Wind JV sees chance in Russia

A Dutch-German joint venture hopes to tap into early Russian government support for renewables and build a 200MW wind farm – but needs foreign turbine manufacturers to follow it to the country.

Dutch company Windlife Renewables and its German JV partner WSB are planning to construct and operate the plant in the Murmansk Oblast region of northeast Russia.

Located on the Barents Sea coast, the €280m ($388.6m) project would be Russia’s largest wind farm.

Windlife will take part in forthcoming government tenders in a bid to obtain support, confirmed CEO Paul Logchies.

In May 2013 an amendment to Russia’s federal power law was passed aiming for an additional 5.9GW of installed renewable energy capacity by 2020. The new decree will support about 3.6GW of wind power.

In contrast to mechanisms applied in many other countries, in Russia renewable energy will be supported on the basis of installed capacity rather than electricity output.

Successful bidders will receive monthly capacity payments based on their investment cost.

Logchies said his project would expect to see a return on investment of about 12% over 10 years.

“Our company will bid for 25MW to be built in 2015 and 175MW to be installed in 2016,” he told Recharge.

However, the plan is dependent on projects satisfying local-content rules contained in the amendment – defined as 55% content for those built in 2015 and 65% in 2016.

Logchies said his company is talking to large wind turbine manufacturers like Vestas, GE and Siemens, but admitted: “The problem is that big companies like that take a long time to make a decision on whether or not to build a construction company in Russia, so we are also looking at medium-to-small companies and Russian ones interested in starting a turbine manufacturing business.”

However, the local-content rules only apply to larger projects serving Russia’s regulated wholesale power market.

Support is also available in relation to the unregulated retail market, where smaller renewable projects under 25MW can opt to feed into regional grids to cover network losses or help supply isolated energy zones.

“These schemes are reportedly less advanced at the moment and need further refinement by the government,” says a report from Apricum Group, a global strategy consulting firm specialising in renewable energy technologies.

Windlife’s CEO said that option is a possibility, as building eight 25MW wind farms, or 25MW in the first year and 175MW the second, would both be feasible alternatives under the company’s plans.

Logchies added: “For now, we are going to tender this summer for the retail market, as I would prefer working that way.” The JV may early next year apply for support in relation to the wholesale market.

Russia has significant wind energy potential, but the sector has for many years been stuck on the launch pad due to a lack of government backing.

Windlife is in the process of updating a planning permission it received as far back as 2009, when it first laid plans for the Murmansk wind farm – but then had to shelve them because the expected Russian support scheme failed to materialise until last year.

According to Logchies, the International Finance Corporation (IFC), part of the World Bank Group, is an enthusiastic proponent of the project, and several local Russian banks have expressed interest in financing the wind farm.