Understanding energy efficiency

For decades, countries around the world have used aggregate indicators to construct a “big picture” of patterns of energy use. One of the most commonly used aggregate indicators is energy intensity: the measure of energy consumption per unit of gross domestic product (GDP). According to this indicator, Russia led G8 countries1 in the reduction of energy intensity over the 1990s; Russia’s energy intensity having improved by 2.5% a year. From 2000 to 2007, Russian energy intensity experienced an even higher rate of improvement with an average annual decrease of over 5%.

However, the usefulness of this indicator is limited and can be misleading; in actual fact, energy intensity is driven by many factors that are not necessarily related to energy efficiency. So it is perfectly possible to have improving energy efficiency, while still seeing rises in energy consumption (the inverse is also true). For instance, given the increase in international hydrocarbon prices during the 2000-07 period and the consequent growth in Russia’s GDP, it is likely that the decline in energy intensity seen during this time frame was linked more to economic growth rather than improved energy efficiency.

This speaks to the need for mechanisms that can deliver a better understanding of the factors that affect energy intensity, not only within a given country but on a sector-by-sector basis that adequately reflects that country’s economic landscape. Moreover, as each main sector2 is influenced by different underlying factors, different explanatory data will be needed depending on the sector analysed. Much more detailed – and disaggregated – data than are currently available in standard energy balances are needed for each main end-use sector to assess the role of energy efficiency and the potential for further energy savings.

Over the past years, the International Energy Agency (IEA) has been developing energy efficiency indicators for each end-use sector, with the specific aim of helping to disentangle the various factors that drive and restrain energy use. Much of this work has been driven by the fact that improved energy efficiency is a shared policy goal of many governments around the world. The benefits of more efficient use of energy are well known and include reduced investments in energy infrastructure, lower fossil-fuel dependency, increased competitiveness and improved consumer welfare. Efficiency gains can also deliver environmental benefits by reducing greenhouse-gas emissions and local air pollution.

In recent years, the IEA has worked closely with Russia to improve energy data collection in general. While some progress has been made, much more work is required: most data required to understand past trends, assess the largest potential for energy savings and enhance energy efficiency policies are currently not available.

Despite the data gaps identified, analysis of some sectors of the economy indicates that there is a large energy savings potential in Russia. In fact, Russia is sometimes referred to as “the Saudi Arabia of energy efficiency”; its vast potential to reduce inefficient or wasteful energy consumption can be considered a significant “energy reserve”. One IEA study estimated that energy efficiency improvements in Russia’s district heating sector, alone, could save 30 billion cubic metres per year (bcm/yr) to 50 bcm/yr of natural gas (IEA, 2004). Optimisation of its transmission and distribution systems for natural gas, coupled with reductions in gas flaring by its oil and gas industry, could save up to a further 30 bcm/yr. In the industry sector, the energy savings from the application of best available technologies is estimated at 750 petajoules (PJ).

Russia, recognising the benefits of more efficient use of energy, is taking measures to exploit this potential. The president has set the goal to reduce energy intensity by 40% between 2007 and 2020. Furthermore, since 2008, Russia has taken important steps toward creating a legal and institutional framework to enhance efficient energy use and supply. A law on energy efficiency, passed in the Duma’5 in November 2009, introduces several important measures such as: restrictions on the sale of incandescent light bulbs; requirements for electrical products to be labelled according to their energy efficiency rating; provisions on mandatory commercial inventories of energy resources; new energy efficiency standards for new buildings and installations; and reductions in budget spending on purchasing energy resources. In addition, energy-intensive businesses will be required to carry out energy-saving research and to adhere to energy-saving and energy-efficiency programmes. This new protocol will also encompass a transition to a long-term tariff regulation and the establishment of a shared inter-ministerial energy efficiency information and analysis system.

In the past few years, the IEA worked closely with Russia’s Federal State Statistics Service (Rosstat) and the newly formed Russian Energy Agency to support the development of energy efficiency indicators in Russia. This work, which has focused on the industrial, residential and transport sectors, is critical to an effective implementation and monitoring of Russia’s ambitious energy intensity and efficiency goals. Since 2008, the IEA has been working with Rosstat to establish what data already exists, identify the data gaps, and assess the data quality.

The key findings of the IEA work with Russia on developing energy efficiency indicators form the core of this report. The report provides an overall assessment of recent trends, the current data situation in Russia, a list of the basic data needed to develop indicators, and the usefulness and limitation of some key indicators. It comprises five chapters covering the five main end-use sectors: industry, residential, services, passenger transport and freight transport.

The report also includes two methodological annexes. Annex A describes the IEA indicator approach, which uses the idea of a pyramid to portray the hierarchy of energy indicators (from most detailed to least detailed). Annex B includes the IEA energy methodology to analyse trends in energy consumption.