Energy Efficiency as Key to New Growth

Russia, the leading producer and consumer of energy resources in the world, holds much potential for Savings. Ivan Nechepurenko talked to Alexander Nekrasov, the executive director of the Union for development of energy efficiency and environmental safety U4E, About how energy efficiency can help restart the growth of The Russian economy.

Alexander Nekrasov

What is the mission of your organization? Are you the binding link between Russia and France in the area of energy efficiency?

U4E is the union of large European, primarily French, industrial establishments working in Russia that united around the subjects of energy efficiency, ecology and climate. In Russia, energy efficiency is seen as the final goal, and other aspects, such as ecology and climate, for now are not as well developed. It so happened for Europe that ecology and climate are put at the forefront, while energy efficiency is seen as one of the practical instruments for attaining results in the sphere of ecological balance.

But we really are the binding link between the French and Russian experiences and companies. For example, in the frame of an energy-serving contract, a European company, according to our internal estimates, will use up to 80 percent of the equipment produced in Russia "primordially" by Russian manufacturers. At the same time, Russian energy-serving companies can use French equipment, including equipment manufactured in Russia; some Russian companies have unique experience of working in climatic zones where the range of seasonal changes in temperature can reach 100 degrees (France has no such experience, but it does have the equipment).

So for French companies, Russia is not only a sales market, but a way to gain experience?

That, along with experience, and the development of a new and promising market. If one more profitable business niche reveals itself in Russia, then everyone wins.

How did the crisis and those "unpleasant" events in economics that are happening right now affect the tendency of Russian companies to be engaged in energy efficiency?

In my opinion, interest in the subject has not fallen. We recently had a seminar on energy efficiency, in the context of analysis of implemented success stories, along with new demands and regulatory obligations. There were many large Russian companies. The interest is there, it did not go anywhere.

The problem is not so much in the current crisis, but in fact that major government initiatives on energy saving and resource conservation are at the moment not well enough supported with legislative and financial instruments that would allow a quick start for many projects. Energy serving contracts, including those with French companies, are implemented at many major Russian enterprises. The company Fenice, one of the world leaders of energy service in the group Électricité de France, implemented an energy serving contract with the group of companies AvtoVAZ. Everyone is happy with this collaboration and plans on its expansion.

Today it is evident that an overall increase in efficiency is one of the major methods of restarting the growth of the Russian economy. Can  energy efficiency be the grounds for that? In this sense, can the energy service contracts be the model of how that should be done?

I think so. The experts say that implementation of a construction project involves a minimum of 200 related industries (the contractors for various services, equipment suppliers, certification companies, etc.). In Russia right now, bets are placed on projects like that, with a multiplicative effect. Energy efficiency holds a scale no smaller than that, in addition to a long line of possibilities that it creates.

This, without any doubt, is one of the elements of fighting the crisis that must not be forgotten by economists, financiers, manufacturers and the government.

Speaking of energy serving contracts, to rewind a bit, they are not entirely developed as a regulatory as well as a financial instrument, which are absolutely interconnected.   

This base can be optimized to develop an economic potential for both sides. One example: How can one show in tax reporting that the implementation of energy effective technology is an investment, and not a gain? A list of similar questions can go on and on.

Energy serving contracts are usually undersigned for a minimum of five years (in order to feel its full effects), though now we are working on picking up a pool of projects that can prove their effectiveness within only three years.

We hope that a successful implementation of these short projects will build the confidence of the members of the market to this instrument and summon long-term projects. In addition, it can lead to the necessary changes in the administrative and regulatory framework.

How long did the process of developing energy efficiency take in France?

France suffered oil shocks in 1973 and 1979, and in 1980 it was decided to provide energy security for the country. The stake was made on the development of nuclear energy and the optimization of consumption. You cannot call that energy efficiency in the modern interpretation of the word; it was more like energy security. Possibly, energy efficiency in the modern sense emerged in France at the end of the 1990s. Now, France is the only country in the world to include an environmental bill as a supplement to the constitution (in the year 2004). The concept of energy efficiency came into use, in the governing bodies, as well as the business and everyday life of a person, starting with the president Jacques Chirac.

Seemingly, France had certain forced incentives to begin energy efficiency. What incentives can Russia have, with her supply of gas and oil?

There can be a number of incentives. We know that internal energy consumption in Russia is not as profitable as an export of energy resources. Accordingly, what is saved in the internal market, may, under certain conditions, be sold on the external. That is, if one is speaking on a scale of an entire county. If one is talking on a business level — the savings made on electricity give additional investment resources for modernization, the expansion of business, or simply for the payment of dividends.

Can you name certain examples among the Russian companies that do this?

Successful projects are present at a number of enterprises. In Russia, French companies work with AvtoVAZ, Severstal, Transmashholding, and others. It is worth noting the initiatives of energy efficiency development implemented by many metallurgical and energy companies, including Lukoil and Gazprom.

Russia - France 2015
Russia - France 2015
Welcome to Russia-France business supplement, devoted to strengthening bilateral relations between Russia and France.
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