Renewable energy sources

The Company is focused on green power generation development in those regions of operation with suitable climatic conditions and existing renewable energy support programs.

Our goals

Our goal in the field of renewable energy is to increase LUKOIL Group’s competitiveness and contribute to the SDGs by implementing renewable energy projects for generating green energy.

The key tasks include:

  • Implementation of commercial RES projects, including with the involvement of government support mechanismsCapacity supply agreement for qualified generating facilities based on renewable energy sources.
  • Reduction in GHG emissions
  • SynergyThe synergistic (economic) effect means reducing the cost and time for the development and implementation of RES projects due to the availability of free sites at production facilities not involved in the production cycle, as well as the infrastructure and resources of the Group’s entities. from the construction of RES facilities at existing oil and gas production entities and refineries

In 2020, LUKOIL’s renewable energy capacity amounted to 395 MW and included four HPPs in Russia with a total capacity of 291 MW, four solar power plants at its own refineries in Russia, Romania, and Bulgaria with a total capacity of 20 MW, and an 84 MW wind power plant in Romania.

Energy that is produced by the SPPs in Russia and the WPP in Romania is supplied to the power system and sold on electricity markets. Electricity generated by solar power plants at the refineries and filling stations in Romania and refineries in Bulgaria is used for the entities’ own production needs. When electricity generated from renewable energy sources is supplied to the power system, it serves to prevent GHG emissions at thermal power plants using fossil fuels, as well as up the supply chain at the stages of fuel extraction and transportation.

2020 projects

In 2020, the construction of the second line of the solar power plant on the territory of the Volgograd Refinery continued. The first phase (with a capacity of 10 MW) was commissioned in 2018. The new phase will have a capacity of 20 MW, which will bring the total plant capacity to 30 MW. The phase is to be commissioned in 2021.

The project will be implemented using a long-term capacity supply agreement for generating facilities based on renewable energy sources on the wholesale electricity and capacity market. All capacity will be supplied to the wholesale electricity and capacity market at a special price under the agreement effective for 15 years. The commissioning of the second phase of the station will additionally generate more than 24 million kWh of green electricity per year, which is equivalent to preventing CO2 emissions of up to 12 thousand tonnes per year (Scope 3).

The development of a construction project for a 50 MW WPP in the area of the Tsimlyanskaya HPP (Rostov region) continued during 2020. Winds were monitored for a year, and based on the results of the data obtained, the wind energy potential was clarified. A final decision on the project may be made in 2021.

Another area of ”green” energy investment includes upgrading and improving efficiency of hydropower assets. After analyzing the options for advancing the hydropower cluster in the vicinity of Krasnopolyanskaya HPP, it was decided to reconstruct a small 1.5 MW HPP on the Beshenka river. In 2020, the following main works were completed: the operation of the hydroelectric unit was restored, equipment for the automation of technological processes was installed, and communication channels for remote control from the Tsimlyanskaya HPP were arranged. The station will supply power to the retail electricity market of the Krasnodar Territory, providing electricity to consumers in the Krasnaya Polyana mountain climate resort and the Big Sochi. The project will serve as a platform for the introduction of advanced technologies for automating the operation of HPPs with remote control from the dispatch center (without the physical presence of personnel).

Plans

Our plans for the mid-term include further expansion of solar generation at the sites of LUKOIL entities located in the south of Russia (20 MW SPP in Volgograd and 2.35 MW SPP in Krasnodar).

The project for the construction of a SPP in Krasnodar was one of the winners of an open competition held by the Administration of the Krasnodar Territory and will become a participant in the government RES support program for the retail electricity market; it is also included in the Scheme and Program for the Development of the Electric Power Industry in the Krasnodar Territory. All generated electricity will be supplied to the local power grid company at special rates under a long-term electricity purchase and sale agreement (for 15 years) in order to compensate for electric power grid losses.

The SPP will be located on land plots of the Krasnodar CHPP of LLC LUKOIL-Kubanenergo which are not involved in production. The commissioning of the power plant will make it possible to generate about 3 million kWh per year of ‘clean’ electricity for consumers, which is equivalent to preventing emissions of up to 1.5 thousand tonnes of CO2 per year (Scope 3). The SPP is to be commissioned in 2022.

Indicators

Over the past three years, the HPP electricity generation has been declining , which is mainly explained by lower water levels in rivers and reservoirs, and, as a consequence, a decrease in water consumption by HPPs. This is especially true at the Tsimlyanskaya HPP and the Krasnopolyanskaya HPP. Given that the volume of electric power generated from renewable sources depends on weather conditions and other natural phenomena, LUKOIL analyzes risks and pays due consideration to the forward-looking conclusions of scientists and experts. In particular, as part of the GHG emission inventory, climate change risks were assessed for the southern regions of Russia where generating capacities are located , including those powered by RES.

Total volume and share of electric power generated from renewable sources across LUKOIL Group
2018 2019 2020
Commercial electric power from renewable sources, million kWh 1,365 1,100 822
including:
wind power 192 218 211
solar power 17 14 12
hydroelectric power 1,156 868 599
Total electric power produced by commercial generating facilities of LUKOIL Group, million kWh 19,919 18,307 17,139
Share of commercial electric power generation from renewable sources in total electric power produced by commercial generating facilities of LUKOIL Group, % 6.9 6.0 4.8
Economic indicators
2018 2019 2020
Investments in RES advancement, million RUB 2,580 526 1,855
Share of investments in renewable sources in CAPEX in the Power Generation business segment, % 47 12 36
Share of income from sales of electric power produced from renewable sources, % 10.5 11.7 13.9
Note.

The indicator “Share of income from sales of electric power produced from renewable sources” is calculated as the ratio of income received from the sale of electricity produced from renewable sources to the total amount of income received from the sale of electricity generated by commercial generation facilities of LUKOIL Group.