Policy Approaches to Policy Approaches to Improvements in Russia’s Improvements in Russia’s District Heating Sector District Heating Sector

Igor BashmakovIgor Bashmakov

Center for Energy Efficiency, Moscow, RussiaCenter for Energy Efficiency, Moscow, Russia

Market and Technology Developments in Small-Scale Heat Generation Market and Technology Developments in Small-Scale Heat Generation International Workshop, Baku, Azerbaijan, October 20, 2005 International Workshop, Baku, Azerbaijan, October 20, 2005

Ten steps to reform Russia’s DHS Ten steps to reform Russia’s DHS marketsmarkets

1.1. Mandatory development of sustainable municipal energy Mandatory development of sustainable municipal energy plansplans

• Clear targets and policies to achieve themClear targets and policies to achieve them• Reliability, security and safety requirements Reliability, security and safety requirements • Energy systems synergy and accounting for energy substitution Energy systems synergy and accounting for energy substitution

(DHS zones, gas supply zones, etc.)(DHS zones, gas supply zones, etc.)• Load density analysis and level of energy supply centralizationLoad density analysis and level of energy supply centralization

2.2. ““Menu” of well-designed heat market models to select Menu” of well-designed heat market models to select from, and corresponding market rules and contractual from, and corresponding market rules and contractual arrangementsarrangements

• Single network system with free access (many heat sources Single network system with free access (many heat sources working for one network)working for one network)

• Indivisible system (limited number of sources working for one Indivisible system (limited number of sources working for one network with high density of heat loads)network with high density of heat loads)

• Planned decentralization for zones with low heat load densityPlanned decentralization for zones with low heat load density

Ten steps to reform Russia’s DHS Ten steps to reform Russia’s DHS marketsmarkets

3.3. Regional and municipal heat supply reliability and Regional and municipal heat supply reliability and efficiency standards efficiency standards

• for municipal indicative planningfor municipal indicative planning• Base yearBase year• Target yearTarget year

• Performance monitoring and heat system operator evaluationPerformance monitoring and heat system operator evaluation

4.4. Separation of DHS products: heat supply and comfort Separation of DHS products: heat supply and comfort supply services supply services

• Metering and billing system Metering and billing system • Customer – energy service company or final consumerCustomer – energy service company or final consumer• Organization of collective consumer (especially in multi-family Organization of collective consumer (especially in multi-family

buildings)buildings)• Turning the heat consumer into heat buyer by setting Turning the heat consumer into heat buyer by setting

association of communal services payers (ACSePs) and association of communal services payers (ACSePs) and attracting ESCOs on the competitive basis to provide leastcost attracting ESCOs on the competitive basis to provide leastcost heat comfort to ACSePsheat comfort to ACSePs

Ten steps to reform Russian DHS Ten steps to reform Russian DHS marketsmarkets

5.5. Energy efficiency improvements as an important Energy efficiency improvements as an important resource for municipal energy planning and launching resource for municipal energy planning and launching “profits-from-savings” mechanisms to generate “profits-from-savings” mechanisms to generate revenue source to repay DHS rehabilitation revenue source to repay DHS rehabilitation investmentsinvestments

6.6. Transition, where necessary, to accounting for really Transition, where necessary, to accounting for really consumed and metered heat or comfort service, to consumed and metered heat or comfort service, to more accurate norms for consumers who are not more accurate norms for consumers who are not equipped with metersequipped with meters

7.7. Providing more operational freedom to DHS Providing more operational freedom to DHS companies and new system of interaction with companies and new system of interaction with municipalitymunicipality

8.8. Clear evaluation of consumers’ purchasing power to Clear evaluation of consumers’ purchasing power to stay within the limits of affordabilitystay within the limits of affordability

Ten steps to reform Russian DHS Ten steps to reform Russian DHS marketsmarkets

9.9. Make heat pricing flexibleMake heat pricing flexible• Seasonal heat prices Seasonal heat prices • Learn mobile phones tariff schemes Learn mobile phones tariff schemes • Fuel allocation methods at CHPsFuel allocation methods at CHPs• Elimination of cross-subsidies and setting right price signals to Elimination of cross-subsidies and setting right price signals to

inspire the rational level of DHS centralizationinspire the rational level of DHS centralization• Transition from the “cost plus” principle to sustainable “upper Transition from the “cost plus” principle to sustainable “upper

limits” tariffs given transparent correction rules set by “pricing limits” tariffs given transparent correction rules set by “pricing formula”formula”

10.10. Development of powerful information instruments and Development of powerful information instruments and “IKEA-like” pre-fabricated technical and managerial “IKEA-like” pre-fabricated technical and managerial guidelinesguidelines

• Tales on lost heat for kidsTales on lost heat for kids• Plus 20Plus 20• From A to Z in housing communal servicesFrom A to Z in housing communal services• Manuals for DHSs maintenance expertsManuals for DHSs maintenance experts