Market Study: Bio-energy in Russia Opportunities for Dutch companies March, 2013 Market study: Bio-energy in Russia Larive International Table of Contents Acknowledgements ................................................................................................................................. 3 1. Executive Summary ......................................................................................................................... 4 2. Introduction ..................................................................................................................................... 6 3. Market Indicators/Trends ............................................................................................................... 8 3.1. Development bio-based economy in the Netherlands ................................................................ 8 3.1.1. The Netherlands: bio-energy segment .................................................................................. 9 3.1.2. The Netherlands: bio-fuels segment ................................................................................... 10 3.1.3. The Netherlands: bio-products segment............................................................................. 11 3.1.4. Sustainability criteria in the Netherlands ............................................................................ 12 3.2. Development bio-based economy in Russia .............................................................................. 12 3.2.1. Russia: bio-energy segment ................................................................................................ 13 3.2.2. Russia: bio-fuels segment .................................................................................................... 18 3.2.3. Russia: bio-products segment ............................................................................................. 19 3.2.4. Sustainability criteria in Russia ............................................................................................ 20 4. Market Potential Assessment ....................................................................................................... 21 4.1. Business needs in Russia ............................................................................................................ 21 4.2. Business potential for the Netherlands ...................................................................................... 24 4.2.1. Opportunities for bio-energy .............................................................................................. 25 4.2.2. Opportunities for bio-fuels .................................................................................................. 26 4.2.3. Opportunities for bio-products ........................................................................................... 26 5. Improving Commercial Involvement Dutch Companies .................................................................... 27 5.1. Market entry strategy ............................................................................................................... 27 5.2. Russian government policy ....................................................................................................... 30 5.3. Grants and support programs Dutch government ................................................................... 34 5.3.1. NL Agency programs ............................................................................................................ 34 1 Market study: Bio-energy in Russia Larive International 5.3.2. Miscellaneous programs ..................................................................................................... 35 5.4. Upcoming events/exhibitions ................................................................................................... 36 5.5. Project finance .......................................................................................................................... 36 5.6. Relevant institutions ................................................................................................................. 38 References ............................................................................................................................................. 39 Appendices ............................................................................................................................................ 41 I. Distribution of types of bio-energy sources in Russia by regions .................................................. 41 II. Overview interviews ...................................................................................................................... 44 III. Company profiles main players in Russia ..................................................................................... 46 Companies and relevant institutions ............................................................................................ 46 Financial institutions ..................................................................................................................... 57 IV. Overview Dutch companies ......................................................................................................... 58 V. Upcoming events .......................................................................................................................... 60 2 Market study: Bio-energy in Russia Larive International Acknowledgements This report would not have been made possible without the essential support of many organizations and individuals. The authors would like to express their sincere gratitude to the Ministry of Economic Affairs of the Netherlands and the Embassy of the Kingdom of the Netherlands in Moscow, Russia. Last but not least, the authors would like to thank all the interviewed representatives of the bio- energy sector, branch organizations and public officials for sharing their experiences and contributions to this study. For questions about this report, please contact the Larive International office at the address below. Larive International Sparrenheuvel 2 3700AW Zeist The Netherlands Tel: +31 30 693 32 21 www.larive.com 3 Market study: Bio-energy in Russia Larive International 1. Executive Summary Biomass can be used to produce bio-energy, bio-fuels and bio-products. Various sources of inputs, such as wood, algae, waste from agricultural processes, etc. can be used as biomass. Russia has an abundant supply of these inputs in the form of wood, agricultural animal waste and crop residues. The country is, however, characterized by a relatively low domestic utilization of biomass and a growing export-orientated wood pellet industry. The Netherlands is in these regards quite the opposite. It is relatively active in achieving a bio-based- economy but it has little biomass of its own and is therefore a large importer of wood pellets. The Netherlands has a developed industry with regard to the conversion, processing and usage of biomass but it falls short in supply of biomass. Dutch-Russian cooperation The Russian Federation has set in its Energy Strategy (2009) energy efficiency as a priority for the period up to 2030. This strategy aims at a 56% energy reduction by 2030 (compared to the 2005 level). The Ministry of Economic Affairs of the Netherlands, (hereinafter referred to as “The Ministry”) has signed a cooperation agreement with the Ministry of Energy of the Russian Federation. Bio-energy has been defined as focus area. The scope of the assignment entails two segments: 1. Determining the possibilities for Dutch companies to export knowledge and technologies in the field of biomass applications to Russia. 2. Determining the possibilities for importing Russian biomass. Potential The opportunities for Russia are twofold. There is a huge potential with regard to using alternative and sustainable energy resources for which they do not have the technology yet nor is there a real existing domestic demand. Therefore this is a long term goal which allows them to use sustainable bio-energy and to reduce CO2 emissions and thereby contribute to a healthier climate. The second opportunity is the possibility to create a market for their (biological) waste material. The opportunities for the Netherlands are also twofold. First of all it creates access to a new and vast market to which Dutch technologies and knowledge can be exported. And secondly, increased access to biomass allows the Dutch to decrease their dependence on non-renewable energy sources and meet the European standards of the European Guidelines on Renewable Energy. Bio-energy With the upcoming legislation and the introduction of the green tariff, demand for bio-energy related technology is expected to rise. This creates business opportunities for Dutch companies which, however, will be linked to certain regions and mainly large agricultural producers. Equipment regarding manufacturing of wooden biomass can be supplied as well as torrefaction technology. With regard to agricultural biomass, biogas installations and manure processing equipment will be needed. For the processing of waste, sorting systems and processing equipment (combustion systems) provide opportunities. Due to pollution on the countryside, waste water treatment systems also offer potential for Dutch companies. 4 Market study: Bio-energy in Russia Larive International Bio-fuels The market for bio-fuels in Russia is hampered by the abundance and low prices of fossil fuels. Though there are quite a few Dutch suppliers of related