CC BY
19DOI: 10.29141/2658-5081-2024-25-1-6
EDN: HEMDRW
JEL classification: L94, O25
Mikhail V. Kozhevnikov
Artem A. Dvinyaninov Nikita G. Sapozhnikov
Ural Federal University named after the first President
of Russia B . N . Yeltsin, Ekaterinburg, Russia
Ural Federal University named after the first President
of Russia B . N . Yeltsin, Ekaterinburg, Russia
Ural Federal University named after the first President
of Russia B . N . Yeltsin, Ekaterinburg, Russia
Institutional barriers to the development of small-scale power generation in Russia
Abstract. The energy strategy of Russia involves a transition to a diversified energy generation characterised by a structural diversity of plant types, as well as the use of small-scale energy technologies. The purpose of the study is to identify the barriers that hinder the implementation of small-scale power generation in the Russian Federation and justify the avenues for its development. Methodologically, the paper relies on the systems approach. Methods of content and logical structural analysis, in-depth interviews are applied. The empirical evidence comes from analytical reports, normative and legal documents, as well as results of surveys of 96 specialists in the field and heads of power plants and power engineering enterprises conducted during 20212023. The findings indicate there are four groups of problems in the Russian energy system: technological backwardness; difficulties with integration of small-scale power generation facilities into the energy market; absence of state support mechanisms; surplus of power generation capacity. Accordingly, the paper provides recommendations for overcoming them, in particular, it is necessary to introduce mechanisms for the support of small-scale power engineering and integration with engineering and consultancy companies, as well as make use of energy service agreements; second, to introduce standards for connecting small-scale power generation facilities, develop guidelines for designing and commissioning them; third, to amend tax regulations and learn from successful foreign experience; fourth, to replace retired power generation equipment with new small-scale power generation facilities located closer to load centres. The theoretical significance of the research is linked with detailing the concept "small-scale power generation" as a segment of energy sector as well as its structure in relation to the Russian Federation, specifying classification characteristics of low-capacity power units. The findings are practically valuable for government authorities, power generation enterprises and equipment manufacturers due to the developed organisational and methodological guidelines.
Keywords: small-scale power generation; institutional barriers; power engineering; decentralised power system; renewable energy sources.
Funding: The research was supported by the Ministry of Science and Higher Education of the Russian Federation within the Programme for Development of the Ural Federal University named after the first President of Russia B. N. Yeltsin in accordance with the Strategic Academic Leadership Programme "Priority 2030". For citation: Kozhevnikov M. V., Dvinyaninov A. A., Sapozhnikov N. G. (2024). Institutional barriers to the development of small-scale power generation in Russia. Journal of New Economy, vol. 25, no. 1, pp. 110-130. DOI: 10.29141/2658-5081-202425-1-6. EDN: HEMDRW.
Article info: received August 25, 2023; received in revised form December 6, 2023; accepted December 24, 2023
Introduction
According to some estimates, from 50 to 70 % of Russia's territory does not have a centralised power supply. The primary problem of small-scale power generation is supplying electricity and heat to consumers, living in those territories1.
Nowadays, in a number of countries with a developed energy system, small-scale power generation facilities2 produce 10-20 % of total electricity annually. Moreover, according to the forecast of the International Renewable Energy Agency, by 2030 the global small-scale power generation capacities are expected to be four times higher than those for centralised generation. Despite the fact that in the Russian Federation at the beginning of 2023, there were more than 50 thousand operating small-scale power generation facilities and their number continues to increase every year, so far distributed generation provides only 1.5 % of power generation in the centralised power generation systems.
An accurate assessment of the small-scale generation's share, as well as the dynamics of its changes in the Russian electric power industry, is practically impossible, since the main regulatory bodies (Ministry of Energy of Russia, System Operator of the Unified Energy System, Association "NP Market Council") do not distinguish it in their public reports as an independent subject of analysis [Khokhlov et al., 2018]. Moreover, those power generation facilities, operating autonomously for one or several consumers and not interacting in any way with the Unified energy system, remain unaccounted for. Nevertheless, we can conclude that the share of small-scale
1 Ministry of Energy of the Russian Federation. The energy strategy of the Russian Federation until 2035 has been approved. https://minenergo.gov.ru/. (In Russ.)
2 Their usual capacity is up to 100 MW, which is on average 5-10 times less than the electrical power of large thermal power plants (TPP) and tens of times less than the installed capacity of state district power plants (SDPP).
power generation in electricity generation in the Russian Federation is growing steadily, both within the Unified energy system and outside it.
The attractiveness of small-scale power generation facilities is quite clear: power plants are located closer to the consumer, and therefore a lower level of losses is recorded in electrical networks, equipment maintenance processes are facilitated, and the energy independence of the facilities increases. Small-scale power generation projects have a relatively low cost of energy produced and higher efficiency of fuel used [Gitelman, Kozhevnikov, Visotskaya, 2023].
At the same time, the development of small-scale power generation in Russia is slow and chaotic, which can be explained by various reasons:
- poor development of the Russian power engineering market, its low competitiveness in many respects in comparison with foreign ones [Kozhevnikov, Dvinyaninov, 2020];
- lack of a favourable tax and credit environment, favourable investment conditions for entities implementing distributed generation technologies [Popadyuk, Ku-preev, 2018; Chebotareva, Strielkowski, Streimikiene, 2020];
- imperfection of the tariff setting system [Samoita et al., 2020];
- lack of objective feasibility study methods confirming the effectiveness of small-scale power generation in comparison with centralised power generation [Hu et al., 2018];
- bureaucratisation of connecting small-scale power generation facilities to the power system [Yaqoot, Diwan, Kandpal, 2016; Kozlov, 2018];
- the impossibility to meet the technical conditions of the network monopoly for the sale of surplus generated electric power at small-scale power generation facilities [Yaqoot, Diwan, Kandpal, 2016];
- the deficit of core competencies relating to progressive forms of engineering and technical maintenance of power generation facilities [Kozhevnikov, Dvinyaninov, 2022; Rostik, 2022].
It is possible to settle some of the problems to a certain extent, for example, to eliminate the deficit of certain core competencies at the local (facility) level. However, most of them are of institutional nature - these are complex barriers (the possibility to overcome them depends on the coordinated efforts of energy companies), regulatory authorities, power generation equipment manufacturers, and the service sector providing the necessary technical, information, and intellectual support for relevant solutions (including universities and energy consulting), as well as the consumers themselves.
The study's relevance is due to the growing interest in small-scale power generation technologies expressed by a wide range of the Russian energy market's
subjects, as well as significant problems that impede its exponential development and require a quick solution.
The purpose of the study is identifying institutional barriers impeding the development of small-scale power generation in the Russian Federation, and then preparing recommendations for overcoming them and justifying areas for the industry's development. The objectives of the study are the following:
- to clarify the conceptual framework and classification characteristics of small-scale power generation facilities;
- to analyse the main problems of small-scale power generation development in Russia,
- to design organisational, economic and regulatory measures to intensify the innovation process in the electric power industry and power engineering while discussing ideas about decentralisation of the national energy system and the active phase of import substitution in the national economy.
Small-scale power generation concept
Both in the Russian and foreign communities there is not an established consensus on a single definition of the concept "small-scale power generation". This is often due to the fact that the criterion is the power generation equipment's capacity and the quantitative amount of energy it produces. It is worth considering both the power characteristics of such equipment and the end consumer.
Despite the growing interest from the state and the consumer market, the concept of small-scale power generation is not legally enshrined. Based on an analysis of a number of publications [Pepermans et al., 2005; Brass et al., 2012; Mehigan et al., 2018; Khokhlov et al., 2018; Iweh et al., 2021] and expert opinions, we will define the term "small-scale power generation".
Small-scale power generation is a segment of the energy sector, including power generating installations and systems with unit capacity of up to 30 MW (20 Gcal/h), not connected to centralised grids, operating on the use of energy obtained from burning fuel (natural gas and fossil liquid fuel) or based on renewable energy sources (RES) designed for electricity and/or heat supply to industrial and municipal consumers.
Along with the term "small-scale power generation", the concepts "distributed generation" and "local" or "autonomous power generation" are widely used, which predetermine the way of power generation on the side of consumers included in the distribution grid [Khokhlov et al., 2018]. However, it is the term "small-scale power generation" that is the broadest and includes the concepts of regional, autonomous and distributed generation.
We are going to consider a number of other definitions, characterising the difference in the experts' views from different professional groups (Table 1). Due to the fact that there was a great number of researches on this topic around the world especially in the 1990s and early 2000s, the main formulations were made in that period; subsequent ones only slightly clarified and supplemented them.
Table 1. Overview of small-scale (distributed) power generation's definitions
Source Definition
International Energy Agency, p. 7* Distributed generation is a set of installations for on-site energy production and supplying energy directly to the local distribution network
[Pepermans et al., 2005, p. 796] Distributed generation is all generation units with a maximum capacity of 50 to 100 MW, that are usually connected to the distribution network and that are neither centrally planned nor dispatched
[Dondi et al., 2002, p. 3] Distributed generation is a way of producing electricity from a small source or storing electricity (from several kW to tens of MW), which is not a part of a large power system and is located near a consumer.
[Chambers, Hamilton, Schnoor, 2001, p. 16] Distributed generation is power generation equipment with a capacity up to 30 MW, which are located at customer sites to meet their energy needs
Concept for the development and use of small-scale and alternative power generation opportunities in the energy balance of Russia, 1994** Small power plants (small-scale power generation) include power generation equipment with a capacity of up to 30 MW with units capacity of up to 10 MW, boilers houses and boilers with a total heating capacity of up to 20 Gcal/hour, power installations using solar, wind, geothermal energy, biomass energy, low-grade heat, as well as small and micro-hydroelectric power station (HPS) (with unit capacity of up to 100 kW)
Association "NP Market Council"*** Small-scale power generation is a segment of the energy sector that includes small power generating installations and systems, including those not connected to centralised power grids, operating on traditional fuels or RES.
*IEA. (2002). Distributed generation in liberalised electricity markets. https://www.iea.org/reports/ distributed-generation-in-liberalised-electricity-markets.
**There is not this concept in open sources. The presented definition was taken when working with dissertation materials in the library. The concept of development and use of small-scale and alternative power generation opportunities in the energy balance of Russia was adopted in 1994. Moscow: Ministry of Fuel and Energy of the Russian Federation (MT-6758-92 of June 7th, 1993).
***Non-profit partnership Market Council for organising an effective system of wholesale and retail trade in electrical energy and capacity. https://www.np-sr.ru/ru/glossary/item/malaya-energetika. (In Russ.)
Considering the concept "institutional barrier", it is noteworthy that in a broad sense, the institutional conditions of market activity in the literature include: the regulatory framework; the attitude of the authorities (regulator) to science and technology, the presence of policies that stimulate innovation; political climate, specifics of the judicial system; business and investment climate in a country (region); 'cultural code' (traditions, habits, attitude towards risk or experimentation) [Nikonova, 2016; Davidson, 2017; Rincon et al., 2021]. Failure to fulfill certain conditions creates institutional barriers to market development, which are specific based on the certain industry context. For example, corruption, which creates difficulties in entering the market, lack of knowledge, technology and innovation, lack of a legal framework, inadequate pricing and taxation [Vlasicheva, 2011; Nikiforo-va, Yashchenko, 2014].
Structure of small-scale power generation in the Russian Federation
According to the current regulatory documentation, small-scale power generation facilities include power plants with a total capacity of up to 30 MW in cases where a single unit capacity of these installations does not exceed 10 MW; boiler houses with heat output up to 20 Gcal/h; hydroelectric power plants (HPPs) with a capacity of hydraulic units up to 100 kW; nuclear power plants (NPPs) where capacity of power units does not exceed 150 MW, and thermal capacity does not exceed 500 MW; power plants using renewable types of energy1. Until 2030, the global growth rate of small-scale power generation in the structure of energy production is expected to maintain positive dynamics (Figure 1).
The most common types of small-scale power generation plants in the Russian Federation are diesel ones. The increased demand for these plants can be explained by operation simplicity, a wide capacity range (from 10 kW to 1.5 MW), small size and weight characteristics, and the ability to operate for a long time without maintenance. However, due to the high cost of the fuel used, such equipment is most often used as backup or emergency sources of electricity.
The most promising and rapidly growing type of power generation equipment, which is used in the construction and commissioning of modern power plants, are gas piston power plants. At the same time, gas turbine units are the rarest type of power generation equipment in Russia. Despite the relative technical simplicity of this equipment, small gas turbine units (GTUs) require large capital investments and long periods design exploration.
1 Federal law of March 26, 2003 no. 35-FZ "On electric power industry". http://ivo.garant.ru/#/docu-ment/76804685/paragraph/539078:3 (In Russ.); National standard of the Russian Federation GOST R 54531-2011 introduced on January 1st, 2013 "Non-traditional technologies. Renewable and alternative energy sources. Terms and Definitions". https://base.garant.ru/71574058/#:~:text=Нацнонапbннн%20станflарт%20Р$%20ГОСТ%20 P,-%201%20flHBapfl%202013%20r. (In Russ.)
U
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2021 2022 2023 2024 2025 ■ Centralised generation
2026 2027 2028 2029 Distributed generation
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Fig. 1. Forecast of commissioned centralised and distributed generation capacities
in the world1, 2021-2030
Table 2 shows the main characteristics of various power generation equipment used in small-scale power generation facilities. This equipment is usually manufactured and operate in conjunction with a heat recovery ventilation system, which is why they are called cogeneration units. However, today more advanced technologies of tri-generation and quad-generation are becoming widespread in the world.
Thus, tri-generation is the process of joint production of electricity, heat and cold using special absorption lithium bromide refrigeration systems. In this case, it is possible to achieve a more efficient (compared to cogeneration) use of the removed energy, which can be directed to heating processes in the autumn-winter period or air conditioning in the summer [Esposito et al., 2018]. Consequently, the power generation equipment can be used all year round without reducing its efficiency.
The quad-generation mode, in its turn, involves the simultaneous production of heat, electricity, cold and carbon dioxide. The most famous Russian case of using quad-generation is the innovative greenhouse farm of the UMMC-Agro, located in the village of Sadovy (Ekaterinburg), where they organised year-round production of various agricultural products.
Table 3 shows some of the implemented projects in recent years in the Sverdlovsk and Chelyabinsk oblasts, as well as in the Republic of Bashkortostan.
As can be seen from Table 3, the introduction of small-scale power generation is becoming common in various sectors of the economy (industry, retail and agriculture). Despite this, such facilities are built mainly in regions with well-developed centralised power grids.
1 Source: [Dzyuba, Semikolenov, 2023].
Table 2. Comparative characteristics of small-scale power generation equipment
Type of equipment Engine Power range (MW) Fuel used Average fuel costs with a capacity of 1 MW and power generation at 100 % load, rubles Heat-electricity ratio equipment mobility Electrical efficiency % Total efficiency %
Steam turbine units (STU) Steam turbine 1-1,000 Anything for generating thermal energy and heating water n.a. 3:1-8:1 No 10-20 less 80
Mini-HPP Hydro turbine 0.001-5 Water flow energy Not used in relation to heat generation 74-82 over 80
Gas piston units (GPU) Compression ignition piston engine 0.1-4.5 Mains gas 1,573.00 0.5:1 - 3:1 Default option: 1:1 Yes 35-45 65-90
Diesel generator sets (DGS) 0.003-2.0 Diesel fuel 15,653.00 Not used in relation to heat generation 30-40 70-80
Gas turbine units (GTU) Gas turbine 0.25-300 Mains gas n.a. 1.5:1-5:1 No 25-42 65-87
Table 3. Projects based on small-scale generation technologies
Enterprise using power plant Type of useful energy produced or Type of power plant Power generation facility capacity
electric, MW thermal, Gcal/ hour
OA Teplichnoe, Sadovy village, Ekaterinburg Quad-generation; based on gas piston power plants IMC 624-GS-N.L (GE lenbacher) 26.4 94.3
Distribution center of the Monetka supermarket chain, Ekaterinburg Emergency power supply; Teksan diesel power plants 0.9 Absent
NLMK-Ural, Nizhnie Sergi, Sverdlovsk oblast. Cogeneration; based on the MWM TCG 2032V VI6 gas piston set 4.5 21.9
AO UGC, the gold mining company, Tsentralnaya mine, Plast, Chelyabinsk oblast. Cogeneration; based on gas piston generator sets: Caterpillar G3520E - 8 units, MWM TCG 2020 VI2 - 2 units, MWM TCG 2020 V20 - 3 units. 24.4 21
Burzyanskaya SPP, Starosubkhangulovo village, Republic of Bashkortostan Power supply in continuous and emergency modes to regional consumers: consists of 35.1 thousand photovoltaic modules 10 Absent
Thus, currently the small-scale power generation market is active mainly in the European part of the country, which has historically been dominated by large thermal and nuclear power plants. At the same time, in Siberia, the Far East, and the Far North, small-scale power generation is developing more slowly and mainly consists of diesel power plants of various capacities operating in island mode or performing an emergency function.
Materials and methods
The research method involves the sequential implementation of three stages. At the first stage, we clarified the conceptual framework based on the analysis of scientific publications and analytical reports, determined the structure of small-scale power generation in the Russian Federation, and systematised the key institutional barriers impeding its development.
At the second stage, in order to verify the identified barriers, we conducted a series of interviews with 42 experts from the professional environment (12 managers and 30 specialists), distributing the respondents depending on a company they represent and their jobs (Table 4).
Table 4. Distribution of experts by their activity and qualification level, persons
Type of business Number of respondents
managers specialists
Power engineering, power and electrical equipment manufacturing 3 7
Power generation 5 13
Electrical grid 2 5
Industrial enterprises - consumers of electrical and thermal energy 2 5
As a rule, the interviews with respondents were individual in nature and included open-ended questions: "What barriers hinder the development of small-scale power generation in Russia?", "What measures should be taken to intensify the implementation of distributed generation in the regions?", "How to improve the interaction between energy companies, equipment manufacturers and government authorities in order to solve the problems of small-scale power generation development?", "What adequate incentive mechanisms should be applied for these purposes?"
Discussion panels were carried out as part of classes held in 2021-2023 with corporate groups of large energy enterprises PAO Rosseti Ural, PAO T Plus, OOO Bashkirenergo pursuing the Master's programme "Energy business" at the Ural Federal University (Ekaterinburg, Russia). The article's authors teach at the programme.
The discussion involved specialists from companies in the field, such as OOO Ru-tector, OOO Pnevmomash, OOO PromMash, AO Power Equipment SP, OOO Generator-Service and some others. In total, 54 experts took part in the discussion panels.
The third stage involved a logical and structural analysis of the problems concerning small-scale power generation development, their subsequent discussion and search for directions for possible solutions.
Research results
The main institutional barriers to the small-scale power generation development in the Russian Federation and directions for settling them. Having interviewed experts, we identified the most significant problems in the small-scale power generation development in the Russian Federation (Figure 2).
Electricity sales problems Lack of regulations and standards Lack of state support Deficit of qualified specialists Low level of service Impossibility of long-term demand planning Low cost (tariff rate) of electricity Equipment reliability problem Lack of demand (surplus capacity) Malfunctional subsidy and lending mechanism Monopoly of large energy companies Low customer awareness Lack of investment return mechanism
0 20 40 60 80 100 %
Fig. 2. Barriers to the small-scale power generation development in the Russian Federation:
respondents' opinion, %
The answers presented in Figure 2 allow us to split the respondents' opinions into four groups, which make up a set of main institutional problems of small-scale power generation development in the Russian Federation:
- problems of technological backwardness;
- legal and organisational problems of selling electricity by small-scale power generation facilities to centralised electrical grids;
- lack of working mechanisms of state support for the small-scale power generation development;
- surplus of generating capacity in the country's energy system.
We are going to consider these barriers in more detail.
Technological backwardness. Until February 2022, the key manufacturers of gas turbine units and equipment for cogeneration, tri-generation and quad-generation units supplied to the Russian market were foreign enterprises, such as Caterpillar S.A.R.L., MTU Onsite Energy, MWM GmbH, Waukesha Engine Dresser Inc, etc. Before imposing restrictions on the supply of this equipment to our country in 2022, their total market share was about 90 %. Among the Russian manufacturers of gas piston units, we can highlight OOO Kama-Energetika (Naberezhnye Chelny), NPO Gas Power Plants (Rybinsk), OAO Barnaultransmash (Barnaul), AO RUMO (Nizhny Novgorod), OOO Samara plant Energia (Samara region, Alekseevka township), OOO PSM Plant (Yaroslavl), OOO Advanced Energy (Tutaev). The small share of Russian companies (about 10 %) in the structure of the Russian GPU market was explained by their focus on the production of equipment with a capacity of up to 1 MW and the prevailing market conditions in the period from 1990-2010 [Aleksakhina et al., 2013]. Foreign companies were aimed at a more dynamic segment of the market, represented by equipment with a capacity of over 1 MW with a wide range of manufactured GPUs, while providing high-quality service.
The Russian segment of small-scale power engineering is mainly formed at the expense of trading and manufacturing companies that use foreign equipment in their projects [Kozhevnikov, Dvinyaninov, 2020]. These companies include major market players: MKS Group of Companies (Chelyabinsk), OOO PKT (Rostov-on-Don), OOO Alfa Balt Engineering (St. Petersburg), OOO Group of Companies TSS (Moscow), etc.
As a rule, such companies carry out a full cycle of work, from design to construction of a power generation facility. At the same time, all the main high-tech equipment is purchased ready-made, and its further installation is a large-unit assembly. Russian business considers it inappropriate to open their own high-tech industries due to the long payback period for investments in the high-tech sector (over 10 years). This is indirectly confirmed by the pronounced trend of replacing equipment from brands that have announced their withdrawal from the Russian small-scale power generation market with similar ones, but produced in China, India and other countries that are ready to cooperate with the Russian Federation [Aldanov, 2023].
In this regard, it is critically important to create mechanisms for knowledge-intensive support for small-scale power engineering, its integration with engineering and consulting companies, who are the 'owners' of scarce skills in the field of R&D, as well as universities in the training highly qualified personnel. Almost three-quarters of the experts surveyed point out this need.
One solution to the problem of the consumer's lack of investment for installing distributed generation could be to use the mechanism of an energy service agreement, which provides for constructing a facility on shared financing terms. This tool is noted as a promising solution by 20 % of the surveyed experts. In the case of an energy service agreement, the return on investment is ensured gradually, as the effect of implementing the measure (usually energy-saving) accumulates, and the resulting income is distributed between the enterprise and the investor in the proportions stated in the agreement; enterprises' debt burden does not increase; the enterprise does not need to increase its staff and does not use a non-core asset. Moreover, there appear working capital reserves that can be used for technological modernisation of production.
Legal and organisational problems of selling electricity by small-scale power generation facilities to centralised power supply grids. Under current legislation, all generators with an installed capacity of over 25 MW are entitled to sell electricity to the wholesale market. Power plants with an installed capacity of up to 25 MW can choose which market to operate on - wholesale or retail one.
Electricity produced at small-scale power generation facilities is rarely sold into the grid. Many manufacturing enterprises would choose to build their own small-scale power generation facility, having the opportunity to freely sell excess capacity to the general grid, thereby partially compensating the costs incurred for the construction of their own power generation facility.
Analysis of world practice allows drawing a number of conclusions.
Firstly, it is advisable to take the path of standardising the issues of connecting distributed generation facilities, establishing uniform requirements depending on a facility's capacity and voltage class, as well as determining the level of system disturbances permissible for power plants, which will not affect reliability [Iweh et al., 2021]. It is necessary to develop unified methodological recommendations for the design, construction and commissioning of such facilities.
Secondly, it is necessary to continue consistent work to change the mode planning system, taking into account the use of tools for forecasting electricity generation and demand management.
Thirdly, the widespread of distributed generation will lead to a paradigm shift in the functioning of distribution and transmission grids due to the emergence of reverse and rapidly changing power flows, which will lead to a strengthening of the role of traditional power grid companies as guarantors of overall reliability. In this case, new requirements for the interaction efficiency between technical personnel of network companies arise, which will lead to the development of new guidance documents, the purpose of which will be not only to handle operational problems, but also to ensure the long-term development of a new energy system.
Lack of working government mechanisms to support the development of small-scale power generation. In addition to the insufficient development level of the regulatory framework, the problem is the lack of a clear and transparent incentive mechanism from government authorities. In 2022-2023 under the influence of unprecedented sanctions restrictions, the prerequisites for the restoring the Russian segment of equipment production in the energy industry have emerged. One of the key approaches to overcoming restrictions on access to advanced developments is creating our own research and production bases through various mechanisms of public-private partnerships, successful examples of which have already been tested on the market [Tol-stolesova, Vorobyeva, Yumanova, 2019; Othman, Khallaf, 2022].
Nowadays in Russia, a mechanism to stimulate the use of RES on the wholesale market has been developed and implemented, which approves the methodology for determining the share of costs compensated by paying for the capacity of generation facilities operating on such sources usage. It was possible to attract private investors and public-private partnerships to the industry through the mechanism of providing subsidies from the federal budget for technological connection of generating facilities with an installed capacity of no more than 25 MW for RES facilities and general tax preferences from the state.
At present in Russia, a mechanism has been developed and implemented to stimulate the RES use on the wholesale market, which approves the methodology for determining the share of costs compensated by payment for the capacity of generating facilities operating on such sources. It was possible to attract private investors and public-private partnerships to the industry through the mechanism of providing subsidies from the federal budget for technological connection of generating facilities with an installed capacity of no more than 25 MW for RES facilities and general tax preferences from the state.
Other state support instruments are absent or not applied, which leads to significant underfunding of potentially attractive investment projects, although the areas of such support are known and include capital subsidies, grants or discounts, onetime government payments, investment or production loans in the form of tax deductions, fixed payments from the state for energy produced at small-scale power generation facilities, government investments, loans or grants for the development of energy infrastructure [Kormishkina, Koroleva, 2018]. The current methods of tax incentives for small-scale power generation need to be adjusted, in particular, according to the respondents, at the federal level it is necessary to adopt a methodology for issuing investment tax credits and income tax deductions; to clarify the procedure for providing a property tax deduction for personal income tax for the amount of actual expenses for the purchase and installation of distributed generation equipment.
Moreover, we believe that a possible impetus for the small-scale power generation development in the Russian Federation could be the partial borrowing and processing of foreign experience. One good example is the Energy efficiency directive 2012/27/ EU of the European Parliament and Council1.
In terms of the development of import substitution policy, it is advisable to take into account the experience of India and China [Zhou, 2008; Adewale, 2017]. National programmes in these countries include measures to simplify procedures for registering a business, licensing and obtaining construction permits, reducing tax rates and facilitating access to land and infrastructure, and stimulating domestic demand for domestically produced products.
Undoubtedly, the dependence on foreign technologies is gradually decreasing, although in a number of areas it remains quite high. In those sectors of the national economy which contribution to the country's economy is significant, a list of products subject to import substitution as a matter of priority was compiled.
Some measures to support the small-scale power generation development can be seen in the adopted Federal law of December 27th, 2019 no. 471-FZ "On amendments to the Federal law "On electric power industry" regarding the microgeneration development"2, as well as subsequent instructions of the President of the Russian Federation, orders and resolutions of the Russia's Government, combined into a single package of anti-sanctions measures3.
Surplus of generating capacity in the national energy system. In the conditions of a developing competitive energy market, this barrier becomes one of the factors constraining the natural growth of electricity tariffs. However, the existing surplus is largely a consequence of the slow decommissioning of physically deteriorated facilities. The solution to the problem may be the construction of new small-scale power generation facilities, not only closer to the consumer, but also more flexible in terms of demand management. Due to the fact that small-scale power generation facilities are initially designed for a high level of digitalisation, the introduction of smart metering tools, the efficiency of forecasting consumption volumes and demand management capabilities increase significantly.
Modern small-scale power generation facilities do not exclude the possibility of consumers' interaction with a centralised system. They can get electricity from it at the time of peak loads and the impossibility of covering the demand for electricity
1 Directive of the European Parliament and Council on Energy Efficiency (October 25, 2012 no. 2012/27/EU Amending Directives 2009/125/EC and 2010/30/EU and Repealing Directives 2004/8/EC and 2006/32/EC). https:// eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2012:315:0001:0056:en:PDF.
2 Federal law of December 27th, 2019 no. 471-FZ "On amendments to the Federal Law "On electric power industry" regarding the development of microgeneration". https://rg.ru/2019/12/30/energetika-dok.html. (In Russ.)
3 Anti-sanction measures 2022-2023 (special economic measures and measures aimed at supporting businesses and citizens). http://ivo.garant.ru/#/document/57750630/paragraph/2532:0. (In Russ.)
with their own generation, and after the peak values, on the contrary, transmit the excess generated power to the general grid. Federal law no. 471-FZ1 greatly facilitates the opportunity for individuals who purchase equipment for households to recoup the costs incurred. We believe that such positive experience should be extended to distributed generation facilities owned by legal entities with different forms of ownership.
Discussion
In general, the identified barriers to the small-scale power generation development in the Russian Federation correlate with the opinions expressed in scientific publications and are consistent with the fact that, first of all, infrastructural support of market mechanisms for ensuring the reliability of power supply based on distributed generation requires improvement, taking into account the peculiarities of electricity supply to consumers using power generation equipment of various reliability categories [Kuzmin, 2018; Moreva, Surovtsov, Panova, 2020].
For a deeper understanding of emergence mechanisms of the institutional barriers to small-scale power generation and the appropriate tools development to overcome them, it is interesting to consider the experience of technologically developed countries regarding legal regulation. However, as shown by the results of a content analysis on the desired issue, the main regulatory documents in the EU2, USA3, China, India and other countries regulating the operation of small-scale power generation facilities relate to RES [Abramova, 2020; Kumar, Majid, 2020]. Documents characterising the operation of distributed generation facilities based on gas piston units, gas turbine units, and diesel power plants can indirectly include, for example, the European Union Directives4 on cogeneration. Such documentation is either at the stages of development and approval, which means it is not publicly available, or simply does not exist.
Undoubtedly, many of the proposed solutions to overcome the above barriers require extensive discussion in the professional community. In this part of the article, it seems appropriate to once again focus the attention on some aspects of the regulatory framework development, which are the subject of heated discussions at the level of relevant ministries, energy companies and equipment manufacturers.
1 Federal Law of December 27, 2019 no. 471-FZ "On amendments to the Federal Law "On electric power industry" regarding the development of microgeneration". https://rg.ru/2019/12/30/energetika-dok.html. (In Russ.)
2 Higher School of Economics. European Union Renewable Energy Handbook. https://www.hse.ru/ data/2016/12/21/1112025400/CnpaBOHHMK%20B^%20B%20ECpdf. (In Russ.)
3 Moscow School of Management SKOLKOVO. Distributed generation. Window of opportunity for development. https://energy.skolkovo.ru/downloads/documents/SEneC/News/SKOLKO VO_EneC_2017.09.20_Presenta-tion_Distributed_Energy_Resources.pdf. (In Russ.)
4 Official website of the European Commission. Energy, climate change, environment section. https://energy. ec.europa.eu/topics/energy-efficiency/cogeneration-heat-and-power_mt#documents.
One of the results of such discussions was additions to Federal law no. 35-FZ1, which defined the concept "microgeneration facility" and established organisational and legal norms for interaction between the owner of such a facility and electrical grids. Thus, the operation of a microgeneration facility is possible for the purpose of selling electricity if the volume of output to the grid does not exceed the maximum connected capacity of the power receiving devices of the specified consumer and is no more than 15 kW. The law does not limit who should be the owner of a microgeneration facility, which means it can be both legal entities and individuals. The limitation of installed capacity to 15 kW is prohibitive even for small and medium-sized power facilities generating more than 1 MW of electricity, since it is not economically profitable for them. This law was primarily developed for individuals - owners of small generator sets with a capacity rarely exceeding 20 kW. Perhaps, as the regulatory framework improves, this limitation will be adjusted, and the range of power for distribution into the general electric grid will be expanded to levels adequate from the point of view of profitability for any owner of a small-scale power generation facility.
There are not restrictions in the law regarding the proportions of power generation for one's own household or industrial needs. This is a positive moment that contributes to the strengthening of small-scale power generation facilities on the Russian market.
Another problem is related to the absence in the above law of the possibility of "offset" for electricity received from the grid and supplied to the grid by the owner of a microgeneration facility.
We believe there should be adjustments to some documents regulating the operation of small-scale power generation facilities. Some of the proposed provisions have successfully proven themselves in foreign countries [Klobut, Hukkalainen, Makelain-en, 2018; Chebotareva, Strielkowski, Blaginin, 2019]:
- assigning to the owner the responsibility for developing a preliminary power distribution scheme and feasibility studies for connected options;
- differentiating of costs between process participants;
- development of regulations to compensate electric network companies for lost income;
- consolidating an integrated approach to connecting distributed generation facilities at the regional level;
- developing regulations for the controlling newly connected distributed generation facilities, independent of a facility's capacity.
Finally, being in solidarity with a number of experts [Fakhraziev, Zatsarinnaya, 2013; Markova, Churashev, 2017] we note the need to synchronise various regulatory
1 Federal Law of March 26th, 2003 no. 35-FZ "On electric power industry". http://ivo.garant.ru/#/docu-ment/76804685/paragraph/539078:3. (In Russ.)
documents and improve them. GOST R 54531-2011 in the reissue of December 2018 can serve as an example which provides a complete definition of alternative and renewable sources of electricity. In our opinion, a similar standard is required for small-scale power generation, in which it is necessary to provide clear concepts and definitions; indicate the areas of responsibility concerning design, coordination of projects and issuance of technological conditions for connection, installation and further operation of a power generation equipment; clarify construction, electrical and other standards and regulations; provide legal and legislative support. The document must have federal status, but take into account the specific characteristics of regions. It is necessary to indicate the extent to which Russian components are to be used in power generation facilities and encourage Russian companies to possibly replace foreign units and components.
Conclusion
Small-scale power generation, including power generation equipment and low capacity power plants for supplying energy to consumers without connecting to centralised electric grids, is not an alternative to traditional power generation. It complements and supports the sustainability of high-quality and reliable power supply to consumers. Due to the lower cost of electricity and high speed of construction, small-scale power generation facilities have a quick return on investment. Modern economic problems have affected the cost of imported power generation equipment (especially the increase in the ruble exchange rate in 2014-2023). Currently, the payback period for such projects is 3-4 years. However, this period for large power plants is about 12 years, which makes small-scale power generation very attractive for potential investors.
The study made it possible to structure specific institutional barriers to the small-scale power generation development in the Russian Federation. The obtained result is original and not previously formulated, despite quite a long-term interest in this issue in both the academic and professional communities. In addition, we have developed a set of solutions to overcome the identified barriers that ensure long-term and predictable small-scale power generation development:
- the problem of technological backwardness is overcome through the introducing mechanisms for supporting small power engineering and integrating with engineering and consulting companies, as well as by using energy service agreements;
- legal and organisational problems of selling electricity to the grid are solved by introducing state standards for connecting small-scale power generation facilities, developing guidelines for designing and commissioning such facilities;
- state support for small-scale power generation is achieved by clarifying the procedure for providing tax deductions, developing a methodological guidelines for
issuing investment tax credits, integrating and processing foreign experience, including the one of European countries;
- the surplus of generating capacity is rectified by replacing retired power generation equipment with new small-scale power generation facilities closer to load centers.
Further studies should investigate the problems of energy demand management, including on the basis of demand aggregator institutions being created today in the country, as well as issues of organising the retail electricity market when intensifying the use of small-scale power generation technologies by consumers.
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Information about the authors
Mikhail V. Kozhevnikov, Dr. Sc. (Econ.), Associate Prof., Head of Energy and Industrial Enterprises Management Systems Dept. Ural Federal University named after the first President of Russia B. N. Yeltsin, Ekaterinburg, Russia. E-mail: m.v.kozhevnikov@ urfu.ru
Artem A. Dvinyaninov, Sr. Lecturer of Energy and Industrial Enterprises Management Systems Dept. Ural Federal University named after the first President of Russia B. N. Yeltsin, Ekaterinburg, Russia. E-mail: aadvinianinov@urfu.ru Nikita G. Sapozhnikov, Lecturer of Energy and Industrial Enterprises Management Systems Dept. Ural Federal University named after the first President of Russia B. N. Yeltsin, Ekaterinburg, Russia. E-mail: sapojnikovng@gmail.com
© Kozhevnikov M. V., Dvinyaninov A. A., Sapozhnikov N. G., 2024
