RECAI: Market to watch


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The goal. Revelations of a green agenda in Russia began in May, when the Government announced a target of 6.2GW of renewables capacity by 2020 (excluding large hydro) as part of its Renewable Energy Source Development Measures package. This is equivalent to around 2.5% of total electricity generation, up from 0.8%. While this represents a reduction of its 2009 pledge to generate 4.5% from renewables by 2020, the latest targets are arguably more realistic given that installed renewables capacity totaled only 1GW at the end of 2012, almost all of it small hydro. (Russia also has more than 45GW of large hydro capacity.)

The strategy. To this end, the Government will provide RUB85b (US$2.7b) of support in the form of tariffs awarded via competitive auctions. Developers will be offered an investment return of up to 14%, with guaranteed payments for 15 years from the start of operations. In a bid to expand the domestic supply chain, successful projects must also source 50% of equipment from local suppliers, rising to 65%–70% by 2020.

The results. The Government not only approved the legislation announced in May, but also subsequently moved to hold its first tenders in September, with surprising speed. Solar was undoubtedly the star, attracting almost 1,000MW of bids for construction in 2014 to 2017 compared with the 710MW on offer, though only 32 projects totaling 399MW were actually awarded. Meanwhile, demand for wind was subdued, with only seven projects totaling 105MW selected, compared with the 1,100MW on offer. No bids were received for large-scale hydro.

Solar versus wind. Many believe the high level of interest in solar is down to greater confidence in the sector’s ability to meet stringent local content requirements. Meanwhile, lower production of wind equipment may have reduced interest in the technology, as well as the fact that 15-year capacity payments will be linked to generation during peak demand, which could cause problems for intermittent generation. Outside of the tender, however, the Russian Association of Wind Power Industry estimated in October last year that around 3GW of wind projects were undergoing feasibility studies during 2012.

Next steps. September’s tender was closed to non-Russian companies, apparently due to a short bidding timeframe and various stringent electricity market requirements, though it’s not clear whether this will apply to future auctions. The Government has already scheduled the second tender for June 2014, when it plans to offer 1,645MW of wind capacity, 496MW of solar and 415MW of small hydro capacity, all for construction from 2015 to 2018.

Also in this article:

  • Scoping the opportunities
  • The rationale
  • Homegrown energy
  • Fighting the battle
  • Vested interests
  • From obscurity to opportunity

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   Ksenia Leschinskaya