Analysis: Russia plans help for wind developers

RUSSIA: The Russian government has announced it is to ease requirements for wind developers to work with local utilities in an effort to spur investment in the sector.

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The move is expected to involve the easing of financial conditions and the elimination of existed bureaucratic hurdles.

Under current Russian rules, renewables projects are awarded as a result of an auction, with the winner receiving a 15-year power purchase agreement. But the most important conditions for participation in the contest is for a potential investor to have a guarantee of support from one of the local utilities.

This has always been a target of criticism from most potential investors, as the majority of large Russian traditional energy generators were not interested in wind and, in some cases, were against them.

As a result, any potential developer affiliated with a local utilty had a large advantage in the auctions.

One example is the Avelar Energy Group, part of Russian conglomerate Renova, which is owned by Russian billionaire Viktor Vekselberg — who also controls IES Holding, one of Russia's largest traditional energy generators. Avelar was the main beneficiary of last year's competitions, winning around 100MW of renewables projects.

However the Russian government now looks set to abolish this requirement.

According to Vitaly Korolev, head of the electricity control department at the Russian Federal Anti-Monopoly Service, removing this condition should stimulate competition in the market and speed up development.

To replace the guarrantees, all potential developers will need to provide a credit for 5% of the project's cost, which will be a financial guarantee for the Russian government in case of any violations during the implementation of the project, in terms of its capacity and duration.

The approved changes have been welcomed by both large and small players in the market. According to Igor Akhmerov, head of Avelar, one of Russia's largest renewables developers, the adoption of a new mechanism of guarantees will be welcomed by the market participants and will stimulate competition in the industry.

Excluding projects gained during its annexation of the Crimea, Russia's wind capacity currently stands at around 14MW. However, the government has plans for 16 wind projects with a total capacity of more than 6GW.

The first on the list is the 150MW Priyutnensky wind farm in Kalmykia, which is scheduled to be commissioned by the end of 2015. Among the other large projects under development are the Middle Volga and Lower Volga wind farms in the Saratov and Volgograd regions. Each will have a capacity of up to 1GW and will be built by 2020.

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