The Russian energy market, which has got used to working in tandem with the European energy market on the principle of resources in exchange for technologies, has run into several problems. First of all, in the domestic wholesale electricity market a glut of capacity emerged in 2009 and it has now come time to cut costs. Secondly, Europe is working harder and harder to shift towards renewable energy sources, which creates risks for Russian companies selling natural gas to Europe. The Rossiyskaya Gazeta has had a close look at the new issue of the Energy Bulletin published by the Analytical Center and put a few questions about the development of renewable energy sources to the Analytical Center expert Ms. Vera Kulpina.
Development of renewable energy sources would be most beneficial in areas where the use of existing fuels results in inefficiencies
“Developing renewable energy sources is a long-term investment that cannot produce any tangible short-term returns, it’s a long-haul commitment that requires political will,” Vera Kulpina said. “Another aspect of the development of renewable energy sources is encouraging related industries (and specifically equipment manufacturers) to bring their products to international markets. This is made possible by cutting edge technologies or by low costs, which, for example, has allowed Chinese manufacturers of solar and wind power equipment to seize significant market share in the western markets.”
If we want to catch up with Europe, we have to develop these areas in leaps and bounds. The Scandinavian countries have already achieved a breakthrough. There, renewable energy sources make up 30-40% of total consumption. Germany, Spain and Italy are next. All these countries are major consumers of Russian natural gas, some players also have manufacturing divisions in Russia. The glut of natural gas could be sold to China, but the actions of European companies still have a significant impact on the Russian fuel and energy sector, the expert explained.
Some European companies are now talking straightforwardly about plans to revise their long-term natural gas contracts to better adjust to new market conditions, diversify imports and improve energy efficiency. “On the one hand, it is a negative development for Russian NG exporters. On the other hand, the European power companies operating in Russia could be encouraged to become trail blazers in the introduction of new energy efficient technologies and use of alternative energy sources in power generation in Russia,” the publication quotes the Bulletin.
Among the incentives that could be used Ms. Kulpina mentioned long-term guarantees for a specific level of tariffs to allow companies to complete modernization programs, subsidizing rates for power plants using renewable energy source and financial incentives. Work is already underway in this area. “A bill on localization of solar generation equipment is also being discussed. Targets have been set for the introduction of various renewable energy sources (solar, wind, mini-HPP): 5.9 GW in 2014-2024,” the expert noted. “Development of renewable energy sources could be beneficial in remote areas, where using traditional fuels is inefficient.”
The interview was prompted by the Energy Bulletin Electric Power: Time to Cut Costs, prepared by Analytical Center experts.