How to succeed with a thousand TWh reform? Restructuring the Russian power sector

Abstract:

As was the case in most developing and transition countries, Russia’s electricity sector was dominated by a vertically integrated, state-controlled monopoly. The common problems of ageing infrastructure, large distribution losses, very low retail tariffs, inefficient management and increasing tightness of supply encouraged many countries to embark on large reforms to liberalize their power sectors during the 1990s. In Russia, the reform started somewhat later, but to the surprise of many it has since proceeded very swiftly.

This paper provides an overview of the reform process and an update on the current situation in late 2010. In particular, the paper situates the Russian reform in the international context by comparing it with the experiences of other countries. Further, the paper strives to underline the importance of the reform for the Russian economy at large – both as an inevitable step to avoid a looming
energy crisis and as a striking example of implementing a liberal, large-scale economic reform in Putin’s Russia.