“Wasted” import

The Ministry of Energy is discussing regulations that will make the conditions for renewable energy sources on the Russian market more comfortable. If amendments to the existing regulations are approved, way to the Russian market will be open for foreign manufacturers, for which requirements on facility localization are an obstacle. Non-government environmental organizations believe that supporting the energy alternative requires a flexible and balanced approach.

Generating companies and manufacturers and vendors of power machinery have asked the Market Council Nonprofit Partnership, the Ministry of Energy, and the Ministry of Industry and Trade to change the criteria of the renewable energy source support system. Advocates of wind generation are especially concerned with the situation.

As it has been reported, the Russian government approved the regulations for support of renewable energy facilities a year ago. During that time, two tenders for wind, solar, and small hydraulic power plants were held. The selection limit that must be passed by objects requesting government support is practically exhausted; the entire capacity for 2015 through 2018 has been sold out. At the same time, a substantial part (200 MW) of capacities allocated for wind energy and small hydraulic power plants has been wasted, as just 8.5% and 4.8% of such sources have been in demand.

According to the experts, wind and small hydropower projects, decisions on construction of new facilities, and intensive development of ‘green’ products are slowed down by imperfect systems. In particular, businesses that would like to ‘take the green road’ has asked to keep (or at least not to reduce, as for facilities commissioned from 2016 it will be cut down to 12%) the current amounts that are planned for selection, namely, 12% to 14% return on invested capital and 15 years payback period, while the requirements for localization of facilities should be mitigated. However, there is no consensus regarding localization, as Russian manufacturers think that the current parameters should stay, as otherwise local manufacturers will be unable to develop. Foreign companies are of the opposite opinion.

A vast majority of the experts believe that raising the maximum capital costs from 66,000/kW up to 97,000 is important due to the change of the foreign currency rate. In addition, market participants have asked to qualify power plants at the design stage rather than after their commissioning so that the risk of penalties could be excluded and capital costs adjusted subject to the climate conditions. The experts also considered it important to introduce a selection criterion in view of the installed capacity utilization factor, which would enable selecting the most efficient projects.

According to Kommersant, in early August, the Market Council workgroup for development of amendments to the regulations on renewable energy sources (RES) has reviewed the industry’s proposals on changes to the conditions of tenders for construction of ‘green’ power plants. The Market Council has supported most of the energy companies’ proposals. In particular, it is planned to raise capital costs and mitigate localization requirements from 65% down to 36%-49% in 2016 to 2018. The proposal to extend the 14% yield rate for 2016-2017 has also been supported. The plans are now being discussed, and the final decision on the matter should be made by the Ministry of Energy in the near future.

Participants of the Russian RE sources market are waiting for the decision eagerly. They believe that any delay with incentive measures can destroy whatever interest there is for alternative energy development in the country. “RE development mechanisms that have been established by the new power market rules must start operating in Russia at full force as soon as possible,” said Olga Senova, the leader of RSEU Climate Secretariat. “The mechanisms of RES stimulation for the complex power system of Russia should be flexible and well balanced to give the development of the Russian ‘green’ energy a chance,” she added.