Quick Scan of Wind-, Solar Energy and Combined Heat and Power in the Russian Federation
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Quick Scan of Wind-, Solar Energy and Combined Heat and Power in the Russian Federation REPORT Quick Scan of Wind, Solar Energy and Combined Heat and Power in the Russian Federation March 2013 1 Lighthouse Russia B.V. Quick Scan of Wind-, Solar Energy and Combined Heat and Power in the Russian Federation Contents 1. Executive summary .............................................................................. 4 2. Introduction ........................................................................................ 9 2.1. Initial assignment ........................................................................... 9 2.2. Assignment as formulated in conjunction with the client ....................... 9 2.3. Methodology .................................................................................. 9 3. General overview of the renewables sector ............................................ 12 3.1. Current state of the overall energy sector ........................................ 12 3.2. Power generation industry ............................................................. 15 3.3. Status quo of renewables in the Russian energy market ..................... 17 3.4. Renewable energy resources potential in Russia ................................ 19 3.4.1.Gross potential of renewable energy sources ................................... 19 3.4.2.Regional potential of renewable energy sources ............................... 20 3.4.3.Business potential ....................................................................... 21 3.5. Drivers of renewable energy deployment in Russia ............................ 22 3.6. Challenges to deployment of renewable energy in Russia ................... 24 4. Policy and legislative environment ......................................................... 27 4.1. Renewable energy regulation .......................................................... 27 4.1.1. Federal level .............................................................................. 27 4.1.2. Recent regulatory developments .................................................. 28 4.1.3. Regional level ............................................................................ 31 4.1.3.1. RUSTEC: IFC’s proposal to green Europe’s electricity supply by developing Russia’s potential for renewable energy .................................. 32 4.2. Administrative regulations .............................................................. 33 4.3. Stakeholder projections ................................................................. 35 4.3.1 Russian Energy Forecasting Agency ............................................... 35 5. Potential barriers and threats for the development of the renewable energy sector ............................................................................................... 37 5.1. Economic .................................................................................... 37 5.2. Financial ...................................................................................... 38 5.3. Social and cultural ........................................................................ 39 5.4. Political and institutional ................................................................ 39 5.5. Legislative ................................................................................... 41 5.6. Environmental .............................................................................. 41 2 Lighthouse Russia B.V. Quick Scan of Wind-, Solar Energy and Combined Heat and Power in the Russian Federation 5.8. Technical and infrastructure-related ................................................ 42 6. Wind energy sector ............................................................................ 44 6.1. Wind energy resource potential and regional potential across Russia .... 44 6.2. Current state of the sector and future prospects ................................ 47 6.3. Bottlenecks along the wind power supply chain ................................. 51 6.4 Case study and lessons learned ...................................................... 53 7. Solar energy sector ............................................................................ 56 7.1. Solar energy resource potential and regional potential across Russia .. 56 7.2. Current state of the sector and future prospects ............................... 60 7.3. Bottlenecks along the solar power supply chain ................................ 61 8. CHP.................................................................................................. 63 8.1. Current state of the sector and future prospects .............................. 63 8.1.1.Sector structure ......................................................................... 63 8.1.2.Challenges ................................................................................ 64 8.1.3. Future prospects ....................................................................... 65 8.2. Potential of CHP in Russia ............................................................. 67 8.3. Bottlenecks along the CHP sector supply chain ................................. 70 9. Opportunities in the Russian renewable energy market ........................... 71 9.1.Recommendations……………………………………………………………………………………74 10.Bibliography ...................................................................................... 75 3 Lighthouse Russia B.V. Quick Scan of Wind-, Solar Energy and Combined Heat and Power in the Russian Federation 1. Executive summary 1. Russia currently uses very little of its huge renewable energy potential: the share of renewables excluding large hydro, i.e. wind, solar, biomass, geothermal, ocean, in the Russian energy mix amounts to less than 1% and has been decreasing during the last decade. 2. The most developed segments of the Russian renewable energy sector are small hydro power and bio fuel. Russia traditionally has extensive expertise in the small hydro power sector, which is currently supported by the emergence of local small hydro plants equipment manufacturers. The bio fuel segment is driven by the access to bio fuel resources, expertise in capturing the bio fuels and feasible export potential. 3. The economic potential of renewable energy sources in Russia is estimated at 273.5 million tonnes of equivalent fuel per year and the technical potential at 4593.0 mln tonnes of equivalent fuel per year. 4. Development of renewable energy facilities in remote communities of the North-West, Siberian and Far East regions of Russia has high economic potential. The costs of diesel power generation, which provides energy supply in remote areas, are higher than the costs of using renewable energy resources, which are widely available in such areas, e.g. biomass in the north-western regions and Siberia, wind on the North-West and Far East coast of Russia, tidal in the Far East regions. 5. The North-West Federal District (especially Murmansk and Kaliningrad regions) and the Southern Federal District (especially Krasnodar and Volgograd regions) have the largest resource potential of renewable energy fuels. 6. The main incumbent market players such as Rusnano, RusHydro, Russian Technologies (“Rostechnologii”) and large energy companies are more focused on furthering their vested interests, e.g. lobbying for their own local projects, and less on contributing to the development of the renewables sector as a whole. The future of large power network projects still directly depends on the state support on the federal and regional levels. 7. The main drivers for the development of the renewable energy sector in Russia are: a) the need to secure energy supply to remote areas with autonomous power generating units and regions with a power deficit; b) increasing fuel prices and energy tariffs for all types of consumers and existing limitations on establishing new grid connections; c) the willingness of industrial enterprises to develop autonomous power supply in order to lower energy costs and minimize risks; d) environmental issues; e) requirements to develop the hi-tech sector of the Russian economy and support value-added production. 8. The main challenges the renewable energy sector faces are the artificially low costs of traditional and locally available energy sources which make renewable energy power generation non-viable; the relatively non- transparent and inconsistent legal framework; lack of practical and systematic political support; weak awareness of environmental issues and renewable energy among the general population; lack of financing opportunities; poor state of the grid infrastructure and advanced average age of electricity and heat generating plant. 4 Lighthouse Russia B.V. Quick Scan of Wind-, Solar Energy and Combined Heat and Power in the Russian Federation 9. The key challenge for renewable energy in Russia is the resistance of key decision-makers within the federal and regional governments and the powerful lobby of the oil and gas and electricity producers. This is exacerbated by a general lack of political will to develop the renewables sector at the highest political level. If the decision to actively develop the renewable energy sector is made by the key political figures on the federal and regional levels, the other practical barriers and constraints can be solved in the shortest time period. 10.The legislative environment in the field of renewables is characterized by on-going regulatory uncertainty with regard to financial and non-financial support for non-hydro renewables and the lack of transparency and