Novak sees Russian energy investment diversifying

Russian deputy prime minister Alexander Novak said he expects to see a "redistribution of investment" in Russia's energy sector in the future as the country's oil and gas companies increase the amount they spend on renewable energy and carbon capture and storage projects.

Novak reiterated his view that hydrocarbons will continue to dominate the global energy mix for decades to come, but said energy investment in Russia will become more varied. "Energy companies provide about 20pc of all investment in Russia. They plan their business now in light of the climate agenda," Novak said today at an investment forum organised by Russia's central bank. "This investment will remain in the [energy] sector, but it will be diversified over time."

Russian oil and gas companies are already implementing projects to minimise gas flaring and to capture CO2, he said. "Our energy companies are actively diversifying their activities. Some oil companies have announced plans to build their own power plants on renewable sources in order to be able to prove the 'greenness' of their products."

Novak warned earlier this month that pressure to decarbonise the global energy system may trigger a sharp rise in crude prices if it causes oil sector investment to decline. His comments came not long after the IEA released its new Net Zero by 2050 scenario, which portrayed a world that has no need for new oil and gas investments.

Russia plans to increase the share of wind and solar in its power generation mix to 10pc in 2040 from under 1pc now, but this will require up to 1 trillion roubles ($13.7bn) of private-sector investment, Novak said. Moscow also plans to lift nuclear's share to 25pc from around 20pc over the same timeframe. In addition to installing new units at its large nuclear power plants, state-run Rosatom also plans to build smaller nuclear units in remote areas of the country.

Russia produced over 1 trillion kWh of electricity last year, around 40pc of which came from nuclear, hydropower, solar and wind plants, Novak said. Of all the new power generation capacity commissioned in Russia last year, 60pc was based on renewable energy, he said.

Renewed competition

Wind and solar projects in Russia rely on a "100pc private investment", but the government supports renewables through a "mechanism of guaranteed return", Novak said. Renewable sources of energy will be able to compete with fossil fuel-based electricity generation in Russia by the mid-2030s, according to Novak. "Renewable energy sources are not competitive yet if we compare them to traditional ones. But we believe that a price parity will be achieved in the coming decades," he said. "For solar energy, we expect it in 2027. For wind, most likely after 2030 but not very far from now, in the first half of the 2030s."

Novak dismissed the idea of shutting down existing power plants. "We are upgrading them," he said. "We are not going to change our energy balance for its own sake. We just put an emphasis on new energy sources. At the same time, old sources will remain in use."

By Anastasia Krasinskaya