Russia advances on energy-efficient strategy, support for renewables

Russia's Ministry of Economic Development has outlined priorities for its energy efficiency policy, Kommersant daily reported on January 18 citing internal memos.

As reported by bne IntelliNews, ESG policy is in focus in Russia as the latter prepares to tackle the EU carbon tax introduction and other "green" challenges. Recent reports suggested several initiatives are being developed at the same time, such as green certificates and a greenhouse gas (GHG) emission reduction strategy

Consolidated energy policy 
Reportedly, the priorities outlined by the Ministry of Economic Development include improving energy efficiency 30% by 2030 (from the 2021 level), further modernising fossil-fuel capacities, boiler houses and heat grids, implementing "white" certificates (energy efficiency certificates, confirming the achieved improvement) and increasing non-budget financing.

The full energy efficiency programme, to accommodate the emissions reduction strategy in Russia, is due to be published by mid-2021.

"In the last 12 months, a lot has been done in terms of climate regulation in Russia," VTB Capital (VTBC) commented on January 19, reminding that various ministries are working to align all the programmes and derive new action plans that will allow Russia to start reducing emissions to satisfy the Paris Climate Agreement targets and to get ready for the EU carbon tax. 

The looming introduction of EU Carbon Border Tax in 2022 is a major issue for Russia to resolve. Most recently, the Central Bank of Russia (CBR) warned that the tax could threaten financial stability, as Russia is the second-largest exporter of CO2-intensive exports to the EU after China, with exporters facing extra costs of $3bn-$4.8bn annually.

Faith of renewables still unclear
In the meantime, in a separate report Kommersant said that the Ministry of Energy has come up with a proposal for the renewables support programme after 2025. 

Reportedly, while previously the Ministry for Economic Development had suggested cutting the programme financing by 50%, the Ministry of Energy had opposed that and now the ministries are said to agree on the possibility of cutting the programme by 30% in 2025-35 to make it possible to keep the growth in end-user electricity prices below inflation. 

"This would suggest RUB306bn [4.17bn] of payments by the market up to 2035, and RUB545bn up to 2050 (in 2021 prices), compared with the RUB437bn and RUB768bn respectively, discussed previously for 6.2GW [of generation capacity]," VTBC commented. 

These measures could allow for the construction of 4.6 GW of new renewable capacity (1.8 GW of solar and 2.7 GW of wind). 

The Association of Renewable Energy Development has said that such a decision would not properly contribute to reducing carbon intensity in Russia, while large electricity consumers continue to argue that the programme ought not to be prolonged at all, as the consumers bear the cost of renewable generation through increased tariffs.

"Were the proposal to be adopted, that would not make it possible to boost the development of renewables in Russia," VTBC analysts believe.

"At the same time, this does not come as a surprise, with the discussions looking to balance the interests of investors into renewables and electricity consumers, with multiple add-ons in the market and the unfavourable COVID-19 effect on the economy," they note. 

More generally, even a larger-scale state support programme "would not have allowed for a dramatic breakthrough in terms of the country’s carbon intensity," VTBC analysts argue, suggesting that the most efficient path in improving Russia’s carbon intensity would be decommissioning coal-fired capacities and modernising fossil-fuel capacities.