Hydropower, Project Development, Solar, Utility Scale, Wind Power

Troubled Economy Dominates Russia Distributed Clean Energy Procurement for 2016-2019

Less green energy capacity up for grabs, fewer bidders, and only big players participating; a single bidder for wind capacity and only a few contestants for hydro power.

Russia’s procurement to distribute renewable energy capacity through 2016-2019 was dominated by concerns over the troubled Russian economy and the fallout for the development of clean energy projects.

The Russian government proposed a total of 365 MW of renewable power capacity, with solar being allotted 280 MW, wind power 35 MW and hydro power 50 MW.

Out of 20 solar bidders, the biggest chunk — 135 MW — was rewarded to T Plus, a Russian company that is part of Renova Group, which is owned by Viktor Vekselberg, a Russian billionaire.

T Plus has recently launched a 25-MW solar power plant in Orsk in the Orenburg region, 1,500 kilometres southeast of Moscow.

To the facility in Orsk, T Plus will add another three solar plants of 24 MW, 30 MW and 60 MW in capacity, also in the Orenburg region and to be built in 2019.

The runner-up was Avelar Solar Technology, a subsidiary of Hevel Solar, with both companies being part of energy holdings Renova and Rosnano.

It received 95 MW in tender, with a 10-MW solar facility slated for this year, one of 85 MW to be erected in 2019.

After grabbing 175 MW of solar capacity in 2014, China-based Solar Systems now was granted only 50 MW, which has to be used in 2019, too.

Nord Gidro-Belyj Porog (НГБП), operating in the Russian autonomous republic of Karelia, will proceed with building two small 25 MW-each hydro power dams in the republic.

The single bidder for wind capacity was a newcomer, Finland’s Fortum, which pocketed all 35 MW offered in tender.

Asked why only Finns were participating in the competition, Igorj Michailovich Bryzgunov, chairman of Russia’s Wind Industry Association, declined any comment.

Russian media has hinted that the scarcity of wind bidders is due to Russia’s obligation to include 70 percent local content from 2017. However, the media further suggests that most hydro and wind power developers believe the requirement is too tough to meet.

Fortum says it is undeterred and expects the entry to Russia’s renewables market will play out well.

“Fortum Russia believes that, now, there are right conditions for such an investment in Russia. We believe the project will be viable,” Denis Litoshik, Communications and PR Director of Fortum‘s Russia Division, told Renewable Energy World.

Fortum’s 65 million euro wind farm project will be developed in Ulyanovsk, Russia, and has to be completed this year.

Russia is expected to sell 110 MW of wind capacity for 2017, 400 MW for 2018 and 500 MW of wind for 500 MW. The capacities will be offered in the next tender, to be held at the end of the year.

Elena Ivleva, the head of the Communications Department of Russia’s Supervisory Council Soviet Rynka (Council of Market), acknowledged that many green investors were wary of the slump in Russia’s economy, a result of tensions with the West and the collapse of global oil prices, and the implications for renewable energy projects.

Ivleva told Renewable Energy World that the Russian Government, cognizant of the difficulties, had addressed green investors’ concerns by pegging for the investors the exchange rate of the ruble and the euro, i.e. setting a fixed contract rate, and allowing investors a 12-month delay with the kick-start of the facilities.

“Still, from the economic standpoint, renewable energy sources do no stand up to the competition from conventional power generators,” Ivleva said. “Nevertheless, the existing RES support system, coupled with the aforementioned measures, does create a stimulus for development of renewable energy in the country.”

She admits though that the interest in investments in renewable energy sector has significantly weakened due to the shaky ruble.

“As most of the investors employ imported technologies and equipment in clean energy projects, with the fall of ruble’s value, the costs of the materials have risen nearly twice,” Ivleva said. “Therefore, the effectiveness of the implementation of such projects has decreased too.”

Still, in tenders for solar energy, she noted, there have been requests for two and a half times more than was offered by the government.

Many companies, Ivleva pointed out, keen on pursuing green projects have actively started developing domestic industrial capacities aimed to boost local content.

“In some solar projects, the extent of local content is already reaching 70 percent and, in 2016, it is expected to be a full 100 percent,” Ivleva said.

However, some green investors, like Energija Solnce (Sun Energy), which in a similar tender in 2012 was given 435 MW of solar capacity and 105 MW of wind capacity to be tapped during 2013 and 2014, has not used quotas at all.

The reason is said to be the high barrier of local content, which from 2017 will increase to 70 percent.

Lead image: Wind and solar energy. Credit: Shutterstock.