Russia’s Energy Ministry and Federal Antimonopoly Service (FAS) oppose a proposal to raise water taxes on the nation’s hydropower plant operators, according to Kommersant.
The Ministry of Natural Resources last year proposed increasing the tax by 2.5 times to bring RUB 40 billion to the nation’s budget by 2025. The opposing ministries and corporates claim the measure would potentially reduce investment in the sector and lead to higher consumer power prices in places where utilities are able to pass it along, according to the Russian news daily.
The development could be positive for RusHydro and En+, Russia’s largest traded hydropower operators, according to Matvey Tayts, a senior analyst at Sova Capital.
“We think the discussion might continue,” Tayts said in a research note. “But the shared position of the Ministry of Energy and FAS looks promising for generators.”
Hydropower is key to the nation’s low-carbon ambitions and represents nearly 100 percent of renewable electricity generated in Russia. The sector provided almost 7 percent of the nation’s total energy consumption last year, according to bp statistics. State-sponsored programmes to develop wind and solar generation have yet to gain scale.
The application of the tax would create a downside potential of 2.3 percent for En+ and 3.5 percent for RusHydro to 2023 EBITDA forecasts, according to Sova. Under Russian market regulations, hydropower plants (HPPs) place price-taking offers when selling electricity on the liberalized market. This means they have little influence over electricity pricing and are unlikely to pass the tax increase on to electricity consumers.
Russia has massive untapped hydropower resources, mostly located in Siberia and the country’s Far East. Their remote geography, distant from major markets, to some extent explains why these resources remain undeveloped. Yet the investment world is changing its attitude toward energy.
A global push to cut carbon emissions to mitigate the effects of climate change may create a new economic context for these resources in the future. This environmental push towards carbon free fuel, mainly electricity, has been accompanied by efforts to develop new fuels, new batteries and new storage options.
Untapped carbon-free resources will likely draw greater interest as energy transition efforts gain traction. Encouraging such opportunities, and the companies in a position to realize them, will add a much-needed boost to the energy transition.
