MOSCOW, September 21 — PRIME, Karina Hamitova. Russia is preparing a large-scale modernization program for thermal power plants, estimated by the Ministry of Energy at 1.5 trillion rubles. Mikhail Lifshitz, Chairman of the Board of Directors of the Russian industrial holding ROTEC, spoke to Prime Agency about whether the Russian power engineering industry is ready for this, what is needed to create a domestic gas turbine, and what innovations are being offered by mechanical engineers.
At present, the program to modernize thermal power plants (TPP) is an active topic of discussion. How much does ROTEC expect to take on as a supplier of power equipment within the framework of this program?
The program, which is currently under discussion, implies an aggregate demand in the region of 40 GW. It is planned to run until 2035. In Russia, there are two manufacturers of steam turbines for large-scale energy projects that can cover the declared demand - these are The Ural Turbine Works and Power Machines.
The production capacity of The Ural Turbine Works allows to produce 3 GW of turbine equipment per year. It is important to note that we have the task of filling the base load of our production without the modernization program. We work a lot on export-related tasks, as well as supplying equipment outside of our traditional generation. We have completed the program for the production of ship turbines for the first three nuclear-powered icebreakers. Now we will produce turbines for waste incineration plants. All this has nothing to do with modernization.
Have energy companies already applied to you with requests or preliminary consultations in relation to the modernization?
Of course they have. There are already a lot of requests for a preliminary assessment of project budgets. Since the beginning of the year, generating companies have been turning to us with requests for preliminary proposals on various projects in the planning stage.
Is the Russian power engineering market ready for a 90% localization of equipment for the modernization program?
As far as thermal power plants are concerned, yes, it is ready.
And what about gas turbines? What is needed to produce a large gas turbine in Russia?
In order for someone to invest in this production, we need a confirmed systemic demand. To make a gas turbine, the manufacturer must understand that he will make 10 turbines per year for the next 10 years.
I hope that the new modernization program will not push generation towards the massive introduction of gas turbines. With proper modernization and competent operation, steam turbines and steam power units are more efficient, at least in our traditional heating plant with centralized heating.
Seeing the trends in the global energy industry, I am not sure that we need to go into the production of a large energy gas turbine. Today in Europe, this market is barely standing after the boom in the late 1990s - early 2000s. In Germany, these have already been abandoned, and are now idle. Old coal steam blocks are coming back into operation. This is because the inputs of renewable energy change the energy balance, and the maneuverability of combined cycle power units is insignificant. At the same time, maintenance of gas turbines is very expensive. When you install a gas turbine, then for the next 10 years of its operation you spend the same amount on maintenance costs. And when you install a steam turbine, you spend only one fifth of the cost in 10 years of operation. Moreover, if you sell not only electricity but also heat, the steam turbine becomes even more economical. If heat and electricity are balanced at the TTP, the gas turbine is a foreign body. It has the right to live where there are no heat consumers.
Is ROTEC interested in the production of gas turbines?
Our joint venture with the Swiss concern Sulzer is focused on restoring components of the hot gas turbine path. All the key operations that allow for the manufacture of new blades are in Ykaterinburg, except for casting. And the rest, including all types of protective coatings, is localized. Both for Siemens and for GE turbines.
Again, we will consider the possibility of creating a full-cycle production of a gas turbine only if we see a confirmed demand for at least the next 10 years. But for now, this is not the case. So, it is unwise for me to invest in the production of an entire gas turbine today. The state intervenes in this process, because a private company simply will not go into this segment without support.
What is the current production volume of gas turbine parts in Yekaterinburg?
The production volume is focused on fulfilling our contracts for the maintenance of energy gas turbines. The service business includes the work of field staff, the restoration of parts of the hot path, and the supply of new parts. The total revenue is 50 million dollars a year.
How did the sanctions against Renova affect the company?
I would be lying if I said we haven't been affected at all, even though the Renova'share in the capital of ROTEC is less than 50%. But the overall market history is rather unpleasant, particularly with regard to the cautious attitude of banks. For customers, financing is always associated with the supplier of equipment, particularly in export transactions. All procedures are lengthened, and more documents appear.
In connection with the sanctions and the situation with Siemens' claims over supply of its turbines to Crimea, do you note an increased Russian market demand for your products and services?
Now the situation is the complete opposite. The entire market is simply waiting for the modernization program of thermal stations, and it has been in this unacceptable condition for almost a year. Each generating company had its own capacity upgrade plan without any large-scale state program. The plans varied in size and scale, depending on the resources of the individual company. But last autumn, after the announcement of the PSA-bar program, everything stopped. Why enter into a project without subsidies, if the same can be done on the best terms after the program is adopted? As a result, only one transaction related to the new turbines was carried out over the last six months. In fact, everyone is just waiting for our agencies to issue regulations that would begin the program.
Is your plant idle?
We are not idle; we have export contracts. But, of course, we are working with much less intensity than we could be. Unfortunately, our country lives in wave mode; first stagnation, and then a boom. For the engineering industry, one of the distinguishing features of which is a long production cycle, this is not good.
Speaking of gas turbines, these "booms" lead to serious imbalances in companies' finances. As part of their compulsory service, small and large-scale inspections are carried out. A large-scale inspection involves the replacement of key elements, which is very expensive. If you implemented 10 gas turbines at once during the boom, they would have to undergo a large-scale inspection at the same time. And this "boom" will catch you out every three years, while you operate them. If one gas turbine is introduced per year, when there is no “boom”, then these large-scale inspections are spread out in space and time...
You talked about the successful supply of equipment for icebreakers, are there more orders?
We are waiting for them. We manufactured six low pressure turbines for the first three vessels and we expect there to be an order for two more icebreakers of this class, and one icebreaker of a heavier class.
What is the demand for profitability of producing equipment for waste incineration plants?
Seeing the scale of the problem in the country, we have independently been developing a power island for the incinerator over the last few years. In fact, it is the classic power plant that runs on mixed fuels.
There are a number of approaches to garbage incineration, and this topic is also related to the modernization of the energy sector. Any old inefficient TTP can be modernized for the purpose of burning garbage. To do this, it is necessary to upgrade the boiler island.
I estimate that the country needs at least 30 incinerators, and we have an effective technical solution that will be in demand. I would not want the construction process to be too lengthy; it's better to get these built as soon as possible so that our children see the benefits.
What is the estimated value of ROTEC's total order backlog?
We are quite diversified: we produce steam turbines for power engineering and ships, we build generating capacities and network facilities, we manufacture supercapacitors and various devices based on them, and our equipment condition prognostics system, PRANA, is one of the best in the world, according to experts. The order volume for 2019 amounts to about 20 billion rubles. In terms of the Ural Turbine Works, if we take into account the projects fo modernizing thermal power plants this year, we will bring the order book to 20 turbines, as it was in 2016. For now, we have already contracted 10 turbines without the PSA-bar program. We are not at a loss, but the domestic market has not yet given the order that is really needed to update generation.
How big are the volumes of ROTEC's export deliveries?
In normal operation, approximately 40% of our deliveries are exports. This is mostly accounted for by turbines of the Ural Turbine Works. But this year we are counting on the first export contracts for our prognostics system.
What countries do you ship to?
Our target markets for turbines are countries with centralized heat supply - Mongolia, Belarus, Kazakhstan.
The business community is actively discussing the digitization of the economy, how will this process affect ROTEC?
We have been working on digitalization for five years. As part of this, we developed the PRANA prognostics system, which allows us to diagnose and predict the condition of industrial equipment to increase its efficiency and reduce operating costs. We announced the system in 2017, and in 2018 it already protects 3 GW of the country's generating capacity from accidents.
Are you planning to distribute this system outside the industry?
The most important task that we have is to go beyond the borders of the energy sector. This means markets where reliability control is needed, where unscheduled equipment downtime leads either to disaster or large losses. These include all types of hazardous production, lifting and transport mechanisms, the petrochemical industry, and all continuous production, the mining industry, and metallurgy. If the company doesn't see when the steel supply motor stops, it suffers the losses both for the cost of the motor and for the time lost in terms of sales of the metal.
What innovative projects are you developing?
We are focusing on two main areas; energy storage, and solar batteries.
With regard to energy storage, we launched the production last year of highly efficient supercapacitors and modules based on them. The production capacity is 200 thousand cells per year, and we are currently at 70%. In the next couple of years we are planning to expand production, bringing the plant capacity to 1 million cells per year.
One of the breakthrough areas that we are focusing on is electric propulsion (for example, technologies for electric vehicles - ed.). It consists of four blocks: energy production, its accumulation, the engine itself and the control system. The first two blocks are where we come in.
Now we have built a flying laboratory - this is an airplane with a gasoline engine, but it has flexible solar modules, energy storage devices and a whole set of measuring equipment. We study how much electricity our flexible solar modules can generate in the most diverse flight conditions. Using this data as a basis, we will make the next plane fully electric.
When will this be?
We expect it to be presented in 2020, so very soon.