Economic efficiency and transformation of the Russian energy sector

Abstract

This paper considers the issues of economic transformation, reconstruction, and technical re-equipment of the energy sector in the Russian Federation. The sector is struggling with economic inefficiency and post-transformation legacy. Energy sector transformation represents a key element in ensuring the energy security and it one of the most troubling questions of energy economics nowadays. It is expected that by 2020 more than half of the energy equipment in Russia would exceed its economic life. Our results show that the main goals of reconstruction might include life extension, increasing production efficiency, and output. We demonstrate that these goals can be achieved through partial replacement of the most worn parts of equipment (e.g. replacement of blades in the turbine), the combination of new and old equipment (such as add-in steam and gas cycle), and full replacement of equipment.