Applying the international esco concept to energy saving projects in the energy production sector in northwest Russia

Abstract

The economy of the Russian Federation and its growth rate currently depend greatly on thecountry's fuel and energy industry and actual development of the business. To maintain theenergy production at least at the present level, capacity must be increased by several gigawattsannually. This sets up an extensive need for investments. One effective solution to theproblem is the realization of energy saving investments, which have very high potential inRussia.The EU project FRESCO (I 0/2003-12/2005), administered by Lappeenranta University ofTechnology, studies the possibilities to promote Finnish energy business in Northwest Russia.The project examines the ESCO concept that is proposed and anticipated to be a potentialfinance tool in energy saving projects in the target area. The international ESCO businessaims at finding solutions to the following problems: the lack of investments, undevelopedtechnology in use, ineffective energy systems, bureaucracy and risks.Potential and feasible ESCO project targets in energy production include a new pre-furnacefor utilization of bio fuels, a new economizer and a boiler automation upgrade. In the nearfuture - when markets exist - the ESCO concept could also be a finance tool in utilizing wastein energy production. For example bio waste from sawmills has significant potential as fuelfor local boilers.Through energy efficiency projects, greenhouse gas em1ss10ns can also be reduced. Theinternational climate policy brings in its own possibilities to finance energy investments andclimate projects. Russia ratified the Kyoto Protocol in February 2005 and can therefore takepart in international emissions trading in 2008 if the country observes the provisions of theProtocol concerning emission reduction units. Alternatives for carbon finance options couldbe, in addition to international emissions trading, Joint Implementation projects and GISprojects, in which so called "hot air" is utilized.