The Russian heat and power industry is a classic tale of a giant built on a previous era that now struggles with age, funding, and geopolitical pressure. Thermal power plants (TPPs) remain the backbone of the country’s energy system, generating 57.5% of all electricity in 2025. Yet, this dominance masks a serious crisis, as most of this capacity is old, worn out, and in urgent need of modernization to avoid a widening electricity shortage.
The Backbone of the Grid
The sheer size of Russia’s thermal generation sector is substantial. In 2025, TPPs produced 767 billion kWh of electricity, underscoring their critical role in the energy mix. Nuclear power (18.7%) and hydropower (16.7%) are significant contributors, but they are secondary to the thermal sector.
However, this scale hides the issue of reliability. The average age of conventional generation in Russia is 37 years, significantly older than equivalent plants in Europe and China. This leads to high levels of wear and tear, with estimates suggesting that up to 40% of equipment in thermal generation has exceeded its service life, while independent assessments from sources such as Ukrainian intelligence put the figure at over 70%. The consequences are predictable: overburdened power lines, frequent local accidents, and a rise in electricity shortages, which are estimated to have reached 25 GW in 2025.
A Sector Under Stress
The challenges facing the sector are severe and mutually reinforcing:
- Aging Infrastructure: The core problem is the deterioration of the physical plant. The unified energy system has seen a decline in generation from TPPs by 1.3-1.5% in recent years, and there are growing power deficits across the country.
- Investment Gap: Modernization is expensive. Total investment tied to approved generation projects is estimated at 2.2 trillion rubles, with potential electricity price increases of around 29% by 2031 to cover costs. The total need for capital investment until 2042 is projected at 9 trillion rubles. There is a critical demand for new capacity, with the need to add 4.5 to 6 GW annually, yet investment momentum has slowed.
- Sanctions and Import Substitution: The war in Ukraine has made the situation worse. Sanctions have cut Russia off from modern Western energy equipment and technology. This has forced a shift towards import substitution, but with mixed results. For instance, the modernization of the Zainsk GRES plant was halted because General Electric could not supply turbines; the project is now exploring alternatives from China, India, or domestic producers, though these options are complex due to sanctions and supply chain issues.
Modernization Projects and the Path Forward
Despite the grim outlook, there is a drive to modernize, with significant investments being made.
- Government and State Corporation Support: The government is using mechanisms like the “Project Finance Factory” to support investment-5. State corporations are also stepping in. For example, Rosatom completed an 8.4 billion ruble modernization of the Smolensk-2 CHPP, boosting its capacity by 15%.
- Large-Scale Investment Programs: The state-owned RusHydro is planning to invest a massive **389.9 billion rubles ($5.12 billion)** in 2026 alone, with a total of 950 billion rubles ($12.47 billion) planned for 2026-2030. Its program includes the commissioning of over 3.1 GW of new electric capacity, with projects like the Shkotovskaya CHP and the second stage of the Yakutsk GRES-2, as well as the reconstruction of Vladivostok CHP-2. This indicates a long-term commitment to maintaining and growing capacity, especially in the Far East.
The Russian heat and power industry is at a critical juncture. Its aging infrastructure, a legacy of the Soviet era, is buckling under modern demand. The combined pressures of massive investment needs, technological sanctions, and the urgent requirement for import substitution have created a “perfect storm.” While significant modernization projects are underway, notably from state giants like Rosatom and RusHydro, the scale of the challenge is immense. The future of the industry will depend on whether Russia can successfully navigate these obstacles to secure its energy sovereignty and meet the country’s growing demand for electricity and heat.
