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Russia

Russia

Analysis: Russia set to power beyond 14MW

RUSSIA: Russia could be set to enter the wind industry in earnest, despite having a current installed capacity that is among the lowest in the industrialised world. However, the unique nature of both the country's energy market and renewable energy auctions presents its own challenges.

A 150-200MW project is to be built near Arkhangelsk
A 150-200MW project is to be built near Arkhangelsk

German developer Sowitec has said that it is planning what would be the largest wind farm in Russia, the 150-200MW Arkhangelsk project in the north of the country.

Sowitec has partnered with Russian utility Mezhregionsoyuzenergo to build the project on Russia's White Sea coast after completing meteorological measurements at the site in October last year.

The project will now go before the Russian authorities under June's renewable energy auction.

Some progress is being made in Russia as a result of a new law brought in last year by prime minister Dmitry Medvedev paving the way for renewable energy auctions and subsidies.

The new regulations, enacted in May last year, offer a very different approach to most countries' systems. Competitive auctions will see developers handed contracts under which they are paid according to the capacity of projects, rather than the more typical agreement to pay for electricity supplied.

This new regime will allow renewable energy investors to benefit from regulated capacity prices for a period of 15 years.

According to the World Bank-financed International Finance Corporation, this is a unique set-up that brings with it an equally unique set of issues. Key among these is the fact that the Russian capacity market rewards power plants for their ability to produce electricity on demand, an ability that can be lacking in renewable energy facilities.

Another block to progress is the stringent 55% local content rules stipulation, which is set to rise over the coming years. Siemens, which formed a joint venture to move into the market in 2010 but put it on hold in 2012, said it will not consider putting any steel in the ground until the local content requirements are brought down.

Unsurpringly, a number of Russian companies have recently made noises about moving into turbine manufacturing. Atomenergomash Holding, which has previously worked with Alstom on gas turbines, has said it is "in negotiations about technology transfer with potential partners" for the manufacture of turbines.

However, while only 110MW of wind capacity was awarded in the first auction in October, this presents quite a sea change in a country that has been reluctant, if not downright hostile, to wind development.

The slow progress is to be expected considering the stance of president Vladimir Putin, who has made it clear that wind can only play a peripheral role in the energy mix. As recently as 2010 he decried wind energy as "claptrap" and has referred to nuclear energy as the only alternative to oil and gas.

In May, Russia lowered its 2020 renewable energy ambitions from 4.5% of power generated to 2.5%. However, hitting this more realistic target, which does not include large hydro, would be a notable achievement considering the previous state of the market.

Significantly, the government had offered up 1.1GW of wind capacity in the auction, but only accepted seven bids, worth just a tenth of what was available. If the local-content stipulation remains, it seems unlikely that the second tender, set for June, will fulfil its 1.6GW potential.

While there are several impediments in the way of growth, meaning Russia's wind industry is unlikely to burst into an untrammelled boom period any time soon, the country should be able to improve of its current installed capacity of 14MW.

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