Competitive Advantage of German Renewable Energy Firms in Russia - an Empirical Study Based on Porter's Diamond*
Dögl, Corinna, Holtbrügge, Dirk, Journal for East European Management Studies
This article analyzes the competitive advantage of German renewable energy firms in Russia. Based on Porter's diamond model of competitiveness, we examine the demand for renewable energy in Russia and German firms' ability to meet this demand. While the overall demand for renewable energy in Russia is still low, the study reveals formidable opportunities in the fields of biomass, solar and wind energy. Our findings are meant to address managers in the renewable energy industry and to aid policy makers in environmental support and action.
Dieser Artikel analysiert die Wettbewerbsvorteile deutscher Unternehmen im Bereich erneuerbarer Energien in Russland. Basierend auf Porter's Diamantansatz untersuchen wir die Nachfrage nach erneuerbaren Energien in Russland und die Fähigkeit deutscher Unternehmungen, diese zu bedienen. Während die Nachfrage nach erneuerbaren Energien in Russland insgesamt noch auf einem niedrigen Niveau ist, zeigt die Studie im Bereich Biomasse, Solar- und Windenergie beträchtliche Marktchancen auf. Die Ergebnisse der Studie haben zahlreiche Implikationen für Manager von Unternehmungen im Bereich erneuerbarer Energien und für politische Entscheidungsträger im Energie- und Umweltsektor.
Key words: Renewable energy, Russia, Porter's diamond
Russia's demand for renewable energy
In terms of power generation, Russia ranks fourth behind the US, China, and India, and has some of the largest reserves in natural gas and coal worldwide (European Bank of Reconstruction and Development (EBRD) 2005). Today, the energy mix in Russia is dominated by gas, which accounts for 54 percent of the total primary energy supply (TPES) and 43 percent of electricity generation (Merle-Béral 2006). Contrary to most other countries, Russia may be a country that actually benefits from global warming during the next years. Lower winter heating costs, a longer and more northerly agricultural growing season and increased tourism could have positive effects on local energy demand, while the global demand for oil will not fall significantly in the future (Stern 2008).
In contrast to many developed countries and emerging markets, Russia does not make large efforts to complement fossil funds by renewables. Currently, the use of renewable energy accounts for one only percent of the TPES. Oil and gas are comparably cheap and perceived as specific industries with special provisions by the Russian government. As a consequence, investments in renewable energies are much lower in Russia as compared to investments in other countries. On the other hand, Russia has very favorable conditions for wind power, solar energy, and biomass. Due to its size and variety of geographic features, Russia is said to be a renewable energy sleeping giant and does not have any lower renewable energy potential than China or the European Union (Grigor'ev/Chuprov 2008).
In almost all parts of Russia, there is at least one of three types of renewable energy sources that could be economically used now. These are wind power, solar energy, and biomass. Russia's forests cover more than 40 percent of the entire landmass and represent nearly one quarter of the forests worldwide. This means ample biomass energy resources are available, which have only been minimally exploited up until now (EU-Russia Technology Centre 2004). With its vast size, Russia receives a lot of solar radiation. The highest potential for solar energy can be found in the southwest of the country, e.g., in North Caucasus. Until now, however, the building of a solar power plant has been postponed (World Energy Council [WEC] 2007). In large parts of Russia, wind energy has great potential, which is realized only to a minimal degree. In 2007, the share of wind energy accounts for a mere 0.1 percent of renewable energies and only 0.001 percent of the total energy production in Russia. Up to 10 percent of the total electricity generation could be allocated through wind energy (Grigor'ev/Chuprov 2008). …