The Ministry of Industry and Trade may force investors to start the production of wind turbines in Russia

The Ministry of Industry and Trade, after criticizing the industry, may tighten the requirements for investors wishing to open the production of a “sovereign wind power plant (WPP)” in the Russian Federation. They can be forced to localize all components in the country, including generators and control systems. Rosatom, Fortum and Silmash want to start the production of wind turbines, which they are negotiating with Chinese vendors. The new conditions, according to Kommersant’s interlocutors, will create difficulties for Fortum. However, the requirements still involve only “importing foreign technology”, and not creating a Russian car from scratch, experts warn.

The Ministry of Industry and Trade can force investors who want to launch the production of wind turbines in the Russian Federation to localize all key components in Russia, including generators and automated control systems (ACS). The ministry adopted “remarks on the obligation to produce generators and automated control systems,” but has not yet “approved it on paper,” said Matvey Airapetov from the department of mechanical engineering for the fuel and energy complex of the Ministry of Industry and Trade, speaking on July 7 at an expert council chaired by Valery Seleznev, first deputy chairman of the State Duma committee on energy.

The Ministry of Industry and Trade explained to Kommersant that “to form a final decision” they will hold a meeting with interested organizations this week. The ministry “supports initiatives for the production of a highly localized sovereign wind turbine”, and the production of generators and automated control systems in the Russian Federation will help increase the level of localization.

After the approval of the parameters, the Ministry of Industry and Trade will announce a competition among investors to conclude a special investment contract (SPIC 2.0). The winner will invest in the launch of the production of components using foreign technology in exchange for tax incentives. Initially, the applicants for the SPIC were offered to launch the production of only nacelles, blades and hubs in the Russian Federation without fail, and generators with a capacity of 4.5 MW or more and automatic control systems – if desired. Novavind (part of Rosatom), Aleksey Mordashov’s Power Machines and Fortum (controlled by the Finnish Fortum, controlled by the Federal Property Management Agency) want to participate in the competition for SPIC 2.0. All of them are negotiating with Chinese vendors.

Silmash (negotiations with Harbin Electric) advocates the localization of all wind turbine components, including generators and software. Silmash’s Strategy Director Dmitry Ostapchuk said at the meeting that an investor must fully own the technology “before the material”, for example, by purchasing the rights: “If you do not own the technology, you will always act as a slave. You can hit your own designs, but it will be an eternal game of catching up with long deadlines and engineering risks.

Novavind also stands for the production of a generator and automated control systems in the Russian Federation. The head of the company, Grigory Nazarov, at the meeting for the first time publicly announced that Novavind was negotiating with “leading Chinese manufacturers.” He noted that in order to increase responsibility, the partner must become “a partial shareholder of a legal entity entering the tender” under the SPIC. The top manager added that “Novawind had a joint venture with a German company (Enercon.— “b”)”, but since 2022 “all production activities are concentrated in the Russian legal entity”. The company is already producing generators at Atommash, but with a smaller capacity of 2.5 MW.

There were no Fortum representatives at the meeting, but, according to a number of Kommersant’s interlocutors, the company will not be able to enter the competition under the new requirements, since the company wanted to localize only a part of the components using Dongfang technology. When asked by Kommersant about the new parameters of the SPIC, Fortum said that “now no market participant meets such requirements,” and the SPIC is designed to “ensure a balance between the expediency of localizing certain components, the capabilities of existing and promising enterprises, as well as attracting RF of effective solutions for wind turbines”. Fortum, together with domestic partners, is striving to ensure the localization of the maximum possible number of components in the Russian Federation, they assured: “As related industries develop, we will involve new participants, since it is impossible to satisfy all localization requirements for all components only at the expense of such a relatively small industry, like wind energy.

Now Fortum has the largest portfolio of wind farm projects (WPPs) — 1.65 GW. About 738 MW – from Uralenergosbyt (JV Fortuma and JSC EC Vostok). Novavind has about 600 MW. Until the end of the RES support program, another 2 GW can be raffled off. Meanwhile, China launched 37.6 GW of wind farms in 2022 alone, says Vladimir Sidorovich, director of the New Energy Research and Development Center. Among the leaders are Goldwind, Envision, Mingyang, Shanghai Electric, CSSC, CRRC, Dongfang.

The parameter of selecting investors according to the criterion of unit capacity of wind turbines looks strange: in the world, the key parameters are CIUM (load level) and LCOE (level value of electricity), Kimal Yusupov, co-founder of NPO B&B Industries, former head of Vestas in the Russian Federation, said at a meeting. Moreover, in the current SPIC, the investor is not required to conduct R&D, create small Arctic vehicles and open a design bureau. “As a result, we will not build stations in the Orenburg region and the Far East, but will again transport a monster with a capacity of 5–6 MW to the south of the country, where more than 30% of generation is from wind farms,” he said. “SPIC and localization are not development industry, but a trap of thinking, a cover for importing foreign technology.”

Polina Smertina