Energy Efficiency and Renewable Energy in Russia: Perspectives and Problems of International Technology Transfer and Investment
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ENERGY EFFICIENCY AND RENEWABLE ENERGY IN RUSSIA: PERSPECTIVES AND PROBLEMS OF INTERNATIONAL TECHNOLOGY TRANSFER AND INVESTMENT by Eric Martinot B.S. (Massachusetts Institute of Technology) 1984 M.A. (University of California at Berkeley) 1991 DISSERTATION Submitted in partial satisfaction of the requirements for the degree of DOCTOR OF PHILOSOPHY in ENERGY AND RESOURCES in the GRADUATE DIVISION of the UNIVERSITY OF CALIFORNIA at BERKELEY Committee in Charge: Professor John Holdren, Chair Professor David Hooson Professor Richard Norgaard 1995 Energy Efficiency and Renewable Energy in Russia: Perspectives and Problems of International Technology Transfer and Investment Copyright (c) 1995 by Eric Martinot ABSTRACT Energy Efficiency and Renewable Energy in Russia: Perspectives and Problems of International Technology Transfer and Investment by Eric Martinot Doctor of Philosophy in Energy and Resources University of California at Berkeley Professor John Holdren, Chair Case study and other research evidence, along with prior studies and literature, demonstrate that there are huge technical-economic opportunities for cost-effective energy-efficiency investments in the industrial, residential, and heating sectors in Russia, and that renewable energy sources, especially wind, solar, and biomass, can play a significant and cost-effective role in energy supply in some geographic regions. The evidence also shows that technological capabilities of Russians to exploit these technical-economic potentials are strong, but that market-related capabilities are still weak. Market-level energy prices, privatization, and greater institutional efficiency, all traditional policy prescriptions for developing countries and countries in transition, are insufficient conditions for exploitation of these technical-economic opportunities. The evidence illustrates that many transaction barriers severely limit economic activities, including technology transfer, that would result in greater energy efficiency and renewable energy supplies. Lack of developed capital markets and long-term capital is a commonly cited problem for Russia. But even with greater capital availability, uncertainty and lack of information in different forms represent formidable transaction barriers. Other barriers relate to missing institutional mechanisms; missing or mismatched incentives; weak legal and market 1 institutions; cultural factors; and a lack of experience and training in economic management, finance, law, and marketing. Existing literatures on energy efficiency, renewable energy, international technology transfer, multilateral development lending, and environment-motivated technology-transfer are analyzed for their relevance to post-Soviet Russia. In Russia, energy efficiency and renewable energy investments and technology transfers reflect a complex combination of elements from developed country, developing country, and Soviet Union perspectives within these literatures. This combination is evident in patterns of energy consumption, technology and sectoral potentials, indigenous technological capabilities, transaction barriers, institutional arrangements and constraints, propensities to transfer technology and modes selected, development policies and approaches, and capacity building. Transaction barriers underscore the importance of market intermediation and joint ventures. Market intermediation provides the knowledge, information, skills, market services, financing, and analysis necessary to overcome transaction barriers. Joint ventures with foreign multinational corporations represent another means for overcoming transaction barriers, one that also takes advantage of Russian technological capabilities. 2 ACKNOWLEDGEMENTS Thanks to the many friends, teachers, and associates who helped with the practical arrangements of my field work, as well as prior preparations including Russian-language training, coursework, and literature reviews. In conducting the research I interviewed and consulted with over one hundred people in eight countries over the course of three years. All of these people gave generously of their time and candor, and often provided copies of supporting documents and access to project sites. The information and cooperation provided by all of these people are deeply appreciated. The following organizations provided financial support for my research in the form of fellowships and grants: University of California (UC) Berkeley Regents, UC Berkeley Slavic Center, UC Berkeley Center for German and West European Studies, Berkeley-Stanford Program on Soviet and Post-Soviet Studies, John Holdren Class of 1935 Professor Fund, UC San Diego Institute for Global Cooperation and Conflict (IGCC), International Research and Exchanges Board (IREX)1, and U.S. Department of Education (Foreign Language and Area Studies and Fulbright-Hays Doctoral Dissertation Research Abroad). Institutional support and assistance were also provided by the Lawrence Berkeley Laboratory, the Stockholm Environment Institute (both Stockholm and Tallinn branches), the Institute of Atmospheric Physics (Moscow), the Center for Energy Efficiency (Moscow), the Khrzhizhanovskiy Power Engineering Institute (Moscow), and the IREX office in Moscow. The cooperation of the following organizations is also highly appreciated: Honeywell Moscow, Danfoss Russia, Kenetech Windpower and its Ukrainian joint-venture partner Windenergo, the Swedish National Board for Industrial and Technical Development (NUTEK), the Estonian State Energy Department, and the World Bank and U.S. Agency for International Development offices in Moscow. 1 IREX funds are provided by the National Endowment for the Humanities, the United States Information Agency, and the United States Department of State which administers the Title VIII Program. None of these organizations is responsible for the views expressed. iii Thanks to the following individuals for reviewing and providing detailed comments on parts of dissertation drafts: Oleg Babinov, Erin Barry, Mark Chao, Professor Mark Christensen, Caron Cooper, Professor Gene Rochlin, Harvey Sachs, Mikail Sandberg, Vasily Socolov, Yuri Tarasenko, Vladimir Usiyevich, Robert Watson, James Wilson, and Vladimir Zhuze. Of course I take full responsibility for all views expressed and any inaccuracies herein. Thanks to my three dissertation committee members -- Professors John Holdren, David Hooson, and Richard Norgaard -- for their inspiration and direction from the very beginning to the very end. Ann Kinzig played a special role in reviewing and commenting on research and funding proposals. I also acknowledge the late Buckminster Fuller, Werner Erhard, and Deborah Byers for inspiring my contributions to sustaining our global environment and our prosperity. Finally, I acknowledge my partner Carol Egan for her original suggestion to undertake a dissertation, for the support that made this dissertation possible, and for her understanding and endurance of hardships throughout the past five years. iv TABLE OF CONTENTS Body of Dissertation Chapter 1: Introduction................................................................................................................. 1 Chapter 2: Literature Review...................................................................................................... 12 Chapter 3: Background: Energy Prices, Policies, and Technology Markets............................ 33 Chapter 4: Energy Consumption and Technical-Economic Efficiency Potential ..................... 51 Chapter 5: Renewable-Energy Economics, Geography, and Motivations................................ 68 Chapter 6: Russian Technological and Market-Oriented Capabilities ...................................... 86 Chapter 7: Transaction Barriers.................................................................................................. 99 Chapter 8: International Technology Transfer Perspectives.................................................... 144 Chapter 9: The Importance of Market Intermediation and Joint Ventures.............................. 164 Chapter 10: Conclusion .............................................................................................................. 189 Reference Material Case Study Descriptions .................................................................................................................... 206 Supplementary Annexes .................................................................................................................... 281 Sources of Evidence (Interviews, Conferences, and Russian Serials).............................................. 348 References .......................................................................................................................................... 354 v LIST OF CASE STUDY DESCRIPTIONS Bergey Windpower Wind-Diesel Systems........................................................................................ 206 Building-Energy-Efficiency Renovations in Estonia........................................................................ 208 Danfoss Russia Subsidiary and Moscow Polyclinic Renovation ..................................................... 210 Danish Building-Heating-System Improvements in Estonia ............................................................ 213 Danish Biomass-Fueled-Boiler Conversion in Estonia..................................................................... 216 EPA/NRDC Integrated Resources Planning ....................................................................................