Ministry of Energy Issued a Doubtful Draft Project for Stimulating Renewables

Olga Podosenova

Ministry of Energy sent for review to the federal bodies of executive power the project of "a series of measures to stimulate production of electric power generation facilities that operate through the use of renewable energy sources." Experts believe that the measures proposed by the Ministry of Energy will have no effect without real reform of the electricity market for renewable energy.

The Ministry of Energy developed the set of measures in response to the orders of the Prime Minister V. Putin of June 12, 2010. The document suggests changes in federal legislation and regulatory acts. It is assumed that, by June 2012, the rules for the wholesale and retail markets will be amended, regulating the sale of electric power facilities from renewable energy sources (with capacities from 25 MW to 150 MW) to retail distribution companies.

The need to encourage the development of renewable energy sources (wind, solar, tidal energy, biogas, geothermal and small hydroelectric power stations under 25 MW) has been discussed for long. Abroad, "green" tariffs are used to support the use of alternative energy: RES electricity costs slightly more, and the state subsidizes the difference. In Russia, it was also assumed that RES shall sell their energy on the wholesale market more expensively, but state subsidies to compensate for the additional costs were not planned.

Now, the Ministry of Energy finally proposed a list of incentives for "green" energy. Unstable sources (wind and solar) will receive a higher tariff and will be used to compensate for network losses. They can sell their production to the retail electricity market (REM), and network companies are seen as the main buyers. Renewable energy sources will be exempted from the general rules. Thus, now generation facilities above 25 MW are obliged to enter the wholesale market, but this threshold will be raised to 150 MW for renewable energy. In addition, the network companies now are prohibited from simultaneously owning assets in competitive sectors of energy (generation and distribution companies). However, networks will be allowed to construct their own renewable energy generation facilities to compensate grid losses.

The larger generation facilities (e. g., small hydro) will be based on schemes similar to that used for mandatory programs WGC and TGC. Part of the costs (25%) is proposed to being compensate by the state: by 2020, the state budget may spend up to 80 billion rubles for that. The remaining 75% may be fully or partially subsidized by the subjects of the Russian Federation.

The Ministry of Energy rejects the idea of introducing a surcharge to the price of "green" energy on the wholesale market, citing the impossibility of pre-emption of unstable energy renewable energy (solar generation or wind power is highly dependent on external conditions). Instead, contracts for sale of power are proposed for the wholesale market.

A positive change is the proposal to introduce additional criteria for qualification of the generating facility on the basis of renewable energy sources, namely, its compliance with the criteria of environmental efficiency and localization of production of manufacturing equipment in the Russian Federation.

Special surprises for experts are some clarifications in the proposed "package of measures". Currently, the target for RES development is set by the Federal Law "On Elecropower" as the volume of production and consumption of electric energy from RES in the total balance of production and consumption of electrical energy. "In relation to the practical impossibility of determining this indicator", the proposed measures replace it with a total installed capacity of generating facilities that operate through the use of RES in the Russian Federation and the Russian Federation subjects.

“The problem of impossibility to determine the volume of production and consumption of electrical energy from RES is fake” - says Mikhail Yulkin, the head of the climate change working group of the Union of Industrialists and Entrepreneurs. – “It is possible all around the world, and is impossible in Russia? It is clear that when there is no market for electricity and there is no system of "green certificates", it is difficult to understand, who exactly consumed how much green energy. However, what is the problem with accounting production? It turns out that one can install a power facility and produce nothing on it?"

According to analysts, introduction of contracts for sale of power for renewable energy sources is unlikely to significantly affect the final prices of electricity, primarily because the amount of this capacity is not great. According to the scheme and program development of the Unified Energy System of Russia in 2011-2017, only 660 MW of renewable energy facilities will be commissioned.

Despite the seemingly "revolutionary" energy proposals the Ministry of Energy, it must be noted that actual understanding of the real importance of this sector by professionals federal agencies is very far away. In his interview to Rossiyskaya Gazeta (www.rg.ru), the Deputy Director General of the Russian Energy Agency Energy Vladimir Baskov stressed that government support is needed to finance pilot projects and said: "We plan to create special demonstration grounds in regions, where corresponding objects will be built. This will help to attract both Russian and foreign investors with the right technology and expertise. In addition, we will pay special attention to environmental issues like, especially to the processes of recycling and incineration of raw materials."

It is clear that both sun and wind are still neglected by federal authorities. Hopes remain for financing renewable energy projects on the basis of public-private partnerships. However, private investors are reluctant to take up "green" energy. The main reason is the same outdated approach to tariff policy in the power generation of the country.

It is obvious that the measures proposed by the Ministry of Energy to stimulate production of renewable electric power generating facilities cannot be called consistent. It is necessary to radically reform the energy sector, to get rid from the nuclear power plants and large hydropower plants that parasite on state subsidies, to introduce a clear and transparent scheme of "green certificates", and support actual production of clean energy.