1. 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

2. 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

3. 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 Energy security Energy efficiency of economy Economic efficiency of FEC Ecological security of FEC Management of state property 13

4. 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

5. ES-2030 Target Modeling ES-2030: from FORECAST to TARGET MODELING 15

6. 1 ST STAGE2 ND STAGE3 RD STAGE Growth of national economy and quality of life of the population Share of Energy sector in Economy 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 20202022 20152013 20302009 ES-2030: a Logic of its Realization 16

7. 7 1 st stage (up to 2012-2015) - post-crisis development 2 nd stage (up to 2020-2022) - energy efficiency development 3 rd stage (up to 2030) - innovative development Energy Sector financial “donor” of the national economy 1990-2009 2009-2015 2015-2022 Energy Sector «innovative designer» of the national economy’s structure Energy Sector investment «engine» of the national economy Innovative Energy Sector 2022-2030 Current state 1 st stage 2 nd stage3 rd stage ES-2030: a Change of Role of Energy Sector 17

8. 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

9. ES-2030: towards Energy Efficiency 20

10. 62 82-83 89-90 % 3166 mln t СО 2 -equivalent Emission of greenhouse gases in Russia will not exceed the level of 1990. ES-2030: successive stabilization of CO2 emissions 21

11. 11 Energy intensity of GDP (by PPP) in the 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./ 1000 USD

12. 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. 13 Potential for energy saving in Russia 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)

14. 14 Key directions of the Russian energy policy for energy 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

15. 15 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

16. 16 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

17. EU and Russia cooperation: common opportunities 10 Energy efficiencyModernization and Innovations EU-Russia Centre for energy innovation Common investment in Russia Cooperation in renewable energyInterconnection 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

18. Thank you for your attention! Institute of Energy Strategy www.energystrategy.ru Tel. +7(495) 698-52-34 Е-mail: gromov@guies.ru