Innovative Development Program Approved by RusHydro’s Board of Directors on November 22, 2016 (Minutes No. 244 of November 23, 2016). of RusHydro Group for 2016–2020 with an outlook until 2025

The Innovative Development Program of RusHydro Group is a policy paper that sets out the focus and framework of the Group’s innovations and specifies the amounts and sources of funds to be spent on its innovative projects.

Prior to approval by the Board of Directors, RusHydro’s draft Innovative Development Program was agreed with the Ministry of Education and Science of the Russian Federation and the Ministry of Energy of Russia, and then reviewed and approved by the Interdepartmental Commission for Technological Development of the Presidium of the Presidential Council for Economic Modernization and Innovative Development of Russia (Minutes No. 8-DO1 of September 23, 2016).

RusHydro’s approved Innovative Development Program was reviewed and evaluated by the Interdepartmental Working Group on the Implementation of Innovative Development Priorities under the Presidium of the Presidential Council for Economic Modernization and Innovative Development of Russia, the final quality assessment of RusHydro’s Innovative Development Program was 95.2% (Minutes No. 1 of April 14, 2017).

In the medium term, it aims to improve RusHydro Group’s economic and operational efficiency by using innovative engineering, technical and management solutions focused on:

  • extending lifespans and improving performance of equipment;
  • enhancing reliability and economic efficiency of equipment;
  • improving the quality of equipment diagnoses coupled with proactive identification and mitigation of operational risks;
  • import substitution and reducing the dependence on imported equipment;
  • reducing the environmental footprint; and
  • improving energy efficiency and cutting losses.

In the long term, the Innovative Development Program of RusHydro Group aims to:

  • Assure the Company’s position as one of the most technologically advanced energy companies, both domestic and international, including via:
    • development of efficient construction, modernization and repair processes for power generation facilities;
    • development of real-time monitoring technologies for the core equipment;
    • automation and robotization of maintenance and repair; and development of new innovative products based on RusHydro’s know-how and expertise (e.g. energy efficiency and storage solutions, EV infrastructure, and advanced materials).
  • Ensure deeper engagement in green energy, including via:
    • development of hydropower potential in certain regions of Russia;
    • development of RES-based alternative energy infrastructure (geothermal power generation); and
    • analysis and development of mini-hydro solutions.
KPI for the Innovative Development Program of RusHydro Group
KPI Target Result
2018 2019 2020 2018 Delivered or not
R&D expenses, % of revenue 0.25 0.25 0.25 0.28 Delivered
Growth in the quantity of IP assets on the balance sheet, % 5.5 6.5 7 6.7 Delivered
Efficiency of hydropower capacity management, employees per 100 MW 20.52 20.36 20.13 21.19 96.9% delivered
Innovative products purchased, % of total volume 1.21 1.33 1.46 1.21 Delivered
HPP repair expenses, ‘000 RUB/MW (at 2000 prices) 19.9 19.8 19.6 12.86 Delivered An «inverse» indicator (the lower the better).
Integrated innovative development management for RusHydro and RAO ES East Subgroup

The innovative development programs of RusHydro Group and RAO ES East Subgroup have been integrated as follows:

  • R&D expenses, % of revenue;
  • growth in the quantity of IP assets on the balance sheet in the reporting period, %; and
  • heat efficiency, % (for JSC RAO ES East only).

The Innovative Development Program of JSC RAO ES East and the corresponding annual progress reports are reviewed and approved by RusHydro’s Board of Directors as part of the Innovative Development Program of RusHydro Group.

Amounts and sources of funds spent on the Innovative Development Program

In 2018, spending on the Innovative Development Program of RusHydro Group totaled RUB 655.4 mn (without the Innovative Development Program of JSC RAO ES East), while the figure for the Innovative Development Program of RAO ES East Subgroup amounted to RUB

1,717.5 mn. The equivalent KPI for R&D expenses across RusHydro Group stood at 0.28, or 112% of the target, in 2018.

Key innovative projects in 2018

  • Development of a hardware and software system for monitoring and predicting the reliability of HPP/PSPP hydraulic structures in geologically challenging environments. The objective was to test and implement a hardware and software system for safety and reliability monitoring of hydraulic structures at Zagorskaya PSPP and Zagorskaya PSPP-2.
  • Research into new processes to repair and restore hydraulic structures, extend their lifespans and enhance their reliability, and drafting implementation guidelines. The objective was to develop robust techniques for repair and restoration of hydraulic structures.
  • Development of recommendations on assessing the human impact on tailraces with regard to the HPP equipment, hydraulic structures and energy efficiency. The objective was to develop and justify an action plan to raise and stabilize the water levels in separate outlets for better performance of HPP turbine equipment.
  • Expansion of the digital testing complex at RusHydro’s branch Nizhegorodskaya HPP. The objective was to evaluate the iSAS automated protection and management system and assess the feasibility of its implementation at energy facilities with a view to a commercial rollout at Nizhegorodskaya HPP.
  • Modernization of reinforced concrete penstock encasements, including application of protective coatings. The objective was to insulate penstocks with waterproofing coatings based on advanced materials, extend time between repairs and cut repair expenses.
  • As regards RAO ES East Subgroup, its key innovative project was to develop technical solutions to reduce the erosive wear and enhance the reliability of moving blades at the downstream stages of steam turbines by using multifunctional nanocomposite coatings. The initiative was carried out during 2018.
Focus of innovations in 2018

Given the industry’s rapid technological development, it is no longer sufficient to adjust corresponding priorities once in five years (as requires the planning horizon for our Innovative Development Program).

In 2018, RusHydro compared the Group’s technological capabilities and innovation KPI with those of its major peers (the “Comparison”) to review its development priorities in this field.

The key objective was to identify attractive areas and technologies, assess their actual potential, and set ambitious but feasible technological development goals for RusHydro Group.

The results are now used to draft proposals on amending the Innovative Development Program, compile a list of technologies crucial to the Group’s further development, and plan measures to bring it on a par with more technologically advanced peers.

Program for Intellectual Property Rights Management within RusHydro Group

The Russian Government has toughened innovation requirements for companies where it is a shareholder, including those on intellectual property management.

In 2017–2018, it issued a number of directives setting IP management requirements for such organizations, which resulted in the Company’s Board of Directors approving the Program for Intellectual Property Rights Management within RusHydro Group along with a corresponding action plan.

R&D projects

RusHydro Group is committed to ramping up its R&D investments. In 2018, they grew by 59.7% to RUB 642.6 mn (incl. VAT).

2018 R&Ds were aimed at addressing the most significant (critical) process problems of RusHydro Group related with the prevention of the risks of process upsets leading to the undersupply of electricity to consumers and significant economic losses.

R&D spending, RUB mn

R&D spending by area in 2018, RUB mn
Key R&D projects implemented by RusHydro Group to ensure sustainable development
Description Progress in 2018
Pilot testing of the digital testing complex at Nizhegorodskaya HPP
  • to increase the guaranteed measurement accuracy; ensure high electromagnetic immunity and low susceptibility to vibration and temperature fluctuations;
  • to improve the electromagnetic compatibility of modern protective relaying equipment with automated process control systems by using optical fibers;
  • to prevent saturation, ferroresonance and undesirable transient events; and
  • to perform self-diagnosis and online monitoring.
  • to install optical and electronic measuring devices.
Pilot testing of the digital complex followed integrated tests in 2018 as part of the Development and Implementation of an Automated Protection and Management System for Next-Generation Electrical Substations national project, which had been initiated by the Russian Ministry of Energy. Results will be used to draft recommendations on a further rollout across RusHydro Group.
Development and implementation of a process to partially restore heat transfer surface elements of cogeneration heat exchange equipment (tubes) instead of replacing the entire tube bundle
  • to develop and implement a process to partially restore heat transfer surface elements of cogeneration heat exchange equipment (tubes) instead of replacing the entire tube bundle and thereby improve its performance, which includes exploring the properties of a set of thermal conductive materials and developing a process and a commercial prototype for application of a protective coating to damaged elements (tubes) of a heat exchanger’s tube bundle.
  • to apply specialty epoxy coating (BLOKOR-MKK115).
Epoxy coating (BLOKOR-MKK115) developed in 2018 along with a modular (block) pilot machine designed to apply it evenly along the inner surfaces of heat exchange tubes. Pilot testing (application of the protective coating and in situ tests) underway at Khabarovskaya CHPP-3.
Design of avalanche-resistant pylons and foundations for 220 kV power lines
  • to cut operating costs for overhead power lines by reducing expenses associated with emergency recovery operations to fix pylons damaged by avalanches.
  • to design special avalanche-resistant pylons and foundations compliant with building codes and regulations, including seismic performance requirements.
Detailed design drawings of pylons and foundations made along with a prototype of an avalanche-resistant angle pylon for overhead power lines. Following utility models obtained:
  • multisided steel pole for overhead power line pylons; and
  • reinforced cast-in-place concrete foundation.
Design of a composite power line conductor core based on thermoplastic resins
  • to achieve a 50% higher current-carrying capacity and reliability vs ACSR conductors without adding weight (resulting in savings on account of the increased quantities of transmitted power).
  • to make overhead power lines and the entire grid more reliable by reducing the ice and wind load on pylons (resulting in extended conductor lifespans); and
  • 15% to 40% lower costs of building new crossings as fewer pylons will be required).
  • to design a composite power line conductor core based on thermoplastic matrices along with manufacturing equipment.
Manufacturing equipment engineering and production documentation drafted. Patents for composite cores and corresponding production processes explored. Plans made to develop an experimental pultrusion machine, manufacture and test core prototypes, draft specifications for the core and conductors, and perform field tests on the conductors to verify their compliance with standards and requirements.

R&D effect on the Company’s risks

Damage caused by natural and industrial disasters outside RusHydro Group’s facilities is one of the key risks for the Company.

This risk results from the underprotection of RusHydro Group’s production assets against natural disasters.

The risk management initiatives provided for by the 2018 calendar plan include the following R&D projects:

  • research and development in the field of remote monitoring of HPP facilities condition and operating modes. Development of a technique to assess the condition of hydraulic structures and hydropower units at HPPs based on the monitoring of the amplitude and frequency of vibrations along with the earth foundation;
  • development and testing of a technology to monitor structural stress in case of a tensiometer failure;
  • development of a hardware and software system for monitoring and forecasting the reliability of HPP/PSPP hydraulic structures in geologically challenging environments;
  • development of an automated warning system to detect ruptures and measure turbine flows at RusHydro’s diversion and impoundment HPPs;
  • development of recommendations on how to assess human impact in the tailrace on the condition of machinery and hydraulic structures and HPP energy efficiency;
  • research into new technologies to repair and rehabilitate hydraulic structures and their elements extending their lifespan and reliability, development of implementation guides; and introduction of an expert system to support decision-making in response to incidents, accidents and emergencies at RusHydro Group’s production facilities.

Business process digitalization at RusHydro Group

RusHydro Group launched its Digitalization Program in 2018 and plans to develop a Digital Transformation Blueprint in 2019. Currently, the Program includes 22 digital projects covering virtually all business lines of the Group such as hydropower and heat generation, grid assets, and sales.

Key focus areas:

  • supporting operational management of RusHydro’s production and grid assets and developing internal capabilities for condition-based repairs;
  • building infrastructure to collect, process, store and escalate know-how up the ladder;
  • developing internal capabilities for remote control over facilities and systems; and
  • leveraging advanced technologies to ensure external communications, including transfer of technical data.

Key milestones:

  • building advanced integrated multi-service information and telecommunications infrastructure;
  • transforming production chains and processes, governance models and planning procedures;
  • using analytical systems to process Big Data to support decision-making; and
  • relying on cross-industry cooperation to build shared services in support of governance models.

RusHydro Group has a distance learning system up and running, which is made accessible to the employees of RusHydro’s HQ, branches and subsidiaries.

In compliance with the respective import substitution directives of the Russian Government, RusHydro Group developed and approved the Action Plan for 2018–2021 which provides for the Group’s increased reliance on domestically developed software.

RusHydro’s Digitalization Program includes 22 projects