Strategy of the leading energy generation companies in solar business in the Russian Federation : features and challenges

Abstract

The aim of this master thesis is to study strategies of the leading solar energy generation companies in Russia. The thesis argues that, from the current perspective, the solar energy generation has limited opportunities in Russia because of (1) low prices for local fossil fuels, including coal, gas, uranium, as well as vast resources for hydro power generation, (2) excessive capacity of traditional electricity production, (3) quite efficient electricity grid that covers major territories with significant demand for electricity, (4) geographical mismatch of high insolation regions vs high demand for electricity regions, and (5) lack of government initiatives and incentives for the shift to the renewable energy sources. High CapEx for a solar energy generation constrains wider expansion of the technology in Russia. Local equipment manufacturing has not provided costs low enough to assure solar electricity’s grid parity. Comparison of state support programs implemented in other countries revealed that Russia chose different way: its capacity-based support program for investments in solar energy generation effectively sponsors building of stations of larger capacity to be connected to the grid in addition or replacing traditional power sources, projects that it supports are identified by official body. Interviews and survey conducted by the author revealed that incumbents tend to build grid-connected solar power stations of larger capacity while newcomers are more agile, building stations of less capacity, including off-grid facilities increasing their competitiveness on the developing market of distributed power supply. The study suggests that Russian companies have two strategic options: 1. to build small solar stations (below 5 MW on average) to substitute expensive electricity supplied by petroleum-based generators in remote regions; 2. to build large solar stations (5 MW and above) connected to the grid under state supported program that guarantees premium purchasing prices to return the investments in 15 years subject to meeting strict requirements, the main one is 70% of local content of the station’s equipment.