G20 Executive Talk Series

September 2016

Green Energy

Authored by: Alexey Lossan

Russia and China Join Forces to Develop Green Energy

Despite the fact that Russia is one of the world’s largest exporters of oil and gas, in recent years the country has actively been developing alternative energy. Experts say that China, which is interested in inexpensive energy supplies from Russia’s Far East, is giving Russia a hand.

In July 2016 the new BRICS Development Bank, which was created on the initiative of Russia, China, Brazil, India and South Africa as an alternative to the International Monetary Fund, issued its first “green bonds.” The total value of the bonds was three billion yuans ($448.5 million), and the money received will go towards the realization of ecological projects, including alternative energy. This is not the only example of cooperation between Russia and China in this field. Chinese companies are increasingly investing in the construction of Russian solar and wind power stations.

“The whole world is placing bets on better ecology, and the BRICS Bank is no exception because member countries also have ecological problems,” said leading expert at Finam Management, Dmitri Baranov. “Therefore, the bank’s decision is logical. Its resources can help solve a part of these problems by improving the ecological situation, including the one in Russia.”
Deep Roots
Russia has deep roots in alternative energy. The country’s first hydroelectric power plant appeared in 1892, in Siberia’s Altai region, and produced electricity with four wooden turbines, each with a 45 kilowatt capacity. In the 1930s the USSR was first in the world to make wind generators, and in the 1960s the country produced the first power stations using geo-thermal energy from the Earth. Today, about 17 percent of all energy in Russia is produced from alternative sources. However, for a long time the country lacked state programs to support alternative energy. Such a program was introduced only in 2013.

According to the program, by 2024 an approximate total of 1.5 gigawatts of solar stations, 3.6 gigawatts of wind stations, and 900 megawatts of small hydroelectric power plants should appear in Russia. The program has already yielded fruit, and investors have committed to build solar stations with a total capacity of 904 MW. The tenders attracted primarily Chinese investors. For example, Solar Systems, which is a subsidiary of China’s Amur Sirius, announced that it intends to invest up to $1 billion in Russian solar energy projects. The Chinese investors plan to build three power plants producing a total of
175 MW.

Large Russian corporations, including state-owned companies, are actively investing in alternative energy. RusHydro, Russia’s largest hydroelectric power plant operator, plans to construct mini plants with PowerChina. Investments will amount to $1.7 billion by 2020. Furthermore, RusHydro also plans on building 139 solar stations, 35 wind stations and two wind farms.

Rosnano, a state company created by Anatoly Chubais to develop nanotechnology, is also very active in the development of alternative energy. Rosnano is ready to offer China its solar panels, said Chubais at the St. Petersburg International Economic Forum in June 2016. Moreover, Rosnano is holding talks, including with its Chinese partners, about investments in Russian wind energy. 

“There has been a change in Russia that few noticed, and recent decisions have shown that after solar energy Russia will start realizing wind energy projects,” said Chubais on Rossiya-24 TV. In particular, Rosnano has already established two foundations with investors from China for developing
alternative energy.
A Sunny Future
The Russian and Chinese focus on developing alternative energy responds to global trends. According to a 2015 report prepared by the International Renewable Energy Agency, by 2030 the total capacity of all the world’s solar-powered electricity plants will increase by more than 10 times from the current 227 GW, to 1760-2500 GW. The agency believes that the markets with the most potential are Russia, Brazil, China, Israel, Jordan, Mexico, the Philippines, Saudi Arabia, South Africa and Turkey; which means that three BRICS countries are on the list.

Experts believe that Chinese authorities are primarily interested in creating additional energy generation for the country’s needs, and this makes Russia’s Far East extremely interesting for Chinese investors.

“Alternative energy is of great interest for Russian-Chinese collaboration,” said professor Ivan Kapitonov of the RANEPA Higher School of Corporate Management. He adds that China, which is relatively poor in energy resources, has been developing alternative energy for a long time, and has the best and least expensive technologies in this field. Private Chinese companies are particularly eager to work with Russia. 

“Certainly Russia and China can cooperate in the field of alternative energy,” Dmitri Baranov concurred, adding that this is a response to global trends concerning the increase of such generation and an awareness of environmental protection. Second, this relates to each countries’ demand for power, since agreements call on increasing the share of this type of energy. Third, these countries have interesting breakthroughs in the field that can be successfully developed, both domestically and internationally.
Betting on the Far East
Experts believe that Chinese authorities are primarily interested in creating additional energy generation for the country’s needs,
and this makes Russia’s Far East extremely interesting for Chinese investors. China’s ecologically dirtiest areas border this area, while neighboring Russian regions are oriented precisely towards developing alternative energy. According to the Russian Association of Solar Energy, the Far East’s potential is at least 500 MW. In turn, PowerChina’s Russian partner, RusHydro, has already set up two wind diesel complexes on Kamchatka and one on Sakhalin. The government of another Russian region, Yakutia, is building a wind farm with the Japanese Komai Haltec Inc., a plant that has a 1-MW capacity.

The Russian Energy Ministry and the State Grid Corporation of China are currently studying the prospects of building a wind farm in the Far East’s north. The project includes the transference of electricity along ultra-high voltage power lines to China. 

“China actively imports electricity from its neighbors — Russia, Mongolia and even a bit from North Korea,” explained Kapitonov, adding that the development of alternative energy in the Far East has a lot of potential both for domestic consumption and for supplies to China.

“China has been showing interest in buying electricity from Russia for several years and is already doing so, which will help it guarantee electricity for the country’s northern regions and abandon its old coal power plants,” said Baranov.