Studies Eastern European Markets

Eastern European Markets


Hanna Mäkinen
Energy efficiency – a new energy resource for Russia?

Electronic Publications of Pan-European Institute 20/2010

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Concluding remarks

Investing in energy efficiency is a rational choice for Russia, both from economic and environmental viewpoint. Reducing the energy intensity of Russian economy is a precondition for the continuation of the country’s economic development in the future – and necessary for the sustainable development of Russian economy. Investing in energy saving will bring much more durable benefits than investing in new supply capacity, and in a more cost-effective way. It will generate various positive results – economic, environmental and social alike – such as increase Russia’s international competitiveness, increase oil and gas export earnings, lower budget expenditures, channel investments from energy sector to other purposes, reduce greenhouse gas emissions, create jobs, and improve social welfare.

Moreover, it can open a window of opportunity for energy cooperation between Russia and international partners, such as the EU. Russia’s need to improve its energy efficiency can create business opportunities for Finnish companies as well. In Russia there is demand for expertise, technologies, and equipment in the field of energy efficiency, which Finnish companies have, and Russia can offer interesting investment opportunities for them. Indeed, both sides can benefit from collaborating and networking in the field in question. Reducing energy intensity can open a new energy resource for Russia. Russia’s future ability to produce enough natural gas to meet the supply needs of both domestic and export customers has been questioned. Maintaining Russia’s current natural gas production volumes requires significant and immediate investments in new production capacity – or in improving energy efficiency. By investing in energy efficiency Russia will be able to meet supply needs at significantly lower cost than by building new production capacity.

Although the demand for Russian gas is expected to increase in the future, there are several external factors that could place the country’s natural gas production into a difficult position. Due to the economic crisis, the demand for Russian gas in Europe has at least temporarily decreased. The increased use of Norwegian gas, LNG and alternative energy sources has also reduced the demand. However, the real wild card could be the unconventional gas.

The very rapidly increased production of unconventional gas in North America has already led to an oversupply of gas there, which can possibly create an increased flow of LNG to European market as well, further reducing the demand for Russian gas in Europe. Furthermore, if unconventional
gas boom spreads to Europe and other continents as well, Russia’s position as a dominant natural gas supplier could be challenged. When it is unclear what the future holds, it would be reasonable for Russia to focus its resources in developing energy saving measures and improving energy efficiency instead of making huge investments in developing new energy production capacity.

Finally, the current state of the world cries out for sustainable development. The global economy should be steered onto a sustainable path, which requires contributions from all countries. There is an increasing demand for environmentally sound energy solutions to fight climate change, without sacrificing the economic development. Increasing energy efficiency reduces greenhouse gas emissions and cuts down the consumption of natural resources. In Russia, very favourable environmental effects can be achieved without unrealistically large investments or complicated technology.

The first steps towards realising Russia’s energy efficiency potential have already been taken, when the Russian leadership has acknowledged the importance of energy saving and incorporated it into the country’s energy strategy. The real challenge will be to proceed from words to deeds – to implement energy-saving measures effectively.

Furthermore, it is difficult to create durable results with a top-down approach only. There still remains a general lack of awareness about the concrete benefits of efficient energy use, and therefore Russian consumers and businesses are not motivated to save energy. Indeed, a transition to energy efficient economy in Russia will require embedding the energy-saving attitudes in the whole Russian society.

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