ENERGY EFFICIENCY PROJECT
Increasing Energy Efficiency for Secure Energy Supplies
By improving their energy efficiency, the Russian Federation and Central Asian countries could reduce domestic energy consumption that would release energy resources which could enhance the security of supply for importing countries. At the same time, efficiency improvements could help raise industrial productivity, diminish fuel poverty and reduce environment air pollution as well as greenhouse gas emissions.
The strategic interest of energy importing countries is for exporting countries to produce and use hydrocarbons as efficiently as possible. There is a vast potential for energy efficiency improvements along the entire energy chain which can be implemented comparatively quickly, cheaply and reliably. The Eastern European market for energy efficiency projects with a payback period of less than five years is estimated to be between 5 and 10 billion Euro.
Western importing countries have the technology, management practices, policies, regulations, standards and experience in financing efficiency improvements. Energy exporting countries generally do so much less. They tend to use their energy less efficiently keeping domestic energy prices below world market levels.
Harnessing the mutuality of interests of both industry and governments from both importing and exporting countries on efficiency improvements for secure energy supplies is a striking new development that fits exceptionally well within the tradition of east-west energy trade and cooperation of the UNECE.
Energy efficiency projects are still not considered to be attractive investments in Eastern Europe and Central Asia. Although these projects may have high internal rates of return (IRR), they do not capture the attention of investors or commercial banks because most of them are small and/or unfamiliar to local lending institutions. Even high IRRs cannot compensate for the high transaction costs banks incur to undertake the due diligence for small projects and to establish political, financial and institutional support for them.
In addition, while many Russian and Central Asian experts know the technical solutions needed to improve energy efficiency in their municipalities, power stations or factories, they do not have the necessary skills to formulate investment projects that would meet banks’ requirements, standards and criteria. Furthermore many governments in the region have not implemented the energy policy, regulatory and institutional reforms needed to improve energy efficiency.
The Committee on Sustainable Energy already began to address this issue during its annual session in November 2008. A special session on “Strategic alliances for energy security” examined how cooperation between national oil companies (NOCs) and international oil companies (IOCs) could help to enhance hydrocarbon investments for global energy security. A new form of industrial cooperation on energy security began to emerge among the companies participating in the Energy Security Dialogue. Experts have also underlined the relevance of the role of Governments in achieving a fiscal and regulatory environment to support the multiple sources of finance investments needed in the hydrocarbon sector.
This project promotes the development of energy efficiency investments projects designed to reduce the domestic consumption of hydrocarbons in the Russian Federation, Kazakhstan and other Central Asia energy exporters in order to release additional energy resources which could be used for either for domestic consumption or to increase oil and natural gas exports, which will enhance security of supply.
The expected accomplishments include an increased capacity and skills of local experts to identify, develop and finance investment project proposals for financing from the Eastern European Energy Efficiency Investment Fund and other sources of equity or project finance as well as an improved capacity to analyse and finance investments from the revenues of increased hydrocarbon exports derived from efficiency improvements.
Establishment of a network of government and industrial experts from energy importing countries and exporting countries aiming at identifying and developing energy efficiency improvements in the production, transportation and use of natural gas and petroleum
Development of technical criteria, information requirements and standard format for the identification and selection of energy efficiency investment project proposals
Review and evaluation of the investment climate, energy policy and local agreements (property ownership, off-take agreements) needed to finance investment projects as loans and through equity financing
The recent developments and next steps to be undertaken in the implementation of the Energy Efficiency for Secure Energy Supplies project will be discussed on June 3rd 2009 during the 20th Session of the Steering Committee of the Energy Efficiency 21 Project by the national experts from the participating countries, including Armenia, Belarus, Kazakhstan, Russian Federation, as well by experts representing major oil and gas companies (GAZPROMpromgaz, EON Ruhrgas), international organisations, regional networks and financial community.
Download here the draft timetable