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…