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Russia’ Far East to Attract Private Investors to Local Distributed Generation Development


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Russia’ Far East to Attract Private Investors to Local Distributed Generation Development

Private investors will be attracted to develop distributed power generation, which includes renewable energy projects, in remote and isolated areas of the Russia’s Far East and the Arctic. This was announced at a roundtable discussion at the State Duma Committee on Energy.

Sergey Yesyakov, First Deputy Chairman of the State Duma Committee on Energy, reminded that a large part of Russia, primarily the Far East and the Arctic, is not provided with centralised electricity and gas infrastructure. This leads to a steady growth of costs for the purchase and delivery of conventional fuels, low efficiency of their use in generating electric power and heat, and a high level of harmful CO2 emissions. All this leads to an increase in total costs.

One of the possible solutions for this issue is the development of decentralised generation. To implement the plans, the Far East and Arctic Development Corporation (FEADC) drew up a road map for attracting private investments in this area. As noted, the document provides for state support measures.

Vasily Potemkin, Managing Director of FEADC, said that attracting private investors to develop distributed generation projects is a rational thing, which is quite feasible to implement. “We are actively working with investors, we see their interest, while we do realise there are complex economics of the projects and the existing administrative burdens. Therefore, our main task is to create equal conditions and state support mechanisms for private investors willing to participate in investment projects on a competitive basis,” he said.

As the panellists noted, market mechanisms for attracting investment in generating facilities cannot be applied to local energy facilities due to the specifics of the industry regulation and proximity to the end consumer. This case requires the involvement of the local government and an individual approach for each project.

“Together with FEADC and the Russian Ministry for the Development of the Russian Far East and the Arctic, we are still discussing mechanisms for the roadmap implementing and we hope for its approval by the federal government in the near future,”” said Mikhail Kuznetsov, Director of Vostokgosplan Federal Autonomous Research Institution.

Dmitry Stepanov, Deputy General Director of Altren LLC (a member of the RAWI), summarising the round table, said that the key point of the situation is to find a balance between the interests of the state, the wholesale market, investors and diesel power plants asset holders. “The existing mechanism applied by power supply companies does not reflect the goals of reducing the cost of power supply. The proposed steps from the Far East Development Corporation may help reduce cross-subsidies in the medium and long term, but in the short term, in terms of co-financing, it will entail an increased burden on the budget, and the actions proposed by NP Market Council will reduce the economics of the already hardly bankable projects to retrofit and backup the diesel power plants with renewables. Until the issue is resolved, the private investor will have to continue developing renewable energy in isolated and hard-to-reach areas at their own risk. In our turn, Altren will help them by minimising the risks when it comes to supplying them with reliable and wind power equipment adapted to harsh climatic conditions,” he added.

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