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Russian Renewable Energy Law Could Significantly Boost Clean Energy But Obstacles Remain

Hopes for Renewable Energy Source Development Measures (RESDM) in Russia's renewable power sector are high: if adopted and properly implemented, it will boost the renewable sector that is plagued with underfunding, often differing regional and federal legislation, other short-comings or simple ineffectiveness.

The draft law is one of the most important provisions of the recently approved state program “Energy Efficiency and Energy Development in Russia during 2013-2020.”

“Indeed, all those in the renewables industry have been impatiently waiting for the package of measures. Under the most optimistic assessments, it is called a game changer; under most moderate estimations, a significant boost for the national ‘green’ sector if passed,” said Maxim Cherednichenko Aleksandrovich, a representative of the recently established Russian Alternative Energy Institute (RAEI).

The current draft RESDM foresees RUB 85 billion (around US$2.8 billion, €2 billion) in state support for RES development and expansion, adoption of legislative acts to support RESDM implementation and an increasing part of green energy in the total power production, up to 4.5 percent by 2020, though some believe that  a more realistic number is 2.5 percent, or 6 GW, down from the planned 11 GW, in both cases a considerable lag compared to the developed Western countries.

The new renewable energy incentive scheme is expected to be implemented through power purchase agreements and will prioritize projects in line with a local content requirement, obliging solar, wind and hydro developers to use 20 percent locally produced renewable energy equipment in 2013–2014, and increase this output to 65–70 percent by 2020.

The RES developers vehemently fight this, arguing the “production localization” hampers sector development. 

“It is akin to bearing a healthy child in six months… The high ceiling is in favor of only a few large renewable energy facility producers, but the regulation is capable of suffocating the entire sector for renewables,” said Jevgenij Konygin, executive director of Energy Politics and Energy Efficiency Sub-Committee at the Russian Industrialist and Entrepreneur Association.

Importantly, the government in the draft commits to buying up the green energy from RES project competition winners for 15 consecutive years, guaranteeing the green entrepreneurs an investment return of no less than 14 percent.

However, no specific details have yet been released concerning the tariffs for the individual technologies.

Unlike the U.S., Western Europe or Japan, the Russian government has not been very supportive of the renewable energy sector until now. Though the country passed the renewable energy program already in 2009, it did not work, as there has not been the necessary supporting legislation.

“In fact, it was lacking core items, like, for example, how to obtain budget money for an RES project implementation, or mentioning anything of support for tariffs. The draft strategy is a lot more numbers-oriented and, if implemented, will help promote the Russian renewables sector,” Adolf Aleksandrovich Cherniavskyj told RenewableEnergyWorld.com.

Now the RES-produced self-cost energy price is some 4-5 rubles [US $0.13-0.16] per kWh, but to have the green investment paid off, he says, the purchase price should be around 16-20 rubles [US $0.51-0.64], and that’s where the green sector counts on state support.

Cherniavskyj is a member of the Russian Union of Scientific and Engineering Organizations, a group set to tackle renewable energy issues, and is a chief scientist at Rostovteploelektroproekt, a science and research institute in the Russian city of Rostov-on-Don.

Originally, in 2009, the goal was for renewables to cover 1.5 percent of Russia’s electric power demand by 2010, 2.5 percent by 2015 and at least 4.5 percent or 11 GW of installed overall capacity by 2020. However, in 2011, only 8.5 billion kWh of energy — less than 1 percent of Russia’s total electricity output — was produced from renewables.

But with the bill signing nearing — set for May or June at the latest — it has been encountering increasing resistance from powerful traditional energy suppliers and lobbyists.

Ahead of the RESDM adoption, in mid-April, the Russian government hinted of a “multiple increase” of investments into the renewable energy sector and promised “over a couple of days” to reveal some numbers from the draft, proving the ambition, but this did not happen and no explanation from the authorities was given.

“This is not unusual in Russia, but it is an obvious sign that the RESDM adoption won’t be smooth, to put it mildly,” says Cherniavskyj. 

Some experts fear that the traditional energy lobbyists, with the traditionally strong connections in the Kremlin, will be able to force the government to trim down the draft significantly, or put off its enactment till much later.

This is even despite Russian Prime Minister Dmitrij Medvedev’s public support for the bill, who still in mid-April regretted that his view from his airplane window in the Russian skies shows “only a few specks” of solar, wind and hydro power facilities, though when flying over the “considerably smaller Europe, it is dotted with various renewable energy facilities.”

“It remains to be seen who will prevail: the energy traditionalists, or the government, tightly linked to them but willing to be modern, though the Russian backwardness from other world powers, in terms of renewable energy development, is big,” a Russian energy analyst from a governmental energy agency said to RenewableEnergyWorld.com on the condition of anonymity.

Instead of the government revelation on the RESDM details, an announcement came from two powerful public Russian energy organizations — Energy Power Consumer Community (EPCC) and Energy Producer Council (EPC) — who urged the Russian PM not to sign the draft until “additional analysis” on the renewable energy development and its impact on traditional energy in the country is made.

The energy public bodies fear that an RES capacity surge can hike power costs by US$2.7 billion by 2020, especially considering that another two large-scale energy programs carried out by state nuclear power company RosEnergoAtom and private company RusHydro increase power costs in Russia by over 15 percent yearly.

“Renewable energy sources are so weather-dependent that any talk of their capacity prognostication is sheer nonsense,” said Mikchail Andronov, the EPCC supervisory board deputy chairman. “Thereby the systemic energy operators will have to permanently reserve certain capacities of traditional energy to support the renewables.” 

EPC director Igor Mironov added, “we are concerned that the foreseen resources for RES will be included in the self-cost price of the renewables capacity, thus harming traditional energy generators.”

Anton Usachiov, chairman of the Russian Solar Energy Enterprise Association, counter-argues that the fears are “unfounded,” as the foreseen US$2.8 billion state support for RES is the “utmost upper limit,” one that will hardly be reached taking into account the amendments tightening the RES development and expansion requirements that were passed during deliberations of the measures with the government.

“Any further trimming of the draft will put the green objectives in jeopardy,” he warned.

“Too much is at stake. If Russia indeed seeks to be on par with the rest of the modern world, which I don’t doubt, it will have to pass the RESDM draft as it is, or with small corrections,” Cherednichenko of the RAEI said, playing down concerns. “It’s too early to speak of somebody trying to derail it.”

Lead image: Moscow via Shutterstock

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