Russia to slash support and increase fines for new wind farms

Government proposes halving support for new projects while mandating 100% local content and increasing fines for late commissioning

Industry has warned that fewer projects will be built if support is cut (pic: Enel Green Power)
Industry has warned that fewer projects will be built if support is cut (pic: Enel Green Power)

The Russian government plans to halve funding for the country’s wind power sector from next year under new proposals.

It plans to cut support from RUB 133 billion ($1.7 billion) to RUB 66.6 billion for wind projects coming online between 2025 and 2035.

The proposed cut comes among a raft of changes the government is expected to green-light by the end of the year, with the new rules due to come into effect in early 2021.

Industry analysts told Windpower Monthly the move is not surprising as the government is concerned that the generous support given to wind power investors could push up electricity prices even as the coronavirus pandemic causes demand to fall.

However, analysts at the Association for the Development of Renewable Energy in Russia (RREDA) added that if funding is cut, capacity additions will not meet targets the government had previously set.

The government is also planning to demand that all wind farm components are produced in Russia – up from an existing 65% localisation requirement – and to increase fines for developers commissioning projects after agreed deadlines.

Fines would be calculated individually based on the overall cost and the level of state support for the project, but the RREDA believes fines could increase by up to 50%.

The economic development ministry also wants to accelerate alternative support mechanisms such as green certificates in a bid to push renewables towards grid parity – equal pricing with non-renewable sources.

But the RREDA thinks it is unrealistic to expect Russian wind power to achieve grid-parity with non-renewables due to low gas prices, excess capacity in the energy system and high interest rates for loans.

Other government proposals include implementing a state support mechanism similar to the UK’s contract for difference (CfD) model and reducing the notice period for tenders, giving developers only 30 days to submit bids rather than the current 90.

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