New state support scheme disadvantageous to Russian wind power operators
Wind energy accounts for only a small part of Russia’s energy mix, and recent changes to a state support scheme are likely to harm an already weak industry. Wind farms may lose all production payments from the Russian state if they fail to meet localisation, export and production goals.
Wind power operators in Russia will face huge fines for missing localisation and export targets under a recently approved state support scheme, says Windpower Monthly. The new scheme for projects commissioned in 2025-2035 will involve tenders that are scheduled for September 2021. The government is going to allocate 177 million rubles ($2,3 million) to support about 3 gigawatts of new capacity. However, industry groups consider this level of support to be inadequate and warn that it may lead to job losses in the Russian wind sector.
Under the revised system of bidding, the previous method of competing based on capital costs is replaced by a new one on a price-per-megawatt-hour generation basis. While bidding for power deals, developers must specify how much their wind farm will produce over the 15-year contract term. If actual production falls below this projected amount in the first year of the agreement, they can be fined for the duration of the deal with the Russian state.
According to the Russian Association of Wind Power Industry, developers may lose at least 30% of total payments, while the maximum losses can reach 80% of payments for the entire period. Besides, wind farm operators will be subject to further fines if their output deviates from a production plan in the so-called day-ahead market.
Furthermore, developers will face a strict penalty regime as early as at the construction stage. The fine for failing to meet 85% localisation targets could cost them as much as 75% of production payments from the state. Wind power operators can also be subject to fines for not meeting export targets. Since all these fines will be cumulative, operators may end up paying all of their production payments in fines if they fail to meet localisation, export and production targets.
Meanwhile, a recent study by the Global Wind Energy Council found that wind industry expansion can create 3,3 million jobs across the world over the next five years, primarily in fast-growing wind energy markets including China, the US, India, Germany, the UK, Brazil, France, Sweden, Spain, South Africa and Taiwan. Besides direct jobs in onshore and offshore wind projects, the figure includes the sector’s entire value chain: installation, manufacturing, project planning and development, operation and maintenance and decommissioning. According to the International Renewable Energy Agency, the industry has already generated some 1,2 million jobs so far.