The Ministry of Economy has turned green – Newspaper Kommersant No. 230 (7431) of 12/12/2022
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According to Kommersant, the Ministry of Economy generally supported an increased tariff indexation of new solar and wind power plants by 20% amid a surge in prices for imported components and in anticipation of the construction of factories to replace equipment imports. Investors assure that such a step “not for a ruble” will increase the burden on the business, although it will reduce the number of commissioned stations. The industry doubts this, warning about rising tariffs and inflation. The Ministry of Energy, according to Kommersant’s information, fears that other energy companies will ask for a similar measure of support.
The Ministry of Economy as a whole supported the additional indexation of the price of generating new renewable energy projects, follows from the recall of the ministry, which Kommersant got acquainted with (the document was sent to the Ministry of Energy last week). We are talking about 2.7 GW projects selected in 2021 with record low tariffs. Investors are asking for prices to be indexed to actual industrial rather than consumer inflation: by 20.4% instead of 8.4%. The company itself must ask the regulator to index the tariff, and in return reduce the amount of power supplied so that the total amount of payment remains the same.
Wind and solar stations (WPPs and SPPs) are built at the expense of industry: consumers buy their energy at an increased rate. Delivery time – 15 years, yield – 12% (at the OFZ rate – 8.5%).
Investors in renewable energy are obliged to gradually deepen the localization of equipment for stations, but still import some of the components. In the summer, investors complained about the rise in price of silicon, inverters, cables. Since 90% of the industry’s payment is to cover the capital costs of renewable energy, therefore, “when considering the issue, it is necessary to take into account only the increase in the cost of capital expenditures,” writes Ilya Torosov, First Deputy Head of the Ministry of Economy, considering investor data on price increases to be objective.
Mr. Torosov emphasizes that the construction of renewable energy sources “stimulates investments in the creation and expansion of localized production of equipment, the development of technologies (including in related industries), and the creation of new jobs.” The Ministry of Economy warns that changing the parameters “should not lead to additional burden on consumers.” The Ministry proposes, along with indexation, to “commensurately reduce” the amount of RES capacity, reduce the non-penalized delay in commissioning and no longer apply such a support measure.
However, at the end of the letter, Ilya Torosov indicates that the Ministry of Economy “reports its readiness to consider the proposals of the Ministry of Energy.” The Ministry of Energy, according to Kommersant’s sources, opposes increased price indexation of new renewable energy sources, fearing that other types of generation will ask for a similar measure. The Ministry of Industry and Trade, according to Kommersant’s information, also sent a letter to the Ministry of Energy supporting the increased indexation of new WPPs and SPPs. The Ministry of Energy, the Ministry of Industry and Trade and the Ministry of Economy did not answer Kommersant.
Aleksey Zhikharev, director of the Association for the Development of Renewable Energy, told Kommersant that indexation by 12% above inflation is necessary in order to return investment projects to “normal parameters for financing.” The sharp rise in the cost of equipment and construction is a serious barrier to the implementation of projects. “The proposed mechanism does not imply an increase in the load on consumers even by a ruble due to a commensurate reduction in power supply,” he assured.
The Market Council (energy market regulator) told Kommersant that the members of the association still “have not been able to reach a unified position.” They warn that investors can refuse projects without penalties, but then “almost all volumes will be raffled off again and with a high probability will be selected with significantly higher price parameters.” At the competition in 2021, the average project prices were almost half the ceiling: WPP – 2.74 rubles. for 1 kWh, SES – 5.45 rubles. SPPs should start operating in 2023-2024, and wind farms – starting from 2025.
According to the Community of Energy Consumers, the difficulties observed at the beginning of the year are already behind us – prices and lending rates have returned to their original values. “Indexation is more likely to deprive the economy of jobs and investment, as it will lead to unproductive spending, rising prices and tariffs for electricity and acceleration of inflation,” they note.
Director of the Energy Analysis Agency Aleksey Presnov invites regulators to think about how relevant the renewable energy industry is for Russia. “Localization and new jobs cannot be goals for the development of this sector,” he said. According to the analyst, the industry should move along a more market-oriented path, through direct contracts for the supply of energy between consumers and generating companies, and then the regulators will not have to puzzle over the parameters of the program.
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