Russia Improved Access to Sustainable Energy Russian Experience and Lessons in Energy Efficiency Natalia Olofinskaya, UNDP Russia UNDP Workshop for NIS Environmental Focal Points, June 2004, Bratislava

UNDP Russia Energy Efficiency Portfolio: Municipal Heating Capacity Building to Reduce Key Barriers to Energy Efficiency in Russian Residential Building and Heat Supply (UNDP/GEF- Ministry of Industry Science and Technologies, US$ 2.98 mln, ) Cost-Effective Energy Efficiency Measures in Russian Educational Sector (UNDP/GEF-Ministry of Education, UD$ 1 mln, ) Reliable, Energy Efficient Municipal Utility Service (UNDP/PPPUE-CENEf, US$ 100,000, ) Russia

Programme areas Promoting efficient technologies in heat production and distribution (ex. autonomous heat supply); Building capacities for project design and implementation; Consumption-based metering and billing, and monitoring heat supply systems; Financial arrangement to sustain and stimulate energy efficiency measures at the local, regional and national levels (ex. revolving funds, ESCOs); Building incentives for end-users through innovative institutional arrangements (ex. tenant associations in the form of Association of Payers for Utility (Communal) Services); Public awareness and involvement in energy saving. Russia

Project Objectives : (a)develop a prototype system for consumption-based metering and billing creating incentives for tenants and district-heat companies to invest in energy efficiency; (b)study and demonstrate the technical, economic, institutional, and geographical feasibility of autonomous heat supplies; (c)develop the skills to conduct the economic and financial project analyses for energy efficiency investment projects (d)disseminate experience gained in the city of Vladimir to other cities in the Russian Federation and CIS Vladimir District Heating: Objectives and Results Project Goal: to help overcome barriers to energy-efficiency investments in residential buildings and related heat-distribution systems Project Results : (a)Municipal heat supply monitoring, metering and billing model and Service established – difficulties realized in bringing real incentives for tenants; (b)Three autonomous boilers of different types installed in residential building; the technical, economic, institutional, and geographical feasibility of autonomous heating studied; (c)Series of training sessions and study tours conducted for municipal managers, two project working groups emerged into two independent expert and maintenance entities – efficiency of activity hampered by high staff turnover and reelections in the municipality (d)Several cities are highly interested in introducing the system; Federal programme in the Komi republic builds upon projects solutions; Several volumes of national report on municipal heating reform is being published Russia

Challenges:Responses: (a) Technological and information Barriers : least harmful in the long run Review of existing technologies International advisors and subcontractors Building training into subcontracts (b) Political: changes in the government and government priorities, tension between federal and municipal government, local reelections Close contacts with sectoral ministry Integration of the local project team and experts with the municipal management (c) Institutional, Legal & Regulatory : restrictions within budget code, ban to construction of basement boilers; need for new contractual arrangements Design/amendments to local regulations Lobbying of local (municipal) decision-making (d) Capacity constraints Training and capacity building Patience !!! (e) Multi-level management, coordination and cultural barriers (UNOPS, international subcontractor) Steering Committee Face-to-face meetings UNDP acted as a broker (g) Sustainability: boiler management, financial sustainability of VLADESCO and Billing Service Prepare financial and business plans for projects and newly-created maintenance entities prior to establishment; investment component in the tariff (i) Ignorance of the broader country context: project design often ignores or undermines systemic barriers in the country (gaps in heat supply chains and lack of incentives for energy efficiency through out the system) thus assigning too ambitious goals; Study Russian context Adapt project objectives without hampering the goals Vladimir District Heating: Main Challenges Russia

Consumption-based metering and billing: (a)Heat supply monitoring as a prerequisite for the efficient billing system (b)The model to adopt various metering capacities and instrumental base (apartment-, building-, district-level metering) (c)City-ownership – integration with municipal heat supply planning and management (d)Economic and financial sustainability of the Service – introduction of investment component into the tariff (e)Cost for measured heat is apportioned to the apartments by area (sq. meters) Autonomous heat supplies: (a)Pilot different types of boilers (roof-top, basement, detached/adjacent) (b)Monitoring prior and after installation – assessment of economic and environmental efficiency (CO 2 reduction) (c)Municipal ownership with independent (quasi ESCO) maintenance Capacity building: (a)Study tours to Eastern Europe – review various heating management options (b)Training courses on business planning, energy auditing and energy efficiency project design (c)International advisors Dissemination: (a)Rely on the ministerial network and resources (b)RUSDEM (c)Conferences and energy exhibitions (d)Website Vladimir District Heating: Adopted Approach Russia

Project Objectives: (a)Introduce energy efficiency education program for secondary schools and related program for public awareness on the local and global benefits of energy efficiency; (b)Demonstrate cost-effective energy efficiency measures in educational facilities, and sustain those measures through revolving financial mechanisms; (c)Capacity building and dissemination of results within the education sector Energy Efficiency in Education: Objectives and Results Project Goal: to contribute to the abatement of GHG emissions by improving energy efficiency of Russian educational facilities Project Results to-date: (a)Textbook on energy efficiency designed and tested at pilot schools – programme to be introduced across the region in September 2004; (b)Municipal revolving funds are being designed in partnership with NEFCO, demo projects under implementation; (c)Series of training sessions for energy managers, teachers and coordination centres conducted Russia Challenges: Legal and budgetary restriction for establishing legitimate revolving funds Dependency on individuals/personal leadership in the regions Lack of understanding between government and NGOs

Energy Efficiency in Education: Adopted Approach Russia Partnerships: Collaboration with NEFCO (loans and conditional grants) for components on sustainable/revolving finance in terms of both co-funding and expertise Leveraging resources from Ministry of Education Looking for partnerships with Russian private companies: energy measures in municipal schools, capitalization of revolving funds Working with NGOs to promote and disseminate educational programme Build upon expertise of regional technical universities and energy efficiency centres Introduce practical components into the educational course (0-cost energy efficiency measures)

Lessons Learned: Methodological Aspects Technical expertise in energy sector Institutional work and policy making Outreach to local communities and civil society Media and PR Keep in mind end-goals and priorities throughout project implementation Balance involvement of various partners, their vision and agendas Government NGOs Tenants Business Russia

Areas for Knowledge and Capacity Development Russia Heat supply monitoring – holistic overview of production-supply chain Municipal energy planning Sustainable financing for energy efficiency – local financing Public-private partnership mechanisms and business-models to attract banks and businesses Outreach to citizens – tenant associations; education; advocacy Packaging and disseminating The Product (solutions, know-how, models) to municipalities, government, residents

Substantive Lessons Learned: Packaging the Product Municipal Heating and Energy System Heat supply monitoring and billing model Consumption based billing system Municipal revolving funds for energy efficiency Training for municipal energy managers: project development, business planning, energy auditing Tenant associations and ESCOs Low cost energy efficiency measures for municipal buildings Autonomous heat supply UNDP/GEF products for municipal managers Russia

Conclusions: Suggestions for UNDPs Further Response Russia Projects with municipalities – traditional UNDPs niche: difficult to mobilize co- financing, difficult to attract private funding Further Response: (1) Projects built on public-private partnerships and new finance mechanisms to facilitate access to finance and investments for energy efficiency; (2) cost-effective and profit-generating models; (3) building upon most advanced municipalities demonstrate effective business-like energy management practices These initiatives build upon and further promote the outputs of existing UNDP/GEF projects as well as provide framework for continuation of GEF efforts under the Strategic Priority #2 Dissemination and replication – restricted by lack of local capacities and resources as well as by unclear product for dissemination Further response: analyze and summarize country-level and sub-regional experience at the portfolio level and prepare a package of replication materials including complementary institutional models and solutions designed by various projects Russias regional differences and disparities allow for piloting a variety of solutions and at the same time impose additional requirements to any replication efforts

References to Relevant Information Russia