New Challenges in Russian Energy Sector: Towards Energy Efficiency

and Innovations

Alexey GROMOV

Ph.D, Deputy General Director

Institute for Energy Strategy

Seminar “The Transformation of the Russian Energy Sector”

FOI, Stockholm, 15th April 2011

Institute for Energy Strategy (IES): Analytical Center for development and

monitoring of Energy strategy of Russia

Forecasting Center for world oil and gas market prices

Scientific Center for sustainable energy development for energy corporations

Consulting Center for energy safety and energy efficiency on the regional, branch and corporate levels

Information and Statistic Center aggregating facts about operating Energy Sector of Russia

Publishing house (magazines, statistical yearbooks), scientific and technical, public and business issues

2

www.energystrategy.ru

State Energy Policy in Russia

Rational market environment

Advanced standards and regulations

Subsoil resources

management

Development of home energy

markets

Formation of rational energy balance

Social policy in the energy

sector

Regional energy policy

External energy policy

Scientific, technical and innovative policy

Strategic initiatives

Energ

y se

curit

y

Energ

y ef

ficie

ncy

of e

cono

my

Econo

mic

effi

cien

cy o

f FEC

Ecolo

gica

l sec

urity

of F

EC

Management of state property

13

Program of long-term development

of the fuel and energy complex of

the Russian Far East

Conception of the long-term

development of the Russian

Federation for the year 2020

Strategy of development of

the power generation in the Russian Far East

Long-term forecast of the development of Russian economy for the years

2009-2030

Eastern Gas

Program

General scheme of allocation of power

generating facilities for the year 2020

General scheme of development of the oil industry for the year

2030

General scheme of development of the gas industry for the

year 2030

Conception of the state

program for exploration and

exploitation of the

continental shelf of the

Russian Federation

ES-2030

State program of energy saving

Investment programs of energy companies

Energy Strategy is a key document for Russian Energy Policy

14

165,9172,6 175,2

188,1

203,7213,2

245,2

167174,1

166,8

183,3 182,4194,8 199,5 204

222,6

101,5 105,3 106,2 104,4 108,8

90,9 95,286,6

93,2101,7 103,5 107,9 108,6 104

233,9227,5

117,3125 130,2 130,8

0

50

100

150

200

250

2000 г. 2001 г. 2002 г. 2003 г. 2004 г. 2005 г. 2006 г. 2007 г. 2008 г.

млн т

производственнаямощностьразрезов

добыча угля наразрезах

производственнаямощность шахт

добыча угля нашахтах

213 25

8 299

316

301

226 30

5 369

394

402

132

171 20

3 212

206

148

201

242 25

5

258

345

429

502528 507

374

506

611649 660

0

100

200

300

400

500

600

700

2010 г. 2015 г. 2020 г. 2025 г. 2030 г. 2010 г. 2015 г. 2020 г. 2025 г. 2030 г.

млн т

Разрезы Шахты Всего

Минимальный вариант Максимальный вариант

ES-2030

Target Modeling

ES-2030: from FORECAST to TARGET MODELING

15

1ST STAGE 2ND STAGE 3RD STAGE

Growth of national economy and quality of life of the population

Overcoming the crisis in the Economy and Energy sector

Modernization of Energy sector

Increase of power efficiency and energy saving in the Economy and Energy sector

Innovative development of Energy sector

New oil and gas fields development (Arctic shelf, Eastern Siberia and the Far East)

Highly effective use of traditional power resources

Switch to the Energy of the Future

2020 202220152013 20302009

ES-2030: a Logic of its Realization

16

7

1st stage (up to 2012-2015) - post-crisis development

2nd stage (up to 2020-2022) - energy

efficiency development

3rd stage (up to 2030) - innovative

development

Energy Sector financial “donor”of the national

economy

1990-20092009-2015 2015-2022

Energy Sector«innovative designer»

of the national economy’s structure

Energy Sectorinvestment «engine»

of the national economy

Innovative Energy Sector

2022-2030

Current state 1st stage 2nd stage 3rd stage

ES-2030: a Change of Role of Energy Sector

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Efficiency of reproduction, extraction and processing of energy resources

Modernization and construction of new energy infrastructure

Energy and ecological efficiency of the national economy and energy sector

Stable institutional environment in the energy sector

Further integration of the Russian energy sector into the global energy system

Aim

Goals

Innovative and efficient energy development

ES-2030 : Aim and Goals

18

ES-2030: towards Energy Efficiency

20

62

82-83

89-90

% 3166 mln t СО2-equivalent

Emission of greenhouse gases in Russia will not exceed the level of 1990.

ES-2030: successive stabilization of CO2 emissions

21

11

Energy intensity of GDP (by PPP) in the world

0,120,14

0,16 0,16 0,16

0,22

0,28

0,21

0,26

0,1

0,5

0,230,21

0,53

0,49

0,16

0

0,05

0,1

0,15

0,2

0,25

0,3

0,35

0,4

0,45

0,5

0,55

0,6

Italy

UK

Japan

France

Germ

any

USA

Canad

a

RUSSIA

Norway

Sweden

Finla

nd

Beloru

ssia

Ukrai

ne

Kazak

hstan

China

WORLD

Technological backwardness of some industries

Prevalence of “heavy” energy-intensive industries

in national economy

Severe climatic conditions

Underestimated price of energy resources in home

market, which doesn’t stimulate energy saving

Reasons of high energy intensity of Russian economy

Specific allocation of population and industry; necessity for extensive

transport communications

t o

.e./

10

00

US

D

12

Barriers for energy saving and energy efficiency in Russia

Lack of motivation

Lack of information

Lack of experience in financing projects in

energy saving and energy efficiency

Lack of organizational and coordinating skills

•Budget constraints•Comparatively low energy tariffs•Cross-subsidizing•Shortage of controlling tools in energy consumption

•Weak informational support of measures in energy saving and energy efficiency•Stereotyped energy-wasteful behavior

•Exacting requirements for projects in energy saving and energy efficiency from investment banks

•Increase in energy efficiency is not perceived as a cure for a wide range of economic and social problems

1

2

3

4

13

Potential for energy saving in Russia

Heat supply9,9

Transportation13,1

Industry14,2

Living apartments18,3

Electroenergetics15,2APG combustion

5,5

Fuel production5,3

State institutions5,2

Agriculture3,6

Services, construction

9,6

45% of the current

consumption

Consumption of energy resources can be reduced by:

20% in heat supply

30% in electroenergetics

40% in transportation and industry

50% in living apartments

Strategic targets in energy saving and energy efficiency in Russia

President D.A. Medvedev: reduction of energy intensity of Russian GDP by 45% by the year of 2020 (compared with the level of 2007)

Energy Strategy 2030: reduction of energy intensity of Russian GDP by 2.5-3 times by the year of 2030 (compared with the level of 2007)

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Key directions of the Russian energy policy forenergy saving and energy efficiency

Housing and communal services

Rational utilization of APG, RES

Effective use of energy resources in

industry•Wide-scale introduction of equipment controlling energy consumption•Obligatory standards for energy efficiency for new and reconstructed buildings•Modernization of heat and water supply systems•Introduction of energy saving technologies in outdoor lighting, sanitation and etc.•Provision state organizations with legal rights for allocation funds obtained from energy saving

•Elimination of infrastructure, technological and legal barriers for rational use of APG (increase in APG-utilization coefficient up to 95%)•Wide-scale introduction and use of RES (5-fold increase in electricity production on the basis of RES)•Top priority of decentralized heat- and power supply systems, rational use of local RES and modern technologies and equipment in the Siberia and Far East

•Ban against energy-wasteful technologies•Obligatory standards for energy efficiency•Development of energy services•Modernization of statistical accounting in the sphere of energy saving and energy efficiency•Energy audit of all the enterprises on a regularly basis•Monitoring of energy saving programs

Rationalization of prices for energy resources in home market

Informational support of arrangements in energy saving and energy efficiency aimed at alteration of wasteful stereotypes of energy

consumption among population

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Investment in energy saving and energy efficiency in Russia

Total investment volume: 320 billion USD*

End users

Effect for:

* Official exchange rate, 2007

National economy•Saving of 80* billion USD•Payback – 4 years

•Saving of 120-150* billion USD•Payback – 2-3 years

!The cost of energy saving and improvement of

energy efficiency in Russia is 3 times cheaper

than expansion of energy resources’ extraction

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Expected results of energy saving and increase in energy efficiency in Russia

Saving of 240 bln m3 of natural gas, 340 bln kilowatt-hour of electric power, 90 mln t of coal and 45 mln t of oil and oil products

Increase in revenues from extra export of oil and natural gas:84 – 112 bln USD

Decrease in governmental expanses:3 – 5 bln USD

Improvement in competitiveness of national economy under conditions of growing tariffs for energy resources

Reduction in СО2 –emissions: 790 mln t/year (Volume of emissions in 2030 = 80% of 1990’s level)Improvement of ecological situation in the country

Rise of national status in resolving global ecological problems

1

2

3

4

5

EU and Russia cooperation: common opportunities

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Energy efficiency Modernization and Innovations

EU-Russia Centre for energy innovation

Common investment in Russia

Cooperation in renewable energy Interconnection of power systems

Heating efficiency in Russia: EU experience is needed

Cooperation in smart greed development

Regional and municipal energy cooperation

Import of equipment and technology

Thank you for your attention!

Institute of Energy Strategywww.energystrategy.ruTel. +7(495) 698-52-34

Е-mail: gromov@guies.ru