Would Russian solar energy projects be possible without state support?

Solar power represents the rapidly evolving sector of the Russian renewable energy industry capable of significantly reducing the cost of electricity and making it competitive in the long run. This paper tackles the puzzling question of whether Russian solar energy projects can be viable without direct state support subsidies. The novelty of the study is in assessing specific risks (political, environmental, and economic) on the total cost of projects which are caused by Russia's transition to an import substitution policy, the need to build new logistics chains for the exchange of technologies and equipment, the rise in the cost of investments, as well as continuing climate commitments. Our methodology relies upon classic investment metrics used for renewable energy projects, such as Net Present Value (NPV), Internal Rate of Return (IRR), and Discounted Payback Period (DPP). We assessed eleven projects and developed ten scenarios for studying the pathways for direct state solar energy support programs, including complete refusal, reduction in the volume, and/or timing of financial support, as well as the ability of projects to withstand the negative impact of external risks on their efficiency. Our multi-criteria scenario assessment revealed that under current market conditions, the Russian solar energy industry was not capable of functioning effectively on its own without permanent state financial subsidies (null hypothesis or the baseline scenario). Only sharp deteriorations of the foreign economic and political situation can reduce the economic efficiency by half with the effectiveness of the projects not being sensitive to minor fluctuations in risks (the first hypothesis). With a gradual reduction in the volume of financial support, we found that at the current price level, projects were able to withstand such a “discount” only within 10 % (the second hypothesis). Testing the possibilities of reducing the program terms while maintaining 100 % of funding showed that these projects remain effective with 12.5 years of support, which is 2 years shorter than the original terms (the third hypothesis). However, our results also reveal that the Russian solar energy sector still surpasses its wind energy sector in the potential to become self-reliant. All of that allows us to formulate policy recommendations for the gradual reduction of direct governmental funding for solar energy sector in Russia with the aim of pushing it further toward economic reliance and growth.