The economic development of any country and the standard of living of its population essentially depend on the condition of the country’s energy sector and its power industry. Figure 3.1 illustrates the correlation between the gross domestic product (GDP) and energy consumption per capita.
It is believed that the higher the energy consumption of a country, the higher its standard of living. It is also assumed that after reaching a certain critical level of GDP, about $18,000 per capita, a society feels prosperous and comfortable, and further growth in GDP does not have any radical impact on the life of the society.
In the lower part of the chart we see countries with low energy consumption and a low standard of living, such as China and India. Unfortunately, Russia is somewhere in the lower half of the chart, despite the fact that it shows a high level of energy consumption. The EU countries, Japan, the USA, and Canada are above the critical line. It is interesting that we can also distinguish two groups of countries with a high standard of living. The same high standard can be achieved with a different structure of energy consumption. There are several factors that influence this: different eco-
K. Hanjalic et al., Sustainable Energy Technologies: Options and Prospects, 51-73.
© 2008 Springer.
(t. e.f per capita)
Fig. 3.1 Correlation between the Gross Domestic Product (GDP) per capita and specific energy consumption. (ES-2020 is “The Energy Strategy for Russia for the period up to 2020”.) nomic structures, climatic conditions, and different approaches to energy efficiency and energy saving.
Since the ultimate goal of the power industry is to provide a sufficient energy supply to a country’s economy, we see that this level is achieved not only by the total amount of energy produced, but also through energy-saving measures. There is a close relationship between energy production, consumption, and energy saving.
A high energy intensity of GDP (the ratio of GDP and energy consumption) is certainly one of the most severe problems for the Russian economy. In 2000, the energy intensity of GDP for Russia was 3.2 times higher than that of the EU countries, 2.2 times higher than that of the USA, and 3.6 times higher than that of Japan. Greater differences can be revealed while analysing different industries. The share of energy cost in manufacturing in Russia is about 18% (compared to 3-10% in the Soviet period). But if we consider the chemical and petrochemical industry, this parameter increases up to 40-45% (and even 70% for some factories). This results in non-competitiveness of domestic products in both world and local markets and increases the share of imports. As a consequence of these high costs, enterprises leave the market. Another dangerous consequence is a decrease in investments – why invest in a plant with no profit return?
What is the reason for the high energy intensity of the Russian economy? There are several natural and inescapable reasons – harsh climate, huge distances and difficult access to energy deposits. But there are other factors as well. The Russian economy has a high proportion of energy-consuming industries with a low level of
high-tech. These technologies are often energy-wasteful both in terms of production and consumption. There is also a lack of economic motivation for the introduction of energy-saving technologies. This is partially because of low domestic fuel prices (especially gas), a poor monitoring and book-keeping of energy consumption, inefficient operation modes and sometimes even a total lack of energy-consumption control facilities. Here are just a few examples. Flaws in the design and operation of boilers and heating plants result in a 30% increase in fuel costs. The efficiency of heat power plants (HPP) with steam turbines is about 35% (and only 25% for small-size plants), in contrast to the 50-60% efficiency of the combined-cycle plants (CCP) operating in many countries. As for fuel prices, a simple analysis reveals two negative contributing factors. First, the low domestic price of fuel: the price of crude oil is 72% of the export price, for coal it is 57%, and for gas 20%. Second, there is a huge difference in prices for different kinds of fuel – the energy produced from gas is half of the cost of that produced from coal (16.6 $/toe versus 30.3 $/toe for year 2001). It should actually be the reverse, since gas is a valuable raw material for other industries as well. This obstructs the development of coal technologies and creates an abnormal proportion of gas and coal in the domestic power industry. In electricity production in Russia, the share of gas is 42.6%, and only 20.1% for coal. In the EU countries, these parameters are 17.5% and 27.4% respectively, and for the US 19% and 50%. The share of gas fuel in the Russian power industry overall is even higher, namely 60-64%.
To make an analysis of the energy supply for Siberia, we must incorporate even more complex conditions. Siberia is the coldest zone in the world, where 60% of fuel is consumed for heat supply. Moreover, 62% of the heat in West Siberia is produced by 28,000 boiler plants with very low energy efficiency and extremely poor environmental parameters.
Guidelines for development of the power industry and the efficient use of energy resources are formulated in “The Energy Strategy for Russia for the Period up to 2020” , published in the year 2000. The strategy is based on two possible scenarios of economic development – optimistic and pessimistic (the latter could be considered also as a “moderate” scenario). The first scenario assumes a 5% annual growth of GDP (i. e., with a GDP 2.6 times higher in 2020 than in 2000), and the second scenario is based on a 3.5% annual growth (with GDP doubling over 20 years). The revised version of the Strategy (dated 28.08.2003) is based on higher growth rates, i. e., 6% and 4.2% annual growth, (predicting an increase in GDP by 3.3 times and 2.3 times, respectively) for the same period. The objective of rapid economic growth is to approach the high standards of living of developed countries. Quantitatively this level can be described in terms of GDP per capita. Here Russia is behind EU countries by a factor of 3 ($7,500 versus $21,900).
Today Russia is among the leading countries in economic growth. According to the estimates of UN experts, in the year 2004 the rate of GDP growth in Russia was 6.7%. In comparison, the world average was 4.9%; economic growth in the US was 4.4%, in theEU 2.4% and China showed 9.1% growth. However, this high index for Russia is a temporary parameter, caused by favourable conditions. For the near future, some experts predict a growth of 3-6%. However it is difficult to forecast with any degree of certainty. Analyses by International Energy Agency experts (among others) give a more reliable figure – about 3% (i. e., by 2020 GDP will increase by 1.9 times). This means that the gap in economic parameters and standards of living between Russia and industrialised countries will still remain high. One of the obstacles to the fast development of the Russian economy is high energy intensity of GDP combined with the unlikelihood of swiftly reducing this parameter. In the framework of the Energy Strategy, to maintain the projected rates of economic growth would require a drastic reduction of energy intensity for the economy (by 2.2 times in an optimistic scenario and by 1.8 times in a pessimistic scenario). According to the estimates of the Melentyev Institute of Energy Systems, this index cannot exceed 1.7, and the International Energy Agency gives an even lower index – 1.4. This forecast means that by the year 2020 the large difference between the energy intensity of the Russian economy and the economy of highly developed countries will remain almost the same as today.
According to the Energy Strategy, the decrease in GDP energy intensity should be carried out through two approaches: 2/3 through economic restructuring (higher input of high-tech or low-energy-intensity production), and 1/3 through technical and organisational energy saving. Here we come to an important conclusion about the crucial role of energy saving in the national economy. Instead of remaining a “desired objective”, energy saving is now an absolute necessity for Russia to achieve high economic growth. A recent analysis of the Russian power industry  by European experts is titled “Energy strategy of Russia – key role of energy saving”. It additionally informs the reader that Europe is interested in the reduction of GDP energy intensity in Russia because the supply of Russian gas to Europe depends on the difference between gas production and domestic consumption. The latter factor depends directly on the efficiency of energy consumption in the Russian economy.
The experts’ estimates demonstrate that Russia has a huge potential for energy saving – more than 40% of its total energy consumption (400-500 million toe per year). One third of this potential is concentrated in the fuel/energy conversion complex, another third lies in the manufacturing and building industries, and one fourth should be pursued in the municipal utility sector. It should be emphasised that the realisation of this potential is costly. According to the Energy Strategy, up to 20% of potential energy saving can be pursued at a cost of about 15 $/toe, which is comparable to the fuel price. The most expensive part of the programme will require more than 60 $/toe (this is 15% of the potential energy saving). But the major part of the potential energy-saving measures will demand costs from 15 to 60 $/toe. Thus, this programme requires considerable, but targeted investments.
However, the indicators presented in the “Energy Strategy – 2020” published in 2004) already need serious correction, since the situation changes rapidly both in Russia and worldwide. Even now we face the problem of doubling the energy production in Russia by the year of 2030 – from 1 to 2 billion kWh. This means that Russia has to bring onto the energy market about 10 million kW of new power production facilities every year. The investment in the Russian power industry should be kept at the level of above $10 billion in the coming years and at $35-40 billion at the end of the stated term. The problem must be solved not only through construction of new facilities, but also through modernisation of existing energy equipment, which is physically too old (50-70% of the life time) and has gone beyond obsolescence. The government should formulate an energy policy with clear priorities: energy efficiency, energy safety, economic efficiency, and environmental safety.
Regarding specific methods for achieving higher efficiency in energy production, the trends of the Russian power industry are congruent with the global ones, though the degree of development and the significance attached to specific approaches are different for different nations. These global trends are as follows:
• A higher degree of efficiency in the conventional fossil-fuel power plants.
• The use of combined methods (cogeneration), e. g., combined production of electric and thermal energy.
• Integration of autonomous power sources into the national power supply grid.
• A comprehensive stage use of energy, i. e., fuel consumed not only for heat and electricity production, but also for chemical products, building materials, etc.
• A reduction of the high proportion of heavy oil and gas in the power industry compensated by a higher share of coal and nuclear energy and, to a smaller extent, by renewable energy sources.
• The use of heat pumps for energy saving and the utilisation of the potential of non-conventional energy sources.
• The development of new types of energy sources; this primarily concerns hydrogen energy and fuel cells.
Several specific approaches and technologies developed in Russia are discussed in the following sections (see also [3, 4]). The last section deals with the problems of higher efficiency in energy consumption. In this section, we will also discuss the Russian programmes in power engineering. Besides the above mentioned “Energy Strategy for Russia for the Period up to 2020” (adopted in 2000), there is another important detailed document on the state’s R&D programme, namely “Ecologically Clean Power Engineering” (1989). This programme comprises four main areas: “Safe Nuclear Plants”, “Ecologically Clean Solid Fuel Heat Plants”, “Nonconventional Energy Sources”, and “Fuel for the Future” . In 1991, five more documents were added to this programme: “Ecologically Clean Methods for the Immobilization of Nuclear Waste”, “Underground Nuclear Power Plants”, “The Non-Conventional Concept of NPP (Nuclear Power Plant) with Natural Safety”, “Hydrogen Energy and Technology”, “Electricity and Heat Production from Coal Slurry”. Within this programme, many projects, selected through various competitions, were implemented. These projects focused on various topics and ideas and inventions, which could alleviate many emerging problems of the Russian power industry, providing solutions of high level technologies within strict environmental standards. We will mention some of these projects later. Unfortunately, in the years of Perestroyka insufficient financial means obstructed most of these valuable projects. Nevertheless, the challenge of power production problems is so great that the Russian government decided to develop a new version of the “GOELRO” plan (i. e., reminiscent of the first industrialisation plan for electric power systems adopted in the USSR in the years 1920-1935), which successfully provided a plentiful power supply for the emerging Soviet Russia.