Presentation by Natalya Volchkova, Assistant Professor and Policy Director at Center for Economic and Financial Research at the New Economic School (NES) in Moscow. Presented at SITE Energy Talks – Energy Demand Management: Insights from Behavioral Economics on Oct 16, 2018.

1. Toward energy efficiency:
Russian experience
Natalya Volchkova
New Economic School
Center for Economic and Financial Research
SITE Energy Day 2018

2. State programs aim for energy
saving
• The problem of high energy usage is recognized by
Russian authorities (Russia is at 133rd position by
energy intensity of GDP out of 150 countries), and
energy saving is declared as 5th source of energy
• Federal law of 2009 on energy saving
• 78 reginal laws on energy provision
• 2008: Presidential Decree states the goal to
decrease energy intensity of GDP by 40% over 2007
- 2020.
• While the speed of decline in energy intensity is at the
world average rate, the goal is not achieved (13%
decrease up to 2017)

3. Today Russia placed at 17th position (out of 110) by
World Bank on energy efficiency aspects of policies
and regulations (RISE score)
RUSSIA, 2016: Energy Efficiency

4. National program has 4 pillars
• State management of energy saving at all levels
• Technological and ecological regulation aimed at
energy savings
• Setting economic incentives aimed at energy saving
(subsidies and taxes) in corporate sector.
• Popularization of energy saving

5. Energy efficiency management in
corporate sector
• ISO 50001:2011 – international standard in energy
efficiency managment
• As of today 250 Russian companies are certified (1 % от
world number, 8 000 companies in Germany (36%), 1
600 in China (7%))
Number of Russian companies with ISO 50001:2011

6. Still positive sentiments about energy efficiency
management are not very popular (survey of
Russian companies in 2015-2017)
Do not plan to implement
Plan to implement in 2017
Plan to implement in 2016
Plan to implement in 2015
Is implemented
Energy
sector
Non-energy
sector
Overall

7. The important distortion in Russian
energy provision - cross subsidization
• Electricity market in Russia is a competitive spot
market. Generators represent supply side and demand
side is represented by companies and utility
companies. The market is settled hourly.
• Utility companies buy electricity for population on the
market, but electricity tariff for population is fixed. So,
private companies compensate the difference between
actual market electricity price and tariff - cross subsidy.
• Population’s consumption is more than 13% of overall
electricity consumption.
• The value of cross subsidy is estimated at 368 bln RUB
(~5 bln EUR) in 2017 and up to 417 bln RUB (5,5 bln
EUR) in 2022. The plan is to cut the value of cross
subsidization up to 89 bln RUB (1,2 bln EUR) in 2022.
• To achieve this cut the tariff for population should increase by
13,9% annually starting from 2018. It is impossible to do
politically.

8. “Consumer side” energy saving is
very important to resolve the
distortion
• Tariff interventions - so far negative experience
• Changing energy saving behavior
• Very difficult given low electricity price (~7 cents per 1
kWh) and extensive set of exemptions .

9. Consumption thresholds were piloted
in 2013 in 6 Russian regions without
success
• Low tariff up to threshold and high tariff after
• In 2013 the threshold was established in the range 50–190
kWh per person. The results of pilot were not dissiminated
and the reform was considered a complete failure.
• This summer this discussion was revived and the parameters
of reform should be defined in 2019. The basic threshold
will be higher (300 kWh per household per month), up to
500 kWh will be paid at higher tariff and above 500 kWh –
at market price.
• Average consumption per household is 220 kWh, 89 kW per person.
But there are regions with higher averages (Irkutsk regions it is 225
kWh per person)

10. Subsidies for energy efficiency:
experiment in Moscow region in 2016
• The goal of the experiment was to evaluate the preferences
of population regarding energy-saving LED bulbs
• Following Alcott 2011, Alcott and Taubinsky 2015 we
designed the following randomized controlled experiment
• vouchers with various discounts were offered to the population
• the size of discount was randomly assigned to address
• people with vouchers had a month to use it.
• As a result, we supposed to receive fractions of various
vouchers used and (the difference in energy consumption
between them and control group)
• the control group consists of two parts: people without vouchers
and people with unused vouchers
• the offering of various discounts allowed evaluating the effect of
each discount and marginal effects.

11. The set up of the field experiment
• Experiment was conducted in the city of Pushkino in
Moscow region (population around 100 000 people).
• Vouchers were delivered to households with monthly
electricity bill (flyer inside a bill).
• Vouchers contained the following information:
• The description of offering
• The discount in rubles
• The address of local OJSC “Mosenergosbyt” office where
subsidized LED bulbs can be purchased
• Vouchers were delivered in total, which offered three
various discounts: 30%, 50%, and 70%
• LED bulbs could be bought in the nearest OJSC
“Mosenergosbyt” office
• no more than three to one consumer.

12. The importance of energy saving
information
• 2 rounds of voucher delivers (few months apart) with
information on energy savings in between
• all consumers received the leaflets with information on energy
conservation and new LED bulbs usage.
• This information was assumed to expose people to energy
conservation methods and use LED bulbs.
• The effect of this delivery was expected to lead to greater energy
consumption reduction in second stage.
• Those consumers who came to offices with their vouchers
filled the questionnaire with basic information about
economic conditions.
• Besides, we have access to some administrative data- the
size of apartments, amount of registered people in the
appartments, electricity and water consumption, the
presence of water meters in appartments.

13. 1st stage of voucher delivery

14. Age and income distribution
consumers who used voucher

15. 2nd stage of voucher delivery

16. Conclusions from the experiment
• Very low response rate
• Additional costs of purchase - time, travel expenses (as in Alcott,
Taubinsky (2015)).
• dditional costs as neglected the informational effect and prevented less
responsible people from purchase.
• Information dissimination in form of printed materials (boring?)
was not helpful.
• Water meters are considered as a good proxy of frugality. Their
effect remained after all other controls were used in regression
analysis.
• The optimal discount depends on population’s frugality.
• The more responsible population we consider , the lower discount
(compensation) was optimal. But, the effect of such discount was lower
too. The optimal discount for the first stage was more than 70%, for the
second stage between 30% and 50%.
• The analysis of the first stage active participants showed that the
probability of purchase did not depend on income.
• Increase in population frugality and consumption habits are
determined as the most efficient way of consumption reduction.