Energy Efficiency is Russia’s Largest, Cleanest and Cheapest Energy Source. Outcomes of State Program and Public Information Campaign

The implementation of the new state policy in the field of energy saving and energy efficiency improvement kicked off when the Russian government adopted two documents: Federal Law 251 On Energy Saving and Energy Efficiency Improvement, in the end of 2009, and state program Energy Saving and Energy Efficiency Improvement Until 2020 – in 2010. Russian Social Ecological Union conducted an information campaign titled Energy Efficiency is Russia’s Largest, Cleanest and Cheapest energy Source in various regions of the country from 2013 to 2015, thus supporting the trend set by the state and demonstrating the potential for energy efficiency in different areas and informing and consulting diverse demographics. The program’s objectives look quite promising. By means of the program, in the electric energy sector alone, it was planned to save up 630 billion kWt by 2020. These numbers are comparable to the energy generation of our largest power stations, for example the Leningrad nuclear power station (generating 28 billion kWt per year) and Surgut hydro power station (39 billion kWt per year). As for NGOs, simple energy saving and energy efficiency measures have been popularized on the local level – in schools, residential housing and offices. A public report on the energy efficiency potential in St. Petersburg, Leningrad region and Murmansk region was released. The estimated potential is comparable to the generating capacity of fossil fuel-based heat power stations and nuclear power stations in the respective regions. In 20 regions of Russia exhibitions, round tables, energy efficiency lessons were conducted for both children and adults. There is a great interest and demand for energy efficiency improvement on behalf of schools, household owners’ associations, as well as a huge reserve for doing so. This implies even the first, basic level that does not require big investment, such as improving insulation, lighting and correct usage of appliances. In St.Petersburg, for instance, a series of trainings for school “energy managers” was conducted. They were taught how to improve the efficiency of heating appliances, economize lighting, and save water. In several schools, this kind of measures helped save over 1 million rubles a year. Measures that are more serious call for state support and its investment mechanisms, and the support of energy service companies. However, energy saving-related legislation has undergone many changes. The Federal Law been corrected over 15 times since its adoption. Given the changes in the legislation, the process of unfolding the potential of energy saving in Russia was supposed to get off the ground. However, according to Carnegie Endowment for International Peace report titled Russia’s Neglected Energy Reserves, from 2009 and on, the rates of energy intensity have been decreasing ever so slowly. This slow-down, on one hand, is due to the lack of finance to implement measures of energy efficiency improvement, along with inefficiency of separate decisions made by the Russian government. On the other hand, this is the result of the exhaustion of the energy intensity reduction potential due to structural changes in the country’s economy. It is notable that prior to this, years 2000 to 2008, Russia was leading globally in terms of reducing its energy intensity per GDP unit. It was largely due to structural changes in its economy, not the modernization. In the years prior to the adoption of energy efficiency legislation, energy intensity had decreased by 35%. Years after the Federal Law was adopted, the energy efficiency level of the Russian economy remains fairly low. The potential of energy saving is hardly tapped into. Measures of data accumulation (energy audits, installation of meters, etc.) and the introduction of limits for the sale of inefficient appliances such as incandescent light bulbs gave a certain positive effect, but overall, in terms of the entire energy consumption, it was very insignificant. According to the Russian Ministry of Energy, given the current trends, the decrease of our GDP energy intensity will be only 22% by 2020 (compared to 40% mentioned in the presidential Decree). According to Oleg Pluzhnikov, Deputy Director of the Department of State Tariff Regulations, Infrastructure Reforms, and Energy Efficiency, the Ministry of Economic Development, the current energy saving legislation almost completely ignores two key sectors of the economy – industry (including energy generation) and transport. The existing tools that could stimulate the implementation of energy efficient projects are hardly used. “Freezing” the tariffs, with all its positive results, leads to a decrease in the number of investment programs, including those dealing with energy efficiency. According to Pluzhnikov, given current interest rates, the use of economic tool of state support and provision of incentives for energy efficiency projects are of vital importance. Many experts believe that the way energy efficiency support tools are introduced by the new legislation is very weak. Evgeny Gasho, President of EnergoExpert Engineering non-profit partnership says, there is no motivation in the public sector, no money has been allocated, no methodology provided, and the objective not explained. As the result, many preferred to pay a small fee for a formal energy passport to use for reporting, and that was it. Public money was spent, but the result is insufficient. It is almost impossible to plan energy efficiency measures and develop programs in order to actually save something – based on the currently existing energy passports. Methodological recommendations were distributed only in by the end of the period of mandatory energy inventory. Sometimes the passports are accepted in the electronic form, sometimes not. The GIS database is not being filled up. The data is not open to the professional community, there was no benchmarking conducted, etc. According to the Ministry of Energy, by March 2014, only 63% of those who had to undergo mandatory inventory did so. Many experts have serious doubts about the official results of the state campaign, and not only experts. The results of an analysis conducted by the Russian Accounts Chamber of the state program Energy Efficiency and Energy Development demonstrate a very low level of measures undertaken in order to implement regional energy saving and energy efficiency programs that are established by agreements between the Ministry of Energy and Russia’s regions. For instance, the regions received 5.7 billion rubles from the federal budget, of which only 47.4% was used, leaving unused around 3 billion rubles. “The measures of energy saving and improving energy efficiency were implemented very poorly in most of the regions. In 15 of them, less than 20% of planned workload on certain measures was carried out. For instance, in Krasnodar Region, in 2013, a total of zero rubles was used of the provided federal funding of 194 337.8 thousand rubles! The same happened in Moscow region, where the federal funding of 307 400.7 thousand rubles remained untouched. Besides, 18 out of 28 regions that got subsidized in 2013, had not used up the federal funds provided to them back in 2012.“ After numerous complaints concerning the state program, in December last year changes were introduced to the document once again. According to the new Governmental Resolution, the sum to be allocated in the federal budget for the implementation of the state program was reduced from 90.7 to 86/5 billion rubles. The distribution of funds between the sub-programs also changed significantly. Spendings on energy saving were reduced from 50.3 billion to 31.7 billion rubles. The money that was saved this way, are going to be directed towards the development and modernization of electricity production, and the restructuring and development of coal industry. The state program now includes new measures to develop peat extraction, develop international cooperation in the field of gas and petrochemistry. The goals and objectives of the state program were adjusted and updated. It is noted that in accordance with the decisions of the Presidential Council on economy modernization and innovative development on November 22, 2013, the list of goals (indicators) was complemented with energy efficiency indicators. The programs’ new goals are less ambitious. The planned GDP energy intensity decrease is 9.5% instead of 13.5%, while gas extraction in 2020 will be 756 billion cubic meters instead of 826 billion. There is also a new indicator – by 2018 workforce productivity in the fuel and energy industry will grow by 30% compared to 2013. This document, which was signed during the UN climate summit, where Russia pledged its allegiance to the principle of low-carbon development, strongly contradicts the goals that Russia announced on the international level. The current indicators stated in the program are lagging way behind the previously planned objectives – 40% by 2020. Further cuts of state funding will significantly decrease the country’s chances for reducing its energy intensity. Besides, the world trend of reducing demand for coal makes the plans to develop one of Russian economy’s most climate unfriendly industry futureless. The plans to increase coal export to Asia are hardly promising. According to various experts, in order to increase energy efficiency a number of current pieces of legislation have to be revised. First of all, in the field of energy auditing of industries and implementation of energy service agreements. It is also important to focus on two sectors of Russia’s economy that are key in terms of energy consumption – energy and transport. The use of new energy efficient technologies without state support is impossible. The practice of providing state guarantees for projects proved unsuccessful and is unlikely to succeed, regardless of attempts to perfect the mechanism. Introducing minor changes to the current legislation would allow for subsidizing projects similar to those carried out within the Kyoto protocol framework. Both the new Resolution and changes to the state program are disappointing, says Olga Senova, Head of Russian Socio-Ecological Union’s Climate Secretariat. The one-third reduction of funding for energy efficiency programs will be reflected on energy intensity indicators of Russian industry. This will have a negative effect on both the energy sector and the country’s entire economy, which is in desperate need to increase its national product’s marketability, reduce its energy intensity and overall modernization. We expected the program to aim for green energy solutions, not cutting back on energy efficiency. We are risking lagging behind technologically and be left behind the global trend of divestment from fossil fuels (mostly coal). This way, we will need decades in order to reach the global marketable level of green energy technologies. Broshure of RSEU information campaign "Energy Efficiency is Russia’s Largest, Cleanest and Cheapest Energy Source" (Russian version)