Analysis: Russia fails to restart Crimean projects

RUSSIA: The reconnection of 100MW of Crimean wind projects has been delayed by issues including uncertainty over their legal status, according to the the Crimean government.

DTEK's Botievo wind farm in Ukraine

The projects, which include the 16MW Tarhankutskaya and 13MW Donuzlavskaya, held PPAs with the Ukrainian government prior to the annexation of the Crimea by Russia. Some of the projects were owned by the Ukrainian government.

In response to the invasion, Ukraine's national operator of wholesale electricity market, Energorynok, officially announced that it would no longer buy electricity produced by the wind and solar plants in the region.

Meanwhile, Crimea's minister of fuel and energy, Sergey Egorov, said that operations of the majority of solar and wind power plants in Crimea have been suspended since April. In August, it was revealed the Russian government was looking at bringing the projects into its tarriff framework.

The Russian government said the wind tariff in Crimea would be set at RUB 3.42 ($0.08) per kWh.

According to Russian energy analysts, the majority of the existing wind power plants in Crimea will probably not be re-launched until mid-2015 at the earliest due to the uncertainty over their legal status and the low tarriff price.

The tarriffs are currently four times lower than the original Ukrainian prices. At the same time consumer prices remain at the pre-invasion level, costing the Russian federal budget around RUB 18 billion ($550 million).

Anton Usachev, director of the Russian Association of Solar Energy, believes that the Crimean industry of solar and wind power will be loss-making. Keeping tarriffs at RUB 3.42 is only suitable for the regions with a developed solar and wind infrastructure, such as those in California or South Africa. At the same time in the case of Crimea and Russia the tarriff should be set at RUB 8 per kWh.

Sources in the Russian Ministry of Energy suggest the government is aware of the current situation. However, it is currently unable to significantly increase tariffs, mainly due to a shortage of funds in the national federal budget caused by sanctions and unfavourable investment climate in the country.

There is a possibility that tarriffs may be increased by 2018-2020, despite the fact that this may spark criticism by the powerful Russian oil and gas lobby. Due to high costs, the government of Crimea is considering alternative ways for the provision of Crimea with energy.

According to Crimean prime minister Sergey Aksenov, there is a possibility of the region switching investment focus to conventional thermal stations.