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Cablegate: Green Struggles Against Black Gold in Russia

VZCZCXRO8744
PP RUEHHM RUEHLN RUEHMA RUEHPB RUEHPOD RUEHVK RUEHYG
DE RUEHMO #0048/01 0101321
ZNR UUUUU ZZH
P 101321Z JAN 08
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 6077
INFO RUCNCIS/CIS COLLECTIVE PRIORITY
RUEHZN/EST COLLECTIVE PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RHMFIUU/DEPT OF ENERGY WASHINGTON DC PRIORITY

UNCLAS SECTION 01 OF 03 MOSCOW 000048

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ENRG SENV ETRD ECON TRGY RS
SUBJECT: GREEN STRUGGLES AGAINST BLACK GOLD IN RUSSIA

Summary
-------

1. (SBU) With its focus on oil, gas, and nuclear power,
Russia has largely ignored the renewable energy sector. The
GOR has not yet established a comprehensive renewable energy
strategy. Instead, the GOR is targetting ways to reduce
wasteful energy consumption. Experts believe renewable
sources such as wind, biomass, solar, and geothermal have
considerable potential in Russia. To date, however, the
sector, apart from hydroelectric, has attracted minimal
investment and political attention. End Summary.

Background
----------

2. (U) According to International Energy Agency (IEA)
statistics, renewable energy sources in Russia, apart from
hydroelectric, account for about 1% of electricity generation
and 5% of heat generation. The IEA says that Russia has the
potential to replace up to 35% of energy that relies on oil
and gas with renewables, especially for "low hanging fruit
niche markets." For example, some 10 million off-grid
customers who may use gasoline or diesel generators could
adopt more reliable and cleaner alternatives, such as
wind-powered diesel systems, biomass-fired steam boilers, and
small hydro.

--Wind: According to a recent report by the European Bank
for Reconstruction and Development (EBRD), most of Russia's
high wind energy potential is concentrated along the
seacoasts, in the steppes, and mountains. EBRD estimates
that wind has the economic potential of 10 million tons of
coal. Regions most favorable for wind energy use include
Northern Russia and the Far Eastern region, where many
Russia's 10 million off-grid customers are concentrated.
Currently, Russia has only 14 MW of installed wind energy
capacity, according to the IEA.

--Biomass: About 22 percent of the world's forests are
located on Russian territory, making fuel derived from
combustible renewables an obvious source of alternative
energy. Biomass accounts for the majority of installed
capacity for heat and electricity generation. Burning
firewood for heating and cooking purposes is common in rural
areas and at dachas. About 40 thermal power stations use
biomass derived mostly from waste generated from the wood
processing industry, and around 100 plants convert biomass
and agricultural waste into biofuels.

--Solar: Solar energy provides only a nominal amount of
energy, especially considering Russia's vast surface area
compared to its installed solar capacity. Despite Russia's
land mass and experience with solar panel and collector
developments during Soviet times, there is little prospect
soon of investment in large-scale solar collectors.

--Geothermal: Russia possesses significant geothermal
resources for electricity and heat generation. Heat
potential in Kamchatka and Chuktoka in particular is high.
Areas containing thermal water fields with proven resources
also include Chechnya, Dagestan, and Siberia. According to
the IEA, geothermal has 73 MW of installed capacity and has
the potential to satisfy power and district heating needs in
some rural areas.

--Hydroelectric: Total hydroelectric installed capacity in
Russia is estimated to be 47,000 MW, or about 21 percent of
total electricity generation capacity today. Almost half of
Russia's hydroelectric plants are located in the West; others
are in Siberia. EBRD estimates that total hydroelectric
technical potential in Russia is about 2,400 billion kWh per
year, the majority based on medium and large rivers.
Scientists say that the focus in Russia today is moving away
from big, Soviet-era scale hydroelectric power plants to
smaller MW plants in more remote areas.

Recommendations to the Duma
---------------------------

3. (SBU) Renewable energy has gained some attention recently
in the State Duma. In mid-November, United Russia Duma
Deputy Valentin Ivanov chaired a hearing at the Sub-Committee
on Renewable Power Sources. The hearing focused on
developments and applications of biofuels, such as biodiesel,
and alternative fuels made from plants, rape-seed, and
ethanol. Ivanov underscored the need for Russia to tackle
global climate change by substituting biomass, biofuels,
wind, solar, and geothermal for carbon-emitting sources.

MOSCOW 00000048 002 OF 003

4. (SBU) Ivanov noted that Russia had the technical
infrastructure to make advances in renewable energy. The
main obstacles are Russia's weak legal system and an absence
of wide-spread application of renewable technologies. Ivanov
and various International Science and Technology Center
(ISTC)-sponsored participants at the Sub-Committee hearing
identified key goals Russia should aim for in the near
future, as follows:

--improving the economic feasibility of new energy
applications;
--developing legislative and regulatory mechanisms to foster
development of renewables;
--promoting the development of an alternative energy
industrial base and increasing investments into the projects
related to power supply to the regions;
--distributing information in the field of alternative energy
and energy efficiency.

No GOR Policy for Renewables
----------------------------

5. (SBU) There is still much skepticism, however. Oleg
Pluzhnikov, who heads the Department on Environmental and
Energy Efficiency at the Ministry of Economic Development and
Trade, admitted to us that the GOR has no renewable energy
policy. He added that although the GOR funds R&D for
renewable technology, the lack of market incentives means few
Russian consumers and industries are likely to switch soon to
cleaner forms of energy.

Conservation
------------

6. (SBU) According to a 2003 Russian Ministry of Industry
and Energy report, a top priority in Russia's energy strategy
up to 2020 is to reduce waste in energy consumption and
production by improving efficiency and competitiveness. As a
proponent of energy efficiency, Pluzhnikov believes Russia
should modernize aging infrastructure, replace obsolete
production and delivery systems, and install better
insulation for heating. Russia can do this using existing,
cost-effective technologies. He estimated that Russia could
recover up to 50% of its current level of energy consumption
by improving efficiency alone. This could render unnecessary
more costly and ambitious nuclear energy initiatives (Note:
Rosatom's plans to expand Russia's reliance on nuclear power
generation from 16% to 25% over the next twenty years. End
note).

Export Market Negligible
------------------------

7. (SBU) Pluzhnikov downplayed the possibility that a
growing Western European market for renewable energy sources
could prompt Russian industries to export alternative energy
products, such as biofuel and wood pellets for industrial
use. He noted that pellet manufacturers do exist in Russia,
but the market for them in the West is still too small.
Pluzhnikov was also dismissive about enhancing domestic
consumption of renewable sources since consumers still have
to rely on Russia's inefficient electricity grid. Major
improvements would have to be made in electricity regulation
and infrastructure. Pluznikov told us that the theme of
energy efficiency would be addressed in a GOR energy strategy
paper to be presented in March 2008.

"Toys and Monkey Tricks"
------------------------

8. (SBU) With vast revenues pouring in from oil and gas
exports, Russia has not taken renewable energy seriously,
Vladimir Chuprov, head of the energy section at
Greenpeace-Russia, told us. To Russian policymakers, biofuel
and alternative energy technologies are simply "toys and
monkey tricks," with no economic viability, he said. The
ecological advantages of green energy technology have little
resonance. He predicted Russia would continue to focus on
gas and oil and build costly nuclear power plants while
ignoring warnings about the dangerous and unsustainable
build-up on its territory of radioactive waste.

Renewable Energy as a Career
----------------------------

9. (SBU) Although the GOR has no separate renewable energy
policy, last fiscal year it provided 217.9 million rubles (or
about 9 million dollars) to fund research and development in

MOSCOW 00000048 003 OF 003


renewable energy and fuels as part of its climate change and
emissions reduction technology development programs. Dr.
Igor Tyukhov, an expert on solar energy and photovoltaics at
the All-Russian Research Institute for Electrification of
Agriculture, told us he regarded that sum as paltry. He
maintained that renewable energy technologies have potential,
but GOR financial support for scientists in this field is
almost non-existent. He said many of his students in his
solar energy lab struggle to make ends meet. Many choose to
abandon the renewable energy field and apply their scientific
know-how in the private sector, where salaries are much
higher and opportunities greater. He told us state funding
is barely adequate to support the main scientific institutes,
let alone provide incentives to attract new students and
professors into research on renewable energy.

Comment
-------

10. (SBU) Apart from the traditional use of hydroelectric,
the GOR has not woken up to the significant potential for
renewable energy in Russia. While the GOR promotes nuclear
power development as a way to liberate oil and gas for
export, it has not viewed renewable technologies in the same
way. With little Russian R&D taking place in the field, the
opportunity exists for U.S. firms to capitalize on the
largely untapped potential in Russia for wind, solar,
biofuel, and geothermal power. Opportunities also exist for
U.S. firms to partner with Russian scientists and institutes
studying practical applications of renewable technologies.
As the GOR pushes for domestic energy prices to rise to
market levels by 2011, economic incentives to realize the
potential for renewable technologies in Russia should
increase.
RUSSELL

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