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The total capacity of green energy in Russia in 2023 reached 6 GW. At 600 billion rubles. Its share in consumption does not exceed 0.8%. But experts expect increased investment in the industry even under sanctions

According to Russia Renewable Energy Development Association (RREDA), the total capacity of renewable energy sources launched in the energy system (RES) in July 2023 exceeded 6 GW. By the end of 2022, this figure was 5.78 GW, that is, in six months in Russia became 4% more renewable capacity. ARWH notes that the increase in capacity was due to wind power plants, while the total capacity of small hydropower increased by 25 MW, and that of solar power by 44 MW. 

Why do renewable energy sources need government support? 

Green energy in Russia has been developing under a state support program since 2013. Investors invest in the construction of solar, wind power plants and mini-hydroelectric power plants, receiving increased payments from the market under so-called power supply agreements (PDAs). The state introduced such a system of support for renewable energy sources to localize the production of equipment. In 2017, some investors had already completed localization (for example, the Hevel company, a joint venture between Renova and Rusnano) or announced finding technology partners (for example, the Finnish Fortum and Rusnano with the Danish Vestas). The renewable energy programm was originally designed by the Government until 2024. The regulator of the energy market «Council of the Market» in 2017 proposed not to extend it, motivating it by the fact that overpayments and PDM for the construction of 6 GW by 2039 will cost the market 2.3-2.5 trillion rubles. Government spending. But investors, on the contrary, in the same year asked the authorities to extend the current system of benefits until 2035. As a result, the Government adopted a second programm to support renewable energy generation for 2025-2035.

Initially, it was assumed that the amount of its financing will be 400 billion rubles. But the estimate was reduced to 350 billion rubles. The Ministry of Energy expected to introduce about 6.7 GW of capacity under the program until 2035. At the same time, Deputy Head of the Ministry of Energy Pavel Snikkars in 2023 said that the state does not plan to extend the mechanism of renewable energy after 2035 - «at least for solar and wind power plants exactly». 

The company «Unigreen Energy» reported that the total investment in the construction of renewable energy in Russia by the end of 2023 amounted to 600 billion rubles. At the same time, by 2035 the indicator may exceed 1.35 trillion rubles. In the first half of 2023, five green power plants were commissioned, including the Kola wind farm in the Murmansk region and the Krasnogorsk small hydroelectric power station in Karachaevo-Cherkessia. In «System Operator» (CO; Power System Manager) in October 2023 noted that the highest share of renewable energy production among the Russian regions is observed in Kalmykia - 92.3% of the total volume in the republic. 

Who are interested in a new energy generation 

Green energy growth is a global trend. The RREDA survey states that by 2022, the world had invested $500 billion in RES generation, which led to the launch of about 340 GW of RES and their cumulative growth of 9%. The International Energy Agency reported that as early as 2022, the share of renewable energy in the global volume of new generation exceeded 83%, and in the EU the share of solar and wind power plants already exceeds 25%. The agency also anticipated the introduction of about 1,000 GW of renewable capacity by the end of 2024, noting the growth of electric vehicles as an additional stimulus to the industry. 

Hydrogen energy should also play its role, according to the RREDA review. Thus, in 2023 the Russian government allocated 9.3 billion rubles. for its development. According to Deputy Prime Minister Alexander Novak, hydrogen fuel will allow Russia to diversify its exports while reducing the share of hydrocarbons in the world energy market and in the future to occupy 20% of the hydrogen market in the world. 

How sanctions affect investment 

Meanwhile, over the past year, the Russian market has continued to adapt to sanctions, says the RREDA report. Restrictions have become an additional factor in increasing unit capital costs. Despite the fact that the trend of rising prices for equipment and components was observed at the global level, investors in Russian projects felt this much more serious - the increase in the cost of projects was 25-35%», -association says. Sanctions have led to a slowdown in the launch of green power plants. If in 2020–2021, thanks to the state support program, 1.2 GW of green capacity was commissioned annually, then in 2022 and the first half of 2023, the total volume was limited to 610 MW. “Given the difficulties faced by the industry following unprecedented sanctions, this result can be considered a great success,” the RREDA report says. 

Difficulties were created primarily by the departure of large investors from Russia, for example Fortum and Enel. ACRA (rating agency) identified the key problems as the withdrawal from the market of suppliers of equipment for wind and solar power plants, such as Siemens, Vestas and Largerwey. Director of Russian Association of Wind Power Industry and Electric Transport (RAWI) Igor Bryzgunov gives the example of the assembly of a nacelle for a Liebherr wind turbine, which was produced at Russian enterprises in Dzerzhinsk and St. Petersburg. “The housing was assembled in Russia, and the converter, generator and other internal components were imported. Wind turbine blades were manufactured at the Ulyanovsk Vestas plant. Wind turbine towers were assembled in Taganrog. After the departure of Vestas and Siemens Gamesa, the listed production facilities were stopped without the possibility of resuming work,” the expert complains. 

Director of RREEDA Alexey Zhiharev confirms that the departure of Vestas significantly complicated the implementation of investment projects, as a large number of wind farms were designed under the wind farm of the Danish company. However, he says that Siemens decided to abandon the implementation of projects in Russia in 2021 and since then there has been no talk about the development of production in the Russian Federation. 

The sanctions led to the fact that the competitive selection of investment projects for the construction of renewable energy facilities within the state support program was postponed to 2023. The Government took anti-crisis measures: projects selected before January 2022 were granted an unscheduled grace period of 24 months. Investors in the green generation authorities were given the opportunity to refuse to implement projects with state support without a fine until the end of 2022. RREDA noted that as of mid-2023, 13 projects (for a total capacity of about 483 MW) had exercised this right, while 92 related agreements remained relevant. Last year, 41 green generation facilities (wind and solar) with a total capacity of 1.825 GW were selected in a government competition. 

How strong is the green electricity system

RREDA has observed a certain slowdown in green energy investment projects over the past two years, but does not consider this critical for the long-term sustainability of the sector. Deputy Director of the Group of Analysts in the Electricity Industry Kept Yulia Miroshnikova believes that the industry has gone through a critical fork when it was asked about the advisability of investing in the development of such projects. After a significant decline and freezing of projects, some market recovery is expected. It is obvious that in the new realities in the electricity industry as a whole, the advantage was and is in the vertically integrated companies that not only operate the facility, but also engage in engineering and equipment production», - she says. The Russian renewable energy industry was initially better prepared for the sanctions risks, as it has been developing since 2013, taking into account the strict requirements for the localization of equipment production. State programs initially implied that the right to support and return of capex in the RES project the investor receives if the project is implemented using localized equipment», - explains Alexey Zhiharev. 

Igor Bryzgunov believes that the difficulties that arose in 2022 opened a window of opportunities for power engineering and wind power. According to him, in the last two years new construction projects were launched only by «Rosatom» «Novavind», which bought design and technological documentation from a foreign donor and localized in Russia production of wind generators with a capacity of 2.5 MW. According to Alexey Zhiharev, in 2023 the total capacity of wind generation «Novavinda» exceeded 1000 MW. «Sanctions stimulated the company to quickly master the technology of blade production, which was previously imported», - said the expert. Yulia Miroshnikova says that the production was organized at the site «Aerocomposite-Ulyanovsk», where Vestas used to be located: «It is planned that from the second half of 2024 about 360 blades will be produced annually. Thus, «Novavinda» will be able to implement projects with a total capacity of up to 300 MW annually. 

RREDA also mentions the largest plant in Europe for the production of silicon wafers and cells for solar energy, launched in January 2024 in the Kaliningrad region, built from scratch in a record two years. Igor Bryzgunov talks about the gradual revival of projects that paused in 2022, citing as an example the construction of the Sviritsa wind farm in the Leningrad region, and in the absence of government support. “Building facilities like this means we are creating a fully commercial wind market,” he adds.

What is the market potential of green energy 

According to Alexey Zhiharev, in 2023 the company carried out a lot of work on identifying new technology partners and suppliers’ chains in the industry. «We expect key decisions from investors in the next three to five months», - the expert added. Ekaterina Artemenkova, senior consultant at Kept's power industry analytics group, says she expects investment in renewable energy sources to grow in Russia.  She connects this with the possible introduction of renewable energy sources with a total capacity of about 5 GW into the Russian energy system, as well as with the development of green energy in the east of the country, where there is a capacity deficit of about 1.3 GW. The potentially expected demand for the technology in the Russian Federation, according to Kept analyst, ranges from 0.6 to 0.8 GW per year. 

The RREDA predicts a return of the Russian renewable energy sector to pre-crisis volumes in the next two years, when more than 1 GW of capacity will be put into operation annually. In 2024 we talk not only about construction within support programs. RES generation became the cheapest solution for energy supply in Russia. The inflationary pressure, sharp decline of the national currency and the sanctions restrictions were reflected by the multiple growth of capital and operating investments of heat generation», - says Alexey Zhiharev. In 2024, it expects to launch 482 MW of green capacity, and by the end of 2025 - 645 MW of solar and almost 1.4 GW of wind farms, as well as 128 MW of small hydropower stations.

Source: https://www.rbc.ru/industries/news/65d473b39a79479a715409c1