New IEA report on Russian energy policies

The International Energy Agency has just published its assessment of Russia’s energy policies.

Russia’s energy sector plays an essential role for the Russian economy, its energy security and global hydrocarbon supplies. Russia holds among the world’s largest resources of gas, oil and coal. Its liquids production has reached historical highs, yet major additional upstream investments and technology upgrades will be needed to sustain these levels in the long term. Its gas production is also at high levels, with Gazprom being the dominant producer, and with other companies now taking significant roles. Since the last IEA review of Russia’s energy policies in 2002, the power sector has also liberalised considerably.

According to the report, the Russian economy remains largely inefficient, with twice as much energy used per GDP compared with IEA member countries. Ambitious energy efficiency policies have been introduced but have not led to significant improvements so far. At the same time, the electricity and district heating infrastructure is ageing and requires rapid investments. Attracting these investments from private domestic and foreign companies will require further regulatory, tariff and fiscal changes as well as a strong focus on policy implementation. Russia’s overall energy sector would benefit considerably from a more competitive, market-oriented environment.

While a number of policies aimed at modernising the energy sector and increasing its efficiency and sustainability are being developed or implemented, further reforms are needed. In 2014, Russia is preparing a new Energy Strategy to 2035 – offering a timely look at these challenges and opportunities.

This review analyses the energy policy challenges facing Russia and provides critiques and recommendations for further policy improvements. It is intended to help guide the country towards a more sustainable energy future.

The report’s recommendations on energy efficiency are as follows:

The government of the Russian Federation should:

• Ensure that energy efficiency is implemented as a strategic economic policy priority in the industrial and residential sectors to maintain the competitiveness of the economy and facilitate the move to market level prices:

o   maintain ambitious targets

o   provide the necessary federal budget support to attain them.

• Expand its current audit requirements for industry into an energy management programme for industry that includes targets, reporting requirements, incentives and support. The government should also develop specific measures targeting light industry and SMEs.
• Continue work on developing a comprehensive package to improve the energy efficiency of buildings through:

o   mandatory energy renovation of the existing building stock and the enforcement of stringent performance‐based energy requirements for new buildings

o   stimulation of the establishment of homeowner associations

o   deploying product energy labelling and consumption-based billing

o   demonstration of leadership by large‐scale energy efficiency improvements and

o   renovations of the public sector buildings.

• Continue work on governance, co‐ordination and the development of a legal and regulatory framework particularly with a focus on developing effective enforcement and compliance mechanisms, improving co‐ordination among federal, regional and municipal levels and ensuring that the REA has the resources and capacity to drive the implementation of energy efficiency across all sectors.
• Stimulate the further development of mechanisms for energy efficiency financing including removing legal and institutional barriers and fostering the framework for the development of the ESCO market and energy performance contracting.
• Scale up efforts in collection and analysis of energy end-use data including the development of a co-ordinated system of data collection for energy efficiency indicators. Measure and report actual progress in implementation of energy efficiency policies.

The publication is available on the IEA Online Bookshop.