Mechanisms of attracting investments in the course of implementing RES and their impact upon RES share in the total energy balance

Deputy Head of FAS Vitaly Korolev took part in the Energy Investments and Regulation Conference organized by the Energy Regulators Regional Association (ERRA) on 25-26 September 2017 in Astana, the Republic of Kazakhstan. The host side was the Committee on Regulation of Natural Monopolies, Protection of Competition and Consumer Rights under the Ministry of National Economy of the Republic of Kazakhstan.

The Conference agenda included the energy sector in Kazakhstan, the prospects of gas markets and competitive ability of liquefied natural gas. The focus was on the role of renewable energy sources (RES) in achieving the climate change objectives and specifics of regulating the transforming electric power market.

During the expert discussion, Vitaly Korolev outlined the main mechanisms of attracting investments to implement RES in Russia:

1. Supporting retail green energy sector through mandatory procurement of its generation at high rates (to cover losses in networks).

This mechanism of support and stimulation of generating facilities operating on the basis of using RES on retail markets establishes a procedure for long-term tariff regulation and the ceiling values of long-term tariff regulation parameters for such generation facilities. The mechanism for supporting RES use is specified in the Federal Law “On the electric power industry”, when to compensate losses grid companies must buy electric power from qualified RES generating facilities at the regulated tariffs, set by executive bodies of the regions of the Russian Federation for state tariff regulation.

Under the mechanism of RES support on retail markets, at the stage of qualifying  RES generating facility a requirement is set for mandatory including such facilities in the scheme for prospective development of the electric power industry in the regions of Russia.

2. Capacity supply agreements (CSA) for RES for the wholesale market —with increased payments, guaranteeing return on investments within several years.

RES support (for three types: solar, wind and small hydropower) takes place through RES CSA – capacity supply agreements, amended in view of RES specifics. Changes to the standard CSA ensures RES facility performance under the rules similar to those applied to electric power generation facilities operating under the forced mode.

Vitaly Korolev pointed out: “The current Russian law provides for active measures to stimulate electric power generation by RES facilities, which leads to a favourable effect upon development and increase of RES in Russia”.