and overhead power lines made with wires with protective insulating sheath - protected wires (VLZ) with a voltage of 10 kV. As a result, losses in networks are reduced, correspondingly the specific fuel consumption is reduced.

Also, power producing equipment is being modernized through investment programs in enterprises. A large number of modular power plants have been built in small settlements.

As a result of these measures, the import of fuel from 150 thousand tons (in terms of indicators of the early 2000s) fell to 70 thousand tons, and this is not the limit.

- What are the prospects for the development of the Energy, Housing and Public Utilities in the Arctic?

- Fulfilling the assignments list of the President of the Russian Federation Vladimir Putin, we have developed the Program of the development of local and renewable energy of the republic, which is a long-term program to optimize local energy. The program is developed in five different scenarios. Accordingly, with different costs and technologies used. The Republic insists on the fifth scenario, where part of the territories cover about 30 settlements, where there is a possibility to switch to a centralized power supply, i.e. build power lines, and the rest to be transferred to more energy-efficient equipment taking into account the use of renewable energy sources. Of course this scenario is more expensive, but ultimately gives a tangible effect.

According to calculations, the use of imported diesel fuel will be reduced to 35 thousand tons. In addition, due to modernization, the reliability and quality of electricity supply to settlements will increase, because the wear and tear of equipment, as is known, leads to an increase in technological violations. At present the document is in the administration of the President and the Government of the Russian Federation in order to determine the sources of funding.

And as for the utilities complex, a modernization of fixed assets continues through the State investment program and the investment program of SUE “Housing and Public Utilities” with the involvement of long-term loans through the European Bank. In general, the whole industry is being modernized. A system of general overhaul of the housing stock has been introduced and started operating in the country. The first stage of resettlement of people from slum and emergency-state dwellings in concluding. The second stage will start in 2019. At present, together with the Ministry of Construction of the Republic, a new register of slum and emergency-state dwellings is being developed.

Also, in connection with a new federal law, we are preparing to introduce an entirely new system for waste management.

- What can you say about the experience of using (introducing) renewable energy sources in Arctic territories of Yakutia?

- In Arctic territories were put into operation seven solar power plants (SPP). So, in 2014 were introduced SPP in Kuberganya, Abiy district (rated output 20 kW), in Eyik, Olenyok district (40 kW), Jargalakh, Even-Bytantay district (15 kW), and in 2015 – in Verkhoyansk district’s, Yunkyur, (40 kW),  Betenkes (40 kW), Stolby (10 kW), Batagay (1000 kW). In 2017, the commissioning of SPP in  Kystatyam, Zhigansky district (40 kW) is planned.

The main goal of the construction and operation of renewable energy facilities in the Arctic is certainly the saving of expensive fuel. The installation of renewable energy facilities in remote and hard-to-reach settlements leads to a reduction in fuel costs, which makes the implementation of such projects cost-effective. On average, the payback period of SPP in the Far North is 7-8 years.

In order to develop RES in the Far East, the Government of Sakha Republic (Yakutia) and JSC RusHydro annually hold an International Conference “Development of Renewable Energy in the Far East of Russia” from 2013 in Yakutsk.

The first conference laid the foundation for a number of cooperation projects between the federal regions of the Far East, energy companies and power equipment manufacturers.

Thus, at the International Conference it was decided to implement the investment project “Construction of a solar power plant in Batagay, Verkhoyansk district, Sakha Republic (Yakutia)”.

As I said above, the solar power plant in Batagay, Verkhoyansk district with rated capacity of 1 MW (with upgrade possibility up to 4 MW) was commissioned in 2015, the cost of construction amounted to 185 mln. roubles.

Currently, within the framework of the signed agreements between Sakha Republic (Yakutia), PJSC RusHydro and Japanese companies Komaihaltec Inc., NEDO, a construction of a wind farm in Tiksi, Bulun district is under way. Every effort will be made to install wind turbines in Tiksi by autumn 2018.

I note that the Government of Sakha Republic (Yakutia), taking into account the high rates of development and introduction of renewable energy sources on the territory of the republic, believes that further work in this area is useful indeed.

- A special place for energy development is occupied by energy service contracts. They are successfully implemented in the republic and have proved their effectiveness. And what about the implementation of energy service contracts in Arctic districts?

- It is too early to talk about energy service contracts in Arctic districts. There, even the percentage of installed maintenance appliances is one of the lowest in the country. Companies that work in energy saving, do not readily go there. They mainly work in the central part of Yakutia. And this is obvious, because project payback is higher.

But it is worth noting that slowly conditions are getting better for entrepreneurs - this is, firstly, the transition to the so-called long-term regulation parameters (long-term tariffs), on the basis of which tariffs are set for three years, and since 2019, we are moving to a 5-year tariffs.

- Why do not businesses look towards the Arctic? Are there any programs for entrepreneurs with state support?

- For a moment, there are no such programs, but since last year we have started actively promoting the idea of ​​factoring. In Yakutia, especially in the Arctic, there is potential for the development of energy service contracts. To date, around 170 energy service contracts operate throughout the republic. But the key issue that prevents the further introduction of energy services is financing. Factoring measures to improve energy efficiency is a new financial mechanism that can create a real impulse to improve the energy efficiency of the economy. Therefore, the work on introducing factoring will be considered at the level of the Chairman of the Government.

Unfortunately, due to the low payback in the Far North and the Arctic, we have practically no offers from investors. But as they say, the ice is broken, and since last year large investors have started to appear from outside the republic. Thus, PJSC “Rostelecom” and the administration of Ust-Aldan district of Sakha Republic (Yakutia) concluded an energy service contract for the modernization of heating systems in the school and preschool educational institutions in the district.

As I mentioned earlier, Japanese investors are interested in the construction of a wind farm in Tiksi, Bulun district. This work has started this year. Now the design and construction of the foundation has started, and next year the equipment will be installed. It is planned to build a wind farm with a capacity of 900kW - 3 wind turbines of 300 kW each, plus two diesel generators with 1 MW rated output each will be installed. The republic's obligation is the construction of power lines with a transformer substation. According to forecasts, we expect a reduction of fuel consumption by 150 tons per year.

- Thank you very much for the conversation!

Interviewed by Tuyaara Khristoforova