Russia's EN+ energy group has assets in Russia's Far East and touts its proximity to Asian markets. Photo: Company Website
Russia's EN+ energy group has assets in Russia's Far East and touts its proximity to Asian markets. Photo: Company Website

Russia will slash electricity prices for industrial users in the Far East of the country to bring them in line with the national average from July 1, a potential boon for investors in the region.

The Far Eastern territories suffer from large power tariff disparities because of the sheer size of the areas near Russia’s Pacific coast, the low density of the population, and a number of isolated local power systems that are unconnected to the main grid.

“The high cost of electricity in the Far East holds back the development of the region,” Minister for the Development of the Russian Far East, Alexander Galushka, told Asia Times.

The lowering of energy tariffs will allow industrial users in five Far East regions to save an estimated US$460 million a year. The cuts will be compensated by increases in wholesale power prices elsewhere in Russia.

The five areas are the Chukotka Autonomous Okrug, the Magadan region, Kamchatka Krai, the Sakha Republic (Yakutia), and the Sakhalin region. The biggest fall in rates will be in Chukotka with 70%, followed by Sakha with 51%. In Kamchatka and Magadan tariffs will slide by 38%, and in Sakhalin by 35.5%.

“In Yakutia (Sakha) you’re facing a tariff that’s double the national average, or one that is 3.5 times higher in Chukotka,” Galushka said. “Products made in manufacturing facilities of the Far East lose their competitiveness, the cost of living in the region goes up, and certain investment projects can never get off the ground.”

The Russian Far East is rich in energy resources, although Inter RAO, one of Russia’s largest power utilities, sells surplus electricity mainly to China via the Primorsk Krai region.

According to the latest figures from 2015, Inter RAO sold 17.5 million kilowatt hours of electricity abroad, earning more than $848 million. Japan has also at times shown interest in importing Russian electricity.

The Chukotka region has the only nuclear power plant in the Far East of Russia, the Bilibino NPP, which has a generating capacity of 48 megawatt and is the only atomic power station that operates in permafrost.

In Magadan, the main power source is the Kolyma Hydroelectric Station which has a power capacity of 900 MW. Kamchatka has a  natural gas-burning power plant with a total capacity of 395 MW.

Sakhalin island gets its power from the Sakhalin Hydroelectric Station (168 MW) and the Yuzhno-Sakhalin thermal power plant No.1 (455 MW).

Sakha’s energy is produced by Yakutia Hydroelectric Station (365 MW), Neryungrinsk Hydroelectric Station (630 MW) and the Vilyuy Dam, a complex of two stations that have a capacity of 680 MW.