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Green giant will wake up from the East

Solar stations in Yakutia and wind farms in Kamchatka as a symbol of the new energy of Russia

Green giant will wake up from the East

Patrick Willems, Head of the IFC Renewable Energy Program in Russia, on the proven economic efficiency of Far Eastern renewable energy projects, as well as their importance for the rest of the country.

At the end of February, news agencies reported that RAO Energy Systems of the East had entered into a partnership agreement with the Khabarovsk Territory. Previously, similar agreements were concluded with Yakutia, Primorye and Kamchatka Territory. The documents are being signed against the backdrop of intensive development of the corporate program of RAO Energy Systems of the East for the construction of renewable energy facilities. According to leading industry experts, it is in the Far East that the energy sector, in cooperation with regional authorities, is able to achieve the most significant progress in the field of renewable energy sources (RES). The EastRussia.Ru correspondent met with Patrick Willems, head of the International Finance Corporation's Program for the Development of Renewable Energy in Russia, one of the key ideologues of green energy in our country.

- Mr. Willems, many of your colleagues consider you a real romantic - to come to the oil and gas country to lobby for the development of cheap renewable energy. You called your first program report "Awakening the Green Giant". Did the giant wake up?

- Unfortunately, the giant is still in hibernation. But what is gratifying - today it is trying to wake up not only IFC. Thanks to the multitude of conferences, seminars and other events that have been systematically held recently in Moscow and in the regions, we have a lot of allies in this topic. And with the help of companies' efforts in the Belgorod region, Siberia and the Far East, we were able to see even small but effective examples of retail generation based on renewable energy sources. Solar stations in Yakutia, wind farms in Kamchatka - it's all day today. And this gives confidence that tomorrow the green giant (and so we call Russia because of its completely unique resources in the field of renewable energy) will finally wake up.

- In the first reports and researches on RES theme, which IFC presented in Russia, practically nothing was said about the potential of isolated territories. Now rhetoric has changed - now the isolated areas of the Far East recognize a certain leadership. At what point did you see this potential?

- I admit that we were wrong. We did not immediately see that in isolated areas renewable energy will develop at a faster rate. Although, if we look at the context, it was not only our delusion, caused primarily by how the Russian government set the targets for the development of renewable energy. In 2010, we lived in the logic that to 2020 year in the country 4,5% of electricity should be produced from renewable sources. This is approximately 15 GW of power. And the maximum potential, which at this time can be "assembled" for isolated systems, is 1 GW. So if you take for the truth the development of the giant industry of alternative energy in the shortest possible time - this 1 GW can go for error. As, actually, we did.

- That is, time to pay attention to isolated systems prevented an excessively large-scale approach at the federal level?

- When we realized that the goal in 4,5% can be treated flexibly - we changed our program. We began to look for where “green” projects can be cost-effective now. Look for conditions in which the presence of surcharges from the state or market will not be a determining factor for the development of renewable energy. In our opinion, precisely such conditions have developed in many energy-insulated regions of the regions of the Russian Federation.

- What is the economic efficiency?

- Do you know what the cost of electricity in isolated areas of the Far East? Here are a few Yakut villages: Yutschui - 33,77 rub / kWh, Deputy - 27,25 rub / kWh, Yunkure - 54 rub / kWh. I can say with full confidence that when you put hybrid equipment to these and many other points, the savings on diesel fuel will not only pay back your investment, but also leave an additional effect that can be used to reduce government subsidies to support diesel. energy in isolated energy regions.

So, unlike projects in the wholesale market zone where "green" electricity is more expensive than the market, here - in the Far East, Siberia, the Far North - renewable energy technologies are on the contrary cheaper than existing production.

- RAO ES Vostoka announces a large-scale program for the construction of renewable generation facilities in isolated areas - more than a hundred solar stations, several dozen wind power projects ...

- Of course, this is not the green giant, which we initially talked about in our work. I repeat - the potential of renewable energy in isolated areas is minimal against the background of the effect that the Russian state can get if it systematically approaches the development of “green” technologies. However, you are right: Siberia and the Far East give us today the most important thing - concrete examples of how solar, wind and geothermal stations work. These local examples, even if they are small, will necessarily entail a change in attitude towards renewable energy at the regional and federal levels.

For me, for example, it is gratifying to note the fact that the Minister of Energy of the Russian Federation, Alexander Novak, several times publicly stated that renewable energy projects in isolated areas are cost-effective. And in November last year, at the ENES exhibition in Gostiny Dvor, our colleagues from the Tomsk region were able to tell in detail about the results of a joint study by the IFC and the Tomsk Center for Resource Conservation and Energy Efficiency to the Prime Minister of the Russian Federation, Dmitry Medvedev.

- How are your optimism supported by technology and equipment manufacturers? Still, our climate, and especially - our harsh Mother Winter, has ruined far more than one good initiative.

- Let's be realistic. Where in the world remains the great potential for the development of renewable energy? Only four countries - Brazil, India, South Africa and Russia. Therefore, for any manufacturer, the Russian market is potentially a leap in development. And the climatic features of Russia are rather not a limitation, but an ambitious challenge for market leaders.

Another thing is that the initiative can be ruined not by the climate, but excessive regulation of the industry. Of course, the requirements that Russia has legally established for renewable energy projects in the wholesale market zone have significantly reduced the enthusiasm of manufacturers. This is primarily about the requirements for localization - the announced requirements are very difficult to fulfill within the specified time frame. Moreover, it should be performed qualitatively so that the technology worked efficiently, and not so that it had to be debugged in a day.

Proceeding from this, a powerful stimulus from the federal government would be a signal to the community of renewable energy enthusiasts that the government really intends to develop this market. There are not enough words and legislation - it is necessary to express real intentions around which it will be possible to do something.

For example, we expect that our own regulatory framework will also be established for projects in isolated energy districts. And we do not yet know whether there will be localization requirements, and if so, to what extent. Too high demands can harm the development that is now underway. Isolated systems can remain a kind of free “testing ground”, where you can try out new approaches and solutions, test new equipment, and so on.

- And what specific steps do you think the regions should take in order to support the nascent direction of renewable energy?

- It must be bold decisions. Renewable energy is a fairly new sphere for Russia, and here the result is far from always the same as the calculations that were originally laid. We expect the authorities of political courage and willingness to share the risks of failure.

Speaking of specific decisions, I want to focus on three aspects. Firstly, each region has its own energy efficiency program, which can also include renewable energy projects. It seems to me that the regions should more actively use this tool in the development of green energy projects.

Secondly, regions can help investors get tariff solutions for a period longer than one year. The current tariff policy, alas, is the main obstacle to the participation of financial institutions in renewable energy projects. No financial institution is ready to finance such projects where the tariff is known for only one year. On the contrary, if the project includes a long-term tariff, a number of potential lenders will willingly join in the work.

And thirdly, the best thing that regional authorities can do is to preserve the subsidies that they give today for diesel fuel to those companies that want to build generation facilities on renewable sources, thus creating a source for return on investment and income generation . And here the example extends not only to the Far East - similar mathematics is applicable in the Tomsk region. If Tomsk guarantees that all fuel economy, which the operator will achieve in a separate isolated energy unit, it will receive as revenue - we will receive intensive development of renewable energy in this region. Even in spite of the fact that diesel fuel costs less here than in Yakutia or Kamchatka.

- And for how many years should the regions guarantee the preservation of fuel subsidies for the success of projects?

- They should guarantee this for the period of investment return, in reality - 7-10 years.

- Then tell me, what kind of income are you willing to consider fair in this market?

- The answer depends more on the level of inflation and economic growth in the country. I believe that today the normal income is about 12%. In Russia, many require much more, but I believe that this figure is fair.

- So these 12% are you ready to defend?

- Why am I only prepared for these 12% - because you understand that all projects are financed partly from own, partly from borrowed capital. And in principle, if we look at how much equity capital can be received here, the indicator can be much more interesting. We are talking about the income of 18% or more per net worth.

- Still, not such a profitability that investors are lining up.

"But one that, in our opinion, will allow real changes in the generation structure, partially replacing the generation of diesel power stations from renewable sources. Moreover, besides commercial interests for business, there are understandable expectations of the state. After all, budget money is currently used as subsidies for energy in isolated areas. And the region is quite interested in giving the business the guarantees of an interesting project, so that after the payback period it is possible to reduce subsidies.

- Since last summer, the IFC Program for the Development of Renewable Energy in Russia has been conducting a large interregional study of the potential of green energy in the Far East. Are you ready to share the first results? How did they meet your expectations?

- We are not ready to announce the results - the research is not quite finished. In addition, this is not only our work, it is a joint project with OAO RAO Energy Systems of the East, and we will need to decide together to what extent the results of the research will be public.

- One more question. The peculiarity of all programs of the International Finance Corporation is that they are finite. When the IFC Program for RES Development in Russia ends, and what will happen next?

“I have good news here.” In principle, the program was supposed to end this year. But we were able to prove to managers and partners that we had just begun to receive the first serious results of our work. The key partner of our Program, the Global Environment Facility, agreed with our findings, and the Program has been extended to 30 in June of 2016. 

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