Shot-gun energy efficiency

20.12.2010 — Analysis

Russian-German Energy Agency (rudea), together with Deutsche Bank and Russian Railways OJSC, is going to build a new locomotive repair plant in Ekaterinburg. The government authorities of the Sverdlovsk Region state that investors are greatly interested in energy efficient industrial projects. However, the first two years of the rudea's operation in Russia showed that funds are primarily invested in Gazprom's subsidiaries. As the "RusBusinessNews" columnist has found it out, the second-tier companies and utilities sector cannot count on investment, as the energy and commodities sector is not interested in modernization of manufacturing industries.

Rudea that came into being in 2009 thanks to good graces of German Chancellor Angela Merkel and Russian President Dmitry Medvedev is aimed to incorporate German energy saving technologies into the Russian economy. In experts' opinion, the Ural Federal District is experiencing tremendous waste of fuel due to energy losses. Valery Rodin, General Director of the Ural Interregional Distribution Grid Company OJSC, says that transmission lines alone account for up to 8% electric energy losses. The Interregional Distributing Grid Company annually spends about 10 billion rubles to cover grid losses.

In 2011, rudea intends to implement several significant projects in the Ural Federal District. 14 agreements have already been signed with companies in the Sverdlovsk Region. In addition to reconstruction of electric power lines, the projects include upgrading of a number of machine-building factories and boiler-houses, renovation of street lighting in Ekaterinburg, decentralization of heat supply in one of the districts of the Middle Urals' capital and some other improvements. The total amount of financing earmarked for implementation of district programs is estimated at 700 billion rubles.

Nikolay Vinnichenko, Presidential Plenipotentiary Representative in the Ural Federal District, is still not quite satisfied with the scope of the Russian and German cooperation. In his opinion, there is no consistency in solving the problem of energy losses. Only few stand-alone projects have been put into action: for example, Gazprombank offers different loans to manufacturing companies so that they could buy high-performance engines and compressed air equipment that consume the lion's share of energy. The most aggravating situation is observed in the utilities sector that is still waiting for financial solutions.

In the meantime, manufacturers are also dissatisfied with the results of the Russian and German cooperation. Not long ago, at an international conference in Ekaterinburg, managers of Kurgan's Sintez OJSC manufacturing pharmaceuticals and medical equipment stated that they were included in Gazprombank's black list, thus, being deprived of any chance to upgrade their process equipment.

Wolfgang Scribot, head of the Department for Energy and Infrastructure Projects at Gazprombank OJSC, pointed out that there is no black list; however, giving loans to municipalities and second-tier companies can be very risky in today's economic situation. In his opinion, companies like Kurgan's Sintez should apply to an energy service company that offers three scenarios for equipment upgrading. In addition to loans, the company can raise outside capital or even put the energy infrastructure of a business into its books.

The performance of rudea is an eloquent evidence of effectiveness of proposals on equipment upgrading: according to Thomas Hendel, head of the agency, many of the plans for 2011 should have been implemented back in 2009. For example, the project for renovation of Ekaterinburg street lighting has not commenced yet. Probably, it will speed up after 300 municipal officials from all the regions of the Ural Federal District go to Germany to improve their qualification in 2011.

Hans-Jurgen Vio, General Director of Siemens Russia and Сentral Asia, agrees that little has been done over two years; however, he looks into future with optimism: "Rome was not built in a day". He thinks that the main tasks have been accomplished: opportunities for energy efficiency have been assessed; return on investment and the amount of required financing have been calculated. The director is confident that the payback period equal to 5-10 years is quite a good indicator for energy saving projects.

However, the problem is that in Russian business people rely only on a two-year horizon; therefore, ten-year loans are seen as fantastic. Lon-term foreign loans are available only for first-tier companies: Gazprom, Russian Railways, etc. Siemens' projects in Russia demonstrate this convincingly. At present, the leading German electro-technical company is manufacturing high-speed engines for Gazprom's compressors, is building a transformer plant in Voronezh, is carrying out a number of other projects aimed to increase energy transmission efficiency from 93 to 97%, is developing a projects intended to decrease energy losses at railway stations, is making more efficient driving gears for gas liquefaction units at the Shtokman field, has invested 20 million euro in the gas liquefaction equipment manufacturing factory in Perm, is involved into localization of small-size gas turbine manufacturing, etc.

Obviously, German companies get involved only when they see prospects for their business. In the non-primary sector of economy, Siemens has no clear prospects: according to Hans-Jurgen Vio, cooperation with Russian companies is hindered not only by lack of private investment, but also lack of transparency and specificity of offered projects as well as by unwillingness to look at the energy saving problem in its totality.

Russian experts think that all the difficulties that rudea encounters are logical consequence of disinterest of Russian commodities elites in saving energy resources. The pattern adopted for development of the gas industry till 2030 contemplates construction of gas liquefaction factories, powerful tanker fleet, and, first of all, increased production of hydrocarbons. During his autumn visit to Yamal, Russian Prime Minister Vladimir Putin stated that gas production must e increased from 650 billion to 1 trillion cubic meters a year. The domestic market will be the primary consumer of additional amount of gas: according to the Prime Minister, "domestic manufacturers can and must ensure the increasing demand for gas".

It is clear that Gazprombank, which is directly interested in implementation of the strategy for gas industry development till 2030, needs a shotgun to agree to finance programs aimed at reduction of energy consumption in the country. On the other hand, shotgun decisions do not threaten the bank's managers - on the contrary, the message is very clear: the Gazprom owners are not interested in industrial modernization. Therefore, rudea projects are likely to remain unspecific.

Vladimir Terletsky