Increasing Private Sector Involvement in Renewable Energy in Russia

Russia’s current electricity generation portfolio is estimated at more than 220 GW installed capacity, of which 68 percent is thermal (oil, gas, coal). Some forecasts predict that Russian gas supply could, without significant additional upstream investment, fall short of projected domestic and export demand within the next few years. Despite the quadrupling in the domestic tariff for natural gas between 1999 and 2006, domestic gas consumption has continued to grow. Average domestic gas consumption during the same time span increased by 1.7 percent annually. The current annual growth rate is 2.5 percent.

To meet increasing electricity demand, over the next two to four years Russia will need to add a minimum of 20,000 MW of new generating capacity. There is a growing realization by Russia’s policy makers and the private sector that increased use of energy efficient and renewable energy technologies can help meet the growing demand for energy resources. The Energy Strategy of Russia until 2020 sets the target for installed renewable electricity generation to 4.5 percent by 2020. Given Russia’s abundant resource base of renewable energy sources, with enabling legislation and proper industry support mechanisms in place, achieving the 4.5 percent target is viable.

At the same time, reaching this target would require approximately 22 GW of new installed capacity and displace more than 36 million tons of CO2 per year, representing approximately $44 billion in capital investment. In addition, it is estimated that in order to meet Russia’s growing energy demands, retrofit aging assets, and replace retiring power generation assets $250-300 billion in investment will be required through 2020.

IFC aims to help improve the regulatory environment by addressing key legal and regulatory issues, in particular an incentive framework to support investment in renewable energy. Main activities would include improving the information basis for policy development; providing support to a multi-agency working group on renewable energy legislation; and development of supporting policies, procedures and bylaws.

We help build market capacity by analyzing and removing barriers to market infrastructure development, and also by introducing various renewable energy technologies. Main activities will focus on two to three selected regions and will include renewable energy resource assessments; contract and legal support to investors; development of market infrastructure; and standardization of templates for project proposals.

IFC helps expand access to renewable energy financing by making available financial products needed by renewable energy developers and investors, such as long term project financing, and by addressing the requirements to enable these products to be offered on the market. This would include building capacity in the banking sector and developing tailored financial products. A key step is to raise awareness about renewable energy issues among key stakeholders and decision makers by developing and implementing a communication strategy that provides accurate information about existing technical and market opportunities. We also document success stories globally and within the Russian Federation, and share lessons learned from other IFC renewable energy projects and programs.

Key expected Impact

• Direct GHG emission reductions (CO2 eq), estimated at a cumulative 5 million tons over a 20-year investment lifetime, and estimated indirect GHG emissions reductions between 20 and 200 million tons;
• Introduction of an enabling regulatory and incentive framework for renewable-based power;
• 205 MW installed capacity of new renewable power generation.