East Meets West

The year 2001 saw the 50th anniversary of the Union for the Coordination of Production and Transmission of Electricity (UCPTE). The Organization for European

The year 2001 saw the 50th anniversary of the Union for the Coordination of Production and Transmission of Electricity (UCPTE). The Organization for European Economic Cooperation (OEEC) established UCPTE to contribute to the development of economic activity through the more effective use of energy resources allowed by the interconnection of electricity networks.

Since UCPTE's formation with eight member countries — Belgium, Federal Republic of Germany, France, Italy, Luxembourg, the Netherlands, Austria and Switzerland — there has been continual growth and reinforcement of the international interconnection of electricity systems. The number of countries whose networks are interconnected has doubled to 16.

In 1999, to comply with the European Community Directive No. 92/96, UCPTE changed to the Union for the Coordination of Electricity Transmission (UCTE) to underline the association with the activities of transmission system operators (TSOs).

Development of the UCTE

The UCTE acts as an independent partner in contact with conventional electric utilities, independent producers, consumers, regulators and national or European organizations, and fully supports the demands associated with the deregulation of the single market for electricity.

Now that all member states have implemented the EEC directive, structural market differences have decreased and electricity trading has increased. The unbundling of transmission of generation and supply now makes it necessary for TSOs to produce a power balance for the entire interconnected European market.

The development of the interconnected network continues to be a core activity for the UCTE. It is preparing for the interconnection of the Bulgarian and Romanian systems. In the southeast, the planned interconnection of Turkey's electricity system comprises two 400-kV transmission lines between Bulgaria and Turkey, and another 400-kV transmission line between Turkey and Greece. In the northeast, the Baltic States and the Ukraine are seeking closer links with the UCTE synchronous network.

Russian Power Sector

The energy systems of Russia, the Baltic countries, Moldavia, Ukraine and Belorussia currently operate within the former Unified Energy System (RAO-UES) of Russia as an isolated synchronous system in 14 of the 15 former countries of the USSR. As Russia has no common borders with the existing member countries of UCTE/CENTREL, apart from the Kalinigrad Region interconnection of the RAO-UES, these systems will only be possible via the networks of the Baltic countries, Moldavia, Ukraine and Belorussia.

The Russian power sector has an installed capacity more than 200 GW, making it the largest in Europe and the fourth largest in the world behind the United States, China and Japan. The power industry was privatized in 1992 with all nonnuclear generation, transmission and distribution assets divided between RAO “UES of Russia,” a national holding company, and 75 regional power utilities (Energoes). UES, with an installed plant capacity of 155.1 GW, is Russia's largest electricity company.

Under the direction of a new management team, the RAO-UES underwent significant internal restructuring as several initiatives addressed the company's key weaknesses:

  • Poor operating performance

  • Unsatisfactory payment collection

  • Weak financial control and discipline

  • Ineffective and rigid management systems

  • Inadequate investor relations.

Management undertakings resulted in dramatic improvement in the company's performance. Measures taken to improve collection rates, negotiations of tariff revisions and agreements with major fuel suppliers are reflected in a dramatic improvement in the financial performance.

In 2000, for the first time in a decade, RAO “UES of Russia” increased its electricity production by 3.4%. In addition, the financial statement showed a positive profit, driven by increased sales (up 14%) and flat operating expenses, strongly reflecting the wave of economic recovery in Russia. In 2001, the RAO-UES Group posted a net profit to international accounting standards of US$1.5 billion — an increase from the US$38.1 million net profit in 2000.

Despite the short-term improvement in UES's performance, a restructuring of the whole energy sector is required if the power sector is to keep pace with Russia's economic growth. For example, it is estimated that over the next decade, some US$20 to $35 billion of new investments in generation capacity alone will be required to meet the expected economic growth. Comparing these estimates with the current market capitalization of the entire Russian power sector, the financing of new construction on the required scale is not feasible for incumbent Russian power companies and not attractive for new investors.

In 2000, Sergey Ivanov, secretary of the state security council, warned that lack of investment in Russia's power sector would be a serious threat to the national energy security. “To keep up the energy security, we need to commission 6000 MW of new capacity annually, compared with the current rate of 1000 to 2000 MW each year,” Ivanov said.

During the first half of 2001, the government and a special working group representing various stakeholders in the Russian power sector reviewed a broad range of reforms. Following an intensive debate, the government approved a pro-competitive restructuring plan developed by the Ministry of Economic Development in July 2001.

Characteristics of the European Interconnected Systems (2000)
SystemUCTEIPS/UPSUPS RF
Population (millions) 373.74 278.20 138.70
Installed Capacity (GW) 526.55 315.20 192.20
Annual Output (TWh) 2183.03 1204.70 820.80
Peak Demand (GW) 352.50 200.00 128.70

The key principles of the Russian restructuring program envisaged a breakup of vertically integrated structures into competitive generation and supply sectors, and regulated transmission and distribution.

RAO “UES of Russia” generating assets will be reorganized into large independent generating companies, operating in a competitive market environment. These sizeable new generating companies (10) will have competitive portfolios of assets, sound financial and operating performance, and capacity to raise financing for large-scale new constructions. The sector also will be opened up to new independent generation and supply companies. The introduction of competition in generation and supply will be accompanied by the separation and further strengthening of the regulation of transmission and supply, to ensure nondiscriminatory access to the infrastructure and to consumers and producers. This large restructuring process will be conducted in three stages with full implementation by 2010/2011.

The planned changes to the electricity industry in Russia follows the pattern of deregulation and introduction of competition that has been in progress since the early 1990s, transforming the electricity industry around the world.

Proposed UCTE/CENTREL Interconnection

The large existing transmission systems of the UCTE, the Interconnected Power System (IPS) of the Baltic States, the UPS of the Russian Federation (RF) and the Commonwealth of Independent States (CIS) have prerequisites for interconnection:

  • No geographical obstacles obstruct transmission interconnection.

  • Each system is under the process of restructuring and deregulation.

  • The systems are connected by several 220-, 400- and 750-kV transmission lines constructed between 1964 and 1985 (and are not presently operational).

These European interconnected transmission systems have characteristics shown in the table above.

The question of interconnection of these systems has been the subject of studies and preparatory works for the past 20 years. The most recent study was performed when the TACIS consortium of energy companies — EDF (France), TRACTABEL (Belgium), RWE (Germany), CEZ (Czech Republic) and RAO-UES (Russia) — conducted a survey in 1998/1999 on the synchronization of TESIS (UCTE-CENTREL) and UPS (European of the Russia, the energy systems of the Baltics, Belorussia, Ukraine and Moldavia). This survey concluded that, subject to compliance with the principles and technical standards associated with the synchronization and operation of the interconnected systems, the power exchange could be active by 2005 and offer the following benefits:

  • The interstate transmission lines may carry a maximum of 6200 MW during the winter peak load, provided there are no limits to the electric-power exchange between the UPS and TESIS.

  • Analysis of the energy systems confirmed that the interstate-connection capacity does not limit the electric-power exchange that is economically advantageous to both systems.

  • Synchronization of the West and East European energy systems would optimize the use of installed generating capacity (over 1000 GW). Furthermore, the combined reserved capacity will be reduced and the variations in the timing of daily peak demands and seasons will increase the opportunity for power exchanges.

Figure 1 (page 52) shows the structure and transmission capacity of the interstate and intersystem links of the IPS/UPS. Figure 2 (page 54) shows the borders between the networks of the CIS and Baltic States, Central and Western Europe.

The future interconnection of these energy systems was discussed at the European Community (EC) & Russia Summit Meeting held in Brussels on Oct. 3, 2001. The joint statement by EC President Verhofstadt and Russian President Putin said the decision on the “interconnection of the parties' electricity networks” was reached.

The synchronous operation of the UPS/IPS with TESIS was adopted as the “most important and strategic goal” in a meeting of the CIS Electric Power Council held on March 19, 2002. The member states of the CIS-EPC resolved to support and provide candidates for the Working Commission who are authorized to cooperate with power agencies and utilities in western, central and southeastern Europe.

UCTE/CENTREL Interconnection

Transmission and distribution remain the only natural monopolies of the deregulated electricity industry, and their operators bear the responsibility for the reliability of the electricity.

Since its formation, the UCTE has played a key role in coordinating the complex task of ensuring the reliability of the European TSOs that form the interconnected system. Thus, all new applicants must satisfy the UCTE that their systems meet two basic system reliability parameters (system adequacy and system security), and are able to operate and perform in accordance with a set of technical rules established to maintain overall system operational security.

The technical approval process is naturally complex and a relatively long-term exercise, but an insight into the practical input to the “European Union — Russia Energy Dialogue,” launched in October 2000, was presented at the Towards a Pan-European Energy Partnership Conference held in Warsaw in March 2002. Anatoli Chubais, CEO of RAO EES Rossii, included in his presentation on “Developments in the Russian Electricity Sector” details on system operational reliability and load-transfer capability, in addition to outlining a phased program of East-West Synchronous Operation Development. This three-stage development includes:

  • Stage 1: The Eastern Interconnection — Burshtynsky Island (UCTE) [via two 750-kV and two 330-kV transmission lines].

  • Stage 2: The Eastern Interconnection — Poland (UCTE) [via one 750-kV transmission line].

  • Stage 3: The Eastern Interconnection — Second nonsynchronous zone of UCTE (Bulgaria and Romania) [via one 750-kV and two 400-kV transmission lines].

Plus, reinforcement of the interface in the northwest with interconnections between Belorussia, Lithuania, Kaliningrad and Poland is proposed.

Following a protocol aiming to introduce close cooperation with electricity generators in the CIS signed by EURELECTRIC (Association of the Electricity Industry in Europe) in Warsaw, EU-Russia Summit participants on May 29, 2002, decided to force the pace. Work is now focusing on a legal basis that will permit interconnection in the longer term of the Russian and European power grids.

Into the Future

The European interconnected transmission system continues to expand — a testament to the UCTE's management of a system with an outstanding long-term operational reliability and security performance. Figures 3 and 4 show the changes in the system during the past decade and the planned future interconnections. At present, there appears to be no limit to the expansion of this system, as more countries seek to satisfy their social and environmental obligations with acceptable economic solutions via membership of an international association established to optimize the use of existing generating and transmission system capacity. The foresight of the OEEC remains as relevant today as in 1951, as the European interconnected system continues to expand to “contribute to the development of economic activity through the more effective use of energy resources allowed by the interconnection of electricity networks.”

Growth of the European Associations and the Member Countries

UCPTE (1951) — Belgium, Federal Republic of Germany, France, Luxembourg, Italy, the Netherlands, Austria and Switzerland.

In 1987, UCPTE was extended to include Spain, Portugal, Greece and Yugoslavia, and in 1995, it was synchronously connected to the CENTREL network (Association of transmission system operators of the Czech and Slovak Republics, Hungary and Poland). With the division of the former Yugoslavia into five countries, the UCTE network extends to 16 countries.

NORDEL — Cooperative association of transmission system operators with members from Denmark, Finland, Norway, Sweden and Iceland.

UKTSOA — Association of transmission system operators in the United Kingdom (England, Wales, Scotland).

ATSOI — Association of transmission system operators in the Republic of Ireland and Northern Ireland.

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