By Climate Scorecard Russia Country Manager Maria Stambler
Microgeneration is the small-scale generation of heat and electric power by individuals, small businesses, and communities to meet their own needs as an alternative to centralized grid-connected power. Although this may be motivated by practical considerations (i.e. unreliable grid power, long distance from the electrical grid) the term is mainly used currently for environmentally-conscious approaches that aspire to zero or low-carbon footprints or cost reduction.
Russia’s law on microgeneration, which came into force de facto in 2020 (de jure – December 30, 2019), has long been awaited by supporters of renewable energy. This normative act legalized the concept of “microgeneration” and allowed citizens or individuals to produce electricity for their own needs. Although this was not prohibited before, the law is novel because it allows for the possibility of technological connection to public networks and sale of surplus generated energy to the guaranteed supplier. Individuals can connect their generation facilities to the grid with a capacity of up to 15 kW (mainly solar panels on the roofs of detached homes).
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 in 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 within which they can freely exchange energy. By 2035, according to 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%.
The microgeneration law does not specify the source of future energy. That is, hypothetically, it can be anything, with the exception, perhaps, of an atomic reactor. It all depends on the economic benefits of using one fuel or another.
A little over a year has passed since the law came into force, what are the results? It is still too early to tell and initial results are a bit mixed.
Anton Usachev, the director of the Association of Solar Energy Enterprises, said in an interview, “the application of the law is so far isolated…Only a few projects have been implemented. For example, in the Sverdlovsk Region, a solar installation is connected to the distribution network, and the owner of solar modules is successfully selling the surplus to the network. We now need regulations governing the relationship between the owner of the solar plant, the guaranteeing supplier and the power supply company. This will standardize many processes, making the process of connection and settlement easier.” Meanwhile, interest in the development of microgeneration is evidenced by a large number of appeals from citizens and organizations to the Ministry of Energy of the Russian Federation.
With its enormous geographic scope and varying climates, Russia has large potential to exploit renewable resources. According to IRENA, Russia could hypothetically increase the share of renewable energy in its total energy mix to 11.9% in 2030. The government has set targets for 2024 and 2030 of 2.5% and 3.5% respectively, so laws like these could stimulate a faster development of the renewable energy sector by getting average citizens involved as well.
Within Russia there is certainly potential for scaling-up, as evidenced by a large number of appeals from citizens and organizations to the Ministry of Energy of the Russian Federation. This might take some time and won’t bring immediate results, but government incentives such as tax breaks until 2029 mean indicate that authorities are interested in citizen uptake of this new initiative. Russians are also, by their nature, curious about new technologies and generally have a DIY attitude to life, so this fits well with cultural and social values. As previously mentioned, the concept of the “Internet of Energy”, which is rapidly developing abroad and in Russia, increases the chance of scaling-up in the next few years as technology for microgeneration becomes cheaper and more widely available. Lastly, the Russian government appears to be waking up to the threat posed by climate change and is starting to realize the need to really get RES off the ground. Public interest in microgeneration is likely to grow as Russians hear more and more about it.
This is also something that can be implemented and scaled up in other countries. Although policymakers were, traditionally, accustomed to an energy system based on large centralized projects like nuclear or gas-fired power stations, a change of mindsets and incentives are bringing microgeneration into the mainstream.
Canada, the United Kingdom, Germany, Poland, Israel, and the U.S. have some kind of laws in place allowing microgenerated electricity to be sold into the national grid or have at least began talking about it. Earlier this month Ireland announced that homes, schools and businesses are set to receive new incentives later this year to invest in solar panels and other ways to generate their own electricity. A key change is that they will be able to sell any excess generated back into the grid.
The Russian law has a concrete incentive (tax break) and it also fits well with the global trend of the “Internet of Energy”, therefore its example could serve as a good staring point for other countries still uncertain how to get citizens involved in microgeneration.