RES Development in Russia Requires Strategic Solutions which Would Support the Growing Renewable Energy Cluster.

«The Potential of Russia in the Global RES Market» round table involved Alexey Texler - First deputy Minister of Energy of Russian Federation, Maxim Bistrov - Chairman of the board of the «NP Market Council», Alexander Korchagin - CEO of «NovaWind», Anatoly Chubais - Chairman of the board of «ROSNANO», Alexander Chuvaev - Executive vice-president of “Russia” division of Fortum Corporation, Igor Shaharay - CEO of «Hevel» and Charles Handry - «Future Energy» executive, London Power Corporation; state Minister of Energy (Energy and Climate Change department) of Great Britain (2010-2012).

The participants of the discussion have agreed that the local wind power market is settled. Key players on the Russian market are already working on localization programs and wind farms construction projects, and the main question today is that of the prospects for Russia in renewable energy industry development and it’s export potential. Which measures should be taken?

«We require some serious strategic solutions which would support the growing renewable energy cluster. First of all, it is the question of industrial policy and perspective goal-setting: are we setting a task of localization of several towers, or are we pursuing localization and development of specific technologies in a coherent business-model», - noted Alexander Korchagin.

«At Rosatom we set our strategic wind energy market priorities two years ago. We can definitely state that Russian wind energy market is in place, we can get references and move onto the world market. But the global market has significantly changed in the past two years. There were no substantial technological breakthroughs. Turbine costs have reduced. With the increase in orders, wind power OEMs’ revenues have decreased by 30%. While the major energy companies may still act as customers of large wind farm projects, the balance has shifted in favor of corporate Power Delivery Contracts (PDC). Industrial companies are ordering wind farms construction and electrical power supply systems. In Europe and other developed economies farms and municipalities are becoming consumers. There is a development in municipal wind energy, when the municipalities invest in wind generation. These are the new challenges. The world PDC model has transformed into free auctions, where at the same site wind, solar and traditional energy compete together. The situation has changed dramatically. We are currently discussing the international strategy of «Rosatom», which would consider all these aspects and will be able to meet new challenges, and I’m certain that by the end of this year it will be approved, - «NovaWind» Chief executive has stated.

Alexander Korchagin has noted that the market is not too much sensitive to technologies, which are relatively even. The market demands strong after-sales support, tough personnel training schedules and high availability of a turbine. From the perspective of successful entry into the global market, it is essential for Russia to elaborate an effective business-model, incorporating all these market demands. There is also an outstanding issue of financial packages, that we will have to work with. Now we are forming a team of professionals, which would work with foreign private and public pension funds and which would be capable of organising long-term financial packages for such projects. It’s essential to determine what and how we are going to localize: technologically simple components, which we are ready to manufacture right now, or should we concentrate our efforts on more complicated parts, which have a bigger export potential.

The discussion on wind turbine manufacturing localization was continued on the third day of the forum with the «Challenges of Wind Turbines localization in Russian» round table.



  Igor Bryzgunov - Chairman of Russian association of wind power industry, Alexander Korchagin - CEO of «NovaWind», Oleg Tokarev - deputy Head of the Department of machine tool building and investment of the Ministry of Industry and Trade of Russian Federation, Victor Garbev - Executive of the sales department in Eastern Europe, Siemens Gamesa Renewable Energy SA, and Dmitry Smolin - localization executive of «Vestas Manufacturing Rus» took part in the discussion.

Oleg Tokarev has noted that three key wind power energy market players in Russia now have to deal with organisational and schedule challenges, which were impossible to evaluate objectively at the very beginning : «Back in 2014 we were in a situation similar to one the Soviet Union found itself in on the eve of the Great Patriotic War. We thought that we had thousands of tanks and planes, that our soldiers were the best in Europe and the world, and that we would defeat any enemy and shift the battle field to his territory, but when the war came knocking at our door, we realized just how much we would still have to learn. Reasoning by that analogy, we are still in 1942 and the Stalingrad of the wind power industry is still ahead. But, thankfully, now we fully understand what we are dealing with». He stressed the fact that it is impossible to organize wind turbine localization at one leap. The government, while keeping its requirements for localisation, understands the challenges the industry has to deal with. It has offered a mechanism of Special Investment Contract (SPIC), which would allow to acknowledge localization right at the start of any project. Oleg Tokarev has noted that a SPIC with «NovaWind» is at the final stage of approval. Ministry of Industry and Trade representative has also pointed out the fact that the Ministry supports the prolongation of the wind industry support program, he expects the parameters to be defined the next year.

Chief executive of «NovaWind» Alexander Korchagin has noted that it is important to define the mere essence of localization: «In his time, Russia tsar Peter the Great has been studying Dutch shipbuilding at the shipyard. Actually, he did nothing but organized the localization of shipbuilding in Russia. In the end, local Russian dockyards have produced 1200 ships for 15 years. The Netherlands’ dockyard where Peter the Great has studied produced 500 ships a year, which is more than one ship a day. While that was a valuable experience, I think we shouldn't try to imitate such localization pattern, when we are studying under the guidance of those that produce more then one ship a day, and then 15 years we make 1200 ships. We have realized that localization is a proper supply chain organization. For this process we have to take into account risk management, finance allocation, logistics and manufacturing organization. All the risks lay within the manufacturing process. Energy companies aren’t accustomed to that: they operate power plants and sell kilowatt-hours. The localization program has forced us to reconsider many aspects, including a team building approach. We required people with profound knowledge of international law and specialists in logistics, metallurgy and financing. External funding constitutes 90% of the project. All this is localization. All of those processes, all this work constitute localization», - «NovaWind» Chief executive has stated.

Alexander Korchagin has noted that the current criteria for the localization were established six years prior to the actual start of wind power industry development in Russia. Now that the market players have plunged into real practice, it is necessary to set criteria for evaluation of the wind turbine components’ manufacturing share in the whole volume of localization basing on the perspective of its multiplicative effect on related industries. Blade assembly, for example, is a manual process. For Russia it is more important to develop the binding components technology. From a localization standpoint, it is even more important. While looking into a generator manufacturing localization, we faced the fact that there is no magnet manufacturing industry in Russia. Today we are considering a large partnership on domestic magnets manufacturing. This is no longer a question of a wind turbine generator. We are talking about a possibility of a much broader application of technologies in various industries. Probably if we evaluate the effect of localization on related industries, the magnet manufacturing will turn out to weigh much more than the whole wind turbine generator in assembly. It is crucial to examine carefully all these aspects when discussing new industry support criteria. We should evaluate technologies not from a perspective of their narrow application in wind power industry, but from a perspective of wide range of industries.

In past two years of real project development, «NovaWind» has reconsidered the mere logic of localization. The tower, nacelle skin and other hardware manufacturing are already under production in cooperation with qualified Russian partners. At the «Rosatom» level, «NovaWind» has set a goal to localize critical wind turbine components - nacelle assembly and generator, which have high export potential.

We have to consider an industrial aspect of wind power programs in our discussion of further industry support. Perhaps it is time to consider an export support for the localization program participants. If a company manages to bring in 100 MW from a foreign customer, it would receive a right to install 100MW in Russia. Our industrial policy should consider the most ambitious goal - the goal of entering the international market.