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The Commonwealth of Independent States (CIS) — a diverse patchwork of nations that stretches across a vast swath of Central Asia, all the way to the eastern fringes of Europe — is a daunting proposition for even the most seasoned solar investor. As emerging markets, these countries vary greatly in terms of how ready they are to deploy renewables; in general, industry observers say the region is largely still in the early stages of development.
SolarGIS statistics show that Uzbekistan’s Samarkand, Kashkadarya and Surkhandarya regions offer the best resource in the CIS, with horizontal solar irradiance on par with central Spain, in the range of 1700-1900 kWh/sqm. Much of central and southern Kazakhstan is similar to Italy and the midwestern United States, ranging from approximately 1500 - 1600 kWh of solar irradiance per sqm. Northern Ukraine and Belarus offer the weakest resource in the CIS region, broadly in line with much of northern Europe.
“There are opportunities, but it’s very scattered and there are no clear, ‘go-to’ markets,” says Josefin Berg, a senior analyst at IHS. “There is not a real, focused drive to promote solar in general. Some of the (countries) need power, but they’re also stuck in a very conventional way of looking at power.”
That said, Ukraine has long been the most advanced country in the CIS region in terms of developing PV, with roughly 825 MW of installed capacity at the end of 2015, according to the International Renewable Energy Agency (IRENA).
The country has had a feed-in tariff (FIT) — known as the “green tariff” — since 2009. The rates in 2016 are set at 160 €/MWh for utility-scale projects and 172 €/MWh for rooftop installations.
“Most of the know-how in the CIS countries comes from the Ukraine,” says Ilko Iliev, chief executive of Bulgaria-based Inea Consulting, adding that the nation tops the CIS in rooftop installations, in addition to being among the region’s leaders at the utility scale.
However, after two years of strong growth in the 2011-12 period, less than 10 MW of solar capacity was installed in 2014-15, according to IRENA data, indicating that ongoing political turmoil has brought PV development to a virtual standstill in the Ukraine.
Iliev believes that investment will start to pick up again in the 2017-18 period.
Berg agrees that there are signs that the Ukrainian market is “picking up” — she points to undisclosed plans to build several projects this year, including a proposal to install several megawatts in the radioactive environs of Chernobyl — but acknowledges that “foreign investors have been reluctant to step in because of political instability.”
Rodnikovoye, Ukraine - Image Credit: Activ Solar
With Ukraine’s solar plans largely on the back burner for now, Kazakhstan arguably shows the most promise in the CIS region. Berg says that “ambitious policies” have triggered a “mini boom” in the country in recent years, resulting in about 180MW of cumulative installed capacity, built across a handful of sites. Most recently, the European Bank for Reconstruction and Development announced plans to provide $26m of debt financing to Indian PV developer ACME Cleantech to build a 29 MW project in Kazakhstan’s southern Zhambyl region.
However, Berg cautions that it remains to be seen how “realistic” the country’s policies are — a conclusion that Arman Kashkinbekov, deputy CEO of the Association of Renewable Energy of Kazakhstan — agrees with.
“There is a good legislative base,” Kashkinbekov says, noting a series of amendments that the government made to the country’s renewables policy in April. However, he acknowledges that a number of issues threaten to cap future market growth.
For the last several years, the legislation has changed significantly three or four times,” he explains, lamenting that such instability is unacceptable to foreign investors. In addition, the devaluation of the Kazakh currency has made the current FIT of 34.61 tenge/kWh [US$0.10/kWh] less attractive than it was when the tariff was introduced in June 2014.
A number of other challenges could also hold back development, including issues related to land acquisition, complicated permitting procedures and the government’s reluctance to pay for much-needed grid upgrades.
Nevertheless, Kashkinbekov remains optimistic that investment will soon take off. “The right time is now,” he says. “If investors see the opportunity in the uncertainty to come, capture the market and help the government… they will win.”
Kazakhstan is also preparing to host Expo 2017, with leaders from more than 95 countries and 15 international organizations set to discuss sustainable energy access and efforts to reduce global CO2 emissions. The event, scheduled from June to September 2017 in Astana, the national capital, will underscore the country's renewed focus on energy security, with IMF managing director Christine Lagarde hailing the oil and gas producer’s “promising future.”
Perova, Ukraine - Image Credit: Activ Solar
Elsewhere in the CIS region, the outlook is uncertain. In Uzbekistan, cumulative installations have reached roughly 1.1 GW, according to IRENA. Promisingly, the government is now facilitating the development of a number of large PV projects. However, Iliev notes that Chinese investors have dominated the opportunity to build solar in the country thus far.
And in many ways, the country is not ready for foreign investment in PV. For example, developers can directly negotiate PPAs with state-run utilities, but the agreements are denominated in the non-convertible Uzbekistani currency.
“It can’t be done according to free market principles… it’s a relatively closed country,” Iliev says, adding that he doesn’t expect the market to become an attractive investment opportunity for at least two or three more years. “It’s too early.”
That said, the resource-rich country of 31.5 million people supplies electricity to its neighbors, in addition to hosting a vast network of oil and gas pipelines. It has also moved up to 87th out of 189 countries in the World Bank’s Doing Business 2016 rankings, from 103rd place in 2015 and 166th in 2012. While the recent death of President Islam Karimov, a ruthless dictator, has cast uncertainty on Uzbekistan’s political stability and economic future, the country’s potential is hard to ignore.
Beyond Uzbekistan, the other CIS countries are at even earlier stages of development.
The Armenian government says the country has the potential to develop up to 3 GW of solar capacity, with ambitious plans to make renewables account for 8% of energy consumption by 2020. However, Armenia is still in the early stages of laying the legislative foundations for PV development. In May, parliament approved amendments to the renewable energy law that could facilitate the development of rooftop PV systems below 150 kW in size, with provisions for system owners to sell electricity back to the grid. But without the capacity to manufacture solar panels, the country will need to introduce additional amendments to lower taxes on imports of modules and inverters before development can truly take off.
Iliev dismisses Georgia as being too “politically unstable” to justify investments in solar at the moment. However, he is somewhat more positive about the prospects in neighbouring Azerbaijan. “But they are not moving very fast — the same for Belarus,” he argues. “They are speaking more than they are doing.”
Aside from Ukraine, he concludes that the “best opportunities” are in in Kazakhstan. “They have developed a good renewable energy framework,” says Iliev. “They are much closer to a market economy than the other countries.”