Resource of energy efficiency IN RUSSIA: scale, COSTS AND BENEFI

Russia has an enormous, although poorly mined, energy resource, namely its energy efficiency potential.  By its ability to ensure Russia’s economic growth it 2-4-fold exceeds expected primary energy production increase until 2020. During the initial stage of transition process (1990-1995), poor energy productivity of Russian economy deteriorated even further. Then, driven by the economic revival, energy intensity of Russian GDP declined by 24% in 2000-2006. However, despite this significant energy intensity reduction, Russia still stays among the least energy efficient countries in the world.

Present-day Russia inherited an energy intense and energy inefficient economy from its Soviet past. However, lack of effective national energy efficiency policies, unbalanced energy pricing policies, lack of proper legislation and regulations, institutions and general public awareness of energy saving opportunities resulted in the conservation of high energy intensity in the last 15 years.

The Russian government is implementing power sector gradual liberalization program and announced substantial increase of domestic gas and electricity prices by 2011. If such energy price hike is not mitigated by energy efficiency improvements, affordability of energy services may shrink for many sectors, slowing down the economic growth.

The government is presently working on the modernization of a federal program targeted to promote energy efficiency. The G8 summit chaired by Russia in St. Petersburg in 2006 also raised the profile of the energy efficiency issues in the country. Yet, these new initiatives are facing many barriers, as Russia still tends to give a low priority to energy efficiency. Many believe, that being so rich in energy resources, Russia can address energy shortages by mere escalating energy supply. Others argue, that Russia is inherently more energy intensive due to its climatic conditions, and attempts to change the situation will negatively affect the economy and well-being of the people.

The objective of this study is to identify areas with high energy efficiency potential and gauge the costs and benefits to help Russia and the World Bank identify priority areas and prioritize energy policy initiatives. At a later stage, this information will be used to recommend specific policy actions to maximize the net benefits, taking account of possible impacts these policies may have on various groups of the Russian population.

Energy efficiency potential was last evaluated in detail for the USSR back in 1988 and 1990 using two approaches: screening detailed opportunities and costs to improve energy efficiency in every energy use sector[1] and cross-country comparisons of energy use efficiency[2]. Ever since that time, the figures have only endured arithmetic manipulations, and from 1992 they have been showing up unchanged in various government documents. Obviously, at this point these figures have very little to do with current Russian realities.

Development and implementation of energy efficiency policies require a more adequate mapping of the scale and structure of the energy efficiency potential. This report presents assessments of the technical, economic, and market energy efficiency potentials as of 2005. Energy efficiency potential is structured by economic activities and energy carriers in compliance with the matrix of Russia’s integrated energy and fuel balance, which was also estimated in the framework of this effort.

Where it was possible (the electricity sector, a number of industrial plants), the energy efficiency potential was estimated based on the analysis of all facilities. In other instances (boiler-houses, buildings, etc.) it was estimated for a representative sample of facilities with further extrapolation for all energy consumers of this class in Russia.

Like evaluations of oil and natural gas reserves, estimates of the energy efficiency potential scale and structure are of a probabilistic nature. Therefore, in many cases, the potential ranges are presented for various energy resources and economy sectors. If the potential is presented in one number, this number is assumptions-related and the accuracy of the potential assessment is no better than +5%. All assumptions for the energy efficiency potential assessments are thoroughly documented in this paper. This study has a number of other limitations, many of which result from unavailability and inaccuracy of data on energy consumption or energy consuming facilities, incomparability of Russian data with the information on energy use and specific energy consumption for other countries used for benchmarking.  Among other factors, energy use and specific energy consumption depend on climate; scale and loads of energy using facilities; their time in operation; quality of maintenance and quality of processed materials; etc.

Data on energy efficiency implementation costs, taken from Russian and foreign publications, as well as from feasibility studies developed by CENEf and other companies in 2000-2007, were used to evaluate economic and market energy efficiency potentials. For example, heat supply systems assessments were based on the results of municipal utilities and heat supply systems renovation programs implemented in Khanty-Mansiysky Autonomous Okrug, Orlovskaya, Sakhalinskaya, Magadanskaya, Tomskaya Oblasts, Khabarovsky Krai, and more than 60 cities, for which thorough data collection had been accomplished for several hundreds heat supply systems. CENEf used the results of programs developed for the residential and public sector in dozens of Russian municipalities, including under the World Bank project in Rostov Oblast and Norilsk city, and under the EBRD project for health care institutions in Moscow. CENEf also used its own data obtained while developing more than 40 Regional Building Energy Efficiency Codes.

This paper was written for the World Bank by: I. Bashmakov (sections 1-7, 8.1-8.5; 8.7; 9); and CENEf experts K. Borisov (section 8.3), M. Dzedzichek (section 8.7), I. Gritsevitch (section 8.6), and A. Lunin (sections 8.1-8.2).

Authors are very grateful to the experts from Moscow World Bank and IFC offices G. Sargsyan, I. Gorbatenko, B. Nekrasov, K. Mokrushina, and S. Solodovnikov for detailed comments and suggestions allowed to improve the quality of this paper.

Igor Bashmakov

Executive director

CENEf