The German engineering giant said on Thursday it would build wind farms across Russia and set up 3 joint ventures to manufacture wind turbines products for them locally. No figure was put on Siemens’ investment.
The deal is part of Russia’s plan to make 4.5 per cent of its energy generation from renewable sources by 2020, but experts say green energy remains mostly a pipe dream for Russia at the moment.
The country lags behind the rest of the world in the private renewable energy market, trailing even the Pacific Islands in terms of output.
“China has something like 50,000 megawatts, while Russia, in 56th place in the world, has something like 16 megawatts,” said Nikita Turkin, an investment manager at Wind Energy Systems in Russia.
Untapped wind power potential
While the country’s energy system remains underdeveloped – and not just from renewable sources – the vast landmass provides plenty of opportunities to harness wind power.
“We believe that more than 30 territories of Russia have high potential for wind energy,” said Kristina Nevsky, a spokeswoman for Siemens in Russia. “Volgograd region may be one of the first steps.”
Remote locations with wind speeds of over five metres per second, such as the coast of Kamchatka in Russia’s Far East, are considered some of the most promising areas in the world.
Huge investment needed
Outdated equipment led to disaster last year at the Sayano-Shushenskaya hydropower station in Khakassia, where 75 workers died after a turbine hall collapsed, putting the 6,400 megawatt plant out of action.
The need to prevent similar accidents and find new sources of energy has forced the government to demand huge investment from generating companies.
The Federal Anti-Monopoly Service, however, has been putting pressure on firms to keep electricity prices low, while the government had put plans to raise tariffs on hold.
State subsidies required
Without heavy state funding or a change in the tariff system, companies believe the private sector is unlikely to achieve its 2020 target.
“In Germany it used to be about 10 cents [per kilowatt] – that is what it is to be economically sustainable to build a wind farm,” said Turkin. “Russia’s tariffs are very low and they are increasing at a very slow rate.”
Analysts believe that the Siemens deal and the government’s commitment to modernisation mean its will subsidise renewable sources.
“In Russia we have affordable electricity produced by conventional methods, so it will be subsidised, since all nations around the world subsidise producers of wind electricity,” said Vladimir Bespalov, an analyst at VTB.
Concerns over demand
Questions remain about when tariffs will be liberalised, with authorities keen to boost growth through lower utility prices.
Analysts believe renewable sources remain a long way from competing with oil and gas but with traditional fuels depleting – and the oil price fluctuating violently during the crisis – now is the time to start building.
“The economic efficiency of wind energy can’t even be compared to traditional sources but [is] a potential direction [for development],” said Bespalov.
Meanwhile, energy giant Lukoil has also stated its interest in boosting renewable sources, releasing a statement with Italy’s ERG Renew saying they would cooperate on developing wind energy, Reuters reported.
“Russia has great wind power potential,” Lukoil president Vagit Alekperov said in the statement. “Wind energy, if promoted by the state, can be of good help to oilmen, especially in remote areas, scarce of power supplies.”
By Ed Bentley, Oleg Nikishenkov contributed to this report, www.mn.ru