Proposals for better energy efficiency in Russia

22.04.2019

The Energy Efficiency Committee at the Association of European Businesses in Russia (Chair of the Committee — Bashir Chalabi, Deputy CEO of TIARCENTER) prepared recommendations for Russian policy makers on achieving increased energy efficiency in the Russian economy.

The AEB’s Energy Efficiency Committee represents the interests of European companies involved in the consumer goods, engineering and energy sectors (full list available here).

The recommendations made can be downloaded in full here

download
recommendations

Energy efficiency in Russia is considerably lower than in other leading world economies:

  • Russia’s energy consumption is only 4 times lower than that of the US, while its GDP is 13 times lower
  • Russian economy consumes 4.5 times less energy than the Chinese economy, with a GDP 8 times smaller
  • It also consumes 2.6 times more energy than Canada, with a comparable GDP.

The Russian economy’s low energy efficiency level is a widely recognized problem. A special Government Order in 2018 set the target of increasing energy efficiency in the Russian economy by 23% by 2030. The Energy Efficiency Committee at the Association of European Businesses (AEB) set out its proposals for increasing energy efficiency in the Russian economy in its 2019 Position Paper.

The AEB’s top 3 recommendations

Devise a series of measures to stimulate procurement of energy-efficient equipment

Set up a system enabling the convenient transfer of energy-efficient technologies

Overhaul the tariff and metering system

Russia is also in second-place among countries with the worst level of energy consumption per unit of consumer purchasing power.

The high level of energy consumption in Russia is an indication of:

A predominance of obsolete facilities with high operating costs
Under-developed communal infrastructure
Challenging climatic conditions

The main obstacle to increasing energy efficiency is the lack of economic incentives to optimize energy consumption:

  • The low cost of electricity for households and businesses in Russia’s most developed regions;
  • The absence of subsidies for procuring energy-efficient products (generally, they are more expensive);
  • The state sector invests little in energy efficiency: over recent decades energy efficiency has become less of a priority.

Timeline of energy efficiency policy development in Russia

2008-2009

Energy efficiency as part of the “Innovation Policy”, development of a state program covering energy efficiency (to increase it by 40% between 2008 and 2020).

2009-2010

Practical implementation of the plans. Admission that the funds set aside ($1bn over 5 years) are insufficient to produce tangible results.

2012-Present

“Innovation policy” loses ground, import substitution becomes the main priority. Energy efficiency is no longer top of government authorities’ agenda.

The potential for increasing energy efficiency

23%

The potential of increase in energy efficiency per unit of Russian GDP as estimated by the Government, 2018-2030

Source: The Comprehensive Action Plan to Increase Energy Efficiency in the Russian Economy (2018)
5%

The actual increase in energy efficiency per unit of GDP, 2007-2016.

Source: Government report on the state of energy conservation and energy efficiency in the Russian Federation in 2017. (Ministry of Economic Development, 2018)

RECOMMENDATIONS TO THE RUSSIAN GOVERNMENT ON ISSUES RELATING TO INCREASING ENERGY EFFICIENCY IN THE NATIONAL ECONOMY

Devise a series of measures to stimulate procurement of energy-efficient equipment
  • Update the system of tax incentives for energy-efficient equipment;
  • Introduce energy efficiency requirements into the state procurement system.
Set up a system for the convenient transfer of energy-efficient technologies
  • Make the transfer of technologies more accessible by way of financial incentives to companies procuring state-of-the-art energy-saving technologies;
  • Establish non-discriminatory rules for production localization.
Improve the tariff and metering system for energy consumption
  • Apply electricity tariffs in line with its actual production costs;
  • Introduce integrated energy consumption metering systems.
Strengthen cooperation between government authorities involved in developing and delivering state policy relating to energy efficiency
  • Create a clear-cut system of distribution of powers in relation to energy efficiency to coordinate over 10 government bodies;
  • Establish an Interdepartmental Commission on Energy Efficiency involving representatives of government authorities, business and the expert community.
Conduct a general audit of government activities aimed at increasing energy efficiency
  • Conduct a comprehensive performance review of existing actions and initiatives – from setting of target indicators in state programs to ratifying the Paris Climate Agreement;
  • Based on the results of the performance review, identify priority actions to increase levels of energy efficiency in the Russian economy.

Bashir Chalabi

Deputy CEO of TIARCENTER, Chair of the Energy Efficiency Committee at the AEB

For Russia, increasing its energy efficiency represents a real opportunity not only to reduce costs for energy-intensive industrial facilities but also the chance to attain a new level of modernization in manufacturing processes, something which will increase both Russia’s investment attractiveness and its competitiveness on foreign markets.