Energy, utilities | Technology & innovation

Kalmykia gets $840m wind energy project

20 Apr '11
Oleg Kouzbit, Online News Managing Editor

An international investor consortium is building an $840m wind energy park in Russia’s south-west Republic of Kalmykia. Between now and 2013 the project owners want to ramp up energy production from 35 to 300MW not only to power Kalmykia but also sell to other regions. It’s another innovation investment designed to put Russia on the map as one of the world’s largest wind power producers.

A European consortium led by Falkon Capital has just announced $840m worth of plans for a large-scale wind energy park in the Republic of Kalmykia, a steppe-dominated region in Russia’s South-West. The project calls for setting up 100 wind power stations with a projected aggregate capacity of 300MW. They will generate twice as much energy as the region annually consumes, making energy-starved Kalmykia an exporter of electricity.

A Czech-Swiss-German-Russian effort

Falkon Capital is a Czech-Swiss investment group that has been betting on Kalmykia winds for years. As far back as 2007 the firm set up two subsidiaries in the Russian region with an eye to prospective generation and transportation of 600MW of electrical energy. Three years later the company is scaling back both the capacity and its original $2bn investment.

With a reported $28m already injected, Falkon has brought on board a major co-investor, Germany’s Landesbank Berlin, and is said to have secured financial commitment from the RF and Kalmykia, which are now expected to pony up as part of the South of Russia development program.

How much the German bank and the RF will actually kick in has yet to be specified.

Powering Kalmykia and selling the rest

The investor will reportedly launch its first two 1.2MW power stations next month in the village of Peschany. Both were manufactured and test-run last year already, according to regional media reports.

By the end of this year 11 more plants with a capacity of 3MW each are expected to come on-line, creating 35.4MW of power—enough to run the regional capital city of Elista.

Between the end of this year and late 2013 another 87 Danish-made 3MW Vestas plants will get on stream, Falkon said.

Kalmykia’s annual energy consumption is a reported 150MW. The long-term plan is to not only create enough energy for the region, but to export the excess.

Falkon is reportedly working with Denmark’s Vestas to create a service center to maintain its wind plants, which is an integral part of the company’s overall investment program. When fully launched, the project is expected to add 1,000 new regional jobs to the 250 currently employed at Falkon’s Kalmykia subsidiaries.

First a huff and then a puff…

Landesbank Berlin’s Bernd Schmidt told media his bank “can only support cost-efficient projects, and we consider the Kalmykia one cost-efficient.” The new investment is estimated to have a seven-to-eight year payback period, relatively short for large projects like this one.

Russia, which is still a dwarf compared to global energy leaders with its mere 15MW share of installed wind power capacity, is determined to catch up and join the club of the world’s top wind power producers.

In early 2010 Russia’s largest energy-generating company, RusHydro, and the RF’s government-run technology corporation, Rostekhnologii, announced a colossal, $2.5bn future wind generator park with a capacity of 1GW in the Volgograd region.

RusHydro is also building a $97m, 36MW wind power station in Russia’s Far East; Japan’s J-Power is its partner in the regional project.

VentRus, energy grid firm MRSK Volga and the Orenburg region are planning three wind power parks with a total capacity of 150MW. The seven-to-ten year project will reportedly cost an estimated $350m.

Leaders of the pack

As of last year the world’s top-3 wind energy producers were the U.S., China and Germany with an aggregate 80+GW in installed capacity. Spain, India and Italy followed with 35GW. The tenth largest wind energy producer on the planet is Denmark—a country that supplies nearly half of the world’s wind turbines.

In the EU, wind power generation accounted last year for 16.7% of total consumption, according to the European Wind Energy Association (EWEA).

CIS joins the race

Russia’s CIS neighbors have also joined the eco-friendly race in a bid to diversify their energy base. This summer Ukraine is launching that country’s largest wind power station, the 107.5MW Novoazovsky plant, which will more than double Ukraine’s overall current wind capacity.

Kazakhstan has plans over the next several years to build as many as 200 wind power plants in its Zhambyl region alone. An international consortium that includes Kazakh and Asian investors has outlined a long-term strategy calling for a reported $1bn in initial investment.

The tsunami lesson

The March 2011 disaster at Japan’s Fukushima-Daichi nuclear power station has stoked the RF’s resolve to diversify its energy sector. Speaking to a Council of Europe session in late March, a Russian spokesperson said Russia would step up use of alternative energy sources, including wind.

For this very reason the Skolkovo Foundation, an entity behind the promotion of Russia’s ‘new Silicon Valley’ innovation hub outside Moscow, has also decided to encourage the development of renewable energy related projects.

Analysts feel that Russia has an estimated potential of generating as much as 30% of its energy from wind (a reported 260 billion kilowatt-hours/year). If the Kalmykia project can deliver on its promise, it will be just the kind of showcase of success the RF needs to be taken seriously.
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