The Russian solar energy industry is on the verge of serious crisis due to economic downturn and the devaluation of the ruble caused by international sanctions imposed on the country.
According to investors, the devaluation of the ruble and general economic uncertainty in Russia have resulted in a large number of developers being unable to secure bank loans and funds from other sources, which in turn has negatively affected their plans to establish solar power facilities in Russia.
Currently, Russia supports the national solar industry and other renewable energy sectors through the wholesale energy market, which involves annual selection of projects in the field of solar power that meet the requirements for capital expenditures and localization of equipment and components. Developers of such projects receive the right to sign contracts on the supply of power, which guaranties a return on investment by increased payments.
While the country’s latest tenders has secured winning bids for all of the planned solar energy capacity for the period ranging from 2015 to 2018, the devaluation of the Russian ruble could force many investors to leave the projects.
According to Viktor Antonov, director of development at Energiya Solntsa, one of Russia’s leading solar energy companies, investor interest in Russian solar power projects has significantly declined.
In the case of Energiya Solntsa, the company won a significant portion of the tenders for 2013-2014 but has been unable to implement any project with a capacity of at least 30 MW or greater this year (but has implemented projects smaller than 30 MW). Energiya Solntsa won bids to build a total of 165 MW of solar power capacity in Russia’s solar tender this past summer.
According to Antonov, due to the current political situation, many foreign investors are considering investing in similar projects in other countries, such as Kazakhstan.
Another problem for investors is the planned decline in return on investment of solar projects from 14% to 12% in 2015. Investors in Russia receive monthly capacity payments based on investment costs. The lower return on investment had already been fixed before the beginning of the current economic crisis in Russia along with an increase in interest rates on loans by Russian banks.
At the same time, serial production of equipment for solar power plants in Russia has not yet been established. According to investors, in order to attract foreign equipment manufacturers to establish production facilities in Russia, the country needs to extend support mechanisms for solar power and other renewables beyond 2020.
There is also a need ease domestic content and localization of equipment requirements, which is currently set at 65% for the 2016-2020 period. Investors are calling for a reduction in the domestic content requirement to 20% until 2016 and 55% by 2019.
However, according to forecasts by analysts at the Russian Ministry of Energy, the government may refuse to provide additional state support to domestic solar power producers due mainly to the current unfavourable market environment.