“Simplifications” for micro generation

The State Duma of the Russian Federation in the third reading adopted the Federal Law “On Amendments to the Law ‘On the Electric Power’ concerning the development of micro generation.” Will there appear a million solar roofs in Russia?

According to officials of the Ministry of Energy of Russia, “the document will contribute to the development of distributed generation in the country, help to increase the reliability of energy systems, smooth out peak hours of consumption and reduce energy costs.” It is also assumed that the adoption of the law should simplify the procedure for placing micro generation facilities and provide their owners with the opportunity to sell surplus generated electricity on retail markets.

Experts are quite inspired: the energy sector, long held captive by monopolies, allows private owners into its possessions! Renewable energy enters the market: there is an opportunity to make a profit, which means formation of prerequisites for development and growth.

Both organizations and ordinary private homeowners can now produce energy for their needs. The law permits the sale of surplus energy to the common network. Moreover, if an individual does this, it should not be considered as entrepreneurial activity. Prior to this, the government initiated amendments to the Tax Code, according to which income from such transactions is exempt from personal income tax until January 1, 2029. 

An important point of the adopted law was that if the owner of the micro-generation facility really decides to get rid of excess electricity generated by them, the guaranteed energy supplier operating in this area has no the right to refuse concluding such an agreement. Also, officials of the Ministry of Energy assured of simplification of the procedure for connecting and accounting.

But at this, according to experts, the good news is over. The key factor for the effective implementation of the law should be a mechanism for accounting for the energy that small producers would put into the network. And there might be two options here: net metering, i.e., a bi-directional counter that fixes the balance on how much an object feeds into the network and how much it takes from it. The second way to support owners of home renewable energy stations is a “feed-in tariff”: energy companies buy surpluses produced by private traders at a higher price than they sell energy to ordinary consumers, and the state compensates for the difference. 

The latter option was immediately denied. It seems that owners of small power plants cannot rely on the “green tariff” and full netting with energy retail companies. This approach had been initially factored in, and would have reduced the payback period of equipment for ordinary consumers by several years.

According to analysts, after passing the second reading, the bill lost the main thing that could stimulate the development of home “green” energy in Russia. Duma members and the Ministry of Energy even denied a full-fledged bi-directional meter scheme, when the payment for energy consumed from the network at the end of the month would be decreased by the cost of the energy produced and delivered to the network by the consumer.

The bill got to the final reading in the State Duma with the wording from which it follows that private owners should purchase energy at the price “not exceeding the prices of electric energy and capacity guaranteed by suppliers on the wholesale market”. That is, the owners of private power plants will sell their energy 1.5-2 times cheaper than that for which they will pay as ordinary consumers.

“It thus happens that the development of renewable energy-based micro generation in Russia will continue as it has been so far: without reference to the state and without expectations that it would help,” says Neosun Energy CEO Ilya Likhov in an interview with Znak.com. “The very fact of the adoption of the law by the State Duma is, of course, a good thing; however, I’m concerned regarding consumers: in the current edition, it may be much too complicated, which means it will not become an additional motive for switching to one’s own generation.”  

In experts’ opinion, one gets the feeling that the Ministry of Energy, although it gave the go-ahead to micro-generation, is quite frightened by the prospects of mass introduction of “solar roofs.” Apparently, there is a reason to fear that the massive inclusion of private renewable energy sources may create an unnecessary impact on the energy system and infringe the prevailing price regulation. “And in this situation, it is quite unlikely that we will have a million solar roofs: there are more incentives not to get involved with official energy suppliers than motives to join the common network,” experts say.

“The further progress of events will depend on the by-laws and the involved parties’ willingness to implement them. How will the initiative be implemented in the regions? Even though energy providers are obliged to accept micro-generation facilities into the network, it’s hard to imagine them rushing to connect in the Russian hinterland,” says Olga Senova, Head of Climatic Secretariat of the Russian Social and Ecological Union. “For wide expansion, in addition to laws, the state needs to seek and implement extra incentive methods that would help make renewable energy sources accessible and economically beneficial for a broader range of private owners.”