Solar panels in Siberia? How Ukraine and Russia could lead the PV pack

Solar panels in Siberia may be an odd proposition, but decades of underinvestment makes modernising eastern Europe’s Cold War-era grid an attractive prospect for investors. But how accessible to foreign companies those markets will be is an open question.

At this summer’s Intersolar conference in San Francisco, Tomasz Slusarz from Solar PV Consulting in Brussels said that Ukraine presented a more promising outlook for outside investors than its larger neighbour Russia. Ukraine has an ambitious renewables target of 30% by 2015, triple the level in 2010, according to Reuters.

“Ukraine would like to be more independent from Russia in terms of energy supply and this also helps politicians to develop solar energy,” said Slusarz. “This is a very young market, but Ukraine has excellent conditions for PV. By 2015 they expect around 100MW of solar power and the target is around 1GW from PV.”

But politics and lack of local competencies are just two pitfalls for investors, he said.

“In Ukraine, there is a domestic company requirement and up until now there was not a lot of industry in the country so it was difficult to fulfill this. There is also no experience with the market. Even if there is a lot of expectation, experience is needed. Even when there is a good law, you need time to kick off the market.”

Slusarz also euphemistically approached the subject of good political connections in Ukraine.

“A lot of big players like Sharp are very close to the market there. Their brands are well recognized there they are trying to get good connections to develop this market. A lot of companies are now going to Ukraine to develop the opportunities. If they find good partners and understand the way to make business there the market can grow.

“The main players on the Ukrainian markets are people who have good connections with the power companies. Also in Ukraine it’s good to have good connections with the right people and very often it’s very hard to start businesses. Very often you have to find a partner in the country who has good connections and then you can start the business.”

In Russia, said Slusarz, although the potential for PV was good, cheap energy and lack of policy implementation were barriers. “Russia is the world’s biggest country -13,000km – with the biggest distance between borders. There are also a lot of areas with good insolation – but there is no market yet.”

“A year ago I would have said that we should not expect more than 200MW by 2020. However, there is a decree of the government which sets targets - but there are not yet targets for PV. It’s very difficult to fix anything in Russia.

“In Russia, politicians act like firefighters - if there’s no problem they don’t deal with it.”

But Slusarz forecast more progress. He said: “We’ve been trying to set up an association since 2005 – this year we finally succeeded. The association is working with the government to kick off the domestic market.”

But he said that investment would come from within Russia, where the market could end up being closed to foreign investors.

However, what is really important is that Russia is investing a lot of money. Renova group is the 48% of Oerlikon is investing a lot of money in the upstream and have established a $200m fund to invest in R&D.

Besides that, the government has created a joint venture fund which is investing in the solar PV industry.

“They also realize it doesn’t make sense to compete on the foreign markets. It would also be good to create some local market for themselves to have the market for their own companies.”

Interest may be further increased with one the country’s first solar PV conferences in Moscow next year.

But the advantage of still having a such a centralized economy in such a large country are clear - when Russia decides to do something, it does it on a large enough scale to make a huge difference. But foreign investment may be frozen out as Russia has done in the fossil fuel industry and decentralizing power sources is a form of decentralising power.

Slusarz said: “Russia has big market potential but – when they deal with something they deal with it in a very serious way. But I’m not sure if it will be a closed or open market. This is the discussion which I think we will be helping with.”

“There is also a very big lobby of utilities which are connected to the government and they do not support solar PV. It’s not so good for them. If we decentralise energy sources we are decentralizing the power…”

Ukraine could be more promising but risky, said Slusarz: “Ukraine is a very promising market although very risky business as a lot of investment is related to people from the government so I expect that they will try to keep for themselves as much as they want.

“There’s also quite a big financial risk far higher than in the western EU. When you speak with the financial institutions you cannot get good financing rates like you can in the western EU of 2-3%.”

Solar PV and the view of feed in tariffs from eastern Europe

When we hear about feed in tariffs in the PV solar industry in Europe, we normally think about Germany’s massively successful scheme. But we don’t hear much from the new member states in the EU.

At this summer’s Intersolar conference in San Francisco, Tomasz Slusarz from Solar PV Consulting in Brussels gave an insightful, and sometimes amusing, summary of the state of the market.

The Czech Republic’s approach to feed in tariffs is a textbook example of how not to run a scheme, he said.

“Until 2007, markets in the NMEs were very small. We saw significant growth in 2009 and 2010. In 2011 we expect 3GW cumulative capacity in this market which means 700MW-800MW installed in these countries.

“But the growth was only thanks to the Czech republic. The market grew during two years. But the market collapsed totally. 10MW were installed in 2011 only. We expect this amount next year too.”

The story of solar in the Czech Republic is a cautionary tale. Investors flocked to the Czech Republic with the promise of the highest feed in tariff in Europe. increased 17 fold between 2007 and 2009 because of a high feed-in tariff. Some 400 MW were installed in 2009 and threatened to overload their grid as the 13% renewables target was on schedule way before the 2020 deadline.

The market crashed when the government slashed FIT rates and has now turned to nuclear, said Slusarz.

“The Czech Republic now only has FITs for systems smaller than 30kW which means that the market is really slow,” said Sluzarz.

“The Czech Republic the market will be even lower - a very small market. The fact that there was such a [high] FIT that caused bad political willingness. Also, utilities are connected to the political decision makers in these countries.

“In the Czech republic they are pushing nuclear. This is one of the reasons why they are so against PV.”

But it didn’t stop there. The Czech government added a retroactive tax on power from projects commissioned between 2009 and 2010 over 30kW.

Investors were stung by the retroactive tax until 2013 of 26% for energy sold to the grid, 28% for energy consumed at source and 32% on carbon credits awarded to solar companies. The energy regulator also cut feed-in tariffs for 2011 by 50%, according to PV magazine.

The new policy had its desired effect. After the generous FIT scheme threatened to overwhelm the country’s relatively small grid, and spiked the solar market.

“In Europe the Czech government introduced a retro active tax on FIT which really diminished the credibility for NMSs for investors,” Slusarz noted.

Of his own country, Slusarz lamented: “I’m from Poland so I would love to give you good news from Poland, but unfortunately there is a big lobby for nuclear plants and no support for solar energy. However, I suppose that in 5 years the market can grow.”

Gas and nuclear may be top priorities for Poland's energy planners. Reuters reported last week that fossil fuel majors such as Chevron and Exxon Mobil are circling Poland which the US Energy Information Administration estimates has the largest proven shale gas reserves in Europe. 

In summarizing, Slusarz said that the “overheated” Czech Republic market had had its day. Slovakia had already installed 300MW of PV and was well on its way to saturation. Hungary is growing steadily at 1MW a year, while Romania remained a dark horse. Bulgaria had great potential but at above 1GW it would be difficult for the grid to have more PV installed and was vulnerable to speculation, he said.

“Poland has no market. When prices reach grid parity it will grow within 5 years maybe after it will one of the biggest markets but we have to wait because we don’t expect any support from the government.”

Even so, analysts from Executive Partners Group and Generali PPF Asset Management are advising energy investors to look east…

Jerry Brown's 12GW distributed solar target shouts FITs from the rooftops

Jerry Brown this week restated his campaign commitment to add 12GW of new distributed generation to California’s grid.

Most of it will have to come from rooftop solar. That’s not a problem in sunny California perhaps. But it’s a tall order given that the figures for distributed generation under the California Solar Initiative currently stand at around 1GW.

It’s also a challenge because solar developers in California are now tooled up for large utility-scale installations, fuelled mainly by the state’s aggressive Renewable Portfolio Standard target of 33% by 2020.

But Jerry Brown in his 70s, appears to be just as shrewd a governor as he was in the 70s, if recent accounts from renewables analysts are anything to go by.

The US has a lot to gain from looking at European models of renewable market growth, said Daniela Schreiber at EUPD Research.

At the recent Intersolar conference in San Francisco she gave a brilliant account of the risks of asymmetrical policy frameworks and argued that Renewable Portfolio Standards, with their emphasis on utility-scale installations, were not sufficient to create a mature solar market. As utility scale installations peaked, longer-term incentives were required to boost the domestic and commercial rooftop segment.

California still led the market in the US, with 30% of installed capacity, down from 80% in 2006, she said. Desert states in recent years have raced to install solar projects, and resulted in the massive growth for 2010 of 710% in New Mexico and 430% in Arizona.

But she said these growth rates were unsustainable and represented how little solar was installed to start with - New Mexcio only had 70MW of installed capacity in 2010, for example.

These growth rates can be partly accounted for by RPS targets, she said. But reliance on only RPS puts the market in a vulnerable position without long-term incentives.

“You may argue that this is not quite sustainable because if you look at what’s behind the framework certainly the RPS is important. But if you theoretically think what if that target is reached? What will be next? In the worst-case scenario, if no more improvements were done in terms of framework, that would mean that the market would die.”

Europe had learned some painful lessons she said: “This growth is not that sustainable. I can give you some European examples, Spain in 2008 was the market leader in terms of installed capacity. Once the target is reached, the market can be closed down. That’s what happened in Spain. Its market skyrocketed in the large-scale segment with average system sizes of 8MW and all of a sudden the government decided to stop it killed the market.”

The key to stabilizing markets would be smaller scale deployment, she said. “The residential and commercial rooftop segment however, is vital for sustainable market development. And this is something you can see in markets such Germany and Italy.”

Colorado had also succeeded in balancing its market too, she said. “Colorado has developed all segments – the residential segment and commercial segment, small and large-scale.

“But if you look at a less mature market in New Mexico there is huge growth in large scale segment.

“However, there is risk involved with large-scale only because smaller scale residential and commercial are considered to be more sustainable.”

She acknowledged that Europe faced pressing challenges over market stabilization now that FITs were winding down in Germany and other countries. But FITs still represent a proven stage in market development, but PV would become more of an energy generation proposition rather and an investment opportunity.

“Let’s face it we’re moving to a time when the feed in tariffs are slowing fading out. Where new market drivers come to the fore, self-consumption, energy production – not so much an investment case and that comes with much more market drivers that will impact the industry.

“There are a lot of question marks over what will happen in the next phase of PV meaning energy generation…”

Italy was still a growth area for FIT-driven projects, she said, despite fears the government was going to scale back quickly on its massively successful Conto Energia.

“Italy had a good last year in 2010. A lot of installed capacity - 2.5GW that will be connected this year plus they amended the Conto Energia. It came out a lot better than expected. So the limitation for the FIT is up to 1MW rooftop systems.

“That’s really good because it helps to address commercial segment – so the prospects for Italy are great. Natural conditions are great. FITs are still great so we still do see a good installed capacity in 2011. And also in 2012.”

Part of this growth was thanks to Italy cutting back on redtape – regulatory streamlining would be an easy improvement for something that the US which also needed to create more market certainty.

“Before there was a problem with the approval process, bureaucratic issues that hindered the market growth. In the US this is really a big, big problem. There are problems around financing and how stable is the framework?

Honestly, the FIT is the very important tool that totally fostered the market development in Europe. Regardless of the framework systems in the US which may absolutely work, it is important to provide security of a stable programme.

“In Europe, the PV market is moving toward commercial and residential as sustainable segments. Markets are so fragile and volatile because they depend on framework conditions in both Europe and the US.”

At his conference in LA this week, Brown railed against barriers to deployment of renewables such as permitting and public participation in democracy:

“There’s two regulatory hurdles - just getting a permit that could take a cookie cutter ordinance. Some 400 cities that could issue these permits which invite community participation. When you have 38m people [living in California] there is always going to be someone who says no.”

“Our system of participation means that any old fool can object to anything. But restricting participation has the feel of being undemocratic but you invite everyone no matter how benighted you wouldn’t get anything done.”

“[There is] a lot of distributed political power - we need base of arbitrary power to get over that.”

He vowed to make the regulatory authorities such as the California Public Utilities Commission, the California Independent Operator System and the California Energy Commission, work together to overcome problems such as complex and expensive permitting processes which varied in the state.

In San Jose a permit for domestic installation can be done over the counter, whereas the process was a lot longer and costlier in LA, Solar City pointed out during a panel discussion.

Brown said that the EU and China were leading on clean energy because its executive leadership were allowed “greater latitude” to execute and implement policies. 

“If you are in Germany or China there are more eyes on the prize because those countries allow executive leadership more latitude. So many people in California can block things.

“Someone has to think long term and someone has the authority to execute that doesn’t please the immediate news cycle.

“The challenge is -  can anyone anywhere in the public sector make a long term decision and make it stick?”

But I wonder if Brown has yet grasped the nettle: making any target stick, such as his ambitious 12GW goal, may well require new legislation… but that will take time.

Incentives through the CPUC may achieve quicker results… but can Brown convince the commission and utilities to make a common sense decision on FITs?

Californian utilities are having a FIT over good clean energy policy

When I first came to California to report on the clean energy industry a few months ago, I was surprised to find the absence of feed in tariffs, in particular for domestic users. 

I have since puzzled why the US was so resistant to such a simple system, which has created massively successful solar PV markets in Europe, particularly in Germany. Craig Lewis of the Clean Coalition has even had to resort to call FITs something else - clean programmes - to break through the mental block in the US.

I have not been able to find a good reason why European-style FITs don't fit in the US - until now. I don't so much have a definitive answer, but at least I have a plausible theory.

Nowhere on this earth could the reasons behind resistance in the US to FITs have been more obvious than at the Intersolar conference earlier this month. Armadas of European companies, analysts, academics and politicians flooded the halls of the Moscone Centre in San Francisco to win business and report from their own frontline on policies that create value for society, rather than just profits for investors.

The California Public Utilities Commission does some valuable work in shielding ratepayers from excessive price hikes from utilities. If only the UK’s Ofgem had similar powers. But Californian ratepayers pay the CPUC to act in their interest through a tariff on their monthly energy bills.

But I am increasingly uncertain that the CPUC is always acting in the interests of ratepayers, instead favouring close relationships with utilities, which is why it launches half-way house schemes such as reverse metering instead of hitting FITs with both barrels.

When people ask me about my experience of the US so far, I wonder whether Winston Churchill was thinking about the US (he was proudly half American, after all) when he described Russia as a riddle inside of an enigma.

My experience of California and the San Francisco Bay Area has been one of contradictions – bright sparks of first-world innovation that set the world alight start in Silicon Valley. It is exhilarating and a privilege to witness this clean energy evolution at the fringes as a journalist.

Yet it is difficult to stomach the desperate poverty of the street homeless. I would guess a disproportionately higher percentage of the city of San Francisco’s official population of 800,000 would classify as homeless or insecurely housed than other “world-class” cities.

But this rot that undermines social cohesion doesn’t stop at those who sleep next to their shopping carts on the pavements during rush hour. The multiplier effect of allowing these desperate souls to sleep rough resonates way beyond the blocks have turned into no-go zones such as the Tenderloin. For every drug addict, there are probably at least 3 dealers. For every dealer, there are probably three suppliers no doubt connected only by a few degrees of separation from the ugly and extreme violence that curses Mexico.

This is where I abandon liberal values and romantic notions of people choosing to live like this. I’m sure even Republican politicians would advocate zero tolerance of such visible social decay… as long as they don’t have to pay taxes to support it.

What has this got to do with utilities and their resistance to FITs? Put simply, it is just one example where commerce trumps common sense. 

The chasm between the elite of Silicon Valley and the homeless on the streets of San Francisco should be filled by good public policy. But problems over funding for the basic requirements of a healthy economy, such as mass transit, expose the failures of public policy to bridge the gap. The valley of death means something quite different for San Francisco’s homeless…

Policies are meant be designed to create value to society, not just individual companies. But in the US, there is an emphasis on policy and regulation that encourages commerce, rather than restricting it.

For the most part, the CPUC balances its regulations with the need for utilities to make money. But some critics have argued that the CPUC has gone too far.

The San Bruno disaster has already cost the "retirement" of PG&E’s chief executive Peter Darbee. And it might not end well either for Michael Peevey, the chief commissioner of the CPUC.

The investigation is ongoing. But has already thrown up some fairly awkward moments for Peevey’s CPUC regarding its oversight of utilities and why the commission hadn’t followed up when it granted PG&E $5m to fix the faulty stretch of pipeline that then blew up. The CPUC had previously not followed through with enforcement of fines after PG&E  was found at fault when a gas pipeline explosion killed one person in Rancho Cordera in 2008.

A few months ago the Bay Area Guardian ran an excellent piece of investigative work into the CPUC’s junkets overseas. I disagree that poachers never make good gamekeepers – who wants a regulatory authority run by someone who doesn’t understand the industry after all?

It is also of tangible benefit to send CPUC and utility executives to see how other jurisdictions in Spain and Germany for example structure their energy industry. God forbid they should never look beyond the walls of the Californian or US energy industry for examples of best practice. I don’t care how big the hotel pool is – but I do care about what they take away from meeting energy industry executives in Europe.

It also describes the California Clean Energy Fund as “obscure” which it transparently is not…

But I agree with the well-researched article that, given his background at Southern California Edison, that Peevey will have taken a generously sympathetic attitude towards utilities into his role at the PUC.

Light winds of change are blowing, however, after Governor Jerry Brown made his first CPUC appointment in March. Mark Ferron, has a background in financing so badly needed in the energy industry. And a fresh pair of eyes without direct experience of working in the energy industry may be an advantage.

Perhaps Brown is playing a shrewder strategy here. By keeping Peevey in post, he keeps him accountable for the San Bruno disaster.

Until there is fresh blood at the top of the CPUC, the state is unlikely to see any significant movement on FITs.

As Dan Adler, CalCEF president, said in the article:

"Utilities are effectively monopoly, or oligopoly, controllers of the energy industry," he said. "And they don't like outside innovation coming and disrupting their work process or their relationship with their customers."

Adler’s comments are a common refrain in the energy innovation sector in California and go a long way to explain why the CPUC has resisted at least domestic FITs on behalf of utilities … because they will sell less electricity and lose money.

Proponents of clean energy have told me that they still see themselves as electricity retailers and the electric vehicle is the best thing to happen to them since air conditioning. All electricity retailers want to sell their commodity regardless of how it's generated and a shift to renewables is a shrewd move to avoid the risk of the inevitable rising cost of carbon.

Utilities are fearful that their revenues will dwindle as US investors wake up to energy efficiency. And making money in a market where energy is cheaper than it is in most other rich nations is going to be a problem when more homes and businesses start producing their own electricity.

But utilities need to stand aside on FITs and allow the policy stimulus to do its work and prove that not all regulations are bad for business. More than that, good regulations should create businesses that bring benefits greater than the sum of their dividends to shareholders. 

More on FITs and the view from Europe tomorrow…