CENTRE FOR ENERGY, PETROLEUM AND MINERAL LAW AND POLICY STATEMENT OF ORIGINALITY

I.D. STUDENT: PROGRAMME: MODULE:

100021180 International Dispute Resolution and Management by Flexible Learning Code CP 50033 Name Downstream Energy Law and Policy

TITLE OF THE RESEARCH PAPER: ABSTRACT: Power generation with renewable energy sources in Russia: evolution of regulation and current issues.
This paper analyses legislative framework for promotion of production of electricity with renewable energy sources in Russia. The research paper aims to answer the following questions: first, how the regulation mechanism for renewables-based power generation in Russia works, second, why the new 2007-2010 legislation made no difference to promotion of RES in Russia and third, whether any new regulation model is expected and what changes it might bring. The paper starts with an overview of the Russian RES potential and a brief overview of the electricity market reform. As a result of the research the following findings are being presented. First, the current legislative framework failed to function due to partial and fragmented character. Second, there are certain political issues impeding promotion of RES. Third,

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ABBREVIATIONS
EPIR UES FSPP GCS MC ODM OGK RAO UES RES RF SO Electric power industry reform Unified Energy System of Russia Federal special purpose program Green certificate scheme Market Council Operational dispatch management 6 generation companies of the wholesale market in the form of joint stock company RAO Unified energy system of Russia Renewable energy sources Russian Federation System operator part of the infrastructure, commercial operator an administrative entity managing , gathering and processing information received from the market participants 14 territorial generation companies in the form of joint stock company Tonne Wholesale electric power market

Minenergo Ministry of energy of the Russian Federation

TGK tn WEPM

ABBREVIATIONS INTRODUCTION.4 1. BACKGROUND 1.1. RES potential in Russia...........4 1.2. Energy security issues.5 1.3. Electric power industry reform (EPIR) overview...6 1.4. Other issues.7 2. LEGAL FRAMEWORK FOR PROMOTION OF POWER GENERATION WITH RES 2.1. RES legislation before EPIR.7 2.2. Review of current legislation and incentives available8 2.2.1. Green certificate scheme (GCS).8 2.2.2. State support mechanisms..9 2.3. Weak points of the current legislation10 3. NEW MODEL SPECULATIONS 3.1. Market initiatives11 3.2. Political issues..11 3.3. Draft laws11 CONCLUSION.12 REFERENCE LIST.13

INTRODUCTION Due to its size and geographic variety Russia has a very diverse RES opportunities portfolio with no single dominant type of RES. Producing electricity from renewable energy sources (hereinafter 'RES') is not a completely new issue in Russia with its early-soviet-era wind power initiatives and following long proven record of large scale hydropower stations1, but so far renewables have had rather modest coverage in academic literature and little regulation. The reform of the state electricity monopolist RAO 'United energy system of Russia' ('RAO UES') in 2000-s brought some basic framework legislation on RES with it. In 2008 just about 1 % of the electricity in Russia (8,5 bln kWt/h) was produced with RES (excluding hydropower stations with capacity over 25 MWt)2. The 2009 power generation policy aims at 4,5% (80 bln kWt/h) to be achieved by 2020.3 Despite the technical potential of RES in Russia being 4,5 bln tn of equivalent fuel it is questionable whether the rather modest figure of 4,5% will be achieved. The green certificate system and related mechanisms do not work partly because of lack of some secondary legislation and partly for other reasons. Notwithstanding the above said there are many potential investors interested in Russian RES that are waiting for clear legislative framework and sound policy. Anticipating future opportunities Siemens concluded a strategic agreement with Rostekhnologii4 and RusHydro5 on collaboration on RES6. A new RES-generation support model is being discussed in the media.

1. BACKGROUND 1.1. RES POTENTIAL IN RUSSIA There are certain issues to be considered when talking about RES: first, what is meant by RES in Russia, second, availability of information on RES in Russia. According to the Russian law renewable energy sources include energy of the sun, wind, hydro/waters (including sewage) excluding cases when such energy is used at storage hydroelectric power stations tidal energy, wave energy (at water bodies, rivers, sees, oceans), geothermal energy, low potential heat earth/air/water energy with use of special heat carrier technologies, biomass incl. specially grown plants/trees, industrial and consumer waste, excl. fossil fuel waste, biogas, landfill gas, coal exploration gas7. Large-scale power including power generation units with capacity over 25 MWt is usually not considered when talking about renewable energy sources or non-traditional energy sources8.
A.E.Kopylov, Russian Wind Industry, the Past and the Future, <http://rawi.ru/media/Text_files/Russia%20Wind%20for%20IndiaEdit_cleanfinal.pdf>. 2 Minenergo data on renewables in Russia, <http://minenergo.gov.ru/activity/vie/>. 3 RF Government Decree of 8.01.2009 N 1-r approving 'Key state policy lines for higher energy efficiency of power generation based on use of renewable energy sources for the period until 2020'; par.10 RF Government Decree of 13.11.2009 N 1715-r 'On the energy strategy of Russia for the period until 2030', law database ConsultantPlus. 4 State corporation dealing with production and export of hi-tech technologies. 5 Russia's largest hydroelectricity company. 6 Russia, Germany to set up JV to produce windmills Russian Official, RIANovosti, 15.07.2010, <http://en.rian.ru/business/20100715/159822559.html>. The text of the agreement is not available, but according to representatives of Siemens a joint venture will be created in order to produce wind turbins for wind power generation in the Volga basin. The agreement is of strategic character and the foreign investor plans no concrete actions until all necessary legislation is in place, Siemens' main purpose being to pioneer the RES market in Russia ahead of other foreign investors. 7 th Federal Law of 26.03.2003 No. 35-FZ (5 version of 4.11.2007) on Electric Power Industry, art.4, law database ConsultantPlus. 8 See more in A. Belyi, Indra Overland, New narratives on Russian renewable energy policy, 594 Revue de lEnergie 99105 (2010), 102.
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There is no updated and coherent official data on the installed capacity of RES in Russia. For example the most recent available official power balance of the Russian Federation dates back to 2007 and indicates combined annual consumption of hydropower and RES (22,067 thousand tn of oil equivalent) with RES including both hydro and wind generation.9 The Ministry of energy of Russia (Minenergo) provides monthly statistics on production of oil, gas, coal and electricity, but the latter is not differentiated based on sources10. The technical potential of electricity from hydropower is 50 TWh with only 89 small hydropower plants (HPPs) existing with combined capacity of 550 MWh and is mostly attributed to Northern Caucasus and Kamchatka11. The technical potential for wind power is about 81 TWh and is located mostly in the remote Northern areas of Russia, coastline of Kamchatka, Sakhalin and Chukotka12. At the moment there is just one functioning wind farm of 5.1 MWh capacity. The technical potential of solar power in Siberia (East and Far East) is estimated to be 100 TWh annually13. There is also huge geothermal potential in the Caucasus, Krasnodar, Kamchatka, Kurils, but currently the installed capacity only counts 80 MW14. Russia actively collaborates with the EU on the RES and energy efficiency issues within the TACIS framework, e.g. there have been studies on what RES have most potential in different regions in Russia15. Many of the areas with high RES potential are remote isolated areas which are not connected to the Unified energy system of Russia (UES) and are excluded from WEPM. 1.2. ENERGY SECURITY ISSUES Russian electricity system faces many problems like energy deficit, worn infrastructure, black-outs with severe frosts and unusual summer heat worsening the situation. Regular black-outs have become an issue for common Russian citizens and a sad reality in remote areas. 2010 was especially fruitful: i.e., regular black-outs in St. Petersburg at Vostochnaja and Chesmenskaja power substations left neighbourhoods, traffic lights, subways, airport and hospitals with no electricity on 10.12.201016, 20.10.201017, 3.09.201018, 20.08.201019 and 4.06.201020. Among the reasons were technical default of equipment at Vostochnaya power station, technical disruption in the supply, poor state of insulation of grids and cables, etc. While there is a big question mark regarding energy security of major Russian cities, the situation in regions is much worse. Availability of local RES-based power stations could have changed the situation for the better, especially in the remote and isolated areas like the Russian Far East.

RF Government Decree of 27.12.2010 No. 2446-r approving the State Programm Energy Conservation and Higher Energy Efficiency for the Period until 2020, law database ConsultantPlus. 10 Minenergo February 2011 Statistics, <http://minenergo.gov.ru/activity/statistic/6950.html>. 11 See Belyi, supra note 8. 12 Ibid. 13 Ibid. 14 Geotermal power industry, Wikipedia, <http://ru.wikipedia.org/wiki/%D0%93%D0%B5%D0%BE%D1%82%D0%B5%D1%80%D0%BC%D0%B0%D0%BB%D1 %8C%D0%BD%D0%B0%D1%8F_%D1%8D%D0%BD%D0%B5%D1%80%D0%B3%D0%B5%D1%82%D0%B8%D0%B A%D0%B0>. 15 Renewable energy sources Minenergo and TACIS (EU), Ecolife, <http://www.ecolife.ru/zhurnal/articles/635/>. 16 Blackout, <http://lenta.ru/news/2010/12/10/blackout/>. 17 Power, <http://lenta.ru/news/2010/10/20/power/>. 18 Blackout, <http://lenta.ru/news/2010/09/04/blackout/>. 19 Versions, <http://lenta.ru/news/2010/08/23/versions/>. 20 Energize, <http://lenta.ru/news/2010/06/04/energize/>.

1.3. ELECTRIC POWER INDUSTRY REFORM (EPIR) OVERVIEW The electric power industry reform lasted a whole decade (2000-s). During the decade a vast law corpus developed21. The reform was driven by a number of facts: technological development lag, lack of economical incentives and planning in energy generation and energy consumption, critical situation in energy supply in certain regions, widespread nonpayment, lack of informational and financial transparency, entry barrier for new independent market players, worn infrastructure and need of investments22. In 2000 electric power industry was characterized by a vertically integrated structure with all the chain elements (energy generation, energy transmission, distribution, dispatch operational management (ODM), supply, maintenance services) managed by one entity - the state monopolist OJSC RAO UES of Russia (RAO UES). In 2001 a piece of legislation was adopted providing for a gradual structural reform of the electric power industry and formulating the reform objectives and other key issues23.It was decided to keep the transmission and ODM monopolized24 and to liberalize the chain elements with competition potential (generation, supply, service). EPIR envisaged reorganization of RAO UES and liberalization of the market rules along with introduction of stronger state control in certain areas. In 2007-2008 the state monopolist RAO UES underwent complex reorganization25 as a result of which many new entities that constitute the current organizational structure26 appeared. Newly formed companies were to specialize on certain types of activities (generation, transmission, etc.) and to accumulate related assets, currently they include: generation companies (OGKs27, TGKs28, HydroOGK (RusHydro), Energoatom, etc.); supply companies, including guarantee suppliers (providers of last resort) and independent suppliers; transmission (the Federal grid company) and distribution grid companies (interregional distribution grid companies, territorial grid companies); maintenance and service companies; RAO Energy system of the East; Isolated energy systems including Kamchatka, Sakkhalin, Magadan, Chukotka and Yakutija systems; ODM entities (System Operator and its units); commercial infrastructure of WEPM and WEPM managing bodies (Market Council and WEPM commercial operator).

Legislative ban on simultaneos performance of naturally monopolistic (transmission, distribution and ODP) and potentially competetive activities (generation and sale-purchase (supply)) was

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Currently legislative basis of the electric power industry includes 11 federal laws, 78 government decrees, 27 government regulations and several president decrees. 22 See the detailed reform analysis at <http://www.rao-ees.ru/ru/reforming/reason/show.cgi?content.htm>. 23 RF Government Decree No.526 of 11.07.2001 approving the Key lines of the reforming of the electric power industry of the Russian Federation, law database ConsultantPlus. 24 RF Federal Law of 17.08.1995 No. 147-FZ On Natural Monopolies, art.4, law database ConsultantPlus. 25 Reorganization of RAO UES of Russia required introducing amendments into the joint stock companies legislation providing for possibility of reorganization in the form of a separation or a spin-off carried out simultaneously with a merger or an acquisition. 26 See more details in A.Y. Arkhipchenko, Organizational structure of the electric power industry of Russia: the outcome of the reform, 1 Energy law (2009). 27 Each OGK incorporates heat power plants of the national significance located in different regions of Russia. 28 A TGK is composed of several stations of neighboring regions.

introduced29. In 2006 new rules for WEPM and new rules for retail energy market came into force, regulated agreements between customers and generation companies were introduced and the spot market was launched. The main purpose of the retail market rules was to ensure steady liberalization of retail markets simultaneously with liberalization of the wholesale market and securing supply of energy to population at regulated tariffs. Initially it was provided that by 2011 regulated agreements were to be replaced by free (non-regulated) ones, but this has not been achieved yet. Currently the russian electric power industry consists of Unified energy system of Russia (UES, WEPM and retail markets) and isolated electric power systems that are not connected to the UES. 1.4. OTHER ISSUES Currently there is quite a large gap between the price of a MWh generated from non-RES and a MWh generated from RES: 27 EUR/MWh against 60 EUR/MWh30, therefore RES-based power generation requires solid state support, therefore RES-based power generation requires solid state support. Among the issues driving the promotion of RES in Russia are also such issues as international climate change regime and reduction of the natural gas share in the Russian energy mix for the sake of increasing the export potential of hydrocarbons31 and feeding the federal budget. Saving hydrocarbons for export is an important economic goal: the State Energy Efficiency Program highlights an opportunity of gaining 2 700 bln. Rubles (appr. 95 bln. USD) from the sale of the preserved hydrocarbons during the time period from 2011 till 202032. One of the ways of achieving higher energy efficiency is promotion of renewables in electric power industry.

2. LEGAL FRAMEWORK FOR PROMOTION OF POWER GENERATION WITH RES 2.1. RES LEGISLATION BEFORE EPIR Basically before the beginning of the 21th century renewable energy sources were ignored by the Russian energy policy and the Russian energy legislation. In 1997 first RES draft law appeared providing for the state obligation to spend 3% of total state investments on promotion of RES in Russia, but it was dismissed by the countrys president of that time33. In 2001 a federal special purpose program (hereinafter FSPP) emerged aiming at higher energy safety and sustainable development of energy industry with reduced impact on the environment. Among the tasks to be solved on the way to the sustainable energy industry were promotion of use of non-traditional energy sources and of manufacturing low-capacity energy installations and units run on non-traditional energy sources (i.e. hydropower, solar, wind and geothermal power)34. The program was laid aside in 2006 and did not achieve its purpose35.

Federal Law of 26.03.2003 No. 36-FZ on the Specifics of the Functioning of the Electric Power Industry during the Transition Period, on the Introduction of Amendments into Certain Legislative Acts of the Russian Federation and on Declaring Invalid Certain Legislative Acts of the Russian Federation in Connection with Adopting the Federal Law on the Electric Power Industry, p.14 art.6, law database ConsultantPlus. There are some exceptions to this rule. 30 See Belyi, supra note 8, at 101. 31 Ibid, 100. 32 See supra note 3. 33 See Kopylov, supra note 1. 34 RF Government Decree of 17.11.2001 No 796 on Federal Specific Purpose Program Energy Efficient Economy for 2002-2005 and with outlook to 2010, law database ConsultantPlus. 35 RF Government Decree of 17.10.2006 No. 1446-r on Completion of Realization of the Federal Specific Purpose Program Energy Efficient Economy for 2002-2005 and with outlook to 2010, law database ConsultantPlus.

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The next policy document was National Energy Strategy 2003 that bullet-pointed strategic goals in the area of RES development36. In the following years Russian policymakers and legislators were mostly occupied with the electricity market reform and privatization of the electricity giant RAO UES. The first legislative definition of renewable energy sources appeared during the reform process in the late 2007 in the fifth version of the new electric power industry law37. The next hot issue that produced a lot of hot air in Russia was climate change: joint implementation projects had quite an unfortunate history in Russia. Then came the energy efficiency concept, which seems to be dominating at the moment. Not only energy efficiency was recognized as an additional source of energy and energy security measure, but also as a promising export opportunity38. Promotion of RES is seen as one of the ways of achieving higher energy efficiency. 2.2. REVIEW OF CURRENT LEGISLATION AND INCENTIVES AVAILABLE The Russian legislation currently provides for the following RES promotion mechanisms: state subsidies for minor generators (up to 25 MWt capacity), price mark-ups for electricity produced with RES, obligation to purchase certain amount of electricity produced with RES. There is also a socalled green certificate system that by means of special qualification procedure enables RESoperating generators to participate in the above mentioned mechanisms. Unfortunately building of none of these has been fully accomplished and many legislation pieces are still missing. 2.2.1. Green certificate scheme (GCS) In the autumn of 2008 the framework of the Russian so-called green certificate scheme was put in place: the MC adopted the qualification rules in accordance with the Government guidelines and set up the register of the green certificates39. The main purpose of the green certification is to provide effective system for calculation of the amounts of electric power produced using RES. Certification allows to prove that certain amounts were produced using RES and the certificate holder is eligible to state RES-support mechanisms. Under the Russian law a power generator in order to become entitled to state support has to undergo the qualification procedure, as a result of which the generator receives the status of a qualified power generating object functioning based on the use of renewable energy sources (further a RES-based power generator). Upon the completion of qualification procedure the qualified RES-based power generator is included into the register of qualified generators and a qualification certificate is issued. In case of change of title to the generation object the certificates can be transferred to the new owner of the generation object. The entity entitled for qualification of the RES-based power generating objects is the MC. Currently for a power generation installation to qualify for a RES-based power generator certain criteria have to be met: only RES or RES in combination with other energy sources are used for power generation; the power generation unit is operational (i.e. is turned into operation mode, is not under repair or out of service)40,

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RF Government Decree of 28.03.2003 No.1234-r on Energy Strategy of Russia for the Period until 2020 (lost effect in view of RF Government Decree of 13.11.2009 No. 1715-r in force staring from 13.11.2009) , law database ConsultantPlus. 37 See supra, note 7. 38 See Belyi supra, note 8, at 100. 39 RF Government Decree of 3.06.2008 No.426 approving Rules of qualification of power generating objects functioning based on the use of renewable energy sources; MC Regulations on qualification of power generating objects functioning based on the use of renewable energy sources, and on keeping the register of qualified generating objects, law database ConsultantPlus. 40 A generator under repair cannot be qualified; however, an eligible generator once qualified cannot be deprived of its status if at the moment of the planned requalification it is found in the state under repair.

the power generation unit has been connected to electric grids of a grid company and equipped with metering devices in accordance with the effective rules and the power generation unit has been included into the RES generation objects allocation scheme approved by the Energy Ministry of Russia.

The last point was introduced into the qualification rules in the beginning of 2010 and has raised many concerns among RES-E generators41. The issue is that the RES generation objects allocation scheme does not exist, therefore no RES-based generator can get included into the nonexistent scheme, hence no RES-based generator can get qualified for the purpose of use of the state support mechanisms. Not surprisingly, as of 1.04.11 there are no qualified RES-based generation object in the register run by the MC42. Another element of the green certificate system is the electronic register of issue and clearance of RES certificates run by MC43. Basically a green certificate stands for a record in the MC register confirming the fact of generation of a certain amount of electric power using RES by a specified generating object. Every generating object has its section in the register, at the same time accounts are opened for certificate holders/recipients. This allows for transfer of certificates from the initial recipient to another one in the case of the change of ownership to the generating object. The important issue is that certificates are granted based on the information received by the SO in accordance with the effective WEPM rules44 and do not require filing any applications on granting certificates. That means that in order to be assigned green certificates, entitling a qualified generator to mark-up price profits (see further), the generator has to become a participant of WEPM. There is a general rule unified rule for all potential WEPM participants: in order to join the WEPM a generators capacity must be over 5MWh. This rule equally applies to qualified RESbased generators. At this point legislator has stopped elaborating the GCS framework: no detailed rules for relations, calculations and certificate clearance between the SO, qualified RES-based power generators and other wholesale market participants have been developed. 2.2.2. State support mechanisms Qualified RES-based power generators are entitled to various state support mechanisms, including the following. Price mark-up The first and the main financial support mechanism provided for RES is the mark-up to the wholesale market price of electric power. The price of electric power generated with RES is determined by adding the mark up (to be defined in accordance with the government-set procedure) to the equilibrium price of the wholesale market. The mark up is to be calculated based on the indicators of RES-based power generation set by the state energy efficiency policy lines. Current the plan is to achieve the indicator of 2.5% in 2015 and 4.5% in 2020. Although the target is rather modest, it is hard to expect itll be met. It is logically to expect that the size of the price markup will depend on the type of the RES used in order to generate electricity, however, this remains unclear.

Unprecedented decision of Minenergo is not for wind power markets good, <http://rawi.ru/media/Text_files/Unprecedented%20decision%20of%20Minenergo.pdf>. 42 Information subject to disclosure by MC at <http://www.npsr.ru/informationdisclosure//SR_0V009323>. 43 Minenergo Order of 17.11.2008 No.187 on the Procedure of Keeping the Register of Issue and Clearance of Certificates, Confirming Amounts of Electric Power Generated at Qualified Generating Objects Functioning Based on the Use of Renewable Energy Sources, law database ConsultantPlus. 44 RF Government Regulations of 27.12.2010 No.1172 approving new rules of the wholesale electric power market, law database ConsultantPlus.

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In theory, once missing regulation in place, the mark-up mechanism should function as follows. A qualified RES-based generator becomes a WEPM participant, generates and sells energy on the one day ahead market, complies with information report requirements. First part of its profit will be from the sale of energy at the balanced WEPM price. Then the SO, based on the information received, counts the amount of certificates assigned to the generator in accordance with the amounts of electric power produced and multiplies this number to the fixed price mark-up, as a result receiving the total amount to be additionally paid to the qualified RES-based generator. The total price mark-up amount will be distributed between all WEPM purchasers in proportion to the electric power consumed and then included into their clearing accounts45. Subsidy for compensation of connection-to-grid expenses The second financial support mechanism is provision of federal budget subsidies for the purpose of compensation of expenses incurred in order to cut in to grids by qualified generators of installed capacity not exceeding 25MWt. The aim of this mechanism is to promote small RES generation. At the same time wind generation experts say the capacity limitation of 25MWt undermines the usefulness of this incentive, since most of the developed wind farms are not covered46. After two-year waiting period Government finally adopted the subsidy eligibility criteria47. The criteria that took 2 years to appear are in the end very basic, i.e. a RES generator is eligible to the state subsidy is it is 1) qualified RES-based generation object; 2) with installed capacity of no more than 25 MWt; 3) was put into operation after entry of the new legislation into force; 4) the title owner is not undergoing any insolvency or liquidation procedure. Obligation (of market participants) to purchase certain volume of RES generated electric power This mechanism has not been activated yet. The law on electric power provides for the possibility of the government to determine such an amount (or delegate one of the empowered state bodies to determine it). Once the amount of RES-E is determined the MC will be able to work out relevant amendments to the conditions of the template agreement on connection to the wholesale market trade system to be concluded with relevant parties. Similar obligation is imposed on the grid organizations, who are obliged to compensate their losses in electric grids by means of acquiring power generated by qualified RES-based generators48. Obligation of a grid organization to by RES electricity is limited to electricity produced by a qualified RES-based generator connected to the grid of this grid organization. 2.3. WEAK POINTS OF THE CURRENT LEGISLATION The main problem with the mark-up mechanism is delay in adoption of the exact figures by the Government. The protraction with approval of the amounts of the mark-ups to market price is due to lack of consent as regard to mark-up structure, namely whether there should be a unified mark-up or it there should be graded mark-up system based on RES-type, whether the mark-up it should be tied to the fluctuations of market prices; the range of the mark-up value is also widely discussed49. Another issue of the current RES support scheme is its narrow application: the mark-up system only covers the free-price zones of the wholesale power market meaning that many areas with high RES potential are left overboard50.

45 A.E. Kopylov, Further development of legal framework for renewable energy sources in Russia, law database ConsultantPlus. 46 See Kopylov, supra note 1. 47 Government Decree No 850 of 20.10.10, , law database ConsultantPlus 48 See supra note 7. 49 See Kopylov, supra note 45. 50 A.E.Kopylov, Supporting renewable energy in Russia: steps to follow, <http://rawi.ru/media/Text_files/Kopylov_legislation_eng.pdf>.

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3. NEW MODEL SPECULATIONS The state support system for RES was introduced in 2007 but has not yet started to function, which provides space for new draft laws, promotion schemes and related speculations. 3.1. MARKET INITIATIVES In January 2011 a Moscow-based supply company Mosenergosbit (sales to consumers energy on WEPM and retail markets) launched its own RES generation program Green energy, which has hastilly been called by media an alternative to the state promotion of RES51. However, the scheme is not what it seems to be. The key point of the Mosenergosbit scheme is conclusion of RES-power sale purchase agreement directly between a generation company and a consumer, Mosenergosbit being an intermediary and supply guarantor. Power is claimed to be generated using two types of RES small-scale hydro and combustion (burning waste). However, the two hydro-power generators mentioned in the press release, OAO RusHydro and OAO TGK, by no means fall within what is considered small-scale hydro. Power from waste combustion in its turn has been determined by the Russian WWF and Greenpeace offices as significantly less effective and not so environmentally friendly (high CO2 emissions since plastics are burned) as compared to waste recycling52. 3.2. POLITICAL ISSUES There is also an amazing discordance in the vision of the RES future in Russia between different political forces. Whereas the president requests to promote use of RES, the Russian energy minister does not seem to be very enthusiastic about it. According to his speach in July 2010 RES can only be used locally in Russia and never on the large scale53. Notwithstanding the speech and just as he spoke Later in December 2010 he confirmed his opinion54 and, moreover, claimed that the envisaged by the current legislation price-mark up mechanism despite attracting investment in the beginning would lead to rise of tariffs by 10-15% by 2020. In view of the forthcoming election such a perspective can be negatively received by the population. Therefore most recent RES promotion related initiatives are draft laws amending the mark-up system55. 3.3. DRAFT LAWS The explanatory note to one of the draft laws claims that in order to secure a new mechanism of state support of RES-based generation it is suggested to remove the obligation of electricity buyers at the wholesale market to purchase electricity generated with RES. The amendment was adopted, immediately cutting off one of the key elements of the current RES-promotion model. The second draft law imposes obligation on RES-based generators with capacity of/over 25 MW to sell electricity (power) only at the wholesale market. Currently it seems that such an amendment might
Mosenergosbit to deliver green power to consumers, Kommersant-Online, 18.01.2011, <http://www.kommersant.ru/doc/1569522>. 52 Ibid. 53 Russia has no plans for large-scale renewable energy projects energy minister, RIANovosti, 15.07.2010, <http://en.rian.ru/russia/20100715/159820652.html>. 54 Protocol of the answers of energy minister Mr. Schmatko during the Government Hour on 8.12.2011, <http://www.gruzdev.ru/duma/government/2010/12/08/government_10.html>. 55 Draft Law No. 439040-5 of 13.10.2010 and Draft Law No. 49789-5 of 7.02.2011, law database ConsultantPlus.
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only lead to further lessening of state support for RES development in remote areas, which infrastructure is not connected with the one of the UES.

CONCLUSION Russia has a very promising potential for RES based power generation. Many opportunities lie exactly in the areas, where they are most needed due to remoteness and absence of connection to the Unified energy system, this areas including Kaliningrad, Sakhalin, Kamchatka, Chukotka and Magadan area, Arkhangelsk and Murmansk areas. However, the current government support system prevents them from enjoying it because of, first, its limited application (e.g. small-scale generation and retail power markets are ignored) and, second, current fragmented and underdeveloped state. It seems that the main issue with promotion of RES in Russia is not due to lack of technologies or knowledge but due to lack of political will, coordination and planning as shown by unjustified protraction in adoption of necessary bylaws for the 2007 RES legislation. Without adoption of bylaws, providing figures and details, the RES promotion policy lines remain declarative and the already established state RES support framework remains inapplicable. Plans of Siemens and plans of some major national energy companies to independently invest in promotion of RES imply that there is a future for RES in Russia. Driven by the administrative force pushing the modernization policy56, changes are bound to take place.

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See more about Russia's modernisation campaign in D. Medvedev, Go Russia!, 10.09.2009 at http://eng.kremlin.ru/news/298; Medvedevs order to prepare new plan on modernization of the electric power market, available at http://www.rian.ru/economy/20110311/344805416.html, last visited on 16.05.2011.

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REFERENCE LIST 1. Primary sources 1.1. Federal laws RF Federal Law of 17 August 1995 No. 147-FZ On Natural Monopolies, law database ConsultantPlus. RF Federal Law of 26.03.2003 No. 36-FZ on the Specifics of the Functioning of the Electric Power Industry during the Transition Period, on the Introduction of Amendments into Certain Legislative Acts of the Russian Federation and on Declaring Invalid Certain Legislative Acts of the Russian Federation in Connection with Adopting the Federal Law on the Electric Power Industry, law database ConsultantPlus. RF Federal Law of 26.03.2003 No. 35-FZ on Electric Power Industry, law database ConsultantPlus, law database ConsultantPlus. Draft Law No. 439040-5 of 13.10.2010, law database ConsultantPlus. Draft Law No. 49789-5 of 7.02.2011, law database ConsultantPlus.

1.2. Bylaws RF Government Decree No.526 of 11.07.2001 approving the Key lines of the reforming of the electric power industry of the Russian Federation, law database ConsultantPlus. RF Government Decree of 17.11.2001 No 796 on Federal Specific Purpose Program Energy Efficient Economy for 2002-2005 and with outlook to 2010, law database ConsultantPlus. RF Government Decree of 17.10.2006 No. 1446-r on Completion of Realization of the Federal Specific Purpose Program Energy Efficient Economy for 2002-2005 and with outlook to 2010, law database ConsultantPlus. RF Government Decree of 3.06.2008 No.426 approving the Rules of qualification of power generating objects functioning based on the use of renewable energy sources, law database ConsultantPlus. RF Government Decree of 8.01.2009 N 1-r, approving Key state policy lines for higher energy efficiency of power generation based on use of renewable energy sources for the period until 2020', law database ConsultantPlus. RF Government Decree of 13.11.2009 N 1715-r on the Energy Strategy of Russia for the Period until 2030, law database ConsultantPlus. RF Government Decree No 850 of 20.10.10, law database ConsultantPlus. RF Government Decree of 27.12.2010 No. 2446-r approving the State Program Energy Conservation and Higher Energy Efficiency for the Period until 2020, law database ConsultantPlus. RF Government Regulations of 27.12.2010 No.1172 approving new rules of the wholesale electric power market, law database ConsultantPlus. Minenergo Order of 17.11.2008 No.187 on the Procedure of Keeping the Register of Issue and Clearance of Certificates, Confirming Amounts of Electric Power Generated at Qualified 13

Generating Objects Functioning Based on the Use of Renewable Energy Sources, law database ConsultantPlus. MC Regulations on qualification of power generating objects functioning based on the use of renewable energy sources, and on keeping the register of qualified generating objects, law database ConsultantPlus.

2. Secondary sources 2.1. Articles A.Y. Arkhipchenko, Organizational structure of the electric power industry of Russia: the outcome of the reform, 1 Energy law (2009). Belyi, Indra Overland, New narratives on Russian renewable energy policy, 594 Revue de lEnergie 99-105 (2010), 102. A.E.Kopylov, Russian Wind Industry, the Past and the Future, <http://rawi.ru/media/Text_files/Russia%20Wind%20for%20IndiaEdit_cleanfinal.pdf>, last visited on 16.05.2011. A.E. Kopylov, Further development of legal framework for renewable energy sources in Russia, law database ConsultantPlus. A.E.Kopylov, Supporting renewable energy in Russia: steps to follow, <http://rawi.ru/media/Text_files/Kopylov_legislation_eng.pdf>.

2.2. Internet Minenergo February 2011 Statistics, <http://minenergo.gov.ru/activity/statistic/6950.html>, last visited on 10.03.2011. Ministry of Energy data on renewables in Russia, available at the official web site of the Ministry at <http://minenergo.gov.ru/activity/vie/>, last visited on 16.05.2011. Geotermal power industry, Wikipedia, <http://ru.wikipedia.org/wiki/%D0%93%D0%B5%D0%BE%D1%82%D0%B5%D1%80%D0 %BC%D0%B0%D0%BB%D1%8C%D0%BD%D0%B0%D1%8F_%D1%8D%D0%BD%D0% B5%D1%80%D0%B3%D0%B5%D1%82%D0%B8%D0%BA%D0%B0>, last visited on 16.05.2011. Renewable energy sources Minenergo and TACIS (EU), Ecolife, <http://www.ecolife.ru/zhurnal/articles/635/>, last visited on 16.05.2011. Unprecedented decision of Minenergo is not for wind power markets good, <http://rawi.ru/media/Text_files/Unprecedented%20decision%20of%20Minenergo.pdf>, last visited on 16.05.2011. Information subject to disclosure by MC at <http://www.npsr.ru/informationdisclosure//SR_0V009323 >, last visited on 16.03.2011. Russia, Germany to set up JV to produce windmills Russian Official, RIANovosti, 15.07.2010 at <http://en.rian.ru/business/20100715/159822559.html>, last visited on 16.05.2011. 14

Mosenergosbit to deliver green power to consumers, Kommersant-Online, 18.01.2011, <http://www.kommersant.ru/doc/1569522>, last visited on 16.05.2011. Russia has no plans for large-scale renewable energy projects energy minister, RIANovosti, 15.07.2010. <http://en.rian.ru/russia/20100715/159820652.html>, last visited on 16.05.2011. Protocol of the answers of energy minister Mr. Schmatko during the Government Hour on 8.12.2011, <http://www.gruzdev.ru/duma/government/2010/12/08/government_10.html>, last visited on 16.05.2011. D. Medvedev, Go Russia!, <http://eng.kremlin.ru/news/298>, last visited on 16.05.2011. Medvedevs order to prepare new plan on modernization of the electric power market, <http://www.rian.ru/economy/20110311/344805416.html>, last visited on 16.05.2011. RAO EES official website, <http://www.raoees.ru/ru/reforming/reason/show.cgi?content.htm>, last visited on 16.05.2011. Blackout, <http://lenta.ru/news/2010/12/10/blackout/>, last visited on 16.05.2011. Power, <http://lenta.ru/news/2010/10/20/power/>, last visited on 16.05.2011. Blackout, <http://lenta.ru/news/2010/09/04/blackout/>, last visited on 16.05.2011. Versions, <http://lenta.ru/news/2010/08/23/versions/>, last visited on 16.05.2011. Energize, <http://lenta.ru/news/2010/06/04/energize/>, last visited on 16.05.2011.

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