Transcript Heat Subsidy Shift Program in Russia

Heat Subsidy Shift
Program in Russia
William U. Chandler
Director AISU, PNNL, USA
Presented at U.S. Baltic Power Sector Investment Seminar.
Vilnius, February 3-4, 2000
Major Problems of Heat Supply:
Boilers
• Lack of financing and
low fuel stocks
• Shortened heat supply
season and lowered
temperatures
• Absence of fuel and heat
metering
• Shortage of qualified
boiler personnel
Major Problems of Heat Supply:
Networks
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High degree of wear
Frequent failures
Heat waste and leaks
Insulation breaks and
heat losses
• Disruption of efficient
hydraulic regimes
• Multiplicity of owners
Major Problems of Heat Supply: Public
Buildings
14 deg C
indoor
temperature
Magadan
>-5.1°C
-6.0
-8.0
-10.0
-12.0
-14.0
<-15.0°C
OSProf. 3
• Shortage of funds to pay for
heat services
• Poor quality of heat supply
• Lack of heat meters
• Poor building insulation and
maintenance
• Lack of qualified personnel
• Lack of financing to improve
facilities’ energy efficiency
Why Subsidies?
• Salaries and pensions average only
$100 and $20 per month
• High fuel-labor cost ratio
• Zero technical price elasticity (no
meters, no valves)
• Complicated building ownership
structure
• Political tool in election years
%
Heat Subsidies Share In Municipal
Budgets: from 10 to 35%
40
35
30
25
20
15
10
5
0
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Program Structure
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Regional legislation and policy
Boiler house efficiency improvement
Heat distribution system modernization
Public buildings retrofits
Residential building metering and efficiency
Buildings Thermal Performance Standards
Monitoring and verification systems
Program Development
Process
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Reach agreement with city administration
Collect and analyze data
Develop efficiency projects
Analyze economic and financial aspects
Identify financial options
Suggest policy solutions
Prepare feasibility study
Discuss options with city officials and potential lenders
Develop business plan
Organize project management and monitoring systems
Boiler-house efficiency
Improve management (data collection,
certification & regulation of heat tariffs)
Equip boiler-houses with fuel and heat
meters
Modernize boiler-houses
Switch to gas
Heat distribution system modernization
Meter heat provided by electric utilities
and enterprises
Modernize heat distribution system
Upgrade heating points and pump-houses
Provide distribution system diagnostics
and operations feedback
Energy efficiency in public
buildings
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Building certification
Energy audits
Metering
Thermal efficiency improvements
Electrical efficiency improvements
Conducted All Over the Russian Federation
Cheliabinsk
Yu.-Sakhalinsk
Izevsk
Zheleznogorsk
Shaking the Money Tree
10%
25%
7%
40%
16%
2%
Loan
Energy efficiency fund
Oblast budget
City budget
Heat supply companies
Population
• Subsidy shift--from fuel to capital
• Oblast budgets and regional
efficiency funds
• Heat supply company investments
• Russian, foreign, and multilateral
banks
• Consumer expenditures
The CENEf Subsidy Shift
Mechanism
• Maximizes use of internal city financial
resources
• Avoids additional tax burden and tariff
increases
• First case: In 1997, Kostroma re-allocated $1.2
million to new budget item, “Energy
conservation program”
• Replication: Many Russian cities now use the
subsidy shift mechanism
Costs and Benefits: 15
Cities
Annual heat subsidies
210 million $US
Total recommended six-year
investment
340 million $US
Estimated annual savings
105 million $US
Savings Monitoring and
Verification
• CENEf developed monitoring and verification
systems for three Russian cities
• Each locality requires specific modifications in
municipal budget planning, heat supply
contracts, and program design
• These systems permit loan repayment from
savings and to account for a balance between
shifted subsidies and program savings.
Ending Financial Eclipse
The Subsidy Shift Program:
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Eases municipal budget crisis
Improves utility balance sheets
Reduces economic waste
Mitigates greenhouse gas emissions--as a
side effect
Last Eclipse of the Millennium (Photo: W. Chandler)