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Energy Governance in Russia: From a Fossil to a Green Giant?

  • Veli-Pekka TynkkynenEmail author
Living reference work entry

Abstract

Russia is an energy giant in terms of both nonrenewable and renewable energy. Furthermore, Russia has large resources and the technologically relatively well-developed society and economy needed to foster an energy transition towards renewables and a low-carbon economy. Russia has a large bioenergy potential via its forest resources, but its vast territory also gives it the potential to develop wind, small-scale hydro, and solar and geothermal power in an economically viable way. Despite this promising starting point, high dependence on the extraction of natural resources – which defines the Russian economy and politics – is a factor delimiting the transition towards carbon neutrality and renewable energy. In particular, the central role played by oil and gas industries in the Russian economy and the strong linkages between political power and the fossil energy sector seem to be at odds with the energy transition objectives that have also been set in Russian official strategies since the early 2000s. The energy sector covers roughly a quarter of national GDP, and export of oil and gas alone accounts for one third to half of Russian state budget revenues. In this situation, defined by the realities of Russia’s political economy, it is difficult to set a fair playing ground for those industries and actors that make it possible to pave the way for an energy transition towards a low-carbon society. Despite this challenging political and institutional situation, Russia has officially promoted the use of renewables and an increase in its energy efficiency.

Keywords

Russia Renewable energy Path dependency Hydrocarbon culture Gazprom Rosneft Rosatom 

Introduction

Russia is an energy giant – and this applies to fossil and nonrenewable energy as well as renewable energy sources (RES). Furthermore, Russia has the large resources and technologically relatively developed society and economy needed to foster an energy transition towards renewables and low-carbon economy. Russia has a large bioenergy potential via its forest resources, which are the biggest in the world, but its vast territory also gives it the potential to develop wind, small-scale hydro, and solar and geothermal power in an economically viable way. Despite this promising starting point, a second glance reveals that high dependence on extraction of natural resources, which defines the Russian economy and politics, is a factor delimiting the transition towards carbon neutrality and renewable energy. Thus, the central role played by oil and gas industries in the Russian economy and the strong linkages between political power and the fossil energy sector seem to be, at least so far, at odds with the energy transition objectives that have also been set in Russian official strategies since the early 2000s. The energy sector covers roughly a quarter of national GDP, and export of oil and gas alone adds from one third to one half, depending on the year and thus on the price of oil, to Russian state budget revenues. In this situation, defined by the realities of Russia’s political economy, it is difficult to set a fair playing ground for those industries and actors that make it possible to pave the way for an energy transition towards a low-carbon society.

Despite this challenging political and institutional situation, Russia has officially promoted the use of renewables and increase of its energy efficiency. All the energy strategies that Russia has approved during the 2000s – in 2003, 2009, and 2017 – underline the necessity to increase energy efficiency in the Russian economy, from households to the public sector and industry. This plea for higher efficiency is in line with the economic rationale to benefit from the barrels and cubic meters of hydrocarbons used less in the Russian economy and allow these volumes to be sold on the international energy markets with a better premium than domestically. Moreover, energy efficiency aims to promote, at least on the discursive level, the deployment of RES, as renewables are also seen as a substitute – especially for oil and coal – in the domestic energy mix. However, this aim seems to be very difficult to meet even though the normative base for investing in renewable energy projects has been laid during the last couple of years, and there are even a few examples of successful RES projects carried out recently. Russia has all the resources needed to become a Green Giant, but at the moment, it is severely lagging behind all other major energy power centers of the world – EU, China, and the USA – in RES deployment. Finally, the proportional increases in RES utilization may encourage the idea that a major shift is already taking place in Russia, but this is only due to the extremely low starting point of RES utilized in Russia.

General Conditions of Energy Governance in Russia

Path Dependencies

The most crucial factor defining energy governance in Russia is the fact that its territory is endowed with large deposits of fossil and nonrenewable energy: oil, gas, coal, and uranium. Russia is also rich in renewable energy resources. The plethora of the latter resources range from hydropower – especially in the Siberian peripheries – to bioenergy (a quarter of global forests), solar, wind, and geothermal. However, the potential of these low-carbon and renewable energy resources has not been unleashed, with the exception of hydropower in the European part of Russia. The reason for this lies at the heart of Russia’s political economy: the political elite has grown highly dependent on the fossil and nonrenewable energy sectors, i.e., rents derived from oil, gas, coal, and uranium industries are a primary cause for the centrality of these sectors in defining the direction of Russia’s energy, environmental, and climate policies. For example, energy efficiency, which is a vast problem due to its low level in energy production, transport, and consumption in Russia, can be regarded as a potential yet poorly managed energy resource because of the centrality of the fossil energy industries in the country (IFC 2014).

Historical path dependencies are the biggest factor dictating today’s approach to energy, resources, and the environment in Russia. An important factor is the centrality of resource extractive industries in the Russian economy during the previous centuries (from furs, coal, and ore to oil and gas), which has produced economic and environmental practices resembling those of colonial contexts in Africa, Asia, and the Americas. This legacy plays an important role, especially in the Siberian part of Russia, but it also has an impact on the rationalities and practices of the political and economic elites of the country. Thus, the Soviet-era industrialization, with its dependence on unchecked utilization of natural resources and an emphasis on heavy industries, has led to institutional settings and interdependencies in the Russian society where energy flows and infrastructures, and rents derived via them, have produced a strong inertia against endogenous political agendas wishing to challenge these trajectories (Rogers 2015; Wengle 2015; Tynkkynen 2016a).

Energy and resource abundance coupled with historical trajectories have created massive industries in all nonrenewable energy sectors in Russia. However, the vast size of the industries and companies in the natural resource sector is the result not only of political history and large resources per se but also of specific resource geographies: the globally important deposits of oil, gas, coal, and uranium are not evenly distributed in the Russian Eurasian space but concentrated in specific regions and territories, mostly far away from the population centers of Russia. Therefore, the fossil energy and uranium industries have required significant infrastructural investments in order to develop resources found mainly in the periphery. The fact that gas giant Gazprom manages 40,000 km of gas pipelines is thus due to the history of political economy in Russia, as well as the specific population and resource geographies of the country, which have the tendency to “stretch” these infrastructures. This factor then amplifies the energy-society loop: the more Russia has been compelled to invest in the energy infrastructures (e.g., in gas and oil pipelines, ports, etc.) to maintain production volumes that allow a certain level of rents, the more its political choices have been narrowed down concerning the energy transition from a carbon-based to a carbon-free energy system.

Composition of the “Energy Mix”

Russia is a major energy exporter, and rents derived via exports of oil, gas, coal, uranium, and nuclear technologies constitute about half of Russia’s budget revenues, in addition to which the energy sector produces circa a quarter of Russia’s GDP. Approximately half of the energy produced in Russia is internally consumed, i.e., 730 million tons of oil equivalent (toe) out of 1370 toe total. Since the last decades of the Soviet era – from the 1970s onward – the share of natural gas has increased significantly in the energy mix, constituting half of the overall energy consumption in today’s Russia. Oil covers just over one fifth of Russia’s energy demand, coal a little less than 20%, and nuclear 6%. Both hydropower and renewables cover between 1% and 2% of the overall energy demand, yet hydropower together with nuclear power constitutes one third of electricity production in Russia, 15% each. Gas dominates electricity production with a production share of almost 50%, yet its role has diminished during the last decade, whereas nuclear, coal, and hydropower each constitute about one sixth of electricity produced in Russia (Table 1 below).
Table 1

TPES in Russia (IEA 2018)

Key data (2016)

Total energy production: 1373.7 Mtoe (natural gas 39.2%, oil 40.0%, coal 15.2%, nuclear 3.8%, hydro 1.2%, biofuels and waste 0.6%), +29.5% since 2002

TPES: 732.4 Mtoe (natural gas 50.7%, oil 23.7%, coal 15.5%, nuclear 7.0%, hydro 2.2%, biofuels and waste 1.1%), +18.4% since 2002

TPES per capita: 5.2 toe, +21.4% since 2002

TPES per real GDP: 0.34 toe/USD 1000 GDP PPP, −23.6% since 2002

Electricity generation: 1088.9 TWh (natural gas 47.9%, nuclear 18.1%, coal 15.7%, hydro 17.0%, oil 1.0%, biofuels and waste 0.2%, geothermal 0.1%), +21.6% since 2002

Heat generation per capita: 10,370 kWh, electricity generation per capita: 7560 kWh

The switch from heavy oil and coal to gas in heat and power generation is a major systemic change in the energy sector of Russia. This change is highly important not only due to its positive local and global environmental impacts – gas consumption releases far less pollutants affecting human health and ecosystems on a local (SO2, NOX, soot, etc.) as well as global (CO2) level than oil and coal – but also in relation to the role of actors in the field of energy markets and policy. The gas sector is therefore central in all energy policy fields in Russia: gas covers half of overall energy consumption, as well as electricity production; households are highly dependent on gas indirectly via district heating and directly due to the fact that gas is widely used in cooking. Furthermore, although to a lesser degree, gas is even used in transport.

However, there are major regional differences in the energy mix. The European part of Russia, excluding the high North, relies on gas, nuclear, and hydropower, whereas Siberian Russia, especially the Far East, is still dependent on coal as the primary energy source. On the other hand, major Siberian industrial centers have evolved around gigantic hydropower plants that function as the primary source of energy for the heavy industries in these cities (Novosibirsk, Krasnoyarsk, Irkutsk, etc.). High dependence on coal, particularly in the Russian Far East, is a factor that affects regional and even foreign policy considerations in the Kremlin. The national gas distribution program, Gazifikatsiya Rossii, is therefore carried out not only to increase gas coverage in the peripheral parts of European Russia and combat the high level of energy poverty in these locations but also to connect Siberian and Far Eastern regions and cities to “mainland” Russia. This connectivity is important both in maintaining the center’s control over these faraway regions and in that way deterring Chinese influence in this region, which Moscow sees as a geopolitical matter: a potentially separatist region (Wengle 2015, 10).

Discourse on Energy Issues

Approaching energy policies and choices from the discursive angle, one can state that two main narratives define the Russian discussion on energy: security of demand and security of supply. First, security of demand refers mainly to the Russia-EU energy trade and the long-lasting fear in Russia that the EU will diversify away from Russian energy to an extent that makes Russia’s investments into new energy projects and infrastructures in the upstream overscaled and subsequently unprofitable (Gromov and Kurichev 2014). This hydrocarbon lock-in, caused by the fact that Russia has to offer hydrocarbons to global markets on a massive scale, also diverts new investments within the energy sector predominantly to oil and gas projects. In this discursive environment, it is challenging to promote RES even if energy efficiency goals concerning oil and gas, e.g., flaring less associated petroleum gas in Russian oil fields, would in principle also promote the onset of RES utilization. Second, the security of supply narrative refers once again to the partly dysfunctional domestic energy markets and especially the low level of energy equity between and within the regions of Russia (Tynkkynen 2016a). The social contract derived from the requirements people ask of the state – low fees on energy for the people of an energy giant – causes path dependencies impacting the deployment of RES, as renewables cannot compete with the subsidized prices of coal, gas, and oil and thus of electricity and heat. Therefore, the Russian government has agreed on this social contract by promising to eradicate energy poverty in the country, and this is predominantly done by switching from wood, coal, and heavy oil to gas.

Energy poverty is therefore an issue with regional, energy, and even security political ramifications, as it includes key critique towards Putin’s regime. People claim that 200 km away from (a luxurious) Moscow, people do not even have access to gas (Tynkkynen 2016a). Extending gas distribution infrastructure to new regions and in the peripheries of urbanized European Russia is the Russian political solution to increasing energy equity. Alongside energy infrastructure construction, the image of a responsible gas company, Gazprom, in an energy-rich state is promoted by discursive means. This is done by using different information channels to produce a positive attitude to fossil energy among the Russian population, high reliance on energy exports in the economy, and the ability to increase Russia’s political strength in foreign affairs via energy (Tynkkynen 2016b). All in all, it is a specific “hydrocarbon culture” that impacts Russia’s choices in the fields of economy and energy, a state-led construction of identity where a positive view of fossil energy is intertwined with great power ambitions of the state and a sceptic and even denialist position on human-induced climate change (Tynkkynen and Tynkkynen 2018). In this situation, there is very little room to develop the renewables sector.

Political Institutions and Actors

The official bodies responsible for energy issues within the Russian state administration are the Ministry of Energy and the Ministry of Natural Resources and the Environment. The former is responsible for outlining and planning the energy policy of Russia, such as the Energy Strategy of Russia (Ministry of the Energy RF 2009, 2017), whereas the latter has the authority to issue licenses on new energy developments, for example, granting rights concerning which companies can access which energy sources and deposits. The president and the presidential administration (en.kremlin.ru/structure/administration) do not have a separate body to address energy issues and policy, yet the president has legislative powers via decrees (ukaz) that also affect the energy sector. However, the president has direct influence on the decision-making of the three state-owned energy companies, Gazprom, Rosneft, and Rosatom, all of which are pivotal actors in defining energy policies in Russia. Gazprom is an open joint-stock company (OAO) in which 50% plus one stock has belonged to the Russian state since 2005. It is the successor to the Soviet Ministry of Gas Industry and currently employs more than 450,000 workers, produces 70% of Russia’s gas, and also includes finance and media in its portfolio. Despite the fact that, in a legal sense, Gazprom is a commercial enterprise and not a state corporation, one can define it as a parastatal company. Designating it as a parastatal company implies that the Russian state and President Putin’s regime exercise authority over the decisions of the company more than its position as a commercial enterprise would allow. Naturally, not all the decisions of the company are politically motivated, as business rationale is the main motivation for operational decisions taken by the company. Moreover, Gazprom is a large company that has dozens of regional subsidiaries with objectives and political voices stemming from the realities of the Russian regions. That said, all strategic moves, especially concerning overseas operations and major infrastructure decisions, are made by Putin’s entourage. Therefore, as the company is steered by Russia’s political elite, it has more privileges but also more state-defined societal tasks than any other company in Russia. In the 2010s, Gazprom lost its monopoly over gas exports and had to provide other companies, primarily Novatek, Rosneft, and Lukoil, with access to the domestic gas pipeline system. However, a de facto monopoly still prevails despite the fact that more competition is now allowed. This position provides the possibility to diminish competitors’ opportunities to increase their market share in regional energy mixes or the national gas market. That makes Gazprom’s position in the Russian domestic energy sector an exceptional one: it has the power to sideline both renewable energy and coal producers who have prospects to increase demand for their products in the Russian regions and to block oil companies trying to feed associated petroleum gas to the national pipeline system.

Rosneft, another state champion focusing primarily on oil production and the world’s largest listed oil company by output with 250,000 employees, comes close to Gazprom in terms of its role and maneuvering space in the Russian economy and society. With its 50% state ownership, Rosneft can be defined as a parastatal company in a similar manner despite significant private and foreign ownership (e.g., BP and unknown offshore owners each have a 19% share in the company). The national oil company, also known as the heir to Mikhail Khodorkovsky’s Yukos oil company and was taken over by the state in the early 2000s, is increasingly challenging Gazprom’s monopoly in the gas sector, along with the second largest gas producer Novatek, which is privately owned yet still controlled by people close to the president. Rosneft plays a pivotal role in the energy efficiency of oil production in Russia, which is a major contributor to the country’s GHG emissions as well as other environmental problems. This is linked to the fact that Rosneft produces two thirds of Russia’s oil, while simultaneously having the lowest energy efficiency in the oil sector. This is most evident when looking at the issue of burning of associated petroleum gas on the site of production, i.e., APG flaring (see discussion below).

The third major energy player in Russia is Rosatom, a state corporation (Gosudarstvennaya Korporatsiya) functioning in the nuclear energy business and also producing nuclear weapons. Unlike Gazprom and Rosneft, Russian legislation does not require Rosatom to produce an economic surplus. The nuclear giant is therefore better equipped and positioned to promote energy and other policy objectives set by the state domestically and internationally. In Russia, nuclear power is prioritized vis-à-vis renewable energy and coal, and internationally Rosatom is able to compete and increase Russian influence via very attractive nuclear power plant and uranium provision offers (Aalto et al. 2017; Tynkkynen 2016c). For example, Rosatom has managed to secure nuclear power plant deals in Turkey, India, and Finland.

Coordination, Instruments, and Issues of the Russian Energy Transition

Drivers of Energy Transition

The centrality of energy efficiency policies, which have been listed among the primary objectives in Russia’s energy strategies since the 1990s, stems from the fact that due to Soviet legacies, the economy is underperforming in terms of energy consumption per capita (5.2 toe/a) versus produced GDP (0.34 toe/1000 USD) (IEA 2014). Furthermore, energy efficiency is central, as the cubic meters of gas and oil barrels saved in domestic consumption release these volumes to be traded on international markets – a business covering 35–50% of Russia’s budget revenues yearly.

Socio-technical evolution of the global energy sector, and particularly the European scene, represents an important external influence on the Russian energy sector and the objectives set in the official energy policies. The European and Russian energy sectors are interlinked via many material and social networks, pipelines, and joint ventures. European energy development and the deployment of RES is the primary benchmark for Russian actors, and it has at least a twofold influence on Russia’s choices. First, Russia copies many legal and governance approaches when facilitating and promoting RES deployment. This particularly affects the official energy policy choices. However, in Russia’s authoritarian and fossil energy-dependent society, informal practices and politics play a far more important role than the official, particularly when it comes to the energy sector itself. Therefore, the legal and governance setting for RES deployment is de jure in place (Boute 2011, 2012a, b), but de facto this scheme has been very difficult to promote (Pristupa and Mol 2015). For example, the capacity market conditions and feed-in tariffs for solar and wind power in Russia are very competitive (Kozlova 2015), but construction of new capacity has still been very moderate. Global comparison shows that Russia lags far behind other major energy producer and consumer countries: Russia’s wind power capacity, including capacity that is installed and under construction, is about 150 times less than the installed wind power capacity of China and about 80 less than that of the USA (Frangoul 2018). This might not seem like such a bad figure, as Russia is typically classified in the category of other fossil energy giants, such as Saudi Arabia and Iran. However, Russia’s vast territory – 17 million square kilometers – sets the potential wind power capacity at thousands of terawatts (IRENA 2017, 33), and in this context, the negligible 110 MWs of installed wind capacity and still low 2000 MWs under construction (IRENA 2017, 12) reveals the vast mismatch between potential and current deployment.

Another external driver framing Russia’s energy policies and RES deployment is global climate policies and governance. Historically, Russia has oscillated between opposition to the mainstream understanding of anthropogenic climate change and its endorsement. Pivotal in understanding this dualism is the Cold War era science battle between Soviet natural science based on empirical research and Western-led climate science, which relied on modeling and the large computational capacities that were lacking in the Soviet bloc (Doose and Oldfield 2019). Thus, the current climate denialist tones being circulated in Russian society by the political and economic elites, which are unfortunately growing stronger as Putin’s entourage takes a tighter grip on power (Tynkkynen and Tynkkynen 2018), can in part be explained by the positions affected by nationalism and great power perceptions: international climate science must be opposed in order to block the hegemony of Western science and Western political and military power. However, this dualist situation has recently fractured into several climate change and governance positions. Trump’s climate denial is fully compatible to that of Putin’s, but due to the soft power gains, Russia is playing along with the US Democrat, EU, and also Chinese sentiments that climate change must be mitigated. The crucial take-home point is that if Russia is able to promote mitigation in real life, the triggers are fully economic and (geo)political. However, Russia’s international soft-power choices, which in this respect reflect China’s climate leadership, may lead to more ambitious climate mitigation policies domestically, even though the entanglement of the political and energy elite and the rent-seeking practices related to fossil energy temper very ambitious climate mitigation policies in Russia.

There are also several internal drivers for RES deployment in Russia. On a discursive level, the resource wealth of Russia in terms of renewables potential in all categories – wind, solar, bio, small hydro, geothermal, and tidal – and the potential economic gains derived via a domestic energy transition from fossil to renewable energy, including the diversion of fossil energy from domestic consumption to export and capitalizing on increased energy efficiency during the transition, are the two most prominent themes utilized in the domestic discussion (Smeets 2017). The choice to emphasize resource wealth fits conveniently into the overall discursive frame, where wealth in natural resources and energy play a pivotal role in defining Russian economic and political potential. In other words, highlighting the resource potential in renewables allows continuation of the same grand strategy that has characterized Russia’s practical economic choices and reflects the realities of political economy in the country. Thus, a domestic energy transition to renewables enhances Russia’s position as a potential exporter of RES and electricity produced with RES in Russia. On the one hand, this “discursive fit” promotes the energy transition in a difficult institutional and political setting dominated by the fossil energy sector, as it is well-suited to the centuries-old extensive economic model in Russia, which is based on the export of raw materials and commodities with a low extent of value added. On the other hand, it can be seen as counterproductive in the framework of Russian modernization aims: seeing RES as a new Eldorado for Russia dwarfs the efforts to diversify the Russian economy from its overall economic dependence on energy.

One of the most potential areas to develop and deploy RES in Russia is the off-grid territories, i.e., regions, cities, and towns that are outside the national electricity and gas grids. Russia’s energy strategies also underline this fact and urge these areas to be at the forefront of RES deployment by designating them as pilot areas for promoting RES in Russia. These areas, mainly in the Russian Far North and East Siberia, have traditionally relied on Northern Delivery (severnyi zavos) to maintain exclave’s electricity and heating systems. Thus, the communities in these areas rely on imported heavy oil and coal from Russia’s energy production centers, thousands of kilometers away, despite the fact that many Northern communities have renewable (bioenergy, wind, wave, micro-hydro, solar) energy resources available that could be utilized cost-efficiently. The fact that this Northern Delivery, which dates back to the Soviet times, is an expensive and inefficient system makes local and regional renewable energy solutions more appealing. Piloting of RES in these communities has been the cornerstone of Russia’s renewables policies, yet the results have been less than promising mainly due to the vested interests of traditional energy sectors, gas, coal, oil, and the rent-seeking networks that have evolved around the Northern Delivery system (e.g., Salonen 2018: 74). Therefore, a constraining factor for deploying local RES is the Northern Delivery system itself: the people, the companies, and the official and unofficial institutions that are intertwined in this system, where rent-seeking inevitably takes place, make it hard to switch to a new system based on local and regional RES despite the direct economic gains for the regional economy.

Furthermore, many regions and cities within the national electricity and gas grids would enjoy similar economic benefits by switching to local and regional RES. The regional policies in many regions of Russia include plans to enhance energy self-sufficiency, in other words, to rely on the region’s own energy potential instead of producing electricity and heat by burning energy commodities (coal, oil, gas) hauled in from other regions (Tynkkynen 2014). However, these plans have run into obstacles as the regional aims are at odds with national objectives, such as those of the national gas distribution program run by Gazprom (Tynkkynen 2016b).

One peculiar but very positive feature in Russian goal-setting concerning an energy transition towards carbon neutrality is the fact that, on the discursive as well as normative levels, promotion of energy efficiency is elementarily tied to renewable energy deployment. The discourse that emphasizes the role of renewable energies in pushing energy efficiencies is made normative via the government resolution “On The Main Areas of Government Policy to Raise the Energy Efficiency of Electric Power from Renewable Energy Sources for the Period to 2020” (Government of Russia 2009). This stems from the objective stated in all Russia’s energy strategies during the 2000s: renewables and nuclear power are the means to promote energy efficiency in Russia, as replacing hydrocarbons with renewables inside Russia releases oil and gas to be exported. And, as it is more economically viable to export hydrocarbons than consume them at home, energy efficiencies in oil and gas production and consumption will be enhanced.

Strategies and Instruments of Energy Transition

The regulatory framework for deploying renewables in Russia, targeting wind power and bioenergy in particular, was initiated in the early 2000s and has recently been elaborated by the Russian Government via several new regulations concerning both wholesale and retail electricity markets (Gsänger and Denisov 2017, Appendix 2.). Two pivotal governmental strategies set the scene. The first is the Government Decree “On the mechanism of promoting the use of renewable energies in the wholesale electricity market and power” (No. 449) passed in May 2013, which introduces mechanisms for deploying renewable energy projects within the wholesale electricity market. This decree has been elaborated several times with amendments and executive orders since its onset. The second is the Government Decree “The scheme of the territorial planning of the Russian Federation in the field of energy” (No.1634-r) issued in 2016, which sets a goal to build more than a dozen wind farms of over 100 MW with the objective of gaining a total wind power capacity of 4.5 GW by 2030.

With regard to wind power, the issued legal framework is relatively generous in terms of the guaranteed return on investments. If they meet the capacity supply contract criteria with respect to efficiency and utilized capacity, investments in wind power capacity have a 12% guaranteed return on capital. Despite this alluring official setting, deployment of wind power has been very slow in Russia: the ongoing wind installation projects constitute less than 2000 MW. However, the finalization of these projects will provide a 100-fold increase in Russia’s wind power capacity. Most of the future capacity will be contributed by big players, such as Rosatom. However, some relatively large-scale projects are also being developed by newcomers, such as Wind Power Generation Company (2019) and Alten (2019), i.e., actors outside the traditional energy sectors (IRENA 2017, 12). Gsänger and Denisov (2017) list several obstacles hindering the deployment of wind power in Russia. First, investments in the sector are few in number, because the remuneration scheme is nontransparent. Second, the institutional setting does not favor the wind power sector, as the actors are scattered and lack the scale needed to push policies through on the national level. This weakness is further amplified by the very small market volume of the wind power business in Russia. Third, despite the fact that a legal framework exists, it is considered weak especially with regard to technical standards and land use issues. For example, the standards are very hard to follow, as there are complicated regulations concerning the requirements for domestic production and procurement of technical appliances and parts. Finally, grid connection is challenging for small-volume wind generator companies, as powerful energy sector players in the thermal and nuclear power and hydropower areas dominate the scene.

The potential for growth in the bioenergy sector is more geographically confined than in the wind power sector. Northwest Russia, South Central Siberia, and the Far East are prominent areas in Russia for deploying bioenergy, as there is a solid resource base and commercial and institutional actors – the forest industry – capable of promoting the branch. The regulatory framework for bioenergy deployment is partially laid out in the same governmental strategies and regulations that apply to the wind power sector.

One specific geographical area in Russia would benefit the most from RES deployment: the off-grid territories of Northwest Russia and the Russian Far North. In energy policy terms, this area is defined as exceptional: its security of supply is based on the Northern Delivery system, described briefly above. These areas have been designated in governmental documents (Government of Russia 2009) for piloting of RES projects deploying mainly wind and solar power installations and for power and heat plants running on bioenergy. The renewable energy projects carried out in this area should set the scene for successful RES deployment in other parts of Russia (Table 2).
Table 2

Central governmental decisions to enhance the energy transition in Russia

Governmental documents on the energy transition

Year of issue

Scope and aim

Resolution of the Russian Government “On the main areas of Government policy to raise the energy efficiency of electric power from renewable energy sources for the period to 2020” (No. 1-r)

2009

Piloting of RES projects deploying wind and solar power installations, power and heat plants running on bioenergy

The Government Decree “On the mechanism of promoting the use of renewable energies in the wholesale electricity market and power” (No. 449)

2013

Introducing mechanisms for deploying renewable energy projects within the wholesale electricity market

The Government Decree “The scheme of the territorial planning of the Russian Federation in the field of energy” (No.1634-r)

2016

Aiming to build several wind farms bigger than 100 MW with the objective of gaining a total wind power capacity of 4.5 GW by 2030

Coordination Mechanisms and Multilevel Governance

Officially, Russia’s energy policy is drawn up by the experts within the collective of the Ministry of Energy (Ministry of Energy RF 2009, 2017). The same ministry is also responsible for implementing the strategy, i.e., ensuring that legal and administrative norms are pushed forward in the spirit of the strategy. The strategy itself is not a binding document but a “document for documents” (Gromov and Kurichev 2014: 17). Thus, the Ministry of Energy is coordinating the projects promoted under the strategic umbrella with other ministries and governmental bodies, as well as monitoring its implementation. The Ministry of Natural Resources and the Environment is also a central body responsible for setting the policy field concerning development and tapping of new energy resources and therefore also in promoting energy efficiency and RES deployment objectives. Despite being criticized for excessive optimism, especially concerning energy efficiency goals and increasing the use of renewable energy, which are central objectives in the strategies, (Tynkkynen and Aalto 2012: 107; Tynkkynen 2014), the three strategies that have been elaborated during the 2000s – in 2003, 2009, and 2017 – all reflect the political goals set for the energy sector by the political elite. The strategies thus tell something about the direction in which official Russia would like to see its energy policies shift and aim to convince the rest of the world that Russia is a modern state with modern goals but lacks the tools to operationalize these somewhat lofty objectives. The overly optimistic character of the strategies is particularly evident when looking at how the issue of RES deployment has been discussed, what kind of goals are set, and how these objectives have been met during the last decade. The 2009 strategy, aiming at 2030, states that the share of renewables in the Russian energy mix should cover 14% of the total energy demand by 2030 and the share of electricity produced via RES should reach 4.5% (Ministry of the Energy RF 2009). At the time of writing in summer 2018, Russia’s energy mix contains only 1% so-called new renewables, and the goal set for electricity produced by renewables will be extremely difficult to attain.

The factual power houses within the Russian energy policy formation, as discussed above in the section on Political Institutions and Actors, are the parastatal energy companies: Gazprom, Rosneft, and Rosatom. The decisions within these companies are mainly dictated by economic rationale. However, in terms of central sociopolitical issues in Russia – the social contract between the state and its people in which energy and the social are intrinsically intertwined – the objectives of the state and Putin’s regime play a pivotal role. Therefore, as Russians have become accustomed to cheap electricity, gas, and heating (Collier 2011; Tynkkynen 2014), it is difficult to change this “fatal” relationship of hydrocarbons and the social, as renewables and energy efficiency would entail a more market-based system in which people pay real prices for the energy they consume.

Private energy companies, such as Surgutneftegas and Lukoil, do play a role in influencing, if not framing, energy policies in those regions where they operate: Western Siberia for the former and the Perm region and Komi Republic for the latter (Rogers 2015). In the coal industry-dominated Southern part of Central Siberia, the Kuzbass coal region, and the Russian Far East, energy policies are mainly dictated by these industrial interests (Wengle 2015). Thus, it has been difficult to replace the use of coal with renewables or even gas in these areas because regional business interests have been able to resist the national gas champion, Gazprom.

The presidential administration and President Vladimir Putin himself are naturally pivotal players in defining the main directions of Russia’s energy policy (Tynkkynen and Aalto 2012) and therefore also the fate of energy efficiency and deployment of RES. During the Medvedev presidency in 2008–2012, modernization of the Russian society and economy were emphasized much more than during Putin 2.0, i.e., after he returned to office in 2012. Putin and his entourage are underlining the role of the energy sector in modernizing the country (Gustafson 2012). Therefore, one qualitative difference from the Medvedev years is the fact that modernization as diversification away from fossil energy dependence is less and less mentioned and the emphasis has been shifted to economic, rather than societal or political, modernization via the hydrocarbon sector. This choice, which keeps the unofficial networks of the energy and political elite intact, is naturally an antidote for policies and practices that strive to promote renewables in Russia.

This shift towards more conservative values, both economic and political, is not good news for promotion of a low-carbon transition in Russia. However, energy efficiency was on the political agenda even before the Medvedev presidency, so Putin’s entourage understands its economic value. For example, associated petroleum gas (APG) flaring reduction policies were established already in 2007 but fully operationalized only in 2014. The positive tendency of oil companies to utilize the associated gas in electricity production for their own needs or to increase the pressure in oil wells by injecting it back to the deposit has decreased APG flaring in the Russian oil industry by approximately half: from a devastating 50 bcm per year in 2007 to some 20 bcm in 2016 (Korppoo 2018). One could argue that this change would have happened without deliberate state policies on APG, as the economic realities set by the Russian electricity market rules have been the primary cause for flaring reductions that started to take effect long before the official APG policies were implemented. Moreover, the successes in this area have taken place in the West Siberian brownfield areas, i.e., old production regions which have a dense network of hydrocarbon infrastructures and oil and gas pipelines. However, there are severe difficulties in meeting the set norms in the new Arctic and East Siberian greenfield locations, which are sparsely populated with energy and other infrastructures. This indicates that prevailing unofficial practices make it possible to circumvent official APG reduction norms in greenfield oil deposits, which are in need of high capital investments and pivotal to maintaining the high oil production levels that are politically and economically crucial for Putin’s Russia. Thus, implementing uniform energy efficiency policies, and providing a uniform playing field for renewables promotion, is going to be a very demanding task in Russia. It is not clear whether this is even possible, as the oil industry is so pivotal to the power and success of Putin’s regime. The same applies to increasing prices and reducing subsidies for household gas, which is an even more central factor in enhancing renewables. The social contract between Russian people and the regime concerning subsidized gas and heat, carried out by Gazprom, is thus a political and even cultural barrier for RES enhancement in Russia (Tynkkynen 2016a, b), as explained below in a more nuanced analysis of the role of gas in the Russia energy transition.

Multilevel Energy Governance: Gas vs. Bioenergy

Gazprom does not only transport gas via its pipelines; its numerous projects and programs are firmly tied to the nationwide gas program Gazifikatsiia Rossii. On the grounds of enhancing energy security and promoting economic growth, regional investment, and environmental protection, Gazprom asserts the importance of extending the country’s gas distribution network to its peripheries. The Republic of Karelia, bordering on Finland and the EU, is one such region. Gazprom (2012) extended its domestic gas infrastructure investment program in 2011, enabling it to further consolidate its role in the domestic market. A social infrastructure component is tied to all pipeline projects and power plants built by Gazprom. In the case of Karelia, this has been significant. As Gazprom cannot evade certain philanthropic obligations set by the state, the company prioritizes charity that can maximize gains for the company.

The Republic of Karelia imports 70% of its energy, including electricity from outside the region and oil and coal for heating purposes. This region has a long history of local forestry, and the forest industry supplies the remaining 30% of energy consumed. Because of its rich forest resource base, Karelia made several plans and agreements in 2001–2003 to decrease energy import dependency by constructing new power plants running on woodchips and peat (Pravitelstvo 2001). However, in 2004, Gazprom moved in with negotiations to expand its gas distribution pipelines in Karelia and construct heat power plants running on gas. This resulted in an agreement between Gazprom and the Republic of Karelia in 2006 on “Gasification of the Republic.” However, the gas investment program was not simply sold to Karelian decision-makers on the basis of economic and energy security arguments but with promises of social infrastructure construction in the form of sport halls. Such projects provided links to national objectives that were considered positive (a great sport nation, Gazprom as the sponsor of Russian and international sports, etc.), making gas look more appealing than local energy sources and energy self-sufficiency. Thus, the broader societal context makes it difficult to deploy renewables even in localities where there is great economic potential for it.

Outcomes: Challenges and Prospects of Energy Governance

Monitoring and Surveillance

The legal basis for RES promotion has been laid in Russia during the last 10 years. Despite the lucrative feed-in tariffs introduced recently, development in the sector has been slow. The ambitious goals set for RES deployment included in all Russia’s energy strategies published during the 2000s have not been fulfilled, and Russia lags far behind all major energy markets in terms of building energy capacities based on RES. Monitoring of achievements within the sector is only evolving now as new, wind and solar power parks are being constructed and even piloted. The lack of a proper monitoring system to follow and encourage RES deployment in the country is partly due to the declarative nature of energy strategies (“document of documents”): Russia lacks genuine normative policy-making to promote RES. The lack of monitoring and surveillance of achievements is partially related to the power of the traditional hydrocarbon sector in Russian society and economy and its central role in defining politics and policies. Therefore, the low institutional capacity and power of actors within the renewables sector is at the heart of the problem.

Sector Integration and Conflicts

Despite this rather gloomy outlook for RES deployment in Russia, a few positive features have to be mentioned, and one of these is linked to sector integration within the energy sector. As noted above, the actors within the renewables sector have thus far been weak in defining the energy policy field and promoting RES in the fossil energy-dominated context. However, the latest solar and wind power projects, e.g., wind power parks with a capacity of up to 700 MW, have been initiated by traditional energy companies like the Russian nuclear operator Rosatom (2018). Players in the Russian power and heat sector that are dependent on gas and coal, such as Fortum, have also invested in major wind parks. Thus, it seems that major energy players must take the first steps in order to establish the renewables sector institutionally in Russia. It may well be that this centralized and state-centered approach to RES deployment is defining the way in which RES will be promoted in Russia for years to come. Furthermore, this may even be the only way to promote RES in Russia in light of the present political realities. However, bioenergy differs from wind and solar in profound ways, as the potential actors promoting bioenergy are bigger and thus more economically and politically powerful, at least on a regional scale. The forest industry in Northwest Russia, South Central Siberia, and the Far East is an actor that enables growth in deployment of bioenergy. Bioenergy may not be the central RES that Russia will develop in the future, but it will certainly play a pivotal role in the taiga (coniferous) zone of Russia, where bioenergy can replace the use of coal, oil, and gas (e.g., Salonen 2018).

However, deploying RES in those localities and regions where it would seem to be the most prominent option both economically and environmentally is difficult because of the centrality of gas and the fact that gas links Russia’s energy and regional and social policies closely together. The Gazifikatsiia Rossii gas distribution program and its policies, practices, and discourses, which are carried out by the parastatal Gazprom (2012), send the following message to the Russian people: regions that do not choose and invite Gazprom and its gas will not develop. The narrative is that prosperous settlements choose gas, while backward ones choose other sources of energy and are thus doomed to scarcity. Moreover, a city or town that chooses to join Gazprom’s network becomes part of “Putin’s enterprise,” whose gas pipelines extend from production sites to consumers. This expansive network is viewed by the company as the material manifestation of Russia’s new role as an energy superpower (Tynkkynen 2016a). This kind of hydrocarbon-based social contract adds to the difficulty of officially governing the energy transition away from fossil energy in Russia. In this kind of a societal, political, and even cultural setting, it is a very demanding task to promote renewables and foster the energy transition towards a low-carbon society. Therefore, in this context, it seems that the transformation towards renewables will only happen after the major energy players of Russia – Gazprom, Rosneft, and Rosatom – start the process. The latter of these giants is already in the renewables business, so an otherwise gloomy outlook for the possibilities of RES in Russia does not seem so hopeless after all.

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Copyright information

© Springer Nature Switzerland AG 2019

Authors and Affiliations

  1. 1.Aleksanteri InstituteUniversity of HelsinkiHelsinkiFinland

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