Despite the fierce protests of oil and gas lobby, the Russian government has taken a crucial decision for the future development of national industry of renewables and in particular solar energy, finally signing a package of measures, which involves the support of the industry through the mechanisms of the wholesale electricity market.
The adopted measures involve selection of renewable energy projects on the competitive basis, taking into the costs of their implementation. It is planned that the projects with the least of costs will be eligible to sign a contract for the supply of power for the period of 15 years from the date of commissioning of the object. This will provide fast payback period of the project. At the same time preference will be given to the projects with the highest level of localization of production equipment.
Protecting cost to consumer
The guaranteed return on investments will be about 14%. Total volume of the generation to be tendered will be limited by 6 to 7 GW in order to avoid unnecessary costs on consumers, as the costs of renewable and solar generation are higher than traditional sources.
According to Arkady Dvorkovich, Russia’s deputy prime minister, who is in charge for the implementation of the project, the competition will also provide requirements for the localization of equipment from 20% in 2014 to 65 to 70% by 2020.
According to Dvorkovich, the first competitions will be organized in autumn of this year, primarily in the Far East, north and south of Russia.
Dvorkovich comments, "We plan to reduce the initial volume of total installed and operating costs. The tariff burden on consumers will be minimized, as we expect that it will be no more than 2% by 2020 in the total tariff, while the rate of tariff itself will be rised by overall 40-50%."
Solar plant in Russia's Mari El Republic
Protests against support
According to initial state plans, the document should be signed at the end of April, however, its final approval was suspended until now, due to massive protests in Russia against the granting of support to producers of renewables and in particular solar energy.
In April of this year, two organizations and in particular the Russian "Community of energy consumers", brought together major consumers of electricity in Russia, and NP "Council of Power Producers", and they sent a letter to Russia’s Prime Minister Dmitry Medvedev, asking him not to sign a set of measures to support renewable energy without further analysis of their costs for Russian budget and local consumers.
According to the opponents of their adoption, total costs of supporting renewable energy in Russia by 2020 may rise up to 85 billion rubles and will be mostly paid by domestic energy consumers. They also recalled that there are currently several projects that involve building of large-scale capacities of heat generation. These have been implemented by such companies as Rosenergoatom and RusHydro, and the costs of these implementation are extremely high.
The consolidated position of energy suppliers and buyers is based on the fact that the expected rise of electricity and power costs will be extremely high, and will negatively affect consumers. In this regard, according to them, the development of renewables in Russia should take place “out of centralized power sector," using targeted support.
Written by Eugene Gerden, a Moscow-based writer specialising in renewable energy issues.