For the First Time, Russia Subsidizes Renewable Energy

For the first time, Russia is subsidizing renewable energy – solar, wind and small hydro.

In its first auction, 39 projects won bids to develop 504 megawatts (MW). Another auction is planned for June.

Although the government offered 1100 MW of wind and 710 MW of solar in this first auction, most bidders were solar developers, who won 32 of the projects (1000 MW), while only seven wind projects received bids.

Developers are required to use at least 50% local components, which may be a reason for the sparse bidding for wind projects.

“The tender has been quite successful for solar energy, showing that the Russian market can attract developers,” Anton Usachev, head of the Russian Solar Industry Association, toldBloomberg. Solar bidders seem confident in being able to satisfy local content requirements, while lower local production of wind equipment may have reduced interest in the technology, he said.

Local companies won the auctions: Avelar Energy, a division of Russia’s Renova Group, and RusEnergoInvest in solar; and  KompleksIndustriya in wind.

In the second auction, 1,645 MW of wind, 496 MW of solar and 415 MW of small hydro will be open for bids.

Russia is deploying the same subsidy program it’s used for conventionally fueled plants – with a minimum of 5 MW, developers can receive payments for 15 years if they agree to provide power to meet peak demand. It gives developers a potential 14% return on investment.

Russia’s goal is for renewables to supply 2.5% of energy by 2020, up from 0.8% now. In May, Russia announced a target of reaching 6.2 gigawatts of renewable energy capacity by 2020 (excluding large hydro).

So far, the country has only a handful of renewable energy plants – about 3 MW of solar, for example. Especially in the Russia’s Far East, which isn’t connected to the nation’s grid, renewables compete favorably on price because of the costs of transporting fossil fuels. Solar PV can cost three to four times less than diesel, according to the Russian Association of Solar Energy.

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