A municipal disaster: what are the real causes of thousands of accidents in Russia

Sergey Kondratiev, Principal Director on Economic Studies at the Institute for Energy and Finance, made a comment to the “RBC.Petersburg” magazine on the situation in the Russian thermal sector.

"In 2022, the sector enterprises invested 193 billion rubles, with the need estimated by the Ministry of Energy in 2019 at 400 billion rubles. Thus, the sector is currently underfunded by 50%. But this is the national average. In Moscow, St. Petersburg and the Tyumen region, heat supply receives significant investments, while in other regions underfunding reaches 60-70%," Sergey Kondratiev notes.

How to prevent losses

The revision of the tariff policy is a necessary but insufficient condition for the involvement of businesses in the modernization of housing and communal services infrastructure.

"By paying this money, the consumer will receive an updated "rigid" centralized heat supply system with significant regulatory losses (because houses are often removed from heat sources), high heat consumption because the consumer cannot change consumption, and expensive redundancy, that is, the need to build duplicate capacities for such large systems. And in 20 years it will face the same problems," Sergey Kondratiev explains.

At the same time, the expert notes that an alternative way — the construction of a fully decentralized system, as the countries of Eastern Europe have done — is hardly available at the moment due to the high cost.

Despite the communal disasters of the outgoing winter, the authorities have at least several years left to launch the process of modernization and reconstruction of the heating system.

"The difficulty is that the federal authorities and the regions need to agree "at the entrance" what to do. And this is not easy in the context of current budget constraints. Perhaps the right decision is to introduce a mechanism, by analogy with the one already launched for the resettlement of emergency housing stock: when regions can, having committed themselves to co—financing, receive targeted support from the federal budget or from a specially created fund," Sergey Kondratiev suggests.

And only after the strategy is determined and the tariff policy is brought into line with the current situation, it will be possible to talk about attracting private investment, the expert concludes.