Prospects and barriers for Russia's emerging ESCO market

Abstract

Purpose

The Russian Energy Service Company (ESCO) market emerges rapidly due to the new energy efficiency legislation that has been implemented since 2009. However, a clear identification of the Russian ESCOs, comparable to those operating on the basis of Energy Performance Contracting (EPC) in the Western markets, remains rather difficult. Hence, aside from the independent ESCOs identified, further energy service‐providing companies (ESPCs) are within the scope of this survey. This paper aims to address these issues.

Design/methodology/approach

Building on comprehensive qualitative research of the international and Russian academic and non‐academic literature on the ESCO concept and an expert interview, an explorative, questionnaire‐based survey among 161 Russian energy companies and organizations was conducted. A total of 28 usable responses were returned, corresponding to a response rate of 17 per cent. Non‐parametric exact tests are used for the statistical analysis.

Findings

The authors' findings show that only nine of the surveyed ESCOs have acquired energy performance‐based projects. In line with the new energy efficiency legislation, such projects are strongly supported in the state sector but much less so in the commercial sector. Most of the projects are financed either through ESCOs' own funds, direct loans to customers, or by the customers themselves. Russian banks, however, rarely provide direct loans for energy performance‐based projects of ESCOs, but rather prefer to offer financial leasing contracts. The contractual form “guaranteed savings”, which is generally more applicable in mature ESCO markets, is gaining in importance, while “shared savings” is barely used.

Originality/value

This paper delivers, to the best of the authors' knowledge, the first systematic empirical investigation of the Russian ESCO industry, taking into account experiences from the international ESCO markets.

Citation

Garbuzova‐Schlifter, M. and Madlener, R. (2013), "Prospects and barriers for Russia's emerging ESCO market", International Journal of Energy Sector Management, Vol. 7 No. 1, pp. 113-150. https://doi.org/10.1108/17506221311316506