Boilers should only be converted from oil to other fuels if the conversion makes economic sense

5 february 2016

The Analytical Center discussed various approaches to assessing the multiplicative effects of converting boilers from oil and oil based fuels to alternative fuels.

“In the past 18 months the situation in the industry has changed drastically, especially in terms of prices,” believes Vitaly Kovalchuk, the Assistant to the Department for Industry and Infrastructure of the Russian Government. “Today we are seeing some power plants deliberately choose fuel oil because it is cheaper.” At the same time, Russia has all kinds of renewable energy sources in different regions that are not being used at all at the moment, the expert noted. In his opinion, economic considerations must be the deciding factor here. “We do not want to replace fuel oil with renewable sources at any cost; we have to look at how savings can be achieved. And then where it is possible and where it makes economic sense, we can go ahead with the conversion to locally sourced renewable fuels,” Mr. Kovalchuk summed up.

Victoria Gimadi, the Head of the Department for the Fuel and Energy Sector of the Analytical Center, believes a board range of positive effects are possible with this approach. “Investors can make net income while suppliers of prioritized fuels can make additional profit and, in the meantime, consumers will end up paying less for heat while the governments at all levels will get more tax revenue while also saving their budgets,” the expert explained.

Evgeny Gasho, the Adviser to the Department for Expert Analyses of the Analytical Center, believes the regions have their own development priorities. He cited such multiplicative effects as more reliable energy supply, the utilization of locally sourced resources, meeting of new demands of the local populations, development of tourism and recreational potential as well as closer links between different regions. “We have looked at inputs and outputs to estimate the multiplicative effects from the introduction of energy efficient equipment in various industries. The largest effects would be in utilities, the second most significant effect, but only about half of that in the utilities, would be in construction and R&D,” Mr. Gasho said.

The experts also noted that these efforts require a stable economic environment in the regions. In addition, it is important to take into account all possible risks and to estimate the entire logistics chain for each type of fuel.