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John Daly

John Daly

Dr. John C.K. Daly is the chief analyst for Oilprice.com, Dr. Daly received his Ph.D. in 1986 from the School of Slavonic and East European…

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Investing in solar power in - Russia?

Investing in Russia since the 1991 collapse of Communism has always attracted a different breed of financier, with the most basic requirement being a cast-iron stomach.

For those brave enough to plunge in however, the rewards can be enormous - to give but one example, Troika Dialog, the oldest and largest private investment bank in the Commonwealth of Independent States, in the early 1990s was producing eye-watering annual rates of return for its subscribers of over 200 percent.

That said, for every Troika Dialog there have been a dozen other ventures that crashed and burned, leaving foreign investors scorched.

But for those with a gambling streak, a new intriguing proposal, if implemented, may produce handsome returns in a most unlikely field - solar power.

Surprisingly to most, Russia has a range of locations suitable for solar power, including large expanses of Siberia and the Russia Far East, as well as the Caucasus. In the last-named region, some local politicians are seeking to establish the North Caucasus in the forefront of solar equipment manufacturing.

During an 23 August meeting, representatives of Stavropol Kray and state officials from the five regions comprising the North Caucasus Federal District (SKFO) pored over a proposal drawn up by the Republic of North Ossetia-Alania to establish a "high technology industrial complex for producing silicon for solar energy applications," giving the Caucasus its very own "Silikon Valleysky."

According to the proposed program, each of the five regions would have a part of the production.

Most intriguingly for prospective investors, the endeavor would be a state and private joint venture. According to Ingushetia Republic representative Vakha Yevloyev, the state and private investors would each front 50 percent of the development costs.

The project would not come cheap, with startup costs estimated at $1billion.

Association of Solar Energy of Russia coordinator Anton Usachev said, "Polycrystalline silicon production will be located in the Stavropol region, while monocrystalline silicon production will be set up in Kabardino-Balkaria. The final production of photovoltaic cells and solar modules will be located in Karachay-Cherkessia and Dagestan respectively. The raw material and production base of the alternative energy market is very new to Russia and is being fostered by local companies such as Nitol Solar and Hevel Solar in Novocheboksarsk, along with the Renova Group and Rosnano. For the moment, the potential market is export-oriented."

Usachev added that this year the world solar energy market is expected to grow by 30 percent.

Yevloyev, a strong supporter of the proposal, commented that the one billion dollar project could break even in two to seven years, with the costs split between investors and the state.

Usachev estimated that the North Caucasus has an average of 300 sunny days a year and that the cost of solar energy could be two-thirds lower than traditional energy sources such diesel-generated power.

Plans call for coordinating the project with the staff of the Russian Federation Presidential Envoy to the SKFO Aleksandr Khloponin later this month, with an agreement between the republics tentatively scheduled to be signed next month during the 10th International Investment Forum in Sochi.

Of course, the project has political overtones, as much of the Caucasus has been wracked by militancy over the past two decades. Given that Sochi will host the 2014 Olympic and Paralympic Winter Games, Moscow is determined to show off the region in the best possible light, and progressive industries would do so.

At a March 2008 meeting with Russian Prime Minister Vladimir Putin and President Dmitry Medvedev, State Duma Chairman Boris Gryzlov stressed the importance of solar power for electricity generation and informed them of a patented Russian technology for solar power applications that could be marketed. Gryzlov subsequently wrote, "Development of renewable energy will make it possible not only to address the problem of energy supply, reduce dependence on hydrocarbon raw materials and improve the ecological situation, but also make money from the production and export of high-tech products and engineering solutions."

Given that the project is likely to receive the Kremlin's blessing, it is about as foolproof an investment as one is likely to find in the post-Soviet space. You read it here first.

By. Dr. John C.K. Daly

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