Looking back on the year 2022 and summarizing its heritage it is obviously impossible not to mention its main eventual and the most affecting factor (no matter in Russia or in the world, at least in Europe-centric one) – the so called Russian special military operation in Ukraine (and we must call it this way as we are under the Russian law). And in the power industry it had an impact as strong as everywhere else – almost all plans and perspectives we had elaborated for years at one moment had gone either to the shredder bin or had been radically changed.
In Russia the main effect was that we almost immediately had forgotten 2021st year’s fancy priorities of the ESG agenda which had been seen as of perpetual importance at least for the rest of our business lives. All of a sudden, they became something off-topic and peripheral regardless how many times interested parties now would keep saying the opposite.
In Europe we saw a crash of normality: all habitual patterns we got used to for last at least 60 years had disappeared within months if not weeks after the “operation” had been unleashed. Finns, for instance, which had been buying Russian electricity for almost up to 10% of their total consumption since no one remembers when, had stopped doing so in May 2022 on a dull pretext related to the bank’s operations impossibility. Power prices, which had been rising since 2021, had skyrocketed after the operation started, while European regulators had poised frozen, mesmerizingly watching as cut-off from the Russian gas supply was pushing prices even higher. The markets had been shattered, politicians kept mumbling something but only by late August 2022, when it had become clear that the Russian gas supply stifle is in earnest and for a long, the EU power market makers have slowly started some real discussion on counter measures and models' adjustments.
In Russia, where, as in many other countries power prices have been strongly linked to the gas ones, which in turn are unlike as in many other countries stringently regulated, cost of electricity to consumers gapped with Europe by tens of times in Russia's favor, and the language of regulators and some of the industry actors has quickly evolved from an early time alarmistic one to the “everything is fine except...” following trends and tendencies of the Russian political discourse in general.
But in both Russia and Europe everything has changed, the energy world has become completely different and continues to drift away from a used-to-be routine. Russia continues to pretend to be a deregulated and fully liberated competitive power market (which it is not) but all these put-offs of the ostensibly marketwise KOM and KOMMOD procedures, the top officials’ statements on extension of the antimarket KOMMODs beyond 2031 and further moves on strengthening the monopoly grid Rosseti with its strife for an unified tariff all over Russia, as well as centralization of planning and integration processes by the state owned System Operator, provided all that is happening in a large and extremely diverse country, clearly show that it moves to a completely different direction. Europe is also seemed too slow with its measures to recover from the shock of gas cut-off, especially in regards with market modelling. We still don’t see a comprehensive response approach to the core of current market problems on the European level in this context. Europe, in fact, stays on with its overpoliticized and superficial reaction to the profound market faults instead of robust, thoroughly, thoughtful and perfectly edged market oriented solutions.
What is next? Still unclear. All depends on the outcome of the main event maker. Should the military operation be over in next few months then we have a chance to come back and sooner or later to return everything (excluding literally blown up gas supply market schemes) to more or less previous normality. If not, no one knows what will happen and we again would tread unknown waters as we did last year. But even if the life goes back before February 24, 2022 our understanding on what should be done and how we must be prepared to the unexpected future has been completely changed by now and never will be the same again.
And this is a real and a most important round up of the strange and fearful 2022 experience.
A tough year? This is a common case in Russia for at least last 10 years. Unfortunately.
