Energy efficiency: reboot

The RF Government has adopted a Complex Plan for the enhancement of energy efficiency of the national economy. A whole list of events focused on the reduction of energy intensity of the gross domestic product until 2030 for “no less than 1.5%” annually, and also on provision of the decrease of technological backwardness of the Russian Federation from the leading countries” has been developed. How realistic is that sort of reboot? 

The Complex Plan for the enhancement of energy efficiency of the Russian economy was developed by the Ministry of Economic Development of Russia within the frame of the “Energy Efficiency 2.0” concept, which is often called an attempt to reboot the state policy in the energy efficiency sphere.

Commenting on the new Plan for the enhancement of energy efficiency of the economy, Prime Minister Dmitry Medvedev pointed out, “As it is well-known, in this sphere (energy efficiency) we are far behind the leaders. We have a huge potential here. Its fulfillment should first of all save energy resources, enhance industrial productivity, competitiveness of both industry and agriculture, and reduce the costs of energy companies. These tasks will be solved in conjunction  with application of measures of state regulation and incentive measures.” 

 The Ministry of Economic Development, Ministry of Energy, Ministry of Education and Science, Ministry of Finance, Ministry of Industry and Trade, Ministry of Communications, Ministry of Natural Resources and Environment of the Russian Federation, Federal Agency for State Property Management (Rosimushchestvo), Federal Service for Environmental, Technological, and Nuclear Supervision (Rostechnadzor), Federal Anti-Monopoly Service, and self-government bodies were assigned for realization of the Complex Plan.

The Plan outlines activities in several areas: organizational and financial support of the state policy, reduction of losses in the transfer of energy resources, reduction of energy consumption in the budgetary sphere, as well as rather a long list of "other measures.” 

For the enhancement of energy efficiency at the state level, as it is stated in the new document, it is supposed "to optimize and effectively delineate the powers of executive bodies in the field of energy saving and energy efficiency and improve the requirements for the procedure for the formation of regional and municipal programs."

 The section of “Financial provision of public policy in the field of energy efficiency” among other events indicates simplification of the procedure for concluding energy service agreements and preparing bank proposals to attract "green finance" for the implementation of energy saving projects.

Within the frame of “Activities focused on reduction of energy losses by regulated organizations when transferring energy resources” it is planned to strengthencontrol over the tariffs and targeted use of funds, and also to toughen punishment for their misuse. Requirements for energy efficiency programs at all levels will become tougher. Regulated organizations (e.g., regional energy companies) will be obliged to take measures to stimulate consumers’ energy saving: by the end of this year, they should come up with proposals for appropriate mechanisms. 

 In the section of “Activities on the improvement of energy efficiency in the energy resources consumption,” it is planned to improve the procedures for formatting up schemes and programs for the future development of the electric and heating power industry.

For industrial enterprises, it is planned to create incentives for energy efficiency enhancement; they should be provided with state methodical assistance in terms of programs of additional professional education in energy efficiency and energy management. A “transparent mechanism for the selection of objects and technologies of high energy efficiency, including assessment of the economic effect for the subsequent application of tax incentives” should be adopted. 

Within the frame of the “Decrease in consumption in the residential sector and in the budgetary sphere” section, changes shall be made in the requirements for heat protection; an obligation to submit information on the energy efficiency class and previous energy saving measures at sale, renting out, and settling of residential premises will be introduced.  The Ministry of Construction (Minstroy) should improve the procedure for establishing a list of mandatory energy-efficient measures.

Requirements for the level of energy consumption will be specified and energy consumption standards will be established for budgetary institutions. In case of their non-fulfillment, execution of an energy service contract might be enforced for the “guilty” organizations. A list of mandatory requirements for budget-funded purchases will be composed.

Improvement of the mechanisms for controlling the targeted use of investment resources is outlined in the section of “Other measures.”  It is proposed to create a rating system for energy efficiency of industrial enterprises. The same section includes events on the establishment of additional vocational education and professional development programs. A separate line is dedicated to awareness-building efforts: “Information agencies with state participation will inform public and promote projects of energy efficiency enhancement and positive experience in this sphere.” 

The new Plan on energy efficiency looks very interesting as compared to the state program for “Energy saving and enhancement of energy efficiency for the period until 2020.”   The purpose of the Program adopted in 2010 was “reduction of the energy intensity of Russia's GDP by 13.5%, which, combined with other factors, should have allowed to solve the task of reducing the energy intensity of GDP by 40% in 2007-2020 and format an energy efficient society in Russia.”

The goal of the complex plan is a lot less ambitious: it presumes modernization of fixed assets, increase the technological factor contribution to reducing the energy intensity of the gross domestic product by no less than 1.5 percent per year, and also ensuring reduction of the technological backwardness of the Russian Federation as compared to the leading countries.  

It was planned to provide for annual saving of primary energy in the amount no less than 100 mln tons of conditional fuel by 2016 and 195 mln tons of conditional fuel by 2020 at the account of realization of the State Program measures.  The total savings of primary energy should amount to 1124 million tons of equivalent fuel for the entire duration of the program (2011-2020). Electrical power savings should have amounted to 630 billion kWh, while savings of heat power to 1,550 mln Gcal, and saving of oil products to 17 mln tons.  The annual reduction of greenhouse gas emissions was expected in the amount of 2,436 mln tons of CO₂ equivalent through the entire period of program realization.  

The list of target indexes of the Comprehensive Plan is a lot more modest: the total budget expenditures under the “energy supply” category should decrease by 18.46 billion rubles by 2025, while by 2030, it is planned to spend on the power supply less than 22.72 billion. By 2025, energy intensity of gross domestic product should have decreased by 12% compared to 2016, and by 2030, this index should go down by 23%.  At the same time, the annual indicator is reduction of energy intensity of gross domestic product by 1.5% annually. This is less than the figures specified in the State Program.

The State Program indicates specific financing, precise amounts of money to be allocated from budgets of different levels. The Complex Plan has no specific amounts of financing and their sources are not indicated; it is just briefly mentioned there that “the Plan foresees measures to attract extrabudgetary funds for the purposes of providing financing for the state policy in the energy saving sphere.” 

In the experts’ opinions, the main reason for the insufficient effectiveness of energy efficiency programs is that fuel industries from the auxiliary, providing for the economy ones, have turned into the most important industries, while the rest of the country’s economy has merely the market role. Besides this, in the last years, the main bulk of energy generating companies were taken under full control by the fuel producers.  In heat supply, with the formation of unified heat supply organizations, a similar “absorption” of the heat supply infrastructure is taking place.   

“This way, a monopoly is being established; it takes start at a gas well or a coal face and ends at the input to any power supply facility, including multi apartment residential houses,”    experts say. “Having got the right in the sphere of housing and communal services to accept payments for energy supply directly from residents, the fuel industry, through the energy companies under its control, now has the opportunity to receive financial means for services that are not actually provided.”

“There are no reasons to speak about any real energy saving and enhancement of energy efficiency in the present situation: everything depends on property issues, the division of powers of the authorities and the containment of monopolies,” believes  Boris Sudenko, Chairman of the Directors Board of the Council of Energy Auditing Companies in the oil and gas industry.  “It happens so that energy saving, enhancement of energy efficiency of the economy as a whole contradicts with the interests of fuel companies because it leads to reduction of fuel consumption on the internal market. We need major structural reorganizations in the economy, after which we should be able to determine the powers and mechanisms for coordination.”  

The Plan does not include any activities related to energy auditing. Neither has it any economic evaluation of costs and effects from the implementation of proposed activities: it might very well happen that the cost of mere administration of many events in reality will exceed the amount of economic effects from their implementation.  Besides this, the Plan does not embrace measures on stimulating introduction of up-to-date energy efficient technologies and renewable energy sources (RESs), which are one of the vital energy saving solutions under conditions of a country where a vast majority of consumers are outside the centralized energy supply system.

“Energy efficiency and renewable energy sources should become the priorities for the low-carbon development of Russia. This requires strengthening of the state support and development of the RF subjects’ roadmaps on RESs,” representatives of the Russian Social and Ecological Union wrote in their Position.

 In the opinion of public environmental organizations, it is important that understanding of that the raw material economy has outlived itself and new drivers for the development of the country's economy are needed should “materialize” at the level of state authority and in the regions.  Unfortunately, the new reboot plan for the energy policy has no credible and funds-supported schemes for energy efficiency enhancement.