Lithuania -- Belarus has been criticized for its authoritarian regime and therefore shunned by most businesses in the West. For the sanctioned country, all Western investments are of a great importance. However, those in the green energy sector perhaps have additional value as they can help Belarus catch up with global renewable energy development. But Belarus has also recently been embracing renewable energy source (RES) investors from the Commonwealth of Independent States (CIS), particularly China.
Over the past five years, Belarus has ramped up its renewable investments by building 10 biogas facilities and dozens of wind and hydropower plants.
“There were two wind farms in the country in the beginning of 2000. Now we have 22 of them. For example, the wind generation capacity of a newly built Chinese wind farm in the city of Grodno is 1.5 megawatts (MW), which satisfies a big part of the city’s energy need,” said Rusan Vikentij Ivanovic, energy professor and chairman of the Belarus Renewable Energy Association (BREA), a not-for-profit association of legal entities and individual entrepreneurs.
There had been some 180 small-scale hydropower plants, but the majority were shut down due to insufficient efficiency and poor planning, according to Ivanovic. “Currently only 40 of them are still running, but building is picking up again. In the last five years, eight small-size hydro plants and one medium-size plant was built on the Neman River banks in Grodno,” he said.
According to Vladimir Petrovic Nistiuk, BREA president, Belarus’ hydropower capacity in 2013 is at 30 MW, solar at 1 MW, wind at 4 MW and biogas at 5.5 MW. However, “the data is approximate as it does not include the green capacity from some private investors,” he warned.
Table 1: Belarus Renewable Energy Capacity Growth
“Our president [Alexander Lukashenko] has long understood the importance of renewable energy sources. He has always seen them as a tool to withstand the Russian energy prevalence and spearheaded most of the green legislation,” said Ivanovic.
In 1994 Belarus introduced a standard feed-in tariff (FIT) for RES-generated electricity. However, with no supplemental legislation, the FIT has been of little use.
In the quest for a renewable energy mix, Belarus — as well as investors, especially those from the West — must overcome not only the notoriety as an authoritarian country, but also the inconsistencies of the national RES legislation package and lack of secondary legislation regulating grid interconnection and pricing. BREA heads maintain that Belarusian lawmakers along with the Association have been actively working on such. In fact, in recent years Belarus has passed an array of legislative acts aimed to boost renewable energy production in the country.
In 2009, Belarusian lawmakers passed a decree onTax Relief for Renewable Energy Investors. According to the decree, investors have the right to deduct the full amount of VAT (value added tax that is equivalent to a U.S. sales tax) paid on the purchase of goods and property rights. It also exempts RES investors from land tax, VAT and income tax in connection with a property transfer.
At the end of 2010, the Council of Belarusian Ministers adopted the National Energy Saving Program for 2011-2015. Its main focus is to deploy alternative and renewable energy sources and increase energy efficiency in all sectors.
In June, 2011, Belarus adopted the Resolution on Feed-in Tariffs for Electricity Generated from Renewable Energy Sources. The FIT is set for installations with a capacity up to 750 kW for a period of 20 years. Belarus pays US$0.39 per 1 kWh of solar power, according to Ivanovic.
This July, Belarus enacted the state program Mitigation of Climate Change Aftermath 2013-2020, which also foresees harnessing alternative energy.
Kuzmic Grigorij Vladimirovic, head of ENEKA, an energy and engineering consulting company, notices that although most foreign green investors are satisfied with the RES legislation, the lack of technical regulation documents and some other unsolved issues regarding the system of cross-subsidies in tariff setting need to be tackled.
“To more actively develop RES in Belarus, it would make sense to increase ecology fees and taxes in the country,” he pointed out.
The Importance of EU Investment
By 2015 Belarus aims to produce 28 percent of its energy demand from RES and local fuels, like peat and wood chips, and 32 percent by 2020. But with a mere 6 percent in production today, many believe that without a renewables boost, the targets are too high.
It is very unlikely that a major boost will come from Western Europe, said Ivanovic. “The European Union and separate Western countries exert political pressure on Western RES developers to not step into Belarus. This is the biggest peculiarity of RES development in Belarus. And those who do not obey, frankly, risk their capital and resources,” he said.
As a result of EU policies, he says, renewable developers from Russia, CIS member states, Arab countries and especially China foray into Belarus. A Chinese company, he said, has recently proposed another “huge project” in Belarus on very attractive investment conditions. “The Chinese are about to wrap up a deal for a 300-MW photovoltaic farm in the Mogilev Region,” noted Ivanovic. “Nevertheless, I wish there were a larger interest of European countries in RES investments.”
EU investment is very critical for two purposes, explained Sergeij Morozov, a Belarusian analyst. “First, economic: to prove the world the 2011 economic ordeal is over and even risk-wary Western companies deem Belarus attractive for investments. And, second, political: to send out a message to the EU policy-makers that the sanctions against the country are not working and therefore they have to tone down the rhetoric. It seems that for a number of Western powers the condemnation for the human rights violations is of little importance.”
Acknowledging that “an undeservedly low international image of Belarus” hurts its RES development, Kuzmic insisted that foreign investors should adapt to the specifics of the country in which investment is planned, and politics should not prevail economics.
“Although some investors may not like Belarus’ centralized energy system and the peculiarities of designing and building,” said Kuzmic, “it is a common sense to expect them to adapt to the specifics and work to abide by Belarus’ rules if they want to invest here, or in any other country.”
Lead image: Rule book via Shutterstock