The Adoption of a New Heat Energy Market Model in Russia: Benefits and Risks

Russian heat supply systems are characterized by both moral and technological backwardness. There is excess capacity appeared because of demand decrease and asymmetric development of the electric power and heat markets in conditions of a high share of combined output at CHP. As a result of these factors, as well as the existing institutional conditions, the industry has completely lost attractiveness to investors. Heat energy industry might even more degrade. According to experts and industry participants, the new industry regulation system can solve most of the existing problems. Reform of heat supply is aimed at preventing the collapse of the industry through the formation of market relations and, as a consequence, increasing the investment attractiveness of the industry. However, the issue of changing the model of the heat energy market causes a large number of discussions in the professional environment. The main concerns are associated with a significant increase in prices for heat energy for consumers, with the monopolization of the market by single heat supply organizations and with a decrease in the role of regional authorities in regulating the industry.