Russian windpower industry calls on State Duma to stimulate development of renewables

Given Russia’s massive potential for wind power and China’s emerging global dominance in the industry, it is quite possible that expansion in energy cooperation between the Eurasian energy super powers will encompass renewables like wind power.

Russia of course has some of the world’s most abundant oil and gas resources as well as a well-developed nuclear power industry. Demand for renewables in Russia has therefore not been significant domestically. However, Russia has a huge renewable energy potential, particularly wind power and hydropower. 

According to the International Hydro-power Association, Russia is second in the world for hydro potential, yet only 20% of this potential has been developed. Nevertheless, Russia was the world’s seventh largest producer of hydroelectricity in 2020.

Currently, Russia has no significant domestic wind power manufacturing industry. Recently China Environment Net reported that companies from Russia and China were seeking to cooperate to set up a joint-venture together with Tatneft, a major Russian oil and gas company based in the Republic of Tatarstan, to establish licensed production of Chinese wind power equipment in Tatarstan).

China and Russia have long standing cooperation in nuclear power. The Tianwan Nuclear Power Plant, in Lianyungang, East China’s Jiangsu Province, is the largest Chinese Russian joint venture ever, and will become the world’s largest nuclear power plant upon completion.

In February 2022, China and Russia announced that the two countries will “strengthen their strategic partnership in energy, steadily advance major oil and gas cooperation projects, and advance cooperation of scientific and technological innovation.” At the same time China National Petroleum Corporation (CNPC) announced separate billion dollar gas and oil deals respectively with Russian gas giant Gazprom and Russian oil producer Rosneft. Given Russia’s massive potential for wind power and China’s emerging global dominance in the industry, it is quite possible that expansion in renewable energy cooperation between the Eurasian energy super powers.

Renewable Energy Sources in Russia in the new economic and political conditions

Following an online meeting on the issue of “Renewable Energy Sources in Russia in the new economic and political conditions: problems and prospects” held by the State Duma Committee on Energy on 28 June 2022, the Russian Wind Industry Association (RAWI) called on the Russian parliament to support a set of proposals to expand the uptake of wind power in Russia.

The RAWI proposals are to be included in the outcome document of the meeting and these were sent by RAWI Board Chairman Igor Bryzgunov to the First Deputy Chairman of the State Duma Committee on Energy, MP Valery Seleznev.

RAWI reports that:

“The document compiles proposals aimed at developing and supporting the construction of wind farms to sell sustainable energy under direct bilateral contracts (DBCs) on the wholesale and retail markets and to facilitate the achievement of so-called “price parity” with conventional generating assets:

  • Exempt electricity sales projects under direct bilateral contracts in the wholesale or retail market from VAT, after they refund the VAT paid during the construction of a wind farm. This proposal would reduce the cost of electricity in some wind farm projects to a competitive value of 4 roubles per kWh.
  • Exempt wind farms that sell electricity under direct bilateral contracts on the wholesale or retail market from income tax until the investment return period is reached (until the payback period is reached). This proposal would also reduce the cost of energy from wind farms and expand the area of commercially viable wind farm construction.
  • Eliminate the upper capacity threshold of 25 MW for wind farms selling energy on the retail market. This proposal would make retail wind farm projects in the regions attractive to investors.
  • Abolish the outdated requirement to transfer land occupied by a wind farm from agricultural land to industrial and energy land. This proposal would reduce the cost of land conversion for both the investor and the local authorities. The requirement to transfer land would not entail any commercial or organisational losses on the part of the local authorities.
  • Consider the possibility of wind farms to be built by industrial consumers for their own needs, following the example of the so-called swap deals in oil production. The mechanism for wind power is as follows: an industrial or other electricity consumer builds a wind farm as far away as possible from the enterprise (its “own” power consumption point) within the same price zone. The electricity generated by the wind farm is consumed at its location by local consumers in the same way as all energy in that zone, but the amount of electricity generated by the wind farm is counted by that industrial consumer as energy generated for auxiliaries. Thus there is no point in claiming to pay transfer of energy. The proposal is the first put forward by the Energy Consumers Association and requires a comprehensive discussion, but the benefits are clear.
  • Abolish grid connection fees for microgeneration facilities as discouraging its development. Microgeneration development can create new jobs in renewable energy generation, while excessive connection fees negate the motivation for individuals – the main market players – to set up their own microgeneration facilities.”

The next set of proposals sent to the State Duma concerns import substitution  localising the production of wind turbines in Russia:

  • Provide support in the form of non-refundable subsidies for the reconstruction of wind turbine production facilities and components. This proposal would create real production of wind turbines and components as opposed to “virtual” localisation and significantly reduce the effective cost of produced wind turbines, which would create jobs and create competitive production of wind turbines in Russia.
  • Provide a tax holiday for companies producing wind turbines and components for wind turbines in terms of income and property tax until the investment in wind turbine production and component manufacturing is repaid. This proposal would stimulate the uptake of previously unavailable technology and provide incentives to resume production of components, materials and equipment that were discontinued due to poor competition with imported equivalents.
  • Provide for compulsory ownership of intellectual property on wind turbines by its producer – a company with Russian jurisdiction. Such ownership may also be in a joint venture with a foreign participant, but the Russian partner’s share in it must be controlling. This requirement will prevent the market from losing sought-after energy equipment involved in investment programmes with public and private investment as a result of unfriendly actions by foreign countries.”

According to Igor Bryzgunov, the proposals sent by RAWI to the State Duma will stimulate the creation of wind energy projects with a competitive price of renewable-energy-generated electricity in relation to conventional generation sources in the short term. The creation of such a market will, in turn, create production of multi-megawatt-class wind turbines and components and jobs, which will entail new tax revenues for the budget and strengthen the competitive position of the Russian industry. In addition, it is important to develop the microgeneration market, which is essentially nascent in Russia due to insufficient legislative support and disincentive tariffs for connection to the grid.

Source: RAWI, 13.07.2022. https://rawi.ru/2022/07/rawi-submits-proposals-to-russian-state-duma-to-stimulate-renewables-development/

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