Experts Suggest Creating an Energy Efficiency Industry in Russia

13 july 2015

The state has begun to get actively involved in developing an industrial policy. Experts are seeing specific and deliberate actions by governments at different levels aimed at implementing the industrial policy and believe that their job is to disseminate information, identify and discuss problems, convey information about existing problems to the government, recommending solutions in difficult situations. One such discussion took place at the Innoprom exhibition in Yekaterinburg.

A round table on energy efficiency in industry looking at how to go from localized savings to energy efficiency brought together industry and energy efficiency practitioners from across the country and enjoyed much attention. Representatives of the Urals region had the floor to share about how they managed to develop an integrated energy efficiency policy in their region.

The Director of the Energy Efficiency Institute of Sverdlovsk Oblast Nikolai Danilov believes that the Urals have always enjoyed the lowest expenditure per unit of output. As far back as in 1942 the People’s Commissar for the energy sector proposed a number of efficient solutions to reduce energy consumption at industrial facilities, including those that had been evacuated to the region since the start of the war. Practitioners are better at organizing energy intensive production than managers, Mr. Danilov believes. “In Soviet Times we trained up to 20 thousand engineers who understand how to run industrial facilities,” the expert noted. “Our industry needs a program for training new engineers and even our president has acknowledged it. This is what development of human capital is all about.”

A whole new energy efficiency industry is being created. “In energy efficiency we have to use imported equipment,” the NPO KARAT CEO Sergey Ledovsky noted, “but when we import technologies, foreign companies coin money and we cannot then talk about a domestic energy efficiency industry.” Russia needs to create integrated production chains, develop its own products for the energy efficiency market, the specialist believes. Mr. Ledovsky reminded those present that on June 30 a law on industrial policy had been passed that aims to improve the situation in the industry. However, Russia still lacks manufacturing of sophisticated products, the expert noted, and technology clusters are needed to develop such manufacturing.

Company representatives said they were willing to join the system but so far they have been running into numerous problems. The LD Group of Companies Director Dmitry Levin, whose group is a potential member of the new technology cluster and who has firsthand experience with all the problems domestic businesses have to deal with, talked about the problems. “Domestic products need to gain trust of our customers,” he said. "And that means that we must give certain quality guarantees, i.e. quality certificates issued by an authorized authority are needed.” In the meantime, when choosing between a product made in Russia and a product made abroad, customers often opt for the foreign product. Another problem has to do with how to distinguish between real manufactures and pseudo-manufacturers. “On the one hand, they need to get a certificate of conformance but the procedure is too complicated so many manufactures choose to buy a Chinese product and rebrand them as their own,” the businessman complained. Another important problem has to do with how to promote new products and to that end an industry association is needed that would bring together all the players and lobby on their behalf. “At the moment we are all fending for ourselves.” Mr. Levin noted.

Experts also touched upon the issue of responsibility: who’s got to be held accountable for the correct development of the industry and who’s got to be responsible for solving its problems and creating the technology clusters everyone is talking about. Representative of the Strategic Initiatives Agency for the Urals Federal District Daniil Mazurovsky believes that, firstly, Russia does not really have that many manufactures that could be included in production chains and clusters and secondly, there are problems with investors. “Companies will always site their manufacturing facilities in places where they can get cheap energy,” he said. Mr. Mazurovsky talked about the national technology initiatives that the Strategic Initiatives Agency is working on at the moment. The initiative aims, among other things, at improving the competitiveness of Russian products both in the western European market and in Asia. The global mission, according to him, is to force a breakthrough by anticipating today the trends that are going to be relevant in energy efficiency 10-15 years from now and then direct investments into those trends.

Expanding on the topic of investments, the GPB Energoeffect CEO Vladimir Kalatuzov noted that today there is practically zero interest in investments in small projects and for that reason they need support. “As long as we have got a market inundated with imports, we will be losing our engineering school, the succession will break down and eventually the whole industry will be gone,” Mr.  Kalatuzov believes. Measures implemented at the state level should help the situation. These must include lowering taxes for small and medium sized businesses that develop domestic manufacturing, support for engineering, measures aimed at retaining human resources that can work in domestic manufacturing.

The round table was organized by the Analytical Center of the Russian Government, the SRO NP Energy Efficiency and the NPO Karat as part of the business program of the 6th international industrial exhibition Innoprom. In total, over 150 events in various formats were held during the exhibition.