Energy Efficiency Immunization for Russians

26.01.2010 — Analysis

The average winter temperature in the Urals is 20-25 degrees Celsius below zero. In the end of December 2009 - beginning of January 2010 temperatures plummeted below 30 degrees. As a rule, electric grid load increases in proportion to the fall of temperature. Representatives of JSC Ekaterinburg Power Grid Company told RusBusinessNews that energy consumption in Ekaterinburg peaked on 17 December, having reached the historic maximum of 980 megawatts. The fall of temperature by 12 degrees entails a 6% increase in daily power consumption.

The increase of grid load, according to the experts, occurs largely due to individual power consumers. People tend to turn on electric kettles, heaters and boilers more often. Needless to say, they also spend more time at home, thus using TVs, computers and music systems for longer. Power consumption in winter is usually twice as high as in summer. An average Russian family (of 2.5 people) using all the usual appliances consumes between 140 and 400 kilowatt-hours and pay for it about 300 roubles in electricity bills.

It goes without saying that it would hardly be possible to abandon high power consuming appliances now. However, whilst previously every family could solve the issue of high power consumption on their own, recently the federal government decided to take care of it.

The law "On energy saving and improving energy efficiency" came into effect on 27 November 2009. Starting from 1 January 2011 all the white goods, and starting from 2012 all computers and other appliances sold in Russia, will have to be provided with information on their energy efficiency in their manuals. In addition to that, this information has to be provided on labels. The only exception to this is the ‘limited usage goods and limited occurrence goods.' Experts are already discussing the possibility of the total ban on selling high power consuming appliances in Russia.

In the last several years the citizens of the Urals were active in "investing" in new appliances and electronics: they either bought new items or replaced the old ones. The sales volume in this segment has been on the increase since 2006. According to the estimates of the market players, Ekaterinburg market volume in 2008 equalled 300-350 million dollars, whereas Chelyabinsk market volume amounted to 215 million dollars (source: Tehnosila). The demand was largely spurred by rising individual incomes and consumer credit development. Driven by the increasing demand the regional, federal and international retailers actively pursued new opportunities: Euronics and MediaMarkt stores opened in Ekaterinburg. 

However, starting from 2009 fever gripped the household appliances and electronics market. The retailers' estimates indicate that sales in non-holiday period dropped by 15-30% in comparison with 2008. Press office of MIR, a federal retailer, commented on the suspension of some of their Ekaterinburg outlets by saying that the market shrank considerably Besides MIR, several other regional retailers faced financial difficulties.

Starting from 2009 almost all the market players introduced anti-crisis measures in order to retain customers. These were mostly aimed at building customer loyalty. This included reducing prices, improving service centres and expanding the range of energy efficient appliances following the latest energy saving fashion.

Revealing Whole Truth

The majority of the appliances sold in Russia is produced abroad. Discovery Research Group estimates the total volume of Russia's import in 2006 at 3.6 billion dollars (about 63% of the market). The remaining 37% are comprised of goods manufactured in Russia by foreign companies.

It should be mentioned that foreign producers are constantly improving energy efficiency of their products without any government instructions whatsoever. They attach EU energy labels specifying energy efficiency classes from A to G (A being the most energy efficient, G the least efficient, respectively). "Almost all foreign manufacturers offer white goods of B class and above. I estimate these goods to account for 20-30% in the cheap segment, for 70-80% in the middle and upper-middle one, and 100% in the luxury segment", a representative of an international manufacturer told RusBusinessNews.

The Russian government standard, GOST, regulates the attribution of goods to a certain energy consumption class; however, local manufacturers don't yet follow the trend of informing the customers about the energy efficiency class. There are several reasons to this "modest" behaviour. First, there's nothing to boast of. Second, energy efficient appliances are generally more expensive than their less efficient analogues. And, since the price is still the most important yardstick for the Russian consumers, these labels can backfire and result in a drop in sales. That's why energy efficiency labels only appear on the more expensive Russian goods, such as freezers, heaters and refrigerators. 

Obviously, mandatory informing of customers about energy efficiency class will mostly influence Russian manufacturers. They will need to ensure that all their products meet the established standards and fall under a certain energy efficiency category. On the one hand, this will most certainly translate in some organisation and technological costs. On the other hand, this requirement will stimulate technological progress and competition. In Europe, for instance, white goods manufacturers have long ago developed a taste for this energy efficiency race. Indesit Company representatives told RusBusinessNews that washing machines manufactured in 2008-2009 consume 44% less energy and 62% less water than those produced in the 90s. "We've arrived at the following figures for fridges in money terms: during 15 years of service life contemporary models will consume energy equivalent of 375 euros versus 1500 euros for the older ones, manufactured in the 90s. For a thrifty and socially responsible individual these figures will play an important role in choosing a model of an appliance to buy", IC press officers said. "At the end of the day, energy efficiency is one of the success factors in the market and an additional stimulus for a buyer; therefore any manufacturer of A or A+ goods is eager to inform the customer about how efficient their products are. We, for instance, cover this issue thoroughly at internal trainings and inform our shop assistants about energy efficiency of our products. Some time ago it wasn't such a hot issue because energy was cheap; now more and more consumers are waking up to it", one of the trade experts told RusBusinessNews.

RusBusinessNews correspondent asked some white goods retailers about this trend and none of them showed any disapproval for this novelty. In addition, promoting these energy efficiency figures is a good opportunity to advertise themselves. As long as the problem of saving money and resources is relevant, people will be looking for competitively priced energy efficient goods. Massive events aimed at explaining to Russians how much they can save with this or that model could stimulate sales even further.

Whether this initiative of the Russian government will actually reduce power consumption remains to be seen, though. For instance, the talks of replacing electric bulbs with luminescent ones started long time ago. However, people still haven't realized why it is so important to replace the bulbs they have, so they will hardly storm the shops to get a new wonder bulb. Household appliances are way more expensive than light bulbs. So even advertising campaigns "pushing" consumers to replace inefficient appliances with more economical ones is unlikely to make them change their minds. We cannot rule out the possibility that following this new law the Government will have to come up with more practical measures to stimulate a massive switch to energy efficient kettles, irons and heaters. 

Yevghenia Yeryomina