Policy Recommendation #1: The Russian Green Deal

The Russian Green Deal is an economic framework program that will help overcome the COVID-19 crisis and transform Russia into a sustainable, green and modern economy. This policy proposal was put forward by Greenpeace Russia in collaboration with Tatiana Lanshina, Senior Researcher at the Russian Presidential Academy of National Economy and Public Administration (RANEPA). The program sets an ambitious national goal for Russia to achieve net zero greenhouse gas (GHG) emissions, or become climate neutral, by 2050. This goal is in line with the IPCC recommendations and Green Deal programs and proposals found in other countries. The Russian Green Deal also sets an intermediate target to reduce GHG emissions by 40% below the 1990 level by 2030. The intermediate target is recommended to be submitted to the UNFCCC as Russia’s new Nationally Determined Contribution (NDC) under the Paris Agreement.

Climate neutrality can be achieved through action in 3 areas: clean energy, waste management, and forestry. The energy sector generates 79% of all GHG emissions in Russia and the waste sector generates 5%. Energy and waste sectors must dramatically reduce their emissions while forestry can offset unavoidable emissions. The program provides the following targets for these three sectors.

Energy sector

• By 2030, the share of renewable energy sources (RES) in electric power generation must be increased up to 20% as well as a 10% increase in transport and heating/cooling. It includes electrification of transport and heating/cooling using RES and excludes traditional biomass. In 2019, the share of RES in electric power generation in Russia comprised 0.28%, excluding large hydropower plants. Statistics on the share of RES in transport and heating/cooling sectors are unavailable.
• By 2050, the share of RES in all energy sectors must comprise 100%.
• By 2030, the energy intensity of Russian GDP must decrease by 40% compared to 2007 levels.
• By 2050, the energy intensity of Russian GDP must decrease to the global average level.

Waste management

• By 2030, the per capita volume of solid municipal waste generation must decrease by 30% compared to 2020 level; by 2050 levels must decrease by 60%.
• By 2050, at least 80% of the solid municipal waste must be processed.

Forestry

• By 2050, the exploitation of remaining wild forests must be displaced by intensive forestry on previously developed lands.
• By 2050, full protection of forests and effective extinguishing of forest fires must be ensured.

This policy envisions that the government will be implementing this new strategy together with large Russian corporations, especially those in the energy sector. It is important to Russia’s climate mitigation efforts because it outlines a framework of what needs to be done and by when, as well as provides practical guidance on how to do it. At the moment, there is no clear strategy of how to achieve reductions in greenhouse gas emissions (and eventually carbon neutrality) so the Russian Green Deal is a breath of fresh air in an otherwise stagnant climate policy making area.

The Russian Green Deal could face opposition from the country’s powerful fossil fuel industry. The government needs to create incentives for them to switch or diversify their business towards renewable energy, perhaps through subsidies. Also, there may not be demand from the Russian public to adopt the Russian Green Deal due to a lack of understanding of climate change and how it will affect Russia (fortunately, this is slowly changing). Therefore it is essential that climate advocacy groups continue shining a light on the dire state of the environmental crisis because more and more Russians are becoming aware to its reality.

Policy Recommendation #2: Towards a hydrogen economy and low carbon development

Hydrogen has emerged as an important part of the clean energy mix needed to ensure a sustainable future. Falling costs for hydrogen produced with renewable energy, combined with the urgency of cutting GHG emissions, has given clean hydrogen unprecedented political and business momentum.

The hydrogen economy belongs to an image of the future for the global economy in which hydrogen becomes a new global energy carrier and starts playing a role comparable to coal, oil, or gas and much more important than the current role of hydropower, nuclear power, and bioenergy. Forecasts predict given the early nature of the hydrogen economy, we can expect it to reach global levels after 2040. More than 20 countries and 50 corporations have adopted long-term programmes for the development of hydrogen technologies, financed from budgets at different levels and supported by beneficial regimes and international technological cooperation.

Researchers and experts at the Skolkovo Energy Centre argue that Russia has a huge untapped potential in this area. Embedding in the global hydrogen market could be Russia’s response to the challenges of  energy transition and climate mitigation. With the exception of a few standalone projects, up until now Russia has stood apart from international communities and partnerships which develop hydrogen technologies. It is important to note that Russia is one of the countries most seriously affected by the energy transition due to its sizeable fossil fuel exports. Moscow realizes, therefore, that the current modus operandi is not sustainable. The hydrogen plans that are already in place are imperative to diversifying the economy and developing new industries to cut emissions and achieve its Paris targets (limit 2030 emissions to 75% of 1990 levels, or 2.33 billion tons).

The policy’s impacts would be measured by looking at how much of Russia’s energy balance comes from hydrogen. Experts say that hydrogen may constitute 7-25% of the [global] energy balance by 2050 as soon as the issues of high production costs and transportation challenges are resolved—this is something that Russia should also aim for.

There are obstacles towards transitioning Russia to becoming a hydrogen economy. Firstly, until now, the climate agenda and de-carbonization have played a minor role in the country’s energy strategy. Among stakeholders, there is predominantly a cautious, conservative attitude in relation to the anthropogenic nature of global climate change and to whether it makes sense for Russia to make serious commitments to reduce GHG emissions.

Secondly, although Russia has enormous resources to bring to a new global market along with its own technological developments (which are for the most part far from commercial-ready at this point) and promising domestic demand, the emerging hydrogen market will likely compete with hydrocarbon markets where Russia’s position now seems unshakable. In this sense, a strategy of ignoring or even opposing the new hydrogen strategy  may seem attractive in the short term. But in the long run, such a strategy will place the national economy at risk of a slowdown—not only because of falling demand for hydrocarbons, but also as a result of holding back the development of the innovation sector in industry.

All together this significantly hinders the development of hydrogen and low-carbon technologies (renewables, energy efficiency, electric transport, etc.) That said, Russia has enormous hydrogen production potential. Therefore, hydrogen technologies are being spoken about in a positive way both at the largest Russian forums and in the course of discussing the innovation strategies of the largest Russian companies.

The experts in Skolkovo outline the following ways to overcome these obstacles. Firstly, it is important to ensure technological development in mastering and reducing the cost of the elements within the monetization chain of “green” hydrogen, as well as complementary technologies (CO₂ capture and storage, steam methane reforming, etc). Secondly, there is a need for market support and sustainable demand for hydrogen for consumers who are interested in buying “green” hydrogen and its derivatives. Thirdly, the key to success is to attract international investment, creating mechanisms to compensate for commercial, currency, inter-cultural and national risks.

The Russian program, based on these three pillars, may also include the following elements according to the Skolkovo report:

Development of pilot projects for hydrogen exports:

• Exports of grey / blue / orange hydrogen to Japan, Europe
• Launch of international projects with the participation of Russia

Development of hydrogen clusters in the domestic market:

• Creation of several supporting “hydrogen clusters” with a focus on the markets and centres of competence (Moscow, St. Petersburg, Novosibirsk, Krasnoyarsk, Yekaterinburg, etc)

Development of fundamental and applied research on hydrogen:

• Inventory of available reserves and coordination of research and development
• Specialization in the areas in which Russia already has and those that receive less focus in other national programmes
• Focus on the future markets and avoid “reinventing the wheel” based on a preliminary analysis of the status of hydrogen technologies and forecasting their development abroad

Education in the field of hydrogen technology

Popularization
Standardization and certification

State coordination:

• Management and coordination at a high political level, with the federal ministry playing leading the creation of a separate department within the Energy Ministry
• Key performance indicators for restructuring and a breakdown by year of programme implementation, with mechanisms for their adjustment
• Creating a unified information platform
• Creating a system of incentive measures for large and small businesses (taxes, benefits, orders) and technology localization

International cooperation:

• Technological partnerships
• Entry into international hydrogen organisations and platforms

Determining the government’s position on this issue will largely determine the attitude of large companies. Many of these already have plans and developments in the field of hydrogen technologies but are not yet giving them priority. Luckily, we are already seeing very positive movement in that direction. At the end of 2020, Russia’s Deputy Prime Minister (and former Energy Minister) Aleksandr Novak Russia declared that Russia will now aim to utilize its vast fossil fuel resources, nuclear technologies and scientific expertise to become “one of the world’s leaders in production and exports of hydrogen” by 2035. Therefore, experts need to continue to lobby the government to adopt hydrogen-friendly development strategies and the authorities in turn need to make it an economically attractive option for Russia’s corporations and the energy and transport sector.

Policy Recommendation #3: Law on Microgeneration

In 2019 the government passed a law on microgeneration, allowing individuals to connect their generation facilities to the grid with a capacity of up to 15 kW (mainly solar panels on the roofs of detached homes) and sell the excess energy. In the past, microgeneration facilities in Russia could operate only in an autonomous mode. In some cases (with tariffs starting at 10 cents per 1 kWh) the transition of small and medium enterprises to renewable energy is becoming economically viable.

Also, as an incentive for such activities, the necessary changes have been made to the Tax Code: for example, the sale of energy by the owner of a generating micro-installation is not considered an enterprise and until 2029 it is not subject to personal income tax. In addition, the establishment of microgeneration fits perfectly into the concept of the “Internet of Energy”, which is rapidly developing abroad and within Russia. The idea involves the creation of a local energy infrastructure (micro-energy system or micro-grid), in which energy producers and consumers are integrated and can freely exchange energy. By 2035, according to some experts, the share of such energy will account for more than half of the market—which is estimated today at $3 trillion and promises to grow by more than 60%.

For now, there are no concrete goals or targets for this new law as there is still some uncertainty about parameters of the connection of microgeneration facilities to the grid and their metering devices (but the Russian Energy Ministry has promised to liberalize them) and therefore the most basic way to measure this over the next 10 years is to see how many individuals have opted for connecting to the grid and how much excess energy was sold over this period.

This law is important for several reasons.

“First of all”, says Irina Pominova (Department for Fuel and Energy Center at the Analytical Center for the Government of the Russian Federation), “the law formalizes the notion of a microgeneration facility and its criteria and thereby lays a legal foundation for the development of this sector. Secondly, it allows selling excess energy and thus reduces the period of payoff of microgeneration facilities and increases their appeal to investors.”

With its enormous geographic scope and varying climates, Russia has large potential to exploit renewable resources. According to IRENA, Russia could theoretically increase the share of renewable energy in its total energy mix to 11.9% in 2030. The government has set targets of 2.5 and 3.5% for 2024 and 2030 respectively, so laws like these could stimulate a faster development of the renewable energy sector by getting average citizens involved as well.

There are several obstacles for RES in Russia in general according to a report by CCSD and +1, all of which can also apply to microgeneration:

• Poor level of government support: Russian energy policy is conservative and focused on the extraction, consumption, and export of fossil fuels. Russia is one of the global leaders in terms of fossil fuel subsidies.
• Lagging Behind in Energy Efficiency Indicators: Russia does not intend to give up any fossil fuels. They failed to achieve their goal of reducing the energy intensity of GDP by 40% by 2020, compared to the level in 2007.
• Ineffective Incentives for Energy Efficiency: Support measures in Russia are a mere formality. For example, since 2012 companies investing in the construction of highly energy-efficient buildings have been able to receive an investment tax credit. However, in practice, it is impossible to take advantage of this benefit for commercial property.
• Low Share of RES in the Country’s Energy Sector: The share of RES, excluding large hydropower plants in the generation of power in Russia remains so low it is almost negligible. In the realm of heating, cooling, and transport, the use of RES is neither regulated by the state, nor encouraged. Practically all of the state support of RES in Russia is limited to support of the sector on the wholesale electricity and capacity market.

That being said, there is reason to be optimistic that these challenges will be overcome in the case of microgeneration. According to Alexey Vasilyev in Electrotechnical Market Magazine, “microgeneration is currently receiving attention at the highest level. The developers of the draft law do not conceal that their main task is to support the high-tech industry in Russia. Microgeneration is just the industry where domestic products can compete with imported ones. At the same time, microgeneration will also become a deterrent to the growth of electricity prices in the context of the actual monopolism of sales companies. The rise in electricity prices is a good reason to think about buying your own power station. That is, to vote with a ruble for the development of the domestic high-tech industry, and therefore for the reduction of the notorious raw material dependence”.

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Contact

Nikolay Shulginov, Energy Minister of the Russian Federation

Email: minenergo@minenergo.gov.ru

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This post was submitted by Climate Scorecard Russia country manager Maria Stambler

Photo: Viktor Borisov