Ways to increase energy efficiency, reduce environmental pollution, and produce electricity and fuel from renewable sources are being debated by Russian officials and industry experts.  However, unless a well-developed system linking legal, financial, regulatory, and technological issues is developed, regional authorities will have few incentives to encourage private investment in renewables.

The federal government is now working on a program aimed at increasing installed wind power capacity to 7 GW by 2020 (up from 16.5 MW at the end of 2007, according to the World Wind Energy Association).  One aspect of the program would subsidize much needed construction of transmission lines from wind power facilities, with some new wind farms built in close proximity to traditional power stations to supplement their electricity generation.  In addition to the need for investment in transmission infrastructure, the implementation of wind-power projects in Russia will require resolution of tariff issues, as well as various types of federal support, grid connection requirements for wind power plants, and imports for wind energy equipment.  Russian experts stress that Western experience in the area of renewable energy will require adaptation to Russian realities, including the production of equipment capable of operating during Russian winters.

Foreign and domestic investments in Russian photovoltaic (PV) projects are currently linked to export opportunities for manufacturers of solar cells, modules, and batteries.    In 2008, China’s Suntech acquired a minority stake in Nitol Solar, which has production facilities in Russia’s Irkutsk Oblast; the International Finance Corporation also agreed to make a multimillion equity investment in this producer of polysilicon.  In 2007, Nitol signed a contract to purchase polysilicon reactors from New Hampshire-based GT Solar and later secured a long-term polysilicon supply agreement with Massachusetts-based Evergreen Solar.  Russia’s Solar Wind Ltd and Kvark, two Krasnodar-based producers, are interested in a project to construct two plants for production of PV products.  This project is awaiting approval from local authorities.  The Massachusetts-based Spire Corporation recently received a contract to deliver a module manufacturing line to Russia’s Bogoroditsk Techno-Chemical Plant in Tula Oblast.  In late 2007, Spire Corporation also received a contract from another Russian producer, the Ryazan Metal Ceramics Instrumentation Plant.  The export-oriented market of Russian PV products has grown rapidly in the last two years.

Russia has a number of ongoing bio-fuel projects, but the market is very underdeveloped.  Producers would like to see the ethanol excise tax lifted or reduced in order to make domestic production and sales of bio-ethanol as an additive to gasoline economically viable.  (This and other challenges to the development of a biofuel market in Russia will be addressed at the third international conference «Biodiesel - 2008» scheduled for November 2008 in Moscow.)  In addition, producers would welcome R&D funding to develop cost-effective technologies for production of cellulosic ethanol and butanol.  For example, Russia’s East-Siberian Biotechnologies Plant in Irkutsk Oblast, has recently announced that its pilot project is expected to produce butanol in September 2008.  If this pilot project results in cost-competitive butanol as an automobile fuel, some other hydrolysis plants, which are currently closed, could attract investment.

Renewable energy initiatives have been endorsed by Russian officials on the federal and regional levels.  The obstacle is often not project money (whether federal or private), but the many impediments to doing business in Russia.  Russia needs well-written laws and executive orders to address concerns pertaining to the production of electricity and fuel from renewable energy sources, such as wind and biomass.  Once such measures are enacted, the market is more likely to respond positively and more private investment will follow.

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