Renewable Energy in Russia: to Be or Not to Be?
By 2050, about half of the world’s electricity will be generated from solar and wind. This is one of the conclusions of the recently published report of the Novaya Energetika Information and Analytical Center “The Russian Renewable Energy Industry in International Comparisons: Solar and Wind Energy” (research commissioned by the Fund for Infrastructure and Educational Programs of the RUSNANO Group).
In the coming years, solar and wind power will be at the forefront of global energy system growth. Other studies and projections also show this. In most energy scenarios, it is solar and wind power that will be the largest sources of electricity on earth in the coming decades. According to Bloomberg agency, the total share of wind and solar energy in the world’s electricity production will be 56% by 2050, and according to the DNV GL international consulting company—more than 60%.
As of now, wind and solar generation are ahead of traditional (coal, gas, nuclear) generation in terms of growth rate. For example, the net increase in global capacity of solar power plants alone in 2019 was almost 2.5 times higher than the net increase in coal and gas capacity combined.
Russia is dozens of times behind the leading countries in the development of solar and wind energy
As of 2019, the world’s installed solar power capacity alone exceeded 580 GW, of which the three largest producers—China, the United States, and India—account for 96%. Installed wind power capacity reached 620 GW by the end of 2019, of which 95% comes from China, Japan, the United States, and Germany.
The global installed capacity of solar and wind power plants is projected to exceed 10,000 GW by 2050.
In Russia, all renewable energy sources, including wind and solar, are being developed thanks to the First Renewable Energy Support Program for 2013—2024 approved by the Russian government. To date, about 0.5 GW of wind power plants and 1.2 GW of solar power plants have already been built in our country. However, by 2024, the total capacity of “green” power generation should grow to more than 5.5 GW. After 2024, the Second Renewable Energy Sources Support Program will come into effect for the years 2025-2035. The budget of the program is about RUB 400 bln. These funds will be used to build at least 7 GW of wind and solar power plants, and to continue the development of renewable energy in our country. Taking into account the volume of the current program (less than 6 GW), this will give about 13 GW of installed solar and wind power capacity.
The government is discussing an option that calls for halving the volume of the second phase of the renewable energy support program
The second program will have more stringent requirements for its participants: a significant increase in the depth of localization, reducing capital costs 1.5-2 times, increasing energy efficiency, as well as ensuring export supplies. Even though Russia is one of the world’s top five largest producers of electricity, it is dozens of times behind the other top five in the development of solar and wind energy (installed capacity indicator). We are talking not only about energy-deficient countries.
Contrary to the prevailing myth that renewable energy sources (RES) are developed mainly by countries deprived of traditional energy resources, it should be noted that such oil and gas-bearing countries as Qatar, Saudi Arabia, UAE, Canada, and Norway are significantly ahead of Russia in the development of alternative generation and have good plans for the future. For example, Canada plans to increase the installed capacity of solar and wind power to 27 GW by 2030, and Qatar—to 56 GW. The authors of the report “The Russian Renewable Energy Industry in International Comparisons: Solar and Wind Power” point out that Russia’s plans for developing solar and wind generation are the most modest of any of the more or less prominent countries in the world economic map. If the first DPM RES program is successfully implemented, by 2024 Russia will probably be only in the top four, or perhaps even top five, countries in terms of installed capacity of solar and wind power plants.
Even a partial reduction in the amount of state support for renewable energy can lead to the loss of developed industrial competencies
At the same time, despite the relatively small size of the market, Russia has managed to create a production base of renewable energy. The young RES industry in Russia has already reduced the cost of projects more than 2 times in a few years, has increased its efficiency, and is currently capable of producing at least 1.6 GW of RES equipment annually. In addition to the production cluster, the educational and scientific components of the renewable energy industry are developing.
According to the authors of the report, the creation of industrial production of equipment and components for solar and wind energy in Russia has become an important step towards diversifying the Russian economy and the country’s full participation in the global renewable energy sector, including the export of products and services.
The development of RES is not only the creation of industrial and technological competencies but also a way to decarbonize the global economy. The EU is already seriously discussing the introduction from 2022 of prohibitive customs duties on imported goods with a high carbon footprint. Consumers of Russian export products can make a collective decision to reject the “dirtiest” part of it by imposing such barrier measures on goods that do not meet the new standards. At the same time, the carbon intensity of Russian exports is one of the highest in the world, and the total losses of domestic oil and gas, metallurgical, and other export-oriented companies may reach at least EUR 3.6 bln annually.
The authors of the report believe that in this regard, it would be appropriate to increase the state targets for the development of solar and wind energy. However, even the total capacity of solar and wind power plants of 50GW by 2035 is unlikely to place Russia in the world’s top ten.
However, today the government is discussing instead the option of halving the volume of the second phase of the RES support program (it should be noted that the support program has already been constrained. Initially, the amount of support was discussed at the level of RUB 700 bln, but in the end, only RUB 400 bln were approved). If such a scenario is adopted, experts say, it will not only lead to a reduction in the construction of new RES facilities, but will also question the profitability of already established enterprises for the production of RES components. This will lead to the departure of key players from the market, and, ultimately, the degradation of the newly created industry.
“The current conditions will allow the introduction of about 400 MW of new wind turbines per year, that is less than 150-180 MW per major player,” explains Kimal Yusupov, General Director of Vestas in Russia. “Even a smaller volume of equipment will not allow for profitable production in the Russian Federation.”
Even a partial reduction in the declared volume of support can lead to the loss of developed industrial competencies. Taking into account the growing importance of renewable energy in the global economy, this will harm the country’s global competitiveness as an energy power. Given the growing attention to the “carbon footprint of goods”, the rollback of the domestic renewable energy industry will also have a negative impact on the competitiveness of the domestic industry.