Russia is looking to award a further 1,250 MW of renewable energy capacity at auction later this year, as part of efforts to diversify its fossil fuel-based economy.
The latest offering includes 830 MW of wind, 150 MW of solar and 270 MW of small-sized hydroelectric capacity, to be completed between 2019 and 2023. This pales in size to last year’s tender, however, in which Russia invited bids for a record 2,800 MW of output between 2018 and 2022.
The Market Council, a state-run association of power industry companies, revealed last week that the auction would be carried out in two stages. During the first stage, which will run from May 29 to June 4, potential investors will submit applications to develop projects. The second stage, which will take place between June 5 and 9, invites these applicants to reduce the cost estimates in their bids.
Russia has over 50 GW of clean energy capacity, although almost all of this consists of large hydroelectric power plants (HPPs) in Siberia. Authorities began holding annual auctions for the construction of wind, solar and small-scale HPPs in 2013, although results have been mixed. A number of projects awarded in early tenders were never realised, with developers citing the government’s failure to provide sufficient incentives. In 2015, however, Moscow introduced measures to spur the sector, including a sharp increase in tariffs for clean energy. Tenders since then have generally been more successful, focusing primarily on the development of wind energy.
Authorities awarded over 1,650 MW of wind capacity last year to the local arms of Italy’s Enel and Finland’s Fortum, as well as VetroOGK, a subsidiary of Russia’s state nuclear group Rosatom. A further 520 MW of solar and just under 50 MW of hydroelectric capacity was handed to local investors.
Russia’s environment is generally more conducive to wind than solar power, although ever more stringent rules on local content have presented a challenge to developers. Under these laws, 65% of all equipment at wind projects awarded in this year’s auction must be manufactured locally, up from 40% a year ago, and the share is set to rise further in the future.
Russia currently lacks the means to produce turbines and other vital components of wind farms domestically. Enel, Fortum and VetroOGC have mooted plans to localise the production of this equipment, although concrete progress has yet to be made.
In related news, the financial arm of Russia’s state gas company Gazprom announced earlier this month it would take a 49.5% stake in VetroOGC. Gazprombank lent 63.1 billion rubles (US$1.11 billion) to the Rosatom business in 2017 to finance the construction of 970 MW of wind capacity it was awarded at auctions.