Russia offers first ever subsidies for renewable energy

Russia has offered its first ever state-backed support for renewable energy, offering subsidies for 39 clean power ventures with a combined capacity of 504 MW.

Solar power won the day, with 399 MW secured, while the wind power sector won just one-tenth of the 1,100 MW of wind capacity offered in the auction. By contrast, solar developers bid for nearly 1,000 MW, winning 32 projects to be built between 2014 and 2017.

"The tender has been quite successful for solar energy, showing that the Russian market can attract developers," the head of the Russian Solar Industry Association, Anton Usachev, told Bloomberg. Because developers are required to use at least 50% of materials sourced from local contractors, the wind power sector may have been reluctant to invest, he believes.

Solar bidders, on the other hand, were evidently confident in their ability to satisfy local content requirements.

Russia’s president Vladimir Putin ratified the subsidy program, which is intended to wean the country off its reliance on fossil fuels. As the largest producer of oil in the world, Russia’s renewable energy sector produces just 0.8% of power. By 2020, Putin wants that share to increase to 2.5%.

The winning bids were those that pledged the lowest capital costs, with final solar bids coming in at around $3,451 per KW. Avelar Energy Ltd. – a unit of Russian holding company Renova Group – won the majority of the bids. RusEnergoInvest also secured a number of projects.

This new subsidy program will mirror that used for Russia’s regular power plants: the plant must have a minimum 5 MW output and developers can receive payments for 15 years so long as they agree to provide power during peak demand hours.

There are just a handful of renewable energy plants in the entire country, with installed solar capacity standing at a meager 3 MW. In Russia’s remote far east, which is not connected to the grid, the Russian Solar Industry Association calculate that solar PV can be three- to four-times cheaper than conventional fuel, which has to be transported across vast distances at considerable cost.

A second auction is scheduled for next June, when a further 1,645 MW of wind power and 496 MW of solar will go under the hammer.