The Development of Wind Power in Russia

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From Leader to Laggard: The Development of Wind Power in Russia

Thesis

Presented in Partial Fulfillment of the Requirements for the Degree Master of Arts in the Graduate School of The Ohio State University

Jared James Dye, B.A.

Graduate Program in Slavic and East European Studies

The Ohio State University

2017

Thesis Committee:

Nicholas Breyfogle, Advisor

David Hoffmann

Jared James Dye

2017

Abstract

The installed capacity of renewable energy is increasing in the developed and developing worlds alike. Yet, the share of renewable energy (excluding large hydroelectric power stations) remains below one percent of the energy mix in Russia.

Over the past century, (Soviet) Russia has been among the global leaders in developing and implementing hydroelectric, nuclear, and fossil fuel technology. Why has Russia been on the cutting edge of so many energy sources, both traditional and alternative, yet lags so far behind its peers in renewable energy sources like solar, wind, and geothermal energy? Through a case study analysis of wind energy, this thesis argues that renewable energy in Russia has not taken off relative to the country’s peers due to a lack of strategic necessity and subsequent political will from the Russian elite. The economic, political, and cultural factors that drove the development of hydropower, nuclear energy, oil, and natural gas are absent for renewable energy. That being said, while large-scale, commercial wind projects have been generally absent, small-scale turbine installations in communities isolated from the unified power grid have begun to emerge with success.

This thesis is divided into two major sections. The first section analyzes how

Russia got to the energy mix it has today by examining the literature on the origins and development of coal, hydropower, oil, natural gas, and nuclear energy for electricity production since the turn of the twentieth century. Following the history of these

energy sources, this research examines the opinions from political and business elites in

Russia on the topic of renewable energy and analyzes the renewable energy support scheme introduced in 2013. The second section examines the development of renewable energy in Russia using wind energy as a case study. Specifically, the analysis focuses on planned and implemented wind power installations in three Russian federal districts: the

Russian Far East, Northwest, and South. This thesis offers a unique contribution to the literature by synthesizing information on multiple wind projects across the country and identifying common strategic, political, and economic themes among them.

iii

Acknowledgments

I would like to thank my advisor, Nicholas Breyfogle, for his guidance, advice, and support throughout the research and writing stages of this thesis. I would also like to thank Nicole Freeman for proofreading the document and for her constant support.

Vita

2008...... Mount Vernon Community High School,

Mount Vernon, Iowa

2012...... B.A. Russian, Grinnell College

2012-2013 ...... Fulbright English-Teaching Assistantship,

Russia

2014-2015 ...... University Fellowship, The Ohio State

University

2015-2016 ...... Foreign Language and Area Studies

Fellowship, Polish, The Ohio State

University

2016-2017 ...... Foreign Language and Area Studies

Fellowship, Polish, The Ohio State

University

Fields of Study

Major Field: Slavic and East European Studies

Table of Contents

Abstract ...... ii

Acknowledgments...... iv

Vita ...... v

List of Tables ...... viii

List of Figures ...... ix

Chapter 1: Introduction ...... 1

Chapter 2: History of Energy Use in Russia ...... 6

Coal ...... 7

Hydropower ...... 8

Nuclear Energy ...... 13

Natural Gas and Oil ...... 16

Elite Views on Renewable Energy in Russia ...... 19

The Russian Renewable Energy Support Scheme ...... 26

Chapter 3: Wind Power in Russia ...... 31

A Brief History of Wind Power ...... 32

Wind Power in Russia’s Regions ...... 36

Chapter 4: Conclusion...... 54

Bibliography ...... 57

vii

List of Tables

Table 1. Installed Wind Capacity (MW) of BRICS Nations, the United States, &

Canada...... 34

viii

List of Figures

Figure 1. Global Cumulative Installed Wind Capacity ...... 33

Figure 2. Locations of Selected Installed and Planned Wind Energy Stations in the

Southern, Northwestern, and Far Eastern Federal Districts ...... 37

Chapter 1: Introduction

There is overwhelming confidence in the scientific community that climate change in the past century has been to an appreciable degree a result of human activity through the emission of greenhouse gases, such as carbon dioxide and methane.

Greenhouse gases—many the result of burning fossil fuels—are at levels in the atmosphere unseen in the last 800,000 years and are warming the planet, causing acidification of the oceans, reductions in sea ice, rise in sea level, species decline, and increased likelihood for extreme weather events, such as floods, droughts, and storms.1

As a result, many governments, environmental groups, and concerned individuals are calling for greater use of renewable energy sources instead of fossil fuels as a way to slow down global climate change. After China, the United States, and the European

Union, Russia is tied with India as the fourth largest emitter in the world at about 6% of total greenhouse gas emissions.2 Is Russia answering the call to install more “zero- emission” renewable power stations? Compared to its international peers, the answer is emphatically “no.”

In Russia since the beginning of the twentieth century, fossil fuels (e.g. coal, oil, and natural gas) have competed with energy alternatives such as hydropower and nuclear

1 IPCC, “Summary for Policymakers,” in Climate Change 2013: The Physical Science Basis. Contribution of Working Group 1 to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change, ed. T. Stockton (New York: Cambridge University Press, 2013). 2 “Global Greenhouse Gas Emissions,” U.S. Environmental Protection Agency, accessed April 18, 2017, https://www.epa.gov/ghgemissions/global-greenhouse-gas-emissions-data. 1

power. Still, the latter two have managed to create and hold sizeable shares of Russia’s modern energy mix as a result of resource availability and, more importantly, political lobbying on their behalf. According to the International Energy Agency, as of 2012, about 49%, 16%, and 3% of Russian total electricity production comes from natural gas, coal, and oil, respectively. Nuclear energy and hydro power make up nearly all of the rest with 17% and 15%, respectively. Most of the increase in energy capacity since 2002 came in the form of gas-fired and nuclear power plants, which increased by 37% and

25%, respectively. Renewable energy sources (RES)3 account for less than 1% of electricity production and this share has increased negligibly since 2000.4

Why has Russia been on the cutting edge of so many energy sources, both traditional and alternative, yet lags so far behind its peers in renewable energy sources

(RES) like solar, wind, biomass, and geothermal energy? This paper argues that renewable energy in Russia has not taken off due to a lack of strategic necessity and subsequent political will from the country’s elite. The economic, political, and cultural factors that drove the development of hydropower, nuclear energy, oil, and natural gas are absent for renewable energy. The paper explores this argument through a brief history on energy use in Russia followed by a case study on the development of wind power.

Chapter 2 examines how Russia has settled into the energy mix it has today as a result of resource availability, global trends, trade, economy, ideology, and foreign

3 Note: The definition of renewable energy offered only includes hydroelectric installations below a capacity of 25 MW. This threshold was selected because the Russian government’s Decree 449 “On the Mechanism to Stimulate the Use of Renewable Energy Sources on the Wholescale Electricity Market” from May 2013 excluded hydro installations above 25 MW from consideration as renewable energy projects eligible under the support scheme. 4 International Energy Agency, “Russia 2014,” (Paris, 2014), 220. 2

policy. Like much of the rest of the Europe at the end of the nineteenth century, Western

Russia was running out of wood sources to burn and began a shift to coal. Hydropower gained tremendous momentum in the early- and mid-twentieth century in a push for electrification and industrialization and amidst a global trend for mega-hydroelectric projects that took off in the wake of the American experiences with the Hoover Dam and

Tennessee Valley Authority. The importance of natural gas and oil emerged around

World War II out of need and technological developments. Soviet Russia then soon learned how blessed it was to sit on top of tremendous oil and gas riches, especially in

Siberia. Finally, nuclear power lobbyists fought hard for their technology to power the

Soviet Union and were propelled both by ideological campaigns and strategic foreign policy in the USSR’s nuclear weapons race with the United States. Since becoming president in 2000, Vladimir Putin has used favorable oil prices to bring Russia out of the turbulent 1990s. It has taken until the 2010s for his tone on renewable energy to soften enough for him to implement a policy to support the development of renewable energy.

However, by this time, Russia had already fallen way behind its peers and had become a renewable energy laggard.

Excluding the annexed territory of Crimea, Russia has an installed wind energy capacity of about 17 megawatts (MW). Is that a lot or a little? For comparison, the installed capacity of wind power in China, the United States, Germany, and India currently sit at approximately 145,000 MW, 74,000 MW, 45,000 MW, and 25,000 MW,

respectively.5 The Russian government has a goal to hit 3,600 MW of wind power by

2024, which is a notable improvement from its current capacity, but pales in comparison to its peers.6 How did Russia get to this point?

Chapter 3 examines Russia’s relationship with renewable energy through the lens of wind power due to the maturity and cheapness of the technology relative to other RES types. Additionally, like with gas, rivers, uranium, and really just about everything else,

Russia is rich with wind. For a time, Soviet Russia was an among the world’s leading innovators in wind energy technology, much like they were with hydropower and nuclear power. But then the USSR collapsed in 1991 and Russia turned into a country dependent largely on oil and gas rents. Despite the fact that Russia’s first substantive RES support scheme began only in 2013, several wind projects have been completed and planned throughout the Russian territory. The Far East has seen small-scale, off-grid projects to help communities who are importing costly diesel shipments for their generators. Wind in the Far East has even become a component of Russia’s foreign policy and trade with actors such as Japan and North Korea. Russia’s Northwest has also seen positive developments with small-scale turbine installations in remote locales, yet has experienced repeated hiccups with large-scale commercial endeavors. The Russian South, an arid steppe, has attracted foreign investors for big wind parks, but they too are still in the planning stages or have been caught in limbo.

5 Ксения Чемоданова, “Деньги на Ветер: К 2030 Году Новые Энергоисточники Привлекут €200 Млрд Инвестиций," RT на Русском, October 20, 2016, accessed April 18, 2017, https://russian.rt.com/business/article/327288-energiya-priroda-investitsii. 6 Ibid. 4

This case study on wind power illustrates that small-scale wind has been a point of success in Russia where big installations have thus far failed. Foreign investors from

Europe and Asia are attempting to find ways to plant turbines in Russian winds, but they have gotten little traction. Still, while the Russian wind energy sector is tiny, it is growing roots in trade, economic development, and foreign policy. However, there is no perception of strategic priority for renewable energy, thus no push from elites or ideological framing to get the country excited about this form of energy.

Chapter 2: History of Energy Use in Russia

Over the past 100 years or so, Russia experimented with and made significant developments to a variety of energy sources such as coal, hydropower, nuclear energy, oil, and natural gas. Often, these energy sources became important for Russian trade and domestic use due to a variety of reasons: wartime needs, economic development, the pursuit of an ideal socialist society, national security, and national and ideological pride.

In addition, the geographic distribution of power plants in Russia reflects the availability of energy resources in its different territories, such as more hydro power and coal in

Siberia and the Far East as compared to western Russia.7 For example, of the approximately 338 megatons (Mt) of coal produced in Russia in 2013, 324 Mt came from

Siberia and the Far East with 203 Mt produced in the Kuznets Basin (Kuzbass) alone.8

For this reason of geographic proximity (and thus cost-effectiveness for transport), coal use is growing in Siberia while it is falling in European Russia where natural gas is more abundant.9 By and large, Russia’s diverse energy mix is a result of the natural availability of resources.10 The exception to this rule, however, is the continuing lack of exploitation

7 International Energy Agency, “Russia 2014,” 184-185. 8 Ibid., 170. 9 Ibid., 171. 10 Ibid., 185. 6

of Russia’s vast renewable resources such as wind, solar, biomass, and geothermal energy.11

Coal

During the nineteenth century, coal became the “universal fuel,” according to

Hogselius, et al. in Europe’s Infrastructure Transformation. By the late 1800s the northwest of the Russian empire had become “highly dependent” on it,12 due in large part to denudation of forests, which had become a problem all over Europe. However, because

Russia’s vast coal reserves were still located in difficult-to-reach areas of Siberia, were poorly connected to areas with the highest demand, or were generally undeveloped compared to the coal mining industries in Britain, Belgium, France, and Silesia (at that time under German control), cities like St. Petersburg found it economically advantageous to import it from across the Baltic Sea rather than transport it from the

Donbass Basin in Ukraine.13

Coal had become an important source of energy for iron and steel production during rapid industrialization in the1930s, but leading up to World War II the Soviet

Union’s active coal extraction operations were located in European Russia and Ukraine, leaving them vulnerable to invading forces. The Pechora basin, one of Russia’s largest, is

11 Note: Wind energy is a type of kinetic energy created from when wind causes turbine blades to turn. Solar energy (photovoltaic) is the conversion of solar radiation into heat and electricity using solar electric cells. Biomass covers a range of combustible material, including wood, wood waste, biofuels (e.g. ethanol and biodiesel), and municipal waste. Geothermal energy is generated when steam from heated subterranean water is used to turn steam turbines. (“Renewable Energy Explained: Types & Usage,” U.S. Energy Information Administration, accessed April 18, 2017, https://www.eia.gov/energyexplained/?page=renewable_home#tab2.) 12 Per Högselius, Arne Kaijser, and Erik van der Vleuten, Europe’s Infrastructure Transition: Economy, War, Nature (New York: Palgrave Macmillan, 2016), 68. 13 Ibid., 68, 72. 7

located in Arctic Russia near Vorkuta. It was important for the defense industry in the

1930s but grew in significance during World War II. Pre-war there existed only one mine, but during the war the Pechora basin grew to ten total mines due to the fact that western mines were under Nazi control.14 By late 1941, the Nazi army had seized territory responsible for about 63 percent of coal production.15 As described later, this proved an important moment for the beginning of the shift to natural gas as a source of electricity in the Soviet Union.

Still, since 1973 to 2015, coal has been used to produce electricity more than any other fuel source worldwide.16 For Russia, this has been good news. In 2015, Russia was the sixth largest producer of coal in the world, making up 4.5% of the total. It was also the third largest exporter of coal in the world.17 Russia, therefore benefits from burning cheap, domestic coal (especially in Siberia) but also exporting what it does not need due to its energy source diversity. Coal has been a traditional staple in the Russian energy sector and worldwide, but is becoming threatened in the developed world, which is beginning to move away from what is considered the dirtiest fossil fuel in favor of renewable energy and more efficient, cleaner-burning natural gas.

Hydropower

Russia is rich in rivers; eight of the ten longest European rivers flow through its territory. These rivers include the Volga, Europe’s longest by a wide margin, as well as

14 Josephson et al., An Environmental History of Russia (Cambridge, Mass: Cambridge University Press, 2013), 104. 15 Ibid., 116. 16 International Energy Agency, “Key World Energy Statistics, 2016,” (Paris, 2016), 24. 17 Ibid., 15. 8

the Ural, Don, and Pechora, to name a few.18 Additionally, Siberia and the Far East are home to the fifth, seventh, tenth, and eleventh longest rivers in the world—the Yenisei,

Ob, Amur, and Lena, respectively.19 Clearly, Russia possesses immense potential for the exploitation of its water resources for electricity. Large-scale hydroelectric production has its origin in North America at the beginning of the twentieth century, but the Soviet

Union caught on fast and began building the world’s biggest hydroelectric dams by the middle of the century. Hydropower was a transformative tool for the Soviet regime to industrialize, settle Siberia, conquer nature, harvest more coal, and showcase to the world what Soviet technology was capable of.

The development of hydropower in Russia coincided with the great push for electrification that began in 1920 under the new Soviet government. According to

Johnathan Coopersmith, in the Soviet regime electrification supplanted the railroad as the

“state technology,” by which the new government would pursue its own distinct identity from the tsarist legacy.20 Importantly, he argues that “environment plays a major role in the development of a technology” and “the acceptance of and diffusion of some technologies might say more about the society than about the technology.”21 In the case of early Soviet rule, Lenin’s State Commission for the Electrification of Russia of 1920

(GOELRO) was the political impetus to drastically increase electrical output across the

18 Rolando Wee, “The Longest Rivers of Europe,” worldatlas.com, accessed April 18, 2017, http://www.worldatlas.com/articles/the-longest-rivers-of-europe.html. 19 Juan Castillo, “25 Longest Rivers in the World,” List25, accessed April 20, 2017, http://list25.com/25- longest-rivers-in-the-world/. 20 Jonathan Coopersmith, The Electrification of Russia, 1880-1926 (Ithaca: Cornell University Press, 1992), 1. 21 Ibid., 5, 265. 9

country. The goal of electrification for the Communist Part of the Soviet Union (CPSU) was to “transform socially, politically, and economically.”22

A major part of this transformation of the country through electrification was the ramping up of hydroelectric power. Hydropower played a significant role in the expansion of settlements, water transportation, agriculture, and industry during the Soviet period. When discussing the development of hydropower in the USSR’s first 50 years,

P.S. Neporozhnii (Minister of Power and Electrification at the time of his publication,

1978) states that the original GOELRO plan called for 30 regional power plants, ten of which were to be hydro power plants (HPPs).23 One of the first major HPPs was installed at Volkhovsk in 1926 with power output of 56 MW.24 He argues that the Soviet leadership envisioned thermal power as the foundation of the energy sector and growth in the Soviet Union, while hydropower would serve as a stabilizing agent to ensure consistent access to power over a vast area.25

Lenin’s initial promotion of hydropower for his vision of electrification was a significant impetus to be sure. However, the post-Lenin development of hydroelectric projects was emblematic of Stalin’s industrialization campaign and an energy megaprojects trend that was prevalent throughout the world in the mid-twentieth century.

The Soviet government under Stalin debated whether to invest more in small HPPs or massive HPPs. Ultimately, the decision in most instances was to opt for the large

22 Ibid., 259. 23 Note: It is not clear what fuel source would be used for the other 20 power stations. 24 P.S. Neporozhnii, “The Role of Water Power and Its Development During Fifty Years of Soviet Rule,” in Water Power and Construction of Complex Hydraulic Works During Fifty Years of Soviet Rule, ed. D.M. Yurinov, trans. Amerind Publishing (Moscow: E’nergiya Publishers, 1969), 3. 25 Ibid., 6. 10

cascading dams that require large reservoirs that can keep the plant functional year- round, which was also the worldwide trend at the time.26 Soviet Russia, much like the capitalist West, planned their economic agendas based on a notion that nature was something to be tamed, transformed, and even conquered.27 The United States and

Canada were leaders, like the USSR, in hydropower with the first commercial use of

HPPs occurring in the United States in the late 1800s. In 1936, the 1,345 MW Hoover

Dam on the Colorado River came online as the world’s largest HPP.28

Around the same time, the Soviet government was constructing the Dneprostroi on the Dnepr River in modern-day Ukraine. This 560 MW HPP, which reached full capacity by 1939, was less than half the size of the Hoover Dam, but was the largest in the Soviet Union at the time and was considered one of Stalin’s first “hero” projects.29 By

World War II, 37 HPPs were constructed with a total approximate capacity of 1,500

MW.30 In The Generation of Power, Anne Rassweiler argues that the decision to build this precursor to other Soviet megaprojects and hydroelectric plants was not a simple one.

The project’s planning and construction took place from the early 1920s to the 1930s and promoters of the plant continuously changed the frame of it to adapt to changing political circumstances: first, it was a project to improve transport and agriculture, then a project of industrialization, then again a project to transform socialist society. Lobbyists for

26 Högselius, Kaijser, and van der Vleuten, Europe’s Infrastructure Transition, 283.; Josephson et al., An Environmental History, 80. 27 Josephson et al., An Environmental History. 28 “A Brief History of Hydropower,” International Hydropower Association, accessed April 18, 2017, https://www.hydropower.org/a-brief-history-of-hydropower. 29 Anne Rassweiler, The Generation of Power: The History of Dneprostroi (New York: Oxford University Press, 1988), 10.; Josephson et al., An Environmental History, 79-80. 30 Neporozhnii, The Role of Water Power,” 3. 11

Dneprostroi included officials of the Ukrainian Republic who desired an inflow of investments, engineers who saw electrification as key to modernization, as well as various party members (eventually including Stalin) who finally decided to make big capital investments to develop industry and show the world what the Soviet Union was capable of.

The Khrushchev era witnessed a change in rhetoric following the coal and hydropower-focused years under Stalin. At the twentieth Communist Party Congress in

1956, Khrushchev expressed his plan to increase Siberia’s mineral resources, agricultural, and industrial utility, and hydroelectric stations as a part of the plan to bring power to the area to help accomplish his goals.31 Yet, Khrushchev’s opinion soon changed course and, by 1957, he thought that large-scale hydropower was no longer an attractive option due to

“high capital costs and the lengthy construction times” and that small-scale fossil fuel plants would make more sense.32 That said, several major hydro projects continued amidst this new competition between hydroelectric and thermal power plants, especially natural gas-fired. The plans for the Bratsk hydroelectric power plant were set in 1954, a year after Khrushchev took office as First secretary and its construction was completed in

1967, three years after he left office in 1964. The Bratsk HPP had a capacity of 4,500

MW, the largest in the world at the time.33

31 Josephson et al., An Environmental History, 129. 32 Ibid., 165-166. 33 “History: Bratsk Hydroelectric Power Station,” Irkutskenergo, accessed April 18, 2017, http://en.irkutskenergo.ru/qa/1004.2.html. 12

Nuclear Energy

In order to better contextualize the evolution of the Russian energy sector, and renewable energy specifically, it is necessary to examine the development of another alternative energy source: nuclear power. The Russian nuclear industry produces approximately 17% of electricity as of 2014.34 The nuclear energy sector finds its roots in the nuclear arms race between the Soviet Union and the United States following the

Second World War. In her analysis of the Soviet nuclear industry before the Chernobyl disaster, Sonja Schmid (2015) argues that, among other things, the development of nuclear power for electricity production was not inevitable due to an abundance of hydro, coal, oil, and gas resources at the time.35 However, because of the success of the USSR’s military nuclear program, Soviet nuclear experts were able to ride a wave of political momentum to push for increased civilian applications for nuclear energy, such as power plants, and argue for the long-term economic viability of nuclear power.36

There are, in fact, several rationales that can help explain the growth of nuclear energy in Russia. Schmid asserts that support of nuclear energy came from both ideological and economic rationales, with the latter eventually becoming most important.

In the early years from 1945 to 1975, nuclear experts in the USSR “actively created a

‘culture’ of atomic energy, a culture that became part of every Soviet citizen’s dream of

‘the bright Communist future.’”37 Indeed, Schmid states the strategies to legitimize nuclear power rested on (1) the prestige of Soviet science, (2) the conceptualization of

34 International Energy Agency, “Russia 2014,” 243. 35 Sonja Schmid, Producing Power: The Pre-Chernobyl History of the Soviet Nuclear Industry (Cambridge, Mass: The MIT Press, 2015), 17. 36 Ibid., 18-19. 37 Ibid., 21. 13

nuclear energy as a part of the USSR’s vision of peace and progress, and eventually (3) the argument for economic viability.38 Hogselius et al. argue that the Soviet government saw “nuclear power as a political tool in its efforts to increase the interdependence between different Soviet republics” by placing these stations on or near borderlands between republics so that they must share the energy generated by them, while also setting the stage for a potential “East Bloc electricity supergrid.”39

The meltdown catastrophe at Chernobyl on April 26, 1986 was as a landmark incident in the world history of nuclear energy. It brought to light the tremendous environmentally destructive capacity that a nuclear meltdown can have on the plant’s surrounding area for decades. The event, once finally exposed to world, eventually led to what Schmid calls the USSR’s last show trial. The trial focused on power plant operator error in order to avoid blame spreading to the nuclear industry and Soviet bureaucratic apparatus more broadly. It would, she argues, “cast doubt on Soviet science and engineering, the cornerstone of the entire communist project.40 While not unlike other major endeavors within the Soviet Union, the success of the nuclear industry was clearly intertwined with Soviet rhetoric. Today, the propagandistic effect of nuclear power in society certainly holds less sway among the general public, yet nuclear energy still retains strong footing among government leadership.

In post-USSR Russia, nuclear power retains its position as an important player in the energy sector. Despite not being a top producer of nuclear energy in terms of its share

38 Ibid., 20. 39 Högselius, Kaijser, and van der Vleuten, Europe’s Infrastructure Transition, 93. 40 Schmid, Producing Power, 10-11. 14

in the country’s energy mix, Russia is certainly one of the most recognized players in nuclear energy. The country currently utilizes 36 reactors in 10 plants (with over 50% of capacity in service for more than 30 years), and has plans to construct 23 new reactor units between with the goal of producing about 25-30% of electricity from nuclear energy by 2030.41 Moreover, Russia is currently the world leader in the export of nuclear reactor technology.42 It has 29 reactors in various stages of development across the globe in countries such as India, Jordan, Hungary, Egypt, Iran, Finland, Turkey, and Argentina.43

In addition to nuclear technology exports, Russia is supporting the nuclear energy industry through innovation. State corporation Rosatom is pioneering the world’s first floating nuclear power plant (NPP). The Akademik Lomonosov floating NPP is equipped with the capacity to produce 70 MW of electricity and 300 MW of heat and is scheduled to deploy in the first half of 2017.44 Generally, the purpose of the Lomonosov is to service remote areas on Russia’s northern coast that deal with energy shortages and difficulties in transporting fuels in the winter months. It could power different areas depending on where it is moored; however, the total area designated for its use contains only about 200,000 people.45 The costs of the project have inflated considerably from

41 International Energy Agency, “Russia 2014.” 42 “Nuclear Power in the World Today,” World Nuclear Association, accessed April 18, 2017, http://www.world-nuclear.org/information-library/current-and-future-generation/nuclear-power-in-the- world-today.aspx. 43 Anil Sasi, “Nuclear Projects in Third Countries: Indian Cog in Russia’s Nuclear Apparatus,” The Indian Express, December 21, 2016, accessed April 18, 2017, http://indianexpress.com/article/india/india-russia- neutron-reactor-project-nuclear-projects-4437920/. 44 “Launch of Reactors at Russia’s 1st Floating Nuclear Power Plant Set for H1 2017,” Sputnik International, December 27, 2016, accessed April 18, 2017, https://sputniknews.com/russia/201612271049022783-russia-floating-nuclear-power-plant/. 45 Alexei Shchukin, “Russia’s Expensive Toy: Huge Risks, Rising Costs, Zero Sense,” Bellona, June 8, 2015, accessed April 18, 2017, http://bellona.org/news/nuclear-issues/2015-06-russias-expensive-toy-huge- risks-rising-costs-zero-sense. 15

about $150 million in 2001 to $1.2 billion in 2013 when the project was approximately

80% complete.46 Alexei Shchukin of the Bellona Foundation argues that this project exemplifies the Russian government’s ambition to pursue major nuclear projects instead of more sensible and increasingly cost-effective renewable energy options. The

Akademik Lomonosov, however, is not Russia’s only solution to electrifying the Far

North. As discussed in Chapter 3, small-scale RES installations appear to be becoming a popular option.

Natural Gas and Oil

The formative years for natural gas overlapped greatly with the early years of nuclear power promotion and development, but the two energy sectors had very different economic and foreign policy trajectories. According to Per Hogselius in Red Gas (2013), the natural gas industry took its first real steps as an untried, but strategically necessary alternative in the 1940s in response to coal disruptions during the Nazi invasions of

World War II. Hogselius asserts that, for the Soviet Union, “the gas industry had arguably more in common with nuclear power than with coal or oil” in that it represented a radical, new approach to energy.47 Like with nuclear, Soviet gas officials saw natural gas has having significant promise for long-term economic and society prosperity.

Compared to coal especially, it was more efficient in industry but also cleaner burning, thus reducing problems of pollution for human health and environmental degradation.

46 Ibid. 47 Per Högselius, Red Gas: Russia and the Origins of European Energy Dependence (New York: Palgrave Macmillan, 2013), 14. 16

Gas really started to take off in the late 1950s. In 1956, Khrushchev called for a quadrupling of gas production and created a state agency devoted to the managing the gas sector, Glavgaz. Khrushchev agreed with the head of Glavgaz, Alexei Kortunov, that the arena of gas exploitation was an opportunity, like with nuclear power, where the Soviet

Union could compete with and overcome the United States.48 By the late 1950s, gas was already taking a big bite out of coal’s share in producing energy domestically.

Broadly, Hogselius argues that the role of gas had important economic considerations domestically, but it also became a valuable weapon and tool both economically and politically in the Soviet Union’s relationship with Europe. The investment in transnational infrastructure over the course of 20 to 30 years after World

War II built up momentum that made it difficult for the USSR and European countries to disentangle themselves from this economic commitment. Whereas many other aspects of the Soviet regime remained cut off from the non-communist world, the gas sector was a relatively integrated tool for the Soviet government to trade with the West and also promoted Soviet legitimacy and standing in the world.

Oil has not been a common source for electricity production in Russia. In 2012, it only accounted for 3% of total production. Generally, oil (or petroleum) is used for gasoline production or other products. For example, less than 20% of petroleum use in the United States in 2015 went toward fuel oils for electricity;49 and the U.S. uses about

21% of the world’s oil compared to Russia at 4%. In short, oil has been one of the least

48 Ibid., 17. 49 “Oil: Crude and Petroleum Products Explained,” U.S. Energy Information Administration, accessed April 18, 2017, https://www.eia.gov/energyexplained/index.cfm?page=oil_use. 17

influential energy sources for electricity production in Russia. That said, oil and natural gas are related industries. Like with gas, the demand for and production of oil as a fuel source also increased drastically after World War II due to its importance in the war effort and growth in the automobile industry. Russia has relied on both for domestic use and export.50 In Wheel of Fortune: The Battle for Oil and Power in Russia (2012), Thane

Gustafson offers greater detail on the relationship between oil and the modern Russian state, arguing that:

Alongside the saga of the Russian oil industry is the parallel story of the collapse and revival of the Russian state. The two are inseparably intertwined. It was the weakness of the Russian state in the 1990s that enabled the oil industry to restructure, privatize, and begin to modernize. The resurgence of strong state power since 2000, supported by rising oil prices, partially reversed those changes and enabled the state to regain control over the oil industry, even as the state itself became increasingly dependent on oil revenues. Throughout both periods, the relationship between the state and the industry has been one of mutual dependence, yet also of constant mistrust and conflict, a ceaseless battle for property, rents, and power.51

This inseparability and co-dependence for survival, he argues, stems from the collapse of the Soviet Union. He argues that the USSR was not a petro-state, but the breakdown of

Soviet industry and technological standing in the world after the country’s collapse meant a turning to oil as a crutch to prop the country up on.52 This dependence on natural resources is not lost on many prominent Russian figures, but the prevailing policies under

Putin have favored the nation’s oil and gas industries.

50 Högselius, Kaijser, and van der Vleuten, Europe’s Infrastructure Transition, 82. 51 Thane Gustafson, Wheel of Fortune: The Battle for Oil and Power in Russia (Cambridge, Mass: Harvard University Press, 2012), 3. 52 Ibid., 6. 18

Elite Views on Renewable Energy in Russia

In the first years of his presidency in the early 2000s, just before the surge of renewable energy (described below), Vladimir Putin repeatedly made light of climate change and the viability of non-fossil and nuclear energy. However, during Medvedev’s tenure as president starting in 2008 and Putin’s reelection in 2012, elite opinion for several of the most important political and business actors began to soften toward renewable energy. For some, supporting energy from RES is a smart, prospective business decision, coming from a desire to see Russia stay economically competitive in a changing world. Still others, tap into the larger global rhetoric of moving toward renewable energy as a way to improve environmental sustainability in the face of climate crisis. The rhetoric of Russian leadership has shifted to a position of support, or at the very least an acceptance of the inevitable role of RES in the future. This is demonstrated through two, or potentially three, major turning points: the Energy Law of 2009, the implementation of a RES support scheme in 2013, and the position taken at 2015 Paris

Climate Conference.

Early in his presidency, in the midst of an economic recovery founded on oil and gas revenues, Putin had a tendency to show preference for the fossil fuel sector over environmental concerns and renewable energy. In 2002, he disbanded the country’s

Ministry of Environment and handed its responsibilities over to regional governments and the Ministry of Natural Resources.53 As a result, the Ministry of Natural Resources and Environment now oversees environmental regulations and management of natural

53 Josephson et al., An Environmental History, 318. 19

resources, a combination of responsibilities not contained within any administrative body anywhere else in the world. This has led to an overload of the ministry and under- penalization of breaches in environmental protection.54

During his first two terms, Putin paid little attention to climate and RES-related topics during his speeches to domestic crowds and openly mocked the idea of climate change to international audiences. At the 2003 World Climate Change Conference, he joked that Russians might save money on fur coats as a result of climate change.55 In

Russian Energy in a Changing World, Jakub Godzimirski analyzes Putin’s annual addresses to the Federal Assembly as president during the period 2000-2007 by measuring the frequency of mentions of different energy types. He finds that Putin mentioned oil 17 times, gas 16 times, nuclear seven times (only in 2007), and coal and hydro three times. Over this span, Putin made no mention of renewable energy (except biomass) and never drew a connection between energy and climate change.56 In 2007, he called for a “second electrification” of Russia, which would involve 26 new nuclear plants and a push to increase the share of coal, hydro, and nuclear in the energy mix. This initiative would be particularly important for far-flung regions like the Far East.57

In 2008, Putin handed the reins of the Presidency over to Medvedev, former chairman of state-owned gas giant Gazprom. Unlike Putin, Medvedev had been clear

54 Anastasia Bazenkova, “Russian Polluters Evading Huge Environmental Fines,” The Moscow Times, May 11, 2015, accessed April 18, 2017, https://themoscowtimes.com/articles/russian-polluters-evading-huge- environmental-fines-46462. 55 Charles Digges, “Putin Speaks the Language of a Climate Convert, but Do His Plans Back Up His Rhetoric?” Bellona, December 2, 2015, accessed April 18, 2017, http://bellona.org/news/climate- change/2015-12-putin-speaks-the-language-of-a-climate-convert-but-do-his-plans-back-up-his-rhetoric. 56 Jakub Godzimirski, “Actors, Ideas and Actors, “ in Russian Energy in a Changing World: What is the Outlook for the Hydrocarbons Superpower? ed. Jakub Godzimirski (Burlington: Ashgate, 2013), 22. 57 Ibid., 24-25. 20

even before he became president in his view that Russia is too reliant on natural resources.58 In 2009, Medvedev introduced a renewable energy law that gave Russia its first renewable energy targets, but were legally non-binding: 1.5% of energy from RES by 2010, 2.5% by 2015, and 4.5% by 2020. Yet, in 2010, only one year after Medvedev introduced national renewable energy targets, Putin said at the Valdai Discussion Club that “nuclear power generation is the only available alternative to oil and gas today.

These projects exist. They are viable alternatives. All other ideas are just for fun now…”59 This claim stood in stark juxtaposition not only with Medvedev’s recent law, but also with the worldwide trend in increased use of RES for electricity generation.

By 2013, however, the leadership began to use explicitly more pro-RES rhetoric.

In May 2013, Prime Minister Dmitry Medvedev said that “the use of renewable energy sources and green energy is far from what we would like it to be.” He added, “I see various countries and their leaders changing their approach to the issue of green energy, green growth and renewable energy sources. That is why we are also correcting our position. We, of course, believe that renewable energy sources have a bright future.”60 It was in this year that the Russian government backed up its rhetoric with policy when

Putin passed Russia’s first major national RES support scheme, which is detailed later in this paper.

58 Ariel Cohen, “Russian Succession: Putin Prime Minister, Medvedev President,” The Heritage Foundation, December 11, 2007, accessed April 18, 2017, http://www.heritage.org/europe/report/russian- succession-putin-prime-minister-medvedev-president. 59 Andrey Ozharovsky, “Comment: Russia’s Premier Putin Denies Renewable Energy Any Chance,” Bellona, October 3, 2010, accessed April 18, 2017, http://bellona.org/news/renewable-energy/2010-10- comment-russias-premier-putin-denies-renewable-energy-any-chance-in-russia. 60 “Russia Changes Stance on Renewable Energy – Medvedev,” Sputnik International, May 28, 2013, accessed April 18, 2017, https://sputniknews.com/russia/20130528181386387-Russia-Changes-Stance-on- Renewable-Energy--Medvedev/. 21

In the wake of the new RES support policy, important commercial actors began to speak out in favor of domestic renewable energy growth. In October 2014, head of

Rosnano, Anatoly Chubais, expressed his opinion to Deputy Prime Minister Arkady

Dvorkovich that he believed the Russian government needed to promote better conditions of support for wind power, such as larger capital investment from the state.61 Rosnano is a state-owned joint stock company that focuses on investments and commercialization of new nanotechnologies, ranging from metallurgy to photonics to electronics and others.62

Rosnano is also a big investor for Hevel, a solar system manufacturer.63 CEO Herman

Gref of state-owned Sberbank,64 Russia’s largest bank and a RES investor, has called for greater government support for new projects in light of poor economic conditions in

2015.65 In October 2016, Gref claimed that by 2030 Russia may run into trouble if it does not diversify its economy from resource reliance due to declining oil and gas reserves.

Such trouble might include dependence on other countries or even revolution and civil war.66

61 Глава “Роснано” Анатолий Чубайс Активно Поддержал Ветровую Энергетику,” Energy Base, November 14, 2014, accessed April 18, 2017, http://energybase.ru/news/alternative_energy/glava_rosnano_anatolij_chubajs_aktivno_podderzhal_vetrovu yu_yenergetiku-2014-11-14. 62 Rusnano, accessed April 18, 2017, http://en.rusnano.com/. 63 Viktor Katona, “Realizing Russia’s Renewable Energy Potential in 2017,” Russia-Direct, February 1, 2016, accessed April 18, 2017, http://www.russia-direct.org/opinion/realizing-russias-renewable-energy- potential-2017. 64 Note: Herman Gref also served as Minister of Economics and Trade from 2000 to 2007. 65 Sean Ross, “The 6 Largest Russian Banks (SBER, VTBR),” Investopedia, August 20, 2015, accessed April 20, 2017, http://www.investopedia.com/articles/investing/082015/6-biggest-russian-banks.asp.; Vladislav Vorotnikov, “Imbalance Declared for Russian Alternative Energy Industry,” Renewable Energy World, March 31, 2016, accessed April 18, 2017, http://www.renewableenergyworld.com/articles/2016/03/imbalance-declared-for-russian-alternative- energy-industry.html. 66 “Russia’s Oil and Gas Age Coming to an End, Warns Sberbank CEO,” RT, October 4, 2016, accessed April 18, 2017, https://www.rt.com/business/361551-gref-russia-diversification-resource-economy/. 22

Around this same time, some high-ranking government officials also chimed in with explicitly pro-RES opinions. In January 2016, Deputy Minister of Energy Alexey

Teksler said that renewable energy is an area that must focus on domestic production of photovoltaic cells and wind turbines technology in order for the country to expand its own RES market but also for future export. He also expressed that RES use in Russia is especially important for remote regions, which suffer the most from inefficient and costly transportation of fuel, and where RES electrical production has already proven its cost effectiveness.67 Additionally, he expressed a desire for Russia to expand its production of energy from RES by ten times by 2035.68 In April of the same year, Sergey Glazjev, advisor to Vladimir Putin, told Russian media that “sooner or later” oil will lose its importance and the shift to renewable energy is inevitable.69

Putin’s rhetoric has evolved to a degree since his remarks in 2010, suggesting now that renewable energy is a genuine alternative to fossil fuels and nuclear energy. In

Paris at the 2015 Climate Change Conference, Putin shared with the crowd that climate change was bringing about “cataclysmic weather events” in Russia and that Russia would stand with other nations in making emission reduction efforts.70 In 2016, Putin declared

2017 to be the “Year of Ecology” whereby he wishes to draw citizens’ attention to

67 “Минэнерго РФ: Развитие Альтернативной Энергетика в России Экономически Выгодно,” ТАСС, January 16, 2016, accessed April 18, 2017, http://tass.ru/ekonomika/2592223. 68 Charles Digges, “Russia Pushes for Renewables, but Entrenched Power Lobbies and Poor Organization Remain Foes,” Bellona, January 19, 2016, accessed April 18, 2017, http://bellona.org/news/renewable- energy/2016-01-russia-pushes-for-renewables-but-entrenched-power-lobbies-and-poor-organization- remain-foes. 69 Linas Jegelevicius, “OVERVIEW – Views on Renewables Future Differ Starkly in Russia,” Renewables Now, April 26, 2016, accessed April 18, 2017, https://renewablesnow.com/news/overview-views-on- renewables-future-differ-starkly-in-russia-522545/, par. 15. 70 Digges, “Putin Speaks the Language of a Climate Convert.” 23

environmental problems and protect ecological security.71 During his address at the

World Energy Congress in Istanbul on October 10, 2016, Putin made some of his most flattering comments regarding the future of renewable energy, yet still reinforced the importance of fossil fuels. He refuted the claims by some that “the sun is setting on the era of hydrocarbons” due to low oil prices, thus necessitating a full switch to alternative energy sources. He claimed the realistic foundations for such actions do not yet exist. He emphasized that the growth of renewable energy will be paralleled by the growth of oil and gas. He also mentioned that oil and gas will remain important for other industrial applications outside of electricity production and transportation, and, citing the IEA, told the audience that in 20 to 30 years we will still be living in a “hydrocarbon world.”72 Yet, he also stated that humanity’s movement toward “green energy” is “undoubtedly, the general path of development, [and] the correct path.”

Yet, in another reversal, in April 2017 Putin’s public comments on a trip to the

Arctic suggest he is now among the ranks of climate change deniers. Putin claimed, “The

[global] warming, it had already started by the 1930s. That's when there were no such anthropological factors such as emissions, and the warming had already started.” He went on to say: “The issue is not stopping it… because that's impossible, since it could be tied to some global cycles on Earth or even of planetary significance. The issue is to somehow

71 “Putin Declares 2017 Year of Ecology in Russia,” RT, January 11, 2016, accessed April 18, 2017, https://www.rt.com/politics/328531-putin-declares-2017-year-of/. 72 Альтернативная Энергетика, “Путин: Оснований для Переориентации на Возобновляемую Энергию Пока Нет,” YouTube, October 10, 2016, accessed April 18, 2017, https://www.youtube.com/watch?v=dA2PZJqrJoI. 24

adapt to it.”73 Perhaps Putin was emboldened to make these claims because of the 2016 election of President Donald Trump, a fellow climate change denier, and claims by

Trump’s appointee to head U.S. Environmental Protection Agency, Scott Pruitt, that carbon dioxide is not a primary contributor to climate change.74 Whatever the case, his claim that adaptation is our only remaining choice suggests he may not feel that reducing carbon emissions is a worthy priority.

In short, it appears Putin’s opinion on renewable energy essentially reversed in just six years’ time, from 2010 to 2016, but his denialist stance on global climate change in 2017 obscures his apparent change of heart. Therefore, to what degree his newfound acceptance of RES as a viable alternative will be put into practice remains unclear. Putin has become willing to acknowledge the ever-amplified global legitimacy and growth of renewable energy production, yet holds fast to his long-held belief that the importance of the fossil fuel industry for will persist, if not increase, for the foreseeable future. If climate change mitigation is off the table for Putin as a reason to push for more energy from RES, it appears the only rationale he might be willing to adhere to is one of economic importance and necessity as the world continues to move towards renewable sources of energy.

73 Andy Rowell, “Putin Now Denies Humans Cause Climate Change, EcoWatch, April 3, 2017, accessed April 4, 2017, http://www.ecowatch.com/putin-climate-change-arctic-2342441915.html. 74 Tom DiChristopher, “EPA Chief Scott Pruitt Says Carbon Dioxide is Not a Primary Contributor to Global Warming,” CNBC, March 9, 2017, accessed April 18, 2017, http://www.cnbc.com/2017/03/09/epa- chief-scott-pruitt.html. 25

The Russian Renewable Energy Support Scheme

As mentioned above, 2013 was a turning point in which the Russian government changed its approach to developing renewables by formalizing Decree 449 “On the

Mechanism to Stimulate the Use of Renewable Energy Sources on the Wholescale

Electricity Market.”75 This section explores this policy as a way to demonstrate how

Russia is attempting to meet its stated goals for increasing the share of renewable energy in its mix, how their approach compares to other countries, what barriers remain in spite of the scheme, and ultimately how it frames the specific discussion of wind energy in

Chapter 2. While the type of scheme they employ— tendering—is becoming increasingly popular worldwide, it has not yielded much fruit for the wind energy sector in Russia in its first three years. A major barrier to getting investors and developers to propose new wind projects has been the law’s high requirements for domestically made turbine equipment, which to date has proven unrealistic given Russia’s absent capacity to produce its own wind energy technology.

First, it is important to provide a brief description of the different RES support schemes used around the world: feed-in tariffs, quota systems, net metering, and tenders.

At the end of 2015, 146 countries had some form of policy support for RES development.76 The most popular form of RES support schemes has been the feed-in tariff (FIT) system, with over 76 countries employing this tactic, many of which are in

Europe where FITs were born.77 Essentially, under FITs, “producers of renewable energy

75 In Russian: О механизме стимулирования использования возобновляемых источников энергии на оптовом рынке электрической энергии и мощности 76 Janet Sawin et al., Renewables 2016 Global Status Report (REN21 Secretariat: Paris, 2016), 107. 77 Ibid., 112, 109. 26

are paid a set rate for their electricity, usually differentiated according to the technology used and size of the installation.”78 FITs can take a fixed-price approach or a premium- price approach that, simply put, adds an extra benefit on top of the average electricity market price.79 Miguel Mendonca80 argues that FITs are the superior model and have shown the most promise for RES growth.

Quota systems, instead of setting prices, set the capacity and generation. One type of quota system is the (“green”) certificate system in which RES producers sell the rights to certificates that represent electricity produced from RES. A third alternative is net metering (used in more than 30 countries), which is a way small RES systems at homes or businesses can sell excess energy to the grid and is the least common RES support scheme.81 A fourth alternative is the tendering system (utilized in over 40 countries) wherein RES producers submit proposals through a competitive bidding process for government funds or power-purchase agreements.82

Russia’s current national RES support system is a capacity-supporting tendering system. Laws dating from the mid-2000s helped set the stage for this program, but

Decree 449 from May 2013 officially set this tender scheme in motion by including vital components such as the limiting of acceptable RES types (e.g. hydropower under 25

MW, wind, and solar), minimum operational capacity provisions, and local content

78 Miguel Mendonça, Feed-in Tariffs: Accelerating the Development of Renewable Energy (Sterling: Earthscan, 2007), 8. 79 Toby Couture et al., “A Policymaker’s Guide to Feed-in Tariff Policy Design,” Technical Report, National Renewable Energy Laboratory (Golden, CO, 2010). 80 Mendonça, Feed-in Tariffs. 81 Ibid., 15. 82 Ibid., 8-14. 27

requirements for RES installation construction.83 In the face of negligible growth of electricity from RES over the past 15 years, the Ministry of Energy set targets for 6 GW of renewable energy by 2020 with total energy share of RES hitting 2.5% by 2015 and

4.5% by 2020 (with the share as of May 2016 at less than 1%,84 the 2015 target has obviously already been missed).85

To meet these goals, the Administrator of the Trading System (ATS) holds annual auctions with a maximum capacity available for wind, hydropower, and solar PV installation proposals.86 The two arms of the government responsible for ensuring auction winners meet their promised energy outputs and obligations are the ATS and the Market

Council.87 The Market Council is also responsible for establishing long-term capacity supply obligations for the auction participants. This scheme, by which the government grants capacity payments to projects that win at auction, is fully financed through priority purchase obligations set up by the ATS for energy buyers on the wholesale market to purchase a contracted percentage of energy from RES sources.88 The Ministry of Energy sets maximum capacities that can be won at auction every year. If the capacity of all qualifying projects does not exceed the maximum, all projects are accepted; however, if they exceed the maximum, projects with the lowest capital costs are given priority.89

83 For more information on Decree 449 and other detailed information on Russian RES policy, see: International Energy Agency, “Russia 2014,” 219-242. 84 Glenn Meyers, “Renewable Energy Report for Russia,” CleanTechnica, May 9, 2016, accessed April 16, 2017, https://cleantechnica.com/2016/05/09/renewable-energy-report-russia/. 85 Sawin et al., Renewables 2016, 174, 166. 86 International Energy Agency, “Russia 2014.” 87 Ibid. 88 Ibid., 230. 89 Brandon Rice, Alex Blomfield, and Alexandra Rotar, “Russia’s Second Renewable Energy Auction Gives Both Glimmer of Hope and Cause for Concern,” Lexology, July 1, 2014, accessed April 18, 2017, http://www.lexology.com/library/detail.aspx?g=787691f8-c5b4-4337-be5f-038d183e8a76. 28

Russia has been awarding these capacity-support tenders for RES projects since

2013 but has already seen the number of projects and wattage awarded decrease through three bid periods. In 2013 (for projects to be completed in the following three years), a total of 504 MW for renewable energy projects were won through bids. Of this total, 32 solar PV projects and seven wind projects won bids for 399 MW and 110 MW, respectively.90 In 2014, while the total number of MW for new RES projects increased to

557 MW and solar PV projects increased to 505 MW. However, wind had only one selected project for 51 MW, despite there being a 1,600 MW maximum capacity the government was willing to award at the auction.91 In 2015, winning bids and MW dropped across the board. Total MW for new projects dropped to 365 MW with 280 MW coming form 14 selected solar projects and only one bid for 35 MW of wind.92

The main reason for these declines in viable projects comes from strict requirements in the capacity-support scheme. One major obstacle hindering the tender system and the awarding of capacity support to new RES projects is the local content requirement (LCR). An LCR essentially means that a certain percentage of equipment used for an installation should have a “Made in Russia” sticker on it. For wind turbine projects up for bid in the tendering scheme, this LCR was 35% in 2014, 55% in 2015, and

90 Marc Roca, “Russia Awards First Clean-Power Tender,” Bloomberg, September 24, 2013, accessed April 20, 2017, https://www.bloomberg.com/news/articles/2013-09-24/russia-names-39-projects-to-earn-first- clean-energy-support. 91 Ibid. 92 Stephen Bierman, “Russia Approves 365 MW of Clean Energy Projects in Tender,” Renewable Energy World, December 18, 2015, accessed April 20, 2017, http://www.renewableenergyworld.com/articles/2015/12/russia-approves-365-mw-of-clean-energy- projects-in-tender.html. 29

65% for 2016-2020.93 These LCRs are implemented as a way to stimulate innovation in

Russian RES infrastructure and industry. However, according to the IEA, “there are wind turbine equipment and manufacturers in Russia, yet overall, the manufacturing, service and maintenance markets are not developed and dynamic enough to provide a diversified and competitive offer that can support the competitive deployment of RES.”94

Interestingly, while China has a 70% local content requirement, which has stimulated their wind turbine manufacturing industry,95 the high LCR in Russia has apparently deterred potential wind power developers and investors from making bids.96 As a result, however, the Russian Ministry of Energy has amended the LRC following pressure from domestic and foreign wind developers who claimed the requirement was far too high for

Russia’s market size in the wind industry. The LCR will be 30% for 2016, 45% for 2018-

2020, and 65% for 2020-2024 with the hope that a lower LCR will encourage more bids for wind projects.97 Whether these modified LCRs will result in greater interest to make bids at auction remains to be seen, but it nevertheless represents the government’s willingness to make adjustments to policy based on the concerns of the renewable energy industry.

93 International Energy Agency, “Russia 2014,” 234. 94 Ibid. 95 Daniel Yergin, The Quest: Energy, Security, and the Remaking of the Modern World (New York: Penguin Group, 2011), 611. 96 Linas Jegelevicius, “INTERVIEW – Russia’s Nuclear Energy Giant Rosatom to Harness Wind Power,” Renewables Now, July 11, 2016, accessed April 18, 2017, http://renewables.seenews.com/news/interview- russia-s-nuclear-energy-giant-rosatom-to-harness-wind-power-532146. ; Note: It is outside the scope of this project to determine why China’s local content requirements have spurred RES technology growth, while it has hindered Russia’s, but it is an interesting area for future research. 97 Eugene Gerden, “Russia Eases Local Content Rules,” Wind Power Monthly, July 20, 2015, accessed April 18, 2017, http://www.windpowermonthly.com/article/1356315/russia-eases-local-content-rules. 30

Chapter 3: Wind Power in Russia

Chapter 2 explored the various sources of energy Russia has at its disposal and has developed in the past century. Nuclear power, hydroelectricity, natural gas, and oil were certainly important for domestic use, but also were undoubtedly important for

(Soviet) Russia’s foreign policy and economic growth through trade. Is renewable energy any different? If so, how?

This chapter builds on the political developments of the late 2000s and early

2010s when Russia began to pay more serious attention to the growing role of renewable energy in the world. Specifically, the study of Russian wind energy offers a way to dissect one tranche of the Russian renewable energy market to see what impediments and incentives might affect the industry in its nascent stage. While there are various other renewable sources to choose from, such as solar, biomass, and geothermal energy, I selected wind because it holds the largest share of renewable energy globally after hydropower. As of 2015, wind produces 3.7% of the world’s electricity.98 Additionally,

Russia, as with most resources, is rich with potential for harnessing wind power. This chapter walks through how the world emerged into a wind renaissance in the early 2000s, why Russia did not take part in this renewable energy revolution, and in what ways wind power is slowly starting to find its way in different areas of the country.

98 Sawin et al., Renewables 2016, 32. 31

A Brief History of Wind Power

According to Daniel Yergin in The Quest, the history of modern renewable energy began in the 1970s and was most notably promoted by Jimmy Carter, who put a solar panel on the White House roof. However, the industry (which was mostly focused on solar power) did not perform up to expectations. Modern wind energy got one of its first big starts in California in the wake of the 1973 oil crisis after which both the U.S. federal government and California’s state government offered tax credits for wind turbines. Yet, the fluctuations of the fossil fuel trade frequently impacted the growth of renewables. For example, low oil prices in the mid-1980s proved a substantial setback for interest in renewables. Californians came to rely on wind turbines built with the sturdy design of the Danes, but by the 1990s the boom for wind had faded. Still, though, the

Energy Policy Act of the United States in 1992 helped put in place some tax incentives for renewable energy production, and this led to states adopting their own renewable energy portfolio standards.99 Around this same time, in 1993 Germany began erecting wind turbines and then passed a Renewable Energy Law in 2000. Germany’s subsequent feed-in tariff became a popular model for many other countries.

Yergin argues, though, that it was not until around 2004 that the “industry started to gain real scale.”100 In 2005, Germany and Spain wielded about 70 percent of Europe’s wind energy capacity because of their feed-in tariffs.101 China joined later but got heavily involved in renewable technologies with their Renewable Energy Law of 2005, which

99 Yergin, The Quest, 607. 100 Ibid., 528. 101 Ibidl., 608. 32

was made in response to increasing energy needs that their supply of fossil fuels could not meet. From 2005 to 2009, wind power capacity in China doubled each year.102

Data from the Global Wind Energy Council, an international trade association for the wind industry (see Figure 1) illustrate the growth of global wind capacity since 1997 and the surge in growth that began in the mid-2000s. Of course, it should be noted that a large reason for the continued increase in global wind power capacity is that wind energy technology costs have dropped considerably. From 1983 to 2015, the cost for onshore wind dropped by about 67% (from US$4,766 per kilowatt to US$1,550 per kilowatt installed).103

500

400

300

200

MW(thousands) 100

Figure 1. Global Cumulative Installed Wind Capacity Source: GWEC Global Wind Report 2014 and 2015

Table 1 shows how Russia compares to other large emerging economies, such as

BRICS nations (e.g. Brazil, India, China, and South Africa), as well as the United States and Canada, which is similar to Russia in size and climate. Whereas a developing country

102 Ibid., 548-549. 103 Sawin et al., Renewables 2016, 81. 33

like Brazil has grown from 4 MW of wind in 1997 to 5,960 MW in 2014, Russia has only grown from about 0 MW to 17 MW.104 Canada, a fellow arctic country rich in fossil fuels and rivers, has also grown from 23 MW to 9,694 MW in those 18 years. It is quite clear from these data just how little wind energy Russia uses compared to its peers.

1997 2006 2014 Brazil 4 237 5960 Canada 23 1423 9694 China 200 2070 115000 India 400 6200 22465 Russia 0 17 17 South Africa 0 3 570 United States 1600 11329 64232

Table 1. Installed Wind Capacity (MW) of BRICS Nations, the United States, & Canada Source: U.S. Energy Information Agency

However, modern-day Russia’s current miniscule use of wind energy does not accurately reflect the role the Soviet Union played in wind energy’s infancy. In his 2015 book, Vladimir Sidorovich argues that the world is undergoing a worldwide revolution in renewable energy, and the era of fossil fuels is coming to an end. Russia is falling well behind countries such as Germany, China, and the U.S. in terms of RES development, but this was not always the case. In fact, the history of wind development in (Soviet) Russia can be dated back to at least as far back as 1931, a big year for the industry. In this year,

104 Note: Technically, since the IEA’s 2014 report, Russia annexed Crimea which has added 75 MW of wind power capacity to the existing 15 MW throughout the rest of Russia. Still, this annexed amount has little effect on the country’s total energy mix. Due to persisting legal complications over their future use, at the time of writing the wind turbines in Crimea were not functioning at capacity. (Meyers, “Renewable Energy Report for Russia,” 2016). 34

three things happened: 1) a department in the Central Aerohydrodynamic Institute

(ЦАГИ) was created and dedicated to the development of wind turbine technology, 2) an inventor from Kursk created the first wind turbine to utilize an inertial battery that could store kinetic energy from the turbine’s flywheel, and 3) a 100 kW 30-meter tall wind turbine was erected near Balaklava in Crimea.105 This turbine is recognized as a precursor to the modern horizontal-axis wind turbines that are so prevalent today.106 Soviet

Research in and construction of wind power installations continued through the 1940s and 1950s, then interest resurfaced again in the 1980s with Regulation No. 1052 “On the accelerated development of wind energy technology in 1988-1995,” which would have dramatically increased production of wind installations in the tens of thousands.107

Then the Soviet Union collapsed in 1991. These projects never came to fruition and the 1990s led to a decidedly oil and natural gas-based economy. The Soviet economy had begun stagnating in the 1960s but had been propelled by oil windfalls in the 1970s and 1980s caused by significant global events such as the 1973 October War, Arab oil embargo, and Iranian Revolution.108 Following the chaos and poverty from the collapse, by the mid-1990s Russia was relying on oil exports for two-thirds of its revenue, despite the ageing infrastructure.109 Shortly before becoming president, in his 1999 article on

“Mineral Natural Resources,” Putin argued that oil and gas were essential to revive the

105 Владимир Сидорович, Мировая Энергетическая Революция: Как Возобновляемые Источники Энергии Изменят Наш Мир (Альпина Паблишер: Moscow, 2015), 43. 106 Niki Nixon, “Timeline: The History of Wind Power,” The Guardian, October 17, 2008, accessed April 18, 2017, https://www.theguardian.com/environment/2008/oct/17/wind-power-renewable-energy. 107 Сидорович, Мировая Энергетическая Революция, 44. 108 Yergin, The Quest, 23. 109 Ibid., 26-27. 35

economy.110 In short, a dramatic political shift and economic collapse derailed the plans for wind power in a country that had pioneered in alternative forms of energy. Russia is now in a position to play catch-up if it desires to become competitive in the production of renewable energy technology for instead of relying on imports as it does now.

Wind Power in Russia’s Regions

Despite the low participation of wind project bids in the tender auctions (see

Chapter 2), there are indeed wind energy projects going on in various stages of development. Several of them even began before major political turning points, such as the 2009 Energy Law and the introduction of the tendering support system for renewable energy projects in 2013. The following section explores the lay of the land for current and proposed wind projects in these areas, paying special attention to the purpose, scale, and stakeholders involved, in three federal districts: Far Eastern, Northwestern, and Southern

(see Figure 2). These regions were chosen for study due to the high potential for wind energy as well as notable differences in geography and demographics. By and large, the highest wind speeds are found along Russia’s borders, especially on its northern and eastern coastlines. More specifically, the most pronounced winds with average wind speeds ranging around 7-8 (or more) meters per second are found on the Kola Peninsula in the northwest, Chukotka in the northeast, Sakhalin Island in the southeast, and to a somewhat lesser extent the coast of the Black Sea in the southwest.111

110 Ibid., 37. 111 “Wind Energy in Russia,” reve: Wind Energy and Electric Vehicle Review, February 5, 2013, accessed April 18, 2017, http://www.evwind.es/2013/02/05/wind-energy-in-russia/28752. 36

Figure 2. Locations of Selected Installed and Planned Wind Energy Stations in the Southern, Northwestern, and Far Eastern Federal Districts Source: Map created by author

The three federal districts under study show among the highest activity with wind projects in Russia, but these projects are planned by different stakeholders who develop the plans based on local economic and geographic circumstances. Projects in the Far East for the most part are done in collaboration with Japanese partners. Turbines constructed out on the Pacific coast are small-scale, intended to support local, isolated communities who have historically depended on diesel fuel imports for electricity, but also to test turbine prototypes designed for harsh northern climates. Similar to the Russian Far East, some isolated communities, such as Pyalitsa on the Kola Peninsula, are removed from the centralized power grid and have installed turbines as a way of providing more consistent

electricity and cutting on diesel fuel costs. In terms of large-scale wind farms for commercial grid use, there have been several proposals for projects with Russian,

Chinese, and European collaboration, yet many have encountered consistent delays and uncertainty. Projects in the Southern Federal District have been entirely large-scale with

Russian and European partners, but they too have experienced repeated setbacks.

Broadly, primary reasons for installing wind turbines are economic development, fuel cost mitigation for isolated communities, and foreign policy.

Far Eastern Federal District

The Far Eastern Federal District of Russia contains nine federal regions with tremendously long coastlines on the Pacific Ocean, which are especially blessed with high wind speeds. In particular, Sakhalin Oblast’, Kamchatka Krai, and Chukotka

Autonomous Okrug have the strongest average annual winds. The Far Eastern Federal

District has the smallest population of all federal districts with a little over six million people but also the most land area with about six million square kilometers, resulting in a population density of approximately one person per square kilometer.112 As a result of the great distances between major cities, and electricity consumers more broadly, many communities removed from the unified power grid have been forced to import fuels, such as diesel for local generators, which has proven to be very costly.

One of the largest wind installations in Russia currently is the 2.5 MW

Anadyrskaya windfarm in Chukotka Autonomous Okrug on the coast of the Bering Sea.

Information on this installation is scant, but it appears to be composed of ten 250 kW

112 Russian Federal State Statistics Service, “Основные Социально-Экономические Показатели в 2014 г.” 2015, accessed April 20, 2017, http://www.gks.ru/wps/wcm/connect/rosstat_main/rosstat/ru/. 38

turbines.113 The Chukotka government commissioned the turbines, which were constructed from 1999 to 2002. The station is the largest wind installation that is not connected to the Russian unified grid and it operates in conjunction with the

Anadyrskaya coal power plant.114 The installation functioned well until 2006 when productivity began to drop substantially drop off due to a lack of service to the turbines.115 Unlike the fate of the other Russian wind projects from the 1990s, this wind park has plans for revitalization to replace the dilapidated turbines with new Vestas turbines from 2016 to 2018.116

With the exception of the Anadyrskaya wind farm, the Far East’s history of wind energy generally rests on smaller-scale wind projects and collaboration with different partners. In 1997, the Danish government gifted two Micon wind turbines to the

Commander Islands apparently in recognition of the burial place of the great Danish explorer, Vitus Bering, who is buried there. These turbines were never used to their full potential because of improper installation, causing the locality’s energy system to destabilize.117 French turbine manufacturer Vergnet also constructed two 275 kW turbines on the Commander Islands (specifically in Nikolskoye on Bering Island) and one turbine in Ust-Kamchatsk on the Kamchatka Peninsula. The turbines in Nikolskoye

113 “Ветроэнергетика,” Экологическое Движение Узбекистана, February 15, 2013, accessed April 19, 2017, http://www.eco.uz/ru/?option=com_content&view=article&id=76:2009-10-20-06-30- 28&catid=25:2009-07-08-05-20-09. 114 Ксения Бархрушева, “Ветроэнергетика в России: Долгая Дорога от Амбициозных Планов к Реализации Конкретных Проектов – Вымысли и Фактов,” Bellona, June 20, 2012, accessed April 18, 2017, http://bellona.ru/2012/06/20/vetroenergetika-v-rossii-dolgaya-doro/.; “История Чукотской Ветроэнергетики,” Энергосовет, accessed April 20, 2017, http://www.energosovet.ru/stat486.html. 115 “История Чукотской Ветроэнергетики.” 116 Майя Тимченко, “Ветер Превратят в Энергию,” Крайний Север, accessed April 18, 2017, http://www.ks87.ru/20/5538.html. 117 “Поймали Ветер,” Восток России, November 1, 2013, accessed April 19, 2017, http://www.eastrussia.ru/material/poymali_veter/. 39

began operation in 2013 and, due to the system put in place to accommodate them, helped improve the effectiveness of the Micon turbines that were long underutilized. The complex, which is actually a hybrid wind-diesel installation, now supports about 50 percent of energy production on Bering Island and saves the community 350 tons of imported fuel per year.118

The major energy provider for the District is public joint stock company RAO

Energy Systems of the East (RAO ES East), a subsidiary of RusHydro, and it contains regional subgroup affiliates that are specific to the nine federal subjects within the

District.119 Despite the sparseness of population in this area of Russia, RAO ES East is responsible for managing the power systems of many of its scattered communities. At present, most of these communities rely on about 500 diesel power plants with total capacity of 640 MW. According to Alexei Kaplun, Deputy General Director of RAO ES

East, energy from renewable sources in many cases is more cost-effective than traditional fossil fuel power. As renewable energy grows in the Far East, Kuplun expects about 60 percent of it will come from wind by about 2030.120 As a way to reduce high fuel and fuel transportation costs, the company has plans to develop 178 renewable energy facilities (mostly solar and wind) with total capacity of 146 MW in the next five years.

As of 2015, the company plans to build four wind farms and 35 other wind installations

118 “”РАО ЭС Востока” Начало Эксплуатацию Ветро-дизельного Комплекса на Командорских Островах,” Итерфакс-Россия, August 18, 2013, accessed April 19, 2017, http://www.interfax- russia.ru/FarEast/news.asp?id=428579&sec=1671. 119 “Company Overview of Public Joint Stock Company RAO Energy Systems of the East,” Bloomberg, accessed April 18, 2017, http://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=47240341. 120 Vladislav Vorotnikov, “Russia and Japan Collaborate on Wind Energy Innovation in the Far East,” Renewable Energy World, March 10, 2014, accessed April 19, 2017, http://www.renewableenergyworld.com/articles/2014/03/russia-and-japan-collaborate-on-wind-energy- innovation-in-the-far-east.html. 40

with a total capacity of 100 MW by 2020.121 Already during 2012-2015, they commissioned three wind installations. One of these is among the 16 MW planned for wind-diesel hybrid projects on the Kamchatka Peninsula, where tariffs for electricity and fuel transportation costs are especially high due to its geographic isolation.122

In 2014-2015 RAO ES East completed wind projects in Sakhalin Oblast’ and

Kamchatka Krai. In 2014, they established the first wind farm in Sakhalin Oblast. This

“wind farm” in the village of Novikovo is composed of only two turbines with a total capacity of 450 kW. They were produced by Russian manufacturer Tulskiy

Electromechanical Plant.123 In 2015 in Ust-Kamchatsk, RAO ES East finished the first stage of the largest wind facility in the Russian Far East. At present the facility is comprised of three turbines equaling 900 kW in total capacity with plans to construct seven more turbines to bring the wind park’s capacity to 3 MW. The project was carried out in collaboration with the New Energy and Industrial Technology Development

Organization (NEDO),124Japanese trading company Mitsui & Co Ltd, and Japanese turbine manufacturer Komaihaltec Inc.125 As of September 2015, the facility was not yet

121 “”РАО ЭС Востока” и Японская Komhai Haltec Планируют Запустить на Дальнем Востоке России Производство по Выпуску Ветроэнергетических Установок,” Energy Base, October 5, 2015, accessed April 19, 2017, http://energybase.ru/news/alternative_energy/rao_yes_vostoka_i_yaponskaya_komai_haltec_planiruyut_za pustit_na_dalnem_vostoke_-2015-10-05.; Vladislav Vorotnikov, “Russia Turns to Sun, Wind to Improve Electricity Supply for Country’s Far East,” Renewable Energy World, October 9, 2015, accessed April 19, 2017, http://www.renewableenergyworld.com/articles/2015/10/russia-turns-to-sun-wind-to-improve- electricity-supply-for-country-s-far-east.html. 122 Ibid. 123 “Rao Energy Systems of the East Builds the First Ever Wind Farm in Sakhalin,” RAO Energy Systems of the East, January 14, 2015, accessed April 19, 2017, http://www.rao-esv.ru/en/press-room/news/10007/. 124 Note: NEDO is a Japanese governmental organization that focuses on the promotion of new energy technologies both domestically and globally. (“About NEDO, NEDO, accessed April 19, 2017, http://www.nedo.go.jp/english/introducing_index.html). 125 Plamena Tisheva, “Mitsui, Partners Commission Wind Micro-grid Demo in Russia,” Renewables Now, March 30, 2016, accessed April 19, 2017, https://renewablesnow.com/news/mitsui-partners-commission- 41

producing energy for commercial production but was projected to save the community more than 550 tons of diesel fuel annually.126 Other than lowering energy costs for the locality, the project is intended to test Komaihaltec’s cold climate-resistant turbines and

“test the micro-grid system to ensure smooth operation and interconnection between the wind power plant, existing diesel station and heat generation facilities,” which will help inform future projects in off-grid areas in harsh climates (of which there are many in

Russia).127

Russia has other partnership projects with Asian nations in the works. Russian-

Japanese collaboration on wind projects is also being carried out by WINPRO Company of Japan and the Far East Federal University of Russia. This project, much like the

Mistui-Komhaitec-NEDO-RAO ES East collaboration, is designed to test turbines for harsh climatic conditions with the intention of producing them for Northern and Eastern

European countries.128 So, while there may be some local advantages stemming from the project, the partners are ultimately conducting a pilot study to benefit future research and development for robust wind turbine technology. The Russian-Japanese partnerships in wind energy are indicative of the broad economic and energy pacts that have been building between both governments. The cooperation is also illustrative of the wealth at

wind-micro-grid-demo-in-russia-519060/.; “Biggest Wind Power Facility in the Russia’s Far East Launched into Operation in Kamchatka,” RAO Energy Systems of the East, September 10, 2015, accessed April 19, 2017, http://www.rao-esv.ru/en/press-room/news/10015/. 126 “Biggest Wind Power Facility in the Russia’s Far East Launched into Operation in Kamchatka.” 127 Tisheva, “Mitsui, Partners Commission Wind Micro-grid.” 128 Vorotnikov, “Russia and Japan Collaborate.” 42

Russia’s fingertips in terms of oil, gas, nuclear, and renewable energy sources that Japan desires in a move away from its dependence on imported fuel from the Middle East.129

In a less likely partnership, Russia and North Korea have plans to cooperate on a wind energy project. As of 2015 (and pending a feasibility study), RAO ES East plans to build four wind farms, two in North Korea and two in Primorsky Krai, totaling approximately 40 MW. All of the energy will be exported to North Korea. This project also precedes possible plans for Russia to eventually export energy to Japan and South

Korea.130

Northwestern Federal District

The Northwestern Federal District contains eleven federal regions and is located in the north of European Russia at the same latitudes as Scandinavia. In terms of size, it rests between the Southern and Far East Federal Districts with an area of about 1.7 million square kilometers and population of 14 million people, resulting in a population density of about 8 people per square kilomter.131 Like the Far East, the Northwest contains long coastlines, which typically harbor high winds. Unlike the Far East, it is more densely populated and is not located in relative isolation, but rather is adjacent to the heavily populated Central Federal District as well as Finland, Norway, Lithuania, and

Poland. While the region has strong potential to use wind for energy, the current energy situation is not particularly advantageous for new large turbine and wind park projects.

129 Nikkei, “Japan Seeks Broad Energy Pact with Russia,” Nikkei Asian Review, September 2, 2016, accessed April 19, 2017, http://asia.nikkei.com/Politics-Economy/International-Relations/Japan-seeks- broad-energy-pact-with-Russia?page=1. 130 “Russia Planning 40 MW Wind Farm with North Korea,” reve: Wind Energy and Electric Vehicle Review, June 30, 2015, accessed April 19, 2017, http://www.evwind.es/2015/06/30/russia-planning-40-mw- wind-farm-with-north-korea/53062. 131 “Основные Социально-Экономические Показатели в 2014 г.” 43

For example, even though about 99 percent of the population in Murmansk Oblast’ (the

Kola Peninsula) is connected to the centralized power grid, this only covers about 50 percent of the territory. Thus, there are several pockets of small communities who have to import fuel (typically diesel).132 As a result, some are turning to renewable sources to mitigate high fuel costs. Also, the presence of the Kola Nuclear Power Plant, which exports 20 percent of its energy, has put a damper on the need to introduce more power into the grid.133 In 2016, the Murmansk regional government discussed plans to extend the operation of reactors due to be shut down. By keeping them in operation, there would be less demand from the area to invest in renewable energy sources in the region.134

Separate from mainland Russia, located between Lithuania and Poland,

Kaliningrad Oblast’ is situated on the Baltic Sea. The country’s largest wind energy installation, Zelenogradskii, has been in Kulikovo, Kaliningrad Oblast’ since 1998 with additions made to it in 2002, giving it a total capacity of 5.1 MW. The wind park was constructed with the cooperation of the regional administration, national government, and the government of Denmark using used equipment from Denmark.135 Of course, many of the ongoing and upcoming wind projects throughout the country will soon dethrone

132 Runa Haug Khoury et al., Environmental Considerations in the Arctic: Sustainable Resource Exploitation (Bellona Foundation, 2015). 133 Ibid. 134 Charles Digges, “Kola NPP Director Wants to Run Reactors for a Total of 60 Years,” Bellona, November 16, 2016, accessed April 20, 2017, http://bellona.org/news/nuclear-issues/2016-11-kola-npp- director-wants-to-run-reactors-for-a-total-of-60-years. 135 Alfiya Galiyeva, “Arkhangelsk’s New Wind Farm Will Be One of Europe’s Largest,” Russia Beyond the Headlines, December 24, 2013, accessed April 19, 2017, https://rbth.com/business/2013/12/24/arkhanglesks_new_wind_farm_will_be_one_of_europes_largest_328 99.html.; “A Powerful Wind Farm Will Be Constructed Near Kaliningrad by a Chinese Investor,” russianconstruction.com, October 22, 2015, accessed April 19, 2017, http://russianconstruction.com/news- 1/1141-a-powerful-wind-farm-will-be-constructed-near-kaliningrad-by-a-chinese-investor.html. 44

Kaliningrad as the largest producer of wind power. That said, this region, too, has plans to develop new wind parks (although not to the scale as those in other federal subjects).

First, in 2014 Russian company Lukoil-Ecoenergo proposed a plan to construct a

10 MW wind park in Kaliningrad.136 Second, in 2015 Russian joint stock company

Yanterenergo has agreed to work with a Chinese electric power equipment firm to develop a 45 MW wind park.137 Third, in a more ambitious move, the Russian government under Dmitry Medvedev proposed a plan to construct 16 wind farms in

Russia by 2030 which would include four major projects in the Northwestern Federal

District: 300 MW in Leningrad Oblast’, 300 MW and 500 MW in Murmansk Oblast, and

200 MW in Kaliningrad Oblast’.138

In terms of foreign investment, since 2001 Dutch company Windlife Energy BV has been planning development wind projects on the Kola Peninsula and eventually proposed a 200 MW wind farm near the village of Teriberka on the coast of the Barents

Sea in Murmansk Oblast’. In 2009, the head of Windlife Energy, Paul Logcheis, was planning to have the park operational by 2012.139 However, there were many complexities and potential problems that shed doubt on these plans. Despite the huge potential of Murmansk’s coasts, the project, which was one of the first major wind

136 Ivan Shumkov, “Lukoil-Ecoenergo May Build 10-MW Wind Farm in Kaliningrad – Report,” Renewables Now, March 11, 2014, accessed April 19, 2017, https://renewablesnow.com/news/lukoil- ecoenergo-may-build-10-mw-wind-farm-in-kaliningrad-report-409076/. 137 “A Powerful Wind Farm Will Be Constructed Near Kaliningrad by a Chinese Investor.” 138 Eugene Gerden, “Russia Approves 16 Wind Projects,” Wind Power Monthly, January 23, 2014, accessed April 19, 2017, http://www.windpowermonthly.com/article/1228405/russia-approves-16-wind- projects. 139 Anna Kireeva, “Windpark near Murmansk to Become a Reality While Remaining a Dream in the Rest of Russia,” Bellona, trans. Charles Digges, September 13, 2009, accessed April 19, 2017, http://bellona.org/news/renewable-energy/2009-09-windpark-near-murmansk-to-become-a-reality-while- remaining-a-dream-in-the-rest-of-russia. 45

projects conceived in the twenty-first century in Russia, was impeded by a national government that lacked a renewable energy policy, the lack of recognition of the wind industry as a real and profitable business, the possibility of regional energy surplus,140 and an electricity system that may be insufficient to handle increases in energy load.141

Not long after the initial announcement to begin construction in 2011, the global financial crisis hit and the region appointed a new mayor who was much less supportive of renewable energy projects than his predecessor.142 These obstacles, in addition to those already described, subsequently led to delays. In 2014, after several years of little progress on the Teriberka wind park, Windlife Energy was joined by Germany investor

WSB Neue Energien to co-develop the project. There were plans to make the park operational by 2016, but were still in the process of acquiring a turbine provider.143 Still, questions persisted from the Murmansk regional government about excess energy in the oblast’ that the wind park would provide as well as a lack of confidence from the governor in Windlife Energy to fulfill legal requirements for the project. As of September

2016, Windlife has pushed back its target construction date to 2020, but the fate of the

Teriberka wind farm remains uncertain.144

140 Note: An energy surplus in the region from existing power plants would mean a lack of demand for new renewable energy installations. 141 Anna Kireeva, “Bellona-Murmansk Forum Highlights Inroads and Obstacles to Renewable Energy in Northwest Russia,” Bellona, trans. Charles Digges, October 24, 2008, accessed April 19, 2017, http://bellona.org/news/renewable-energy/2008-10-bellona-murmansk-forum-highlights-inroads-and- obstacles-to-renewable-energy-in-northwest-russia. 142 Anna Kireeva, “After Years in the Doldrums, Wind Energy Projects in Murmansk See Their Sails Filling,” Bellona, April 8, 2014, accessed April 19, 2017, http://bellona.org/news/renewable-energy/2014- 04-years-doldrums-wind-energy-projects-murmansk-see-sails-filling. 143 “Double Act for Murmansk Wind,” reNEWS, August 4, 2014, accessed April 19, 2017, http://renews.biz/64609/double-act-for-murmansk-wind/. 144 “Нидерланды Намерены Построить к 2020 Году Ветропарк в Мурманской Области,” Телекомпания ТВ-21, September 18, 2016, accessed April 19, 2017, 46

Also up near the northern coast of Murmansk Oblast’ is Pechenga, the site for a proposed 100 MW wind park. Russian company Russky Veter (“Russian Wind”) will be constructing this agglomeration of 50 turbines in an area of Murmansk Oblast’ that is generally removed from other major energy sources and envisions this project as a way to promote social and industrial development in the area. This project, which was planned with the possibility of expanding the park to 400 MW total capacity, was announced in

2008, the same year Russky Veter was founded.145 The company’s mission is to be a domestic supplier of turbines so that wind projects in Russia can meet the local content requirements outlined in the 2013 energy law on RES tenders. According to their website, they have maintained connections with international wind technology firms such as Goldwind (China), LZ Blades (China), and Vensys (Germany) and have worked on construction projects in Chuvashia.146 Yet, mention of the proposed wind farm in

Pechenga is absent. In fact, since 2010, information about the project appears nonexistent, casting substantial doubt on the progress and future of the wind park.

In 2013, a 200 MW wind farm project was announced for the Arkhangelsk

Oblast’ near the village of Lapominka on the coast of the White Sea.147 Russian utility company Mezhregionsoyuzenergo partnered with German SOWITEC to develop the first

Arctic wind farm in Russia. The wind farm would be one of Europe’s largest and would

http://www.tv21.ru/news/2016/09/08/niderlandy-namereny-postroit-k-2020-godu-vetropark-v- murmanskoy-oblasti. 145 Anna Kireeva, “Demand for Wind Energy on the Kola Peninsula Growing,” Bellona, trans. Charles Digges, November 7, 2008, accessed April 19, 2017, http://bellona.org/news/renewable-energy/2008-11- demand-for-wind-energy-on-the-kola-peninsula-growing. 146 Русский Ветер, accessed April 19, 2017, http://www.russianwind.su/. 147 Денис Тереньтев, “Где Деньги на Ветер?” argumenti.ru, July 21, 2016, accessed April 19, 2017, http://argumenti.ru/society/n548/460044. 47

be enough to power approximately 100,000 homes in Arkhangelsk.148 As of 2014, the wind park was set for commissioning by 2016, yet a wind turbine provider had not yet been selected.149 At the time of writing, no new information was available on either partner’s website, which begs the question whether this project will float in limbo like the other major wind projects that have been planned for the region.

While large-scale wind projects have been tangled up, small-scale renewable energy installations have met with success in Murmansk Oblast’. According to the

Bellona Foundation,150 in 2014 in Pyalitsa, a small rural locality on the eastern coast of the Kola Peninsula, federal grants to a regional energy savings plan funded a renewable energy pilot project. The installation contains a 60 kW diesel engine, 20 kW from 60 solar panels, and 20 kW from four small wind turbines. The complex offers the community electricity 24 hours a day, whereas when they only had a diesel engine, they only had power for about eight hours a day. The change to a RES-diesel hybrid system also benefited the community with approximately 50,000 euros in fuel savings in the first six months of operation.151 The initial success of this project has led to other such projects in Murmansk Oblast’. In 2015, the villages of Tetrino and Chavanga, located along the coast to the southwest of Pyalitsa, came online with similar RES-diesel hybrid

148 “Wind Energy in Russia: Wind Farm in the Arkhangelsk Region,” reve: Wind Energy and Electric Vehicle Review, December 23, 2013, accessed April 19, 2017, http://www.evwind.es/2013/12/29/wind- energy-in-russia-wind-farm-in-the-arkhangelsk-region/40706. 149 Patrick Smith, “Sowitec Plans Russia’s Largest Wind Farm,” Wind Power Monthly, January 17, 2014, accessed April 19, 2017, http://www.windpowermonthly.com/article/1227602/sowitec-plans-russias- largest-wind-farm. 150 Note: According to their website, the Bellona Foundation is an independent non-profit organization that focuses on climate, environmental, health, and nature protection issues. For more information see: “About Bellona,” Bellona, accessed April 20, 2017, http://bellona.org/about-bellona. 151 Anna Kireeva, “Villages in Russia’s Arctic Make Coveted Progress with Renewables Energy,” Bellona, trans. Charles Digges, August 10, 2015, accessed April 19, 2017, http://bellona.org/news/renewable- energy/2015-08-villages-in-russias-arctic-make-coveted-progress-with-renewables-energy. 48

installations.152 The initial success of this project has important implications for the 10 million Russians who are located “off-grid” from the centralized energy transmissions systems.153 By reducing the amount of imported diesel fuel needed to run their generators, they limit the threat of local pollution, contamination, and high transport costs associated with it.

Southern Federal District

The Southern Federal District is much more dense in terms of population than the

Northwest and Far East. It has over double the population of the Far Eastern District with about 14 million people, but only a fraction of the land area with almost 420 thousand square kilometers, resulting in a population density of about 33 people per square kilometer.154 It is the most populous of the three federal districts studied and benefits from high winds on arid steppes and coastlines on the Black Sea and Caspian Sea. Wind energy projects have been a part of energy plans in the Russian South since the 1990s. In particular, two projects show how the technology was introduced and then often quickly abandoned. In the Markinskaya Tsimlyankskaya region of the Rostov Oblast’, a wind park with ten turbines made of German design was constructed in the late 1990s. The capacity of the park was only about 10 kW. Since the early 2000s, however, the turbines began to fall into disrepair due to a lack of continued financing, and, as of 2016, appeared to be completely defunct.155 In in the Republic of Kalmykia near the city of Elista, a 22

152 Ibid. 153 International Energy Agency, “Russia 2014,” 222. 154 “Основные Социально-Экономические Показатели в 2014 г.” 155 Boris221, “Бывшая ВЭС в Маркинской” (blog), April 24, 2016, accessed April 19, 2017, http://www.meriner.ru/byvshaya-ves-v-markinskoj.html. 49

MW wind park composed of 1 MW turbines was planned in the early 1990s.156 For reasons that remain unclear, only two turbines of the 22 planned turbines were installed and today they no longer function.157 While pure speculation, it would not be surprising if they simply fell into disrepair like many of the other Russian wind projects from the

1990s. In 2007 and 2008, Canadian and Spanish investors had announced their initial intentions to develop wind parks in Krasnodar Krai and the Karachay-Cherkess Republic; however, neither of these projects materialized.158

Since 2010, some projects with foreign investment backing have started to take shape throughout the Russian South. In 2010, a wind park project led by Czech Republic- based holding company Falcon Capital made its first major development in the

Priyutnensky wind park with the construction of two 1.2 MW wind turbines produced by

Vensys, a German manufacturer.159 This park will be the largest private investment for a wind project in Russia.160 A subsidiary of Falcon Capital, Alten Ltd., is the main operator

156 Галина Шефер, “Калмыцкая Ветровая Электростанция в Тумане” (blog), Дороги Мира, 2014, accessed April 19, 2017, http://worldroads.ru/kalmyitskaya-vetrovaya-elektrostantsiya-v-tumane; Note: According to this blog, only one wind turbine was constructed. 157 Марина Бровкина and Руслан Мельников, “Поставили на “Зеленое,”” Российская Газета, February 14, 2017, accessed April 19, 2017, https://rg.ru/2017/02/14/reg-ufo/pod-rostovom-na-donu- vmesto-kazino-postroiat-vetropark.html. 158 Алексей Быков, “5 Лет Ожидания: SOWITEC GROUP Начинает Строительство ВЭС на Дону,” Эксперт Юг, February 8, 2017, accessed April 19, 2017, http://expertsouth.ru/novosti/5-let-ozhidanija- sowitecgroup-nachinaet-.html. 159 “Media,” Falkon Capital a.s., accessed April 19, 2017, http://www.falkoncapital.eu/media/.; “Falkon Capital к 2013 Году Планирует Построить в Калмыкии Ветропарк Мощностью 300 МВт,” kalmykianews.ru, April 13, 2011, accessed April 19, 2017, http://www.kalmykianews.ru/2011/falkoncapital-k-2013g-postroit-v-kalmykii-vetropark-300-mvt/. 160 Алексей Кирпиченко, “Европейцы Построят в России Масштабный Ветропарк,” Live Energo, July 6, 2016, accessed April 19, 2017, http://live-energo.ru/articles/evropejtsy-postroyat-v-rossii-masshtabnyj- vetropark.; “Ветропарк в Калмыкии Получил Статус Полноправного Участника Оптового Рынка Электроэнергии,” GreenEvolution.ru, August 7, 2013, accessed April 19, 2017, http://greenevolution.ru/2013/08/07/vetropark-v-kalmykii-poluchil-status-polnopravnogo-uchastnika- optovogo-rynka-elektroenergii/.; Бровкина and Мельников, “Поставили на “Зеленое.”” 50

for the project.161 In addition to Falcon Capital, a German bank, Landesbank Berlin, is investing in the project.162 The plan for the project has been in continuous development since 2010 with the ultimate vision of achieving total park capacity of 300 MW. As of

2013, Falcon Capital brokered a deal with Vestas, a major Danish turbine manufacturer, to construct and ship 20 turbines from Europe. It is unclear at this point if these installations have, in fact, taken root. As of 2016, Falcon Capital established a deal with

German turbine manufacturer FWT Production GmbH to supply 20 turbines for a total capacity of 51 MW, which is expected to be commissioned by the first half of 2017.163

The Azov District of Rostov Oblast’ is also in the midst of planning a 90 MW wind park project that was originally presented in 2012 by SOWITEC group. SOWITEC is a Germany-based wind power project developer that has created several entities in other countries, including in Russia. In particular, SOWITEC “aim to promote the development of wind energy in new markets.”164 After initially being designed in partnership with a local casino, the casino decided to relocate to Sochi. Under the new plan, the park will now contribute its electricity to the wholesale market. The park is now set to be commissioned in 2020.165 SOWITEC also plans to apply to the June 2017 tender competition in order to get up to 100 percent of its capital investment returned over a 15 year period.166 However, at the time of writing, SOWITEC had not yet selected the turbine equipment supplier, which has an impact regarding the local content requirements

161 “Media,” Falkon Capital a.s., accessed April 19, 2017. 162 “Falkon Capital к 2013 Году Планирует Построить в Калмыкии Ветропарк Мощностью 300 МВт.” 163 Кирпиченко, “Европейцы Построят в России Масштабный Ветропарк.” 164 “Company,” SOWITEC, accessed April 19, 2017, http://www.sowitec.com/en/company.html. 165 Быков, “5 Лет Ожидания.” 166 Бровкина and Мельников, “Поставили на “Зеленое.”” 51

of the tendering system.167 Rostov Oblast’, in addition to other regions like the Republic of Kalmykia, has some of the highest measured wind speeds in the country, which is indicative of the number of wind park projects currently in development. Yet even this area, rich in wind, faces ongoing competition. A 1,100 MW reactor in the Rostov nuclear power plant is set to go online in 2017.168

In addition to foreign investment, Russian state-owned Rosatom is turning toward renewable energy projects, especially wind power. Rosatom is Russia’s state corporation responsible for nuclear energy projects and regulation. In the emerging market of renewable energy, Rosatom began to diversify its energy portfolio through its subsidiary

JSC VetroOGK, which has tendered 26 wind energy installations with total capacity of

610 MW. Rosatom (VetroOGK) has now invested over one billion euros in wind energy development, and most of their investment has been directed to Russia’s southern regions, which has the most extensive wind measurements. Specifically, Rosatom is targeting Krasnodar Krai and the Republic of Adygea with the latter getting its first wind farm in 2018. Rosatom claims this energy portfolio diversification is representative of the government’s overall commitment to international climate agreements and carbon mitigation.169 In early 2017, Rosatom selected Lagerway, a Dutch turbine manufacturer, to be its partner in its plans. As a partner, Lagerway has expressed its plan to construct

167 Быков, “5 Лет Ожидания.” 168 Ibid. 169 Mark Willis, “Russia Takes Tentative Renewables Step,” Breakbulk, February 9, 2017, accessed April 19, 2017, http://www.breakbulk.com/russias-energy-investment/. 52

over 600 MW of wind power in Russia but also help contribute to Russia’s local content requirement by manufacturing in Russia.170

170 “Lagerwey Forges Russian Ties,” reNEWS, March 2, 2017, accessed April 19, 2017, http://renews.biz/105788/lagerwey-scores-in-russia/. 53

Chapter 4: Conclusion

Wind power has emerged in Russia mostly in the form of small-scale installations designed to help reduce the burden of costly diesel imports for isolated communities in the Northwest and Far East. Large wind projects have met with an unfavorable investment environment and a restrictive support scheme that, with high local content requirements, simply demands too much of a domestic wind energy industry that has hardly gotten off the ground. Still, foreign companies from Germany, the Netherlands,

Denmark, Czech Republic, and Finland have main some inroads to construct turbines on

Russian soil in the South and Northwest. In the Far East, Japan has been a consistent partner, but for smaller-scale, pilot projects. Russian giants, such as Rusnano and

Rosatom, are also getting involved in wind energy projects. The potential for wind energy development is certainly there. The technology is becoming increasingly affordable, foreign investment is coming in, and Russian political and business elites started to realize in the 2010s the future economic importance for renewable energy.

However, unless the leadership in Russia believes that renewable energy is of critical strategic importance either economically, militarily, ideologically, or environmentally, there will not be sufficient political will to drive the industry forward quickly enough to become a major player globally.

Through a review of Russia’s history of energy use and a case study on wind energy development in select regions, this paper has argued that Russia is ripe for

renewable energy but too many political obstacles stand in the way of its development, both internally and with foreign investment. Still, there are a number of other explanations for why RES has not flourished in Russia while it has elsewhere in the world. First, Russia is energy independent (e.g. self-sufficient) and the state owns a large share of the energy sector. Unlike smaller countries who are poor in extractable energy resources and who must then import their fuels, Russia can instead rely on its own supply and often export the rest for profit. State connections to profits from oil and gas exports likely have a large role in shaping the political environment around energy investment priorities. Second, Russia’s energy source diversity might allow it to ignore new sources of energy on top of natural gas, coal, hydropower, and nuclear energy. A country dependent on one fuel type, such as coal, could suffer substantially from high coal prices, and thus would want to take advantage of a domestically available source of energy like wind or solar energy. Third, Russia is generally regarded as a carbon sink, meaning its vast forests absorb the same if not more carbon dioxide than the country emits.171 As a carbon sink, Russian leadership may feel less pressure from within to accommodate international carbon emission reduction goals as it may consider itself far less to blame.

Although, this train of thought may not be altogether relevant given Putin’s climate change denialist beliefs. Fourth, the public health imperative for cleaner air may not be sufficient to spur clean energy growth. China, by contrast, faces considerable pressure

171 Note: The idea of Russia as a carbon sink is up for debate, however, as the potential for methane release from melting permafrost cancels out much of the carbon absorbed in forests.; For more information, see Shiklomanov et al., “Interactions Between Land Cover/Use Change and Hydrology,” in Eurasian Arctic Land Cover and Land Use in a Changing Climate, eds. Garik Gutman and Anni Reissell (New York: Springer, 2011), 137-176. 55

from high population centers that deal with consistent smog crises. Russia, it seems, is spared from this problem.

Endowed with elevated arid steppes and coastlines on the Black Sea, Caspian Sea,

Baltic Sea, Arctic Ocean, and Pacific Ocean—all with regular and forceful winds blowing—the world’s largest country has only 17 MW of wind energy capacity while the rest of the planet wields about 416,000 MW more.172 It is simply staggering to consider this disparity. Perhaps Russia will never want or need to use wind power to generate its electricity on a commercial scale. Ultimately, in contrast with the development of hydropower, oil, gas, and nuclear energy over the past century, the virtual absence of wind energy in Russia demonstrates a lack of political will and a weak lobby within the government advocating for development of wind power.

172 Sawin et al., Renewables 2016, 75. 56

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