Igor Bashmakov Russian GDP Doubling, District Heating and Climate Change Mitigation

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Igor BashmakovRussian GDP Doubling, District
Heating and Climate Change Mitigation

• UNFCCC Workshop
• Climate Change Mitigation Vulnerability and
  Risk, Sustainable Development, Opportunities and
  Solutions
• June 19, 2004, Bonn, Germany

High energy intensity
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Does Russia sells its economic growth for Kyoto
or does Kyoto opens a window of opportunity for
Russian economic growth?

• The evaluation of potential impact of Kyoto
  protocol ratification on Russian economic growth
  requires answering the following 7 questions
• What are possible levels of energy production and
  what portion of Oil and Gas revenues are needed
  to keep those levels?
• How much oil and gas revenues (own investments
  deducted) are needed for Russia to buy the
  doubling GDP?
• How much energy would then be available for
  domestic use?
• What GDP doubling means for two sectors Oil-Gas
  sector and Non-Oil-Gas sector?
• Can Russia support the required growth of
  Non-Oil-Gas GDP with sufficient energy services
  when energy export to finance growth is deducted
  ?
• How far Russia can go with the energy efficiency
  revolution?
• What are sustainable economic growth rates for
  Russia before 2012 and how much GHG emissions
  sustainable growth generates?

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If Russia doubles GDP with present high energy
intensity the capacity to export oil and gas
expires in 2010!

• Russia needs energy export revenues to pull its
  NOGGDP growth, so aggressive energy policy is
  vital!
• To keep 2002 oil and gas export levels, while
  doubling GDP, Russia needs to sustain annual
  energy productivity growth by 4,8!
• If Russia is only able to keep rates of energy
  productivy improvements achieved in 2000-2003
  (2,3), then achievable GDP growth in 2002-2010
  is in the range of 50-70.

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Law of energy efficiency the sustainable way to
economic prosperity goes along the energy
efficiency arch!Central planning makes every
economy irrespective of climate and size pregnant
with large energy inefficiencies! Transition
back to a market economy allows decoupling of
economic growth and energy consumption. Poland
managed to increase its GDP by 45 in 1990-2001
with the decline of TPES by 9,3!Russia reduced
GDP energy intensity by 2,3 annually in
2000-2003!
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Russian District Heating

• Is regularly ignored when Russian energy and GHG
  mitigation policies are discussed and determined,
  but
• Accounts for about 45 of all domestic energy
  consumption, and for over 50 of fossil fuel use
  and
• Is the largest single product market in Russia
  split into over 50000 local markets with
• 30 US billion annual sales, and
• 50 US billion efficiency improvement investments
  potential, but with only 500 US million annual
  investments (100 year to release the potential)
• at least 20 nation wide fossil fuel consumption
  and GHG emission reduction potential
• Over 50 of district heat is consumed by
  buildings
• Industrial consumption went down by 35 in
  1995-2001
• The future for large CHPs in Russia is not
  bright. Market for large CHPs is squeezed by the
  competition vise
• With the shortage of metering heat in Russia is
  still traded in the mystery of heat quantities
  and costs.
• Large business recently moved into heat market.

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Russian District Heating Indicators
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Russian large CHPs heat in a competition vice

• CHPs supply 30 of district heat
• Wrong system designs and blind tariff policy
  makes decentralization attractive
• Industry built own large and small CHPs and
  boilers
• Consumers started heat metering and consumption
  reduction
• CHP generation declined by 35 in 1990-2001
• Sales reduction escalates costs and pushes more
  clients to decentralization
• Public utility CHPs design capacities are loaded
  only at 40-45.

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Heat losses in the 190 Russian DHSs as a function
heat load rarefaction
Marginal heat supply centralization efficiency
zone
High heat supply centralization efficiency zone
Effect of low heat supply networks maintenance
quality
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Some Russian DHS efficiency indicators

• Average efficiency for all heat sources 71,5
• Heat only boilers
• for 64 municipal boilers efficiency is below
  80,
• for 27 - below 60,
• and for 13 - even below 40
• Heat supply networks average heat losses are in
  the range 20-25
• Actual losses in 70 of heat supply systems are
  in the range of 20-70
• Due to excessive centralization in 75 of DHSs
  costs to transport heat accounts for about 50 of
  total DHS costs
• Low replacement rates lead to critically low
  level of heat networks physical reliability and
  high frequency of failures 0.6-4
  accidents/km/year
• High leakages ratio, lack and low quality of
  insulation, failure to provide required hydraulic
  regimes and temperature schedule.
• Buildings are as a rule either overheated or
  under-heated and consume 20-50 as much heat and
  hot water as potentially needed
• New building build on the basis of new Building
  codes are twice as heat efficient as existing
  ones, to modernize which a lot efforts and
  investments are required.

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Regional EE Building Codes development and
enforcement system timetable (Russia) 10 years
to develop and 10 more years to get effects
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Private Russian business is moving to DHS with
limits of purchasing power they have to reduce
costs and improve efficiency to pay back
investments
 

• Bashmakovs wing

Threshold 1 collection rate starts declining
Threshold 2 rigidity of collecting payments
actions brings no results
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Doubling Russian GDP and GHG Emission Mitigation
Policy Synergy. Major conclusions

• Kyoto commitment is just half way on the road to
  GDP doubling
• To reach Kyoto targets Russia needs an effective
  energy efficiency policy
• To double GDP to the year 2010, Russia needs
  revolutionary energy efficiency policy!
• Absence of clearly stated federal energy
  efficiency policy and institutions limits the
  energy productivity growth and so limits the
  potential economic growth
• Addressing this problems trough Kyoto is
  equivalent to setting for Russia country-wide
  energy efficiency improvement target which should
  correspond to desired rates of economic growth
• So ratifying Kyoto for Russia means
• a stamp on the decision to pull country out of
  the energy inefficiency swamp to the sun of
  economic growth
• open window of opportunities gives push to use
  major Russian undeveloped energy resource
  energy efficiency improvements.