Возобновляемые источники энергии в России – это миф или реальность?
На вопросы издания "PV MAGAZINE"
ответил директор Ассоциации развития возобновляемой энергетики Алексей Жихарев. Interview: Is Russia's embrace of renewable energy a reality or a myth?
The superpower has always been seen as a fortress for oil and gas but positive signs are emerging from its renewable energy sector. pv magazine
caught up with Alexey Zhikharev, director of the Russia Renewable Energy Development Association and a consultant in the nation's energy market, at an alumni meeting for former students of the master's program in international energy economics and business administration offered by Leipzig University and the Moscow State Institute of International Relations. pv magazine: How do you assess the renewable energy market in Russia? How do Russia and its utilities perceive these new technologies? Alexey Zhikharev
: From my perspective, this market can be assessed as a sustainable and developed market nowadays. The sector was initiated five years ago and what we have seen is only the start. The renewable energy-supporting mechanism adopted by the Russian government in 2013 targets the installation of 5.5 GW of solar, wind and small hydropower plants by 2024. This was driven by the state desire to stimulate the development of a local industrial base for renewable energy technologies and to promote the exports of local producers. This was the reason for the local content requirement implemented as one of the key criteria of the support scheme.
Unfortunately, renewable energy is not emphasized enough in the Russian energy policy. The target share of renewable energy in total electricity production is set as 4.5% by 2024. The actual Russian energy strategy to 2030 indicates implementation of 25 GW of RE [renewable energy] by 2030 as one of the scenarios. Unfortunately, all these figures are not supported by the real masterplans. The acting RE support mechanism will stipulate just 1% of the total electricity production [must come from renewables] by 2024. Prolongation of RE support after 2024 is not yet supported by the Russian government. Based on my insights, the new 2035 strategy which is under preparation and revision now, can bring a brighter future for renewable energy in Russia. Decarbonization, digitalization and decentralization are expected to have a great impact on the grid system and even change its whole structure, prioritizing new generation sources.
Nevertheless, we can say that the market in Russia has already developed high growth expectations PV is becoming the dominant technology in the global renewable energy market. Is it the same in Russia? How successful is PV there and what are the best regions for this technology?
In terms of numbers, 1.8 GW of capacity was assigned to solar projects by 2024, placing [PV] second after wind. An advantage of solar PV over other technologies is its simplicity, namely, it requires small investment in the pre-development stage where solar data is easy to acquire through satellite atlases. That supported the acceleration of PV projects in Russia. Moreover, the current support mechanism, based on the capacity supply agreements, made large PV projects appealing to investors. Here the payment is related to the installed capacity per megawatt per month not to the electricity produced, while only a certain minimal level of capacity factor (14%) is set as a must. Most likely this approach will be modified for projects after 2024 to try to stimulate more efficient and productive PV plants. Still, I believe that it will be easy for developers to identify locations with good solar irradiation to meet the expected power factor values.
Although the climate is cold in Russia, some southern regions such as Astrakhan, Krasnodar, Stavropol, Altay and the southern Urals enjoy good solar conditions. Remarkably, Siberian Yakutsk, with its extreme winter temperatures below -50 degrees Celsius, has one of the best solar insolation values in the country. How do you assess the legal framework and investment environment for renewable energy projects in Russia?
In this regard we should highlight the two different support mechanisms for wholesale and retail markets. On the federal wholesale market [for generation capacities of more than 5 MW] the support mechanism is based on guaranteed payments per installed capacity, as discussed earlier. Developers participate in annual auctions organized by the trading system administrator, competing to offer the lowest CAPEX [capital expenditure] per installed capacity. As soon as a project is secured, a capacity supply agreement, or secured payment, for 15 years will be agreed and enter force. The baseline value for return is 12%, typically, but developers may reach higher values thanks to lower capital and operational expenditures, cheap debt financing, higher capacity factor etc.
In the regional retail market [for generation capacities below 25 MW] as per federal law, local network companies are obliged to purchase electricity produced by renewable energy units but only to cover 5% of their network losses [power lost during distribution]. For example, if a grid operator supplies 100 GWh per year and has 10 GWh of network losses [10% curtailment], the 5% rule means 0.5 GWh has to be compensated for from renewable energy production. Unfortunately this mechanism is still unsuccessful. The auctions held by the regional administrations are not standardized and even more don't provide tariff guarantees for developers. At the same time, network companies still prefer to buy cheaper electricity from the last-resort suppliers than relatively more expensive electricity from local renewable energy power plants. To sum up, the risk is higher in the retail market, and even if a couple of projects were integrated, it has not been in a systematic sort of way. What about local content requirements? Is there already a well-established local industry? Are there any co-operation opportunities with international manufacturers?
A lot of success has been achieved with the capability to produce major equipment here in Russia. Besides major international manufacturers in wind technology such as Vestas, Enercon (Lagerwey) and SiemensGamesa, several companies are engaged in producing solar PV equipment locally. Remarkably, the local producer Hevel provides highly efficient PV panels relying on pure Russian technology which has been developed by Russian scientists, and is one of three leading PV panel producers reaching 23% conversion efficiency. Some other manufactures [Solar Systems and Helios Resource] take the approach to produce only the cells in Russia, export them to China for assembly and then re-import the final product to Russia. A new production facility in the area of Ulyanovsk is planned by Rizen Grinvelyu Enerdzhi. The current total production capacity of PV panels in Russia is estimated to be more than 500 MW per year. This figure is relatively small in comparison with global production capacity, but sufficient to fulfill the local content requirement in the auctions.
It is immediately obvious the vertically integrated companies, which are developers and manufacturers at the same time, are the main actors in the local RE market. Even independent developers are normally affiliated with manufacturers. That's why, from my point of view, a purely competitive market for PV equipment has not been set up yet. In the wind sector, the situation is more or less the same, the project developers have either affiliation with the equipment producers or have anchoring contracts necessary for localization.
As for new co-operation opportunities, this will depend on the capacity assigned by the government for the next RE support mechanism. If our efforts succeed in convincing the government to raise the target share [of renewable] in the electricity mix to at least 3-5% by 2035, then there will be room for newcomers and higher competition. Recently, the consortia of developers and OEMs [original equipment manufacturers] who have secured their projects on the auctions are focused on the satisfaction of their own demand but later on, OEMs will compete directly in the market with other suppliers. Russia is using auctions to implement large scale projects. What is your assessment of this procurement method? Do you expect any new rounds in the near future?
Tendering rounds are held each year with the chance to compete for project capacities for the next five years, with capacities already predefined until 2024. The last rounds have had such high competition that they swept up almost all the capacities until 2024. The next round is to be held at the end of this month and will offer only 5.6 MW of new PV solar capacity and just 78 MW of wind. At the same time, there is still a free capacity of 220 MW that was originally assigned to small hydro projects but was not taken up by investors. Investors are not eager to step into small hydro projects due to their complexity and high costs in the pre-development stage. We are trying to reopen the discussion with the authorities to modify the mechanism for those site-specific projects. We aim to convince the government to redistribute this spare capacity in favor of wind and solar projects while adopting a new mechanism for small hydro projects. If our efforts succeed, 200 MW and 100 MW more for solar and wind will be auctioned until 2024. So the total installed capacity of PV projects will reach 2 GW and the wind sector will have 3.5 GW. Russia recently adopted a draft law for small solar systems and other renewable energy technologies. What do you think of this and can it boost the distributed generation market in Russia?
We had raised a lot of questions and concerns about the new federal law in this regard. The law as it is now doesn't bring any incentives. It only gives the opportunity to install small solar systems and then sell electricity to last-resort suppliers under standard prices, which make these systems unfeasible. To be more specific, this law does not introduce a feed-in-tariff scheme or any other supporting measures.
RREDA [the Russia Renewable Energy Development Association] is trying to suggest to the authorities other fruitful incentives for household and commercial consumers, such as tax credits and exemptions, compensatory interest rates and net metering. Normal net metering could work in some regions in Russia where electricity prices are high, for example in the Moscow region, while in other areas, such as Yaroslavl, the prices are really low and even net metering will not work there. What role will renewable energy play in the off-grid market? What potential do you see?
The major opportunity here is to replace diesel generators and similar units, as the electricity produced by such equipment is very expensive. However, such projects are normally small –typically below 100 kW. The size of the biggest project implemented in an isolated area is 1 MW – a PV plant located in Yakutia inside the Arctic Circle.
The main challenge is that investors are not willing to take the trouble to try to identify these small projects and their regulatory conditions. That's why we are actively trying to convince the government to introduce a special support scheme of centralized auctions for off-grid projects. The idea is to empower a special body that will gather all the information related to these projects, such as location, size and consumption rate. The next step would be to upload project profiles on an online platform so developers can access and assess the potential opportunities. Having at least one pilot project of such a nature will open the door for more engagement in a systematic approach. Additionally, introducing off-grid projects as clusters will make them more appealing to investors and at the same time reduce project costs. The main responsibility here lies with regional administrations and consumers to facilitate such projects and attract investors. Talking geopolitically, many countries are considering renewable energy as a route to energy independence. What impact will this have on Russian exports and its usage of fossil fuels?
There is a global trend towards consuming more electricity from renewable sources and less from fossil fuels. On the other side, and if we consider the case of Europe, the decommissioning of coal power plants and nuclear facilities is giving a high chance for new gas combined cycle plants. This means that the demand for Russian gas will remain stable. Russia at the same time is accelerating its liquified natural gas facilities, targeting Asian and African markets. Therefore, I believe that for the next 15 years there will be no problems for Russian gas exports.
From another angle, the Paris agreement will put more pressure on conventional power sources in linkage with their high CO²
emissions. It is true that Russia only signed the agreement [without ever ratifying it] but the indications show a decision in favor of ratification can be adopted by 2020. Globally, countries rich in oil and gas such as Saudi Arabia, the UAE and even Uzbekistan are starting to invest heavily in renewable energy to keep up with the energy transition. In Russia, we have our own way of sort of saying to do this and I hope that the attitude of the government and traditional power companies sooner or later will change in this regard.