Scope of new energy resources in Russia

Russia is a very rich economy in terms of energy reserves. It is currently a global leader (now second largest after US) in natural gas reserves, has the second largest coal reserves and eighth largest oil reserves. Russia maintains its position as one of the most important energy players globally, continuing its essential role in global energy supply.

via_may2014In the renewable energy market, Russia is currently ranked 5th in total renewable energy generation. Its major source is hydroelectric power which contributes a significant 16% to total electricity generation.

The economic crisis of 2008 resulted in a sharp decline in domestic consumption and major economic losses from reduced oil and gas exports. This ushered investment and exploration of new energy resources in Russia. Thus, Russia which primarily depended on traditional fuel-based energy resources changed its path towards new alternative energy sources. However, the country decided not to shun the development of traditional resources in the wake of upcoming resources.

The country was just recovering from its 2008 crisis when it faced a major setback with the discovery of new shale gas reserves in US. This led to a tremendous fall in the global gas prices from $110 in June 2014 to $60 by the beginning of 2015. Russia, whose oil revenue contributes nearly 45% of its total government budget, was completely disturbed due to the falling prices. It also led to depreciation of the ruble in global markets making imports expensive. Thus, the economy was hard hit by the entire scenario. Moreover, the carbon intensity of Russian economy measured as carbon dioxide emissions per real GDP is 60% which is much higher than any other IEA member country.

Moreover, Russia’s current electricity generation is nearly 220 GW installed capacity of which 68% comes from thermal energy. Some have predicted that Russian gas supply is likely to fall in the coming years making it insufficient to meet the growing energy demand. Russia needs to add a minimum of 20,000 MW of new generating capacity.

Because of these reasons, there is a high need for Russia to diversify its revenue sources and develop renewable environment friendly energy resources.

Russia has a huge potential for renewable energy generation but its current utilization of this resource is very low. The primary reasons are- abundance of fossil fuels and lack of important information, which resulted in minimal development of renewable energy resources.

Russia is endowed with a diverse renewable energy resource base unlike other small countries where only one kind of renewable energy predominates. Different regions within Russia offer unique renewable energy resources. The South-West region, Southern Siberia, and the Far East boast of significant solar energy potential, while the coastal areas in the north, lower and middle Volga regions and the Urals offer wind energy. Hydro energy potential is mostly found in Central and Eastern Siberia and the Far East. Biomass is linked to Siberia as well as the Far East. Finally, geothermal energy prospects are promising in the Far East, Northern Caucasus and the Far East.

Solar energy was often mistaken to be a very expensive source with long periods of investment return. This led to reluctance by investors and bankers in the solar projects although the nation had great potential for the same. Wind and hydro energy suffers from certain region-specific requirements which are expected to ease in the near future.

In 2013, Russia implemented an incentive system for renewable energy sources that was based on the wholesale electricity capacity mechanism. This move intended to make the economy investment friendly in this sector by making renewable energy investments in wind, solar and small-scale hydro power profitable for investors. This system aims to achieve at least 75% of the target production. It was really felt that new alternative sources of energy need to be developed especially for hard-to-reach, remote areas which lack power infrastructure.

For biomass energy, the country carries a great scope because of its huge forest cover. However, currently the exploitation rate is very minimal. However, the country carries a great potential in this sector where agriculture produces and other forest products can be used to generate this form of energy especially in remote areas. Russia has been developing biogas power generation since the 1960s, although this technology has only started gaining popularity after the year 2000. In 2008 the government launched a national program to support bio fuel production, pledging to build 30 additional bio fuel plants and refurbish existing facilities.

In terms of hydro energy generation, Russia has more than two million rivers, which stretch for 3 million km. It has the second highest level of mean annual river runoff, after Brazil. It is Russia’s main renewable energy source. Nearly 16% of the electricity is generated from hydropower and only 1% from the remaining renewable energy resources combined.  Investments in solar energy and hydro energy have already begun. Russia is also planning to use solar energy in regions which are located at a height and which receive a lot of sunlight. In September 2014, Russia’s largest solar energy project has been initiated in the village of Kosh-Agach in Altai. This is Russia’s first 5MW solar facility. In addition to this, projects have also been erected in the Republic of Khakassia and Bashkortostan, the Orenburg and Astrakhan regions. However, because of technical peculiarities, solar energy would not be able to benefit a large number of customers in the near future.

The alternative energy sources are prioritizing in power generation in Russia. This has resulted in many investors raising funds to transfer advanced technology and improve it in cooperation with Russian scientific organizations. A very good example is the largest solar module factory in Europe has been built in Russia as a joint project between Renova and Rusano.  Government has been really supportive in increasing investments but Russia mainly lacks in availability of cheap finance which is a key constraint to the development of alternative energy in Russia. The country has also collaborated with economies like China in shaping the development of its solar and hydro power sectors. Russia’s biggest hydropower company RusHydro JSC was announced to enter into a partnership with Power Construction Corp of China Ltd (Power China) which aims to subsidize the construction of small hydro projects in Russia.

Wind energy is the most dynamically developing renewable energy sector in Russia. The country has excellent potential for wind power generation. An attempt to utilize just 25 percent of its total potential would yield some 175,000 MW of power.

Russian wind power market is now one of the youngest. The main challenges of this market today are – the need to comply with the requirements of a high degree of localization of production of wind turbines in the country. In addition, there is a shortage of experienced companies.  However, there has been a great improvement in this sector. In 2014, a new programme in Russian energy industry was outlined wherein the construction of 16 wind power projects with a total capacity of 6GW is proposed. The first one on the list is the 150MW Pryutnensky wind farm in Kalmykia where works will start by the end of 2015.Among other projects in the list are the Middle Volga and Lower Volga wind farms in the Saratov and Volgograd regions each with a capacity of 1GW to be built by 2020.

The upcoming energy resources in Russia are the geothermal energy sources and are currently in the process of Research and Development.  The Kamchatka Peninsula and the Kuril Islands hold the richest geothermal resources. In Kamchatka, there are about 150 thermal spring groups and 11 high-temperature hydrothermal systems. The potential for geothermal energy is high.  Currently, geothermal energy is the third most commonly used form of renewable energy in Russia, after hydropower and bio fuel. Back in 1966 in Pauzhetka, in the very active geothermal region of Kamchatka, the first geothermal power plant in Russia was built with a capacity of 5 MW. More recent openings include the gigantic power station in Mutnovsky, as well as the smaller Iturup and Kunashir both on the Kuril Islands. Kamchatka is still the most important region for geothermal energy, followed by the Kuril Islands, Western Siberia, Northern Caucasus and Lake Baikal.

The government also initiated the Russia Renewable energy programme which focuses primarily on mobilizing investment and increasing private sector involvement in renewable energy. The Project also promotes a sustainable market for renewable energy in the Russian Federation by supporting the development of enabling policies, institutional capacity, introduction of financial mechanisms, and expanding access to finance.

The potential for Russian development of renewable energy is great and becoming recognized.   With more robust government support in terms of renewable energy targets and Russian and foreign investors expected to actively explore the hidden potential of green energy in Russia, the green industry will be able to develop and to grow generating interesting opportunities. While considering the economic potential, the geothermal energy is a very bright sector followed by hydro energy and biomass fuels. These three sectors contribute 70% of energy potential of Russia. Hopes are high that the Russian economy would be able to tap its potential resources and attain world leadership in the same.

– Mishika Jain


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