Valery Limarenko, Governor of Sakhalin Region, greeted participants in the conference on energy conservation and energy efficiency in the region, and described the region’s energy sector as a priority area in terms of the need to attract investment. He added that the Sakhalin authorities were focusing on the use of public-private partnerships as the best model for housing and utilities projects. The total volume of investment projects under concession agreements was just 5 billion rubles as of the beginning of 2021, and has now increased to 58 billion rubles.
“We were given a highly ambitious target: to achieve carbon neutrality in the region by 2026. The main instrument we are using to achieve that target is the implementation of investment projects to generate green energy and improve the energy efficiency of housing and utilities services, which will enable us to significantly reduce the proportion of carbon-free power generation in our energy mix and ensure that fuel resources are used efficiently. We have drawn up a list of investment projects totaling 20 billion rubles and will be happy to work with private investors in this technological sector,” Valery Limarenko added.
Alexey Yeresko, Deputy Minister for Construction, Housing and Utilities of Russia, Olga Serdyuk, Deputy General Director of the State Corporation - Foundation for Cooperation on the Reform of Housing and Utilities, and Ekaterina Kvasha, head of the Strategic Development Center’s energy efficiency unit all shared their views on the investment potential of the sector and the specific nature of public-private partnerships.
Mikhail Guzenko, Sakhalin Region Minister for Energy, presented a number of investment projects in the energy sector. He stated that eight renewable energy facilities will be operational in the region by 2025. These will include a 200 MW wind farm - the largest of its kind in the Far East - operated by NovaWind JSC, the largest industrial wind park in Russia, with a capacity of 67 MW, operated by VGK LLC, which will provide green energy for the Solntsevsky coal mine, and the 5 MW Okeanskaya geothermal plant, operated by the Compulink Group Management Company, as well as smaller hydroelectric plants, wind-diesel and solar-diesel plants designed to ensure a continuous energy supply to consumers in the Kuril Islands.
“The modernization of the street lighting system has significant investment potential. This system consumes more than 30 million kW/h a year, at a cost of more than 180 million rubles. The replacement of the existing sodium and mercury lights with LED lights will significantly reduce the burden on the Sakhalin Region budget and represents a profitable investment opportunity for private companies,” said Mikhail Guzenko.
Natalia Kuprina, Sakhalin Region’s Minister for Housing and Utilities, talked about the investment potential of this sector. By 2025 more than 100 utilities projects will be completed in the region, including the modernization and gas conversion of existing boiler stations with a total capacity of 600 GCal, the construction of water plants with a capacity of more than 30 000 cubic meters a day, the reconstruction of more than 800 km of heating pipes, 2,000 km of water pipes and 850 km of drainage, the construction of new wastewater treatment infrastructure and the introduction of modern commercial metering systems.
“Sakhalin Region’s Ministry for Housing and Utilities is working on attracting private investment, and is creating mechanisms to guarantee return on investment, including concession, lease and energy services agreements, and providing support to companies as part of the regional programs for the development of the housing and utilities sector. We are interested in introducing modern technical and organizational solutions to manage utilities services and we are open to partnerships with the private sector,” said Natalia Kuprina.
Alexey Tulikov, head of the Legislation Development Department of the Russian Energy Ministry’s Heat Energy Division and also head of the Russian Association of Energy Service Companies (RAESCO), sees increasing energy efficiency in the Far East and Arctic as an extremely promising market. He added that the main activities in this market are related to housing, utilities and energy supply, and include the creation of hybrid autonomous generators that use both traditional fuels and renewable energy sources, as well as measures to increase the energy efficiency of state and municipal social organizations and of the street lighting system.
“In order to involve private investors in energy conservation projects both federal and regional authorities will need to create transparent and attractive conditions for business. These measures should include tax exemption for profits from energy services agreements, and interest rebate on loans used for the implementation of energy efficiency measures. This would have the effect of encouraging banks and factoring organizations to create special products for energy service companies,” said Alexey Tulikov.
Vasily Potyomkin, Deputy Director of the FEDC’s Sector Expertise Department and a specialist in the field of ESG, spoke about the specific factors involved in attracting private investors to energy housing and utilities projects in the Far East and Arctic, the implementation of such projects in that macroregion, and the investment opportunities offered by that sector.
He described the implementation of major new investment projects in infrastructure sectors as a low-profit business which requires some state financing. Moreover the state is already spending an enormous amount on the maintenance of obsolete energy and utilities infrastructure, and the modernization of this infrastructure, financed from current operational budgets, would be an attractive investment project for small and medium-sized businesses, and the resulting inflow of private investment would serve to improve living standards in the region.
“We are actively working with energy and housing and utilities companies and they have shown considerable interest in projects on Sakhalin. Last year, the FEDC signed agreements with investors including VGK LLC and the Compulink Group Management Company, and these companies are already implementing renewable energy projects. The distributed generation sector in the Far East and Arctic regions, of which the Kuril Islands form a part, is a particularly promising investment area. We are therefore in the process of developing of a separate federal program which will provide state support to private investors in this sector,” said Vasily Potyomkin in conclusion.