The Russian heat and power industry, the backbone of the nation’s energy infrastructure, is facing a profound crisis. While the sector continues to generate the majority of Russia’s electricity and heat, it is grappling with aging infrastructure, chronic underfunding, and mounting investment needs. This has led to a growing number of accidents, rising costs, and a strategic push for modernization and technological sovereignty.
Generation Profile and Market Size
In 2025, electricity generation in Russia’s Unified Energy System totaled 1.166 trillion kWh, a 1.2% decrease from 2024. Despite the slight decline, the industry’s importance to the Russian economy remains substantial. The Russia Power Market is valued at approximately USD 45 billion, driven by electricity demand and government investments in infrastructure. Thermal power plants bore the main load in the generation mix, accounting for 57.5% of total electricity generation. Nuclear and hydroelectric power contributed 18.7% and 16.7%, respectively, while renewable sources like wind and solar remain minimal, at 0.6% and 0.3%.
Early data for 2026, however, suggests a more positive outlook, with electricity generation in January-February 2026 rising 3.1% year-on-year to 226 billion kWh.
The Infrastructure Challenge: Aging Assets and Investment Pressure
The cornerstone of Russia’s heat and power infrastructure, much of which is decades old, is a significant source of concern. The average age of conventional generation in Russia has reached 37 years, surpassing levels in both Europe and China. This aging asset base has led to increased power shortages and a rising number of accidents. From 2020 to 2024, shortages in the Russian wholesale electricity market rose by 79%, with volumes in the Far East and Siberia more than doubling.
To renew this capacity, experts estimate that Russia needs to add 4.5 to 6 GW of new capacity annually. The financial burden of modernization is substantial. Total investment tied to approved generation projects is estimated at 2.2 trillion rubles (approx. USD 29.3 billion), and electricity prices in the capacity market could rise by approximately 29% by 2031 to cover these costs.
The crisis is particularly acute in the heating sector, where one-third of networks are in critical condition. Accidents and prolonged outages have become more common, with incidents at heat supply facilities decreasing by only 14% during the recent heating season. The situation is exacerbated by the diversion of state funds away from utilities, with the federal budget for utilities falling far short of the trillions of rubles needed for comprehensive modernization. The government admitted that 40% of the country’s utilities are in serious disrepair, and the number of accidents is expected to grow without urgent fixes.
Modernization and Strategic Initiatives
Amid the challenges, both the government and key industry players are undertaking significant modernization efforts.
Government Strategy:
- A meeting of the State Council Commission on Energy focused on ensuring technological sovereignty and developing domestic power engineering.
- The goal is to commission 88.5 GW of new generating capacity by 2042, supported by the “New Nuclear and Energy Technologies” national project.
- The share of domestically produced equipment in the fuel and energy sector already exceeds 80%.
Major Investment Projects:
- Rosatom: Completed the modernization of the Smolensk-2 CHPP at a cost of more than 8.4 billion rubles, boosting its capacity by 15%.
- RusHydro: Plans to invest a substantial 389.9 billion rubles ($5.12 billion) in its projects in 2026, with a long-term investment program of 950 billion rubles through 2030. This includes the commissioning of over 3.1 GW of new electric capacity and over 2,500 Gcal/h of new thermal capacity.
- Power Machines: Is preparing the second gas turbine for the Artyomovskaya CHP-2 as part of a broader state program to develop thermal generation in the Far East.
Outlook
The Russian heat and power industry is at a critical crossroads. While the government and state-owned enterprises have outlined ambitious investment plans and set targets for technological independence, the scale of the infrastructure challenge is immense. The sector’s ability to secure necessary investment, upgrade its aging assets, and maintain a reliable supply of heat and power to its citizens will be a key test for the country’s economic stability and the well-being of its population in the coming years.
