Kohler: Energy efficiency and the German-Russian modernization partnership

Energy efficiency is one of the key factors of economic development of our time. This also holds true for a country with vast natural resources like Russia. Investments in efficiency technologies not only enhance the competitiveness of Russian companies and create stable sustainable assets, but also allow Russia to preserve and strengthen its role as an energy exporter: the more efficiently energy is used domestically, the more sustainable energy exports will be. This is something that President Dmitry Medvedev, by making energy efficiency one of the political priorities of his mandate, has clearly acknowledged.  

 Ambitious Goals, High Potential

The challenges are great, but so are the opportunities. Medvedev recently signed a decree according to which Russia should reduce its energy consumption/economic production ratio by 40 percent by 2020 compared to current levels. A 40 percent reduction would represent twice the amount of natural gas that Russia currently exports to Western Europe each year.  This clearly shows that energy efficiency is a resource that should be systematically developed.

Sergey Shmatko, Russia’s energy minister, has estimated that the returns of increased energy efficiency often exceed those linked to the exploitation of new gas fields in Siberia. A new law on energy efficiency therefore introduced, among other provisions, efficiency standards for buildings, the obligation to use electricity, gas, heating and water meters as well as a requirement to label the energy consumption level of all electronic devices. In the meantime, Russian regions are working on their energy efficiency strategies in order to reach the national saving targets for 2020.

For more than 30 years now, Russia and Germany have maintained a reliable partnership in the energy sector – not only with regard to cooperation in the oil and gas industry, but also, and increasingly, in the area of energy efficiency. In order to deepen this cooperation, we established in 2008-2009 a German-Russian Energy Agency (rudea), which is modeled on the German Energy Agency (dena) and serves as a center of excellence for energy efficiency projects.

Rudea and Its Mission

Rudea’s goal is to promote the development of energy efficient markets in Russia in a mutually beneficial way: while this supports Russia’s economy in its drive to become more modern and more competitive, it also allows German companies to access new markets for their efficiency technologies.

Rudea was jointly designed by dena, the German Ministry of Economic Affairs and the Russian Energy Ministry. Its shareholders are dena (40 percent) and the Russian Energy Carbon Fund (60 percent), while both share-holders as well as German and Russian ministries are represented on its supervisory board. Dena and rudea closely cooperate with German and Russian companies in the fields of project development and implementation, which is why an advisory board comprising a number of leading German companies (such as ABB, BASF, EnBW, E.ON Ruhrgas, Herrenknecht, Lurgi, Siemens, Viessmann and VNG – Ver-bundnetz Gas) was also established. Dena advises rudea on technical and strategic issues and acts as a contact point for German companies.

In order to fulfill its immense potential, Russia has no choice but to improve energy efficiency on the whole value-added chain – that is on the production, transformation and utilization levels. The introduction of modern technologies for the production and distribution of electricity and heating, as well as the implementation of efficiency measures at corporate level and the modernization of buildings play a particularly important role in this regard. The use of renewable energy sources like biomass, wind power and geothermal energy must also be promoted. Rudea’s goal is to develop all these areas – and it has done with success, so far. Within eight months of the start of its operations in the Spring of 2009, the agency and its Russian partners launched projects amounting to over €6 million in total.

The Ural Federal District: a Pilot Region for Rudea’s Actions

Rudea’s work is currently largely focused on the Ural Federal District, which is home to much of Russia’s steel and iron industry and where respectively over 90 percent and 60 percent of the country’s natural gas and crude oil are located. Russia’s energy and manufacturing centre, the district is also an important junction between Europe and Asia. 

Rudea, which is currently developing an energy efficiency strategy for the district, is involved in a number of pilot projects for the modernization of buildings, boiler houses, heating and public lighting systems, in particular with the city of Yekaterinburg. In cooperation with the Russian corporation RENOVA, we also launched a new competence center that will advise Russian companies on energy efficient civil engineering and will facilitate their access to German know-how. Rudea also supports the network operator MRSK Ural for the modernization of its network infrastructure and advises a number of industrial companies on the modernization of their production facilities, for example in the chemicals sector (Khimmash) and metals and mining (UGMK). The exchange of experiences and best practices with German experts plays an important role in this respect.

A number of innovative energy efficiency services already well established in Germany have been warmly welcomed in Russia. One such service, “contracting,” allows the owners of buildings to improve their energy efficiency with cheap access to external know-how. Dena and rudea are implementing a joint strategy aimed at promoting the rapid development of this instrument on the Russian market, including through pilot projects, a training program for Russian managers in Germany and providing consulting services to Russian Ministries on how to adapt the legal framework.

The foundation of rudea marked the start of a new chapter in German-Russian economic relations. While it helps Russia create the institutional pre-conditions required to fully exploit its efficiency potential and to develop its economy in a sustainable way, it makes it easier for German companies to establish cooperations in which they can bring in their know-how and their experience. Rudea is hence both a clear sign of the success of the modernization partnership between Russia and Germany and a driver of its continuation.