The modernization of the Russian electricity production sector. Regulatory risks and investment protection

PhD ceremony: Mr. A.J.R.T. Boute, 11.00 uur, Academiegebouw, Broerstraat 5, Groningen

Title: The modernization of the Russian electricity production sector. Regulatory risks and investment protection

Promotor(s): prof. M.M. Roggenkamp

Faculty: Law

Given the poor state of the infrastructure in Russia, the modernisation of the economy is an absolute priority for the Russian authorities. The use of outdated industrial equipments makes of Russia one of the most energy intensive countries in the world. It is therefore one of the most important emitters of CO2. Moreover, its high energy intensity affects European energy security by reducing the availability of Russian gas for export. A contrario, energy savings in Russia could contribute to European security of supply and to the international CO2 emission reduction objectives of the European Union.

This thesis analyses the role that European energy companies could play in the modernisation of the most important gas consumer and CO2 emitter in Russia: the electricity production sector. It proposes an analysis of the regulation that the Russian authorities have developed to attract investments in the refurbishment of the electricity infrastructure.

This thesis defends the view that the success of this modernisation policy will depend on the stability of the “rules of the game” for investors. Given the strategic importance of the electricity sector, the risks of regulatory changes or of state interference are considerable.

The investment protection treaties that Russia has signed contain important guarantees that European investors could invoke against state interference with their investments. These treaties are however also characterised with important flaws. In the context of the current negotiations on a new EU-Russian energy regime, this thesis makes recommendations to improve the protection of energy efficiency investments.