project identification form (pif)...gef-5 pif template-january 16, 2013 1 for mor e information...

GEF-5 PIF Template-January 16, 2013

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For mor

e information about GEF, visit TheGEF.org PART I: PROJECT INFORMATION Project Title: LOW-CARBON TECHNOLOGY TRANSFER IN THE RUSSIAN FEDERATION Country(ies): Russian Federation GEF Project ID:1 5366 GEF Agency(ies): UNIDO (select) (select) GEF Agency Project ID: 120074 Other Executing Partner(s): Min.of Natural Resources and

Environment, Min. of Education and Science, Min.of Energy, SME Bank

Submission Date: Resubmission Date: Resubmission Date:

2013/04/03 2013/08/22 2013/12/17 2014/01/22

GEF Focal Area (s): Climate Change Project Duration (Months) 60 Name of parent program (if applicable): • For SFM/REDD+ • For SGP • For PPP

Project Agency Fee ($): 654,075

A. INDICATIVE FOCAL AREA STRATEGY FRAMEWORK2:

Focal Area Objectives Trust Fund Indicative

Grant Amount ($)

Indicative Co-financing

($) CCM-1 (select) Technology Transfer GEFTF 6,885,000 55,150,000 (select) (select) (select) (select) (select) (select) (select) (select) (select) (select) (select) (select) (select) (select) (select) (select) (select) (select) (select) (select) (select) (select) (select) (select)

Total Project Cost 6,885,000 55,150,000

B. INDICATIVE PROJECT DESCRIPTION SUMMARY Project Objective: To increase and accelerate transfer and deployment of low-carbon technologies through public-private mechanisms and investments.

Project Component

Grant Type3

Expected Outcomes

Expected Outputs

Trust Fund

Indicative Grant

Amount ($)

Indicative Cofinancing

($) 1. National Competitive Platform and strengthened framework for low-carbon technology transfer

TA Acceletared diffusion of LCTs in the Russian Federation through increased transfer of manufacturing capacity and best-practice deployment models

1. National Competitive Platform to reward and facilitate LCT transfer and deployement projects for identified climate technology priorities is developed and established 2. Design and build-up of database of state-of-the-art and leading-edge LCT for priority transfer and deployment in

GEFTF 2,400,000 6,100,000

1 Project ID number will be assigned by GEFSEC. 2 Refer to the reference attached on the Focal Area Results Framework and LDCF/SCCF Framework when completing Table A. 3 TA includes capacity building, and research and development.

PROJECT IDENTIFICATION FORM (PIF) PROJECT TYPE: Full-sized Project TYPE OF TRUST FUND:GEF Trust Fund


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Strengthened policy and legal framework for LCT transfer

Russia. 3. Extensive advocacy and outreach activities organized at the federal and regional level for promotion and stakeholders engagement 4. Proposals developed for reinforcing or expanding existing policy and legal frameworks in support of speficic LCT, focusing on investment tax credit and fiscal incentives.

2. Demonstration of leading-edge low-carbon technologies transfer

TA i Accelerated penetration in the Russian market of LCTs with large GHG emission reduction potentials and other substantial socio-economic benefits

1. At least three leading-edge LC technologies are introduced in the Russian market and manufacturing capacity is installed. 2. Energy and climate performance of the projects is monitored and measured. 3. Technology transfer projects, performance and lessons learnt are reviewed and documented and disseminated to relevant stakeholders and market players

GEFTF 2,460,000 7,600,000

3. Investments for low carbon technology transfer

Inv Increased financing for and investments in LCT transfer projects.

1. Financial mechanism to leverage funding from financial institutions to support LCT transfer projects in Russia developed and established.

GEFTF 1,550,000 40,000,000

4. Monitoring & Evaluation

TA Increased support and demand for LCTT as result of stakeholders awareness of performance and benefits

1. Project evaluation framework in place 2. Independent mid-term review carried out 3. Independent final project evaluations conducted

GEFTF 150,000 150,000

Subtotal 6,560,000 53,850,000Project Management Cost (PMC)4 GEFTF 325,000 1,300,000

Total Project Cost 6,885,000 55,150,000 Note i: During the PPG market research will be carried out and consultations with stakeholders will be held to better define the potential mixes of technical assistance to be provided to the awarded projects and subsequently understand whether Component 2 GEF funding will be only TA or it may include an investment (Inv) share.

C. INDICATIVE CO-FINANCING FOR THE PROJECT BY SOURCE AND BY NAME IF AVAILABLE, ($)

4 To be calculated as percent of subtotal.


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Note ii: The indicated cash co-financing represents a tentative minimum level. Substantive discussion will take place during the PPG with Government counterparts to refine the in-kind-cash breakdown.

Note iii: The indicated cash co-financing represents a tentative minimum level. Further research and substantive discussion with stakeholders will take place during the PPG to better quantify the in-kind-cash breakdown.

Note iv: At this stage the category “Others” is envisaged to include international LCTs experts and expertise provided through the CTCN and Russian LCTs experts and expertise provided by Foundations like Skolkovo and industrial associations like RSSP. The type of co-financing envisaged is essentially in-kind, contributed to the Competitive Platform and its Expert Panel and the Specialists Groups.

D. INDICATIVE TRUST FUND RESOURCES ($) REQUESTED BY AGENCY, FOCAL AREA AND COUNTRY1

GEF Agency

Type of Trust Fund Focal Area Country

Name/Global

Grant Amount ($) (a)

Agency Fee ($) (b)2

Total ($) c=a+b

(select) (select) (select) 0 (select) (select) (select) 0 (select) (select) (select) 0 (select) (select) (select) 0 Total Grant Resources

1 In case of a single focal area, single country, single GEF Agency project, and single trust fund project, no need to provide information for this table. PMC amount from Table B should be included proportionately to the focal area amount in this table. 2 Indicate fees related to this project. E. PROJECT PREPARATION GRANT (PPG)5

Please check on the appropriate box for PPG as needed for the project according to the GEF Project Grant: Amount Agency Fee Requested ($) for PPG ($)6 • No PPG required. ___________ _ _______ • (upto) $50k for projects up to & including $1 million ___ ________ ___ _____ • (upto)$100k for projects up to & including $3 million ___ ________ ___ _____ • (upto)$150k for projects up to & including $6 million ___ ________ ___ _____ • (upto)$200k for projects up to & including $10 million ___180,000_______ ___ 17,100 _____ • (upto)$300k for projects above $10 million ________ ________

PPG AMOUNT REQUESTED BY AGENCY(IES), FOCAL AREA(S) AND COUNTRY(IES) FOR MFA AND/OR MTF ROJECT ONLY

5 On an exceptional basis, PPG amount may differ upon detailed discussion and justification with the GEFSEC. 6 PPG fee percentage follows the percentage of the GEF Project Grant amount requested.

Sources of Cofinancing Name of Cofinancier Type of Cofinancing Amount ($)

GEF Agency UNIDO In-kind 550,000 GEF Agency UNIDO Cash 250,000 National Government State budget In-kind 5,000,000 National Government State budget Cash ii 2,200,000 Private Sector Enterprises In-kind 5,000,000 Private Sector Enterprises Cash iii 2,000,000 Private Sector SME Bank Soft Loan 40,000,000 Others Others iv Unknown at this stage 150,000 Total Cofinancing 55,150,000


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Trust Fund GEF Agency Focal Area Country Name/

Global

(in $)

PPG (a) Agency Fee (b)

Totalc = a + b

(select) (select) (select) 0 (select) (select) (select) 0 (select) (select) (select) 0 Total PPG Amount 0 0 0

MFA: Multi-focal area projects; MTF: Multi-Trust Fund projects.


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PART II: PROJECT JUSTIFICATION7

A. PROJECT OVERVIEW A.1. Project Description. Briefly describe the project, including ; 1) the global environmental problems, root causes and barriers that need to be addressed; 2) the baseline scenario and any associated baseline projects, 3) the proposed alternative scenario, with a brief description of expected outcomes and components of the project, 4) incremental cost reasoning and expected contributions from the baseline , the GEFTF, LDCF/SCCF and co-financing; 5) global environmental benefits (GEFTF, NPIF) and adaptation benefits (LDCF/SCCF); 6) innovativeness, sustainability and potential for scaling up The objetive of the proposed project is to reduce greenhouse gas emissions in the Russian Federation by increasing and accelerating the transfer and deployment of low-carbon technologies through the establishment of institutional mechanisms, pilot demonstration investments in LCT manufacturing capacity transfer, increased availibility of financing for LCTs transfer and applications projects and enhanced policy frameworks. The proposed project is designed to support the Russian Federation’s efforts to meet its ambitious Energy Strategy and climate change mitigation targets by capitalizing on its large potential market for low-carbon technologies (LCTs) transfer and deployment. The project aims to accelerate implementation pace, enhance scope, effectiveness and impact of ongoing and planned policies and initiatives for low-carbon technologies transfer (LCTT) and deployment in the Russian Federation. The project interventions are hinged on the establishment and demonstration of mechanisms to promote, facilitate and support transfer and deployment of state-of-the-art and leading-edge low-carbon technologies; while reinforcing the existing enabling conditions to promote and support LCT market. The project proposes the establishment of a National Competetive Platform to stimulate, reward and facilatate the development and implementation of LCT transfer and deployment projects in selected climate technologies priority areas to be identified on the basis of experts' analysis and defined criteria. The Platform aims to establish an instrument to promote and facilitate greater and broader collaboration between the key public and private actors and stakeholders in the LCTT chain in order to achieve greater coherence of plans and actions. The Platform is intended to establish close cooperation with the Russian Federation Climate Technology Centre and Network (CTCN) Nationally Designated Entity (NDE) and to enhance its instituional and functional capacity. LCT transfer and deployment projects to be awarded through the Platform will receive technical assistance from the project in order to bring them towards and to the investment and implementation stage. The project would work with partner Russian financial institutions to establish a financial mechanism that would add value in levering funding available from private and public financing institutions and investors. A loan-guarantee scheme is envisaged and has been initially discussed with partner financial institutions. . 1) Global problem In 2010 the Russian Federation accounted for about 5.3% of global primary energy demand and about 5.4% global energy-related GHG emissions. The International Energy Agency estimated in 2011 that just through energy efficiency (i.e. implementation of a full package of economy wide energy efficiency policy best-practices and introduction of best-available technologies) the Russian Federation could cut its primary annual energy consumption by 30 % (2009 consumption level) and its annual GHGs emission by 44% (i.e. 7 Part II should not be longer than 5 pages.


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793 million tons of CO2eq per year). During the last 5 years the RF Government has made impressive efforts in developing policies, regulations and programs (especially for promotion and support of energy efficiency and to a lesser extent for renewable energy) but implementation pace is slow and results still very limited. In 2011, despite the economic crisis, the GHG emissions of the Russian Federation were reported to have increased by 5% compared to 2010. The achievement of the global GHG emission reduction targets requires the key contribution of the Russian Federation in reaping most of its huge potential for improved energy efficiency, greater use of renewable energy and deployment of low-carbon technologies in the minimum possible timeframe. Root causes and barriers Multiple causes and barriers do hamper deployment and transfer of LCTs in the Russian Federation. Policy, legal and institutional barriers Over the last 5 years the Russian Federation has made impressive progress, both in terms of scope and speed, with respect to the development of policies and programs to promote and support energy efficiency, renewable energy and technology modernization and innovation. However, this fast and great progress when combined with finite resources and relatively limited capacity in some technical areas has led to mistakes and significant work remains to be done to effectively operationalize and enforce policies. There is not yet a critical mass of professionals with the expertise, competencies and experience required to develop thorough policies as well as to translate them into comprehensive and effective actions, programs and tools. The transfers of low carbon technologies is not a specialised activity that is carrie out by one-two specific institutions that the Government can create and direct but it is rather the result of multiple actors and diffused primary forces that the Government can empower and influence. Experience from past and ongoing projects has shown a tendency of Russian Government institutions to adhere to strict division of labor and activities. While this approach can prove effective for matters fully or largely within the mandate and the core business area of individual institutions, it has had and has a detrimental impact on those policies and matters that do require effective coordination and factual collaboration of many institutions. The transfer of LCTs, and in particular of manufacturing capacity, is certainly one of these areas where more coordination and collaboration is needed, especially at the implementation level. The Government has taken some steps to enhance and ensure more coordination in the LCTs field by establishing the Energy Efficiency Working Group (EE WG) within the Commission on Technological Development and Modernization of the Russian Economy under the President of Russian Federation. The establishment of these high-level EE WG has certainly helped in increasing coherence and coordination of EE related policy-making between different Ministries, but it did not translate so far in equally meaningful collaboration and synergies at the implementation level. The facts that there is not yet a unified RF strategy on LCTs and that the 5th National Communication to the UNFCCC does make very little reference to specific technologies, are regarded as additional indicators of still insufficient level of coordination, data available, information sharing and planning for really effective promotion and support of LCTs transfer.

In the field of economy modernization and technology innovation, the Russian Federation Government has set up a number of programmes (such as Skolkovo, Skoltech, Rosnano) and funds (such as the Russian Venture Company and the Foundation for Assistance to Small Innovation Enterprises) to promote and support research, development and commercialization of new technologies. However, work and support of such programmes and initiatives have so far focused on innovation in traditionally strong industrial sectors or technology clusters, such oil and gas, space, nuclear and fossil fuel energy technologies, with few real new areas, such IT and biomedical, only minimally LCTs relevant. It is also to mention that sectors and technologies towards which focus and resources have beend so far directed are those dominated by large state-owned enterprises and corporates, with consequent disincentive for SMEs to engage, innovate and


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compete. The lack of focus and programmes promoting LCTs as a "strategic area" for economy modernization and diversification combined with the low levels of dynamism and innovation of the SMEs sector, represent two significant obstacles to the development of a Russian LCT manufacturing industry. The successful implementation of policies and programs does not depend only on policy push, but also on market pull, which is more articulated and time/action demanding to materialize. So far Government support for economy modernization, technology innovation and EE/RE applications have essentially materialized in the form of fiscal and financial incentives (tax rebates and deductions, grant programs and very recently credit guarantee schemes) but very little has been done to address market deficiencies with respect to information and ability to develop projects, lack of dedicated initiatives/mechanisms to facilitate and support business ventures and public-private partnerships for technology transfer. Efforts made by the Government to address these market barriers have been so far concentrated on technology innovation rather than on technology transfer, like the establishment of institutions like Skolkovo and Skoltech demonstrate. Despite significant increments over the recent past, energy prices remain low. Substantial work is being done, also through international cooperation projects, to design policies, programs and interventions that could provide the right price signals for investments in EE and RE technologies. However, work and activities carried out so far have essentially focused on EE and RE technologies applications and basically no focused attention has been given to promote and support transfer of manufacturing capacity as way to drastically reduce costs of LCTs for Russian consumers/users and so doing mitigatig the negative impact of low energy prices on the financial viability of investments in LCTs applications and uses. Knowledge and market barriers Still relying on the technological heritage of the Soviet era many technology users, in industry as well in other economic sectors, lack real knowledge of the benefits and co-benefits provided by low carbon technologies and often underestimate their impact. The market community (technology vendors and suppliers, engineering firms, consultants, contractors, investors and others) largely lacks the information, knowlegde, skills and tools required to meanigfully expand promotion and commercialization of LCTs. Product and services offer is very much limited to mainstream EE and RE technologies. There is still a low level of international and national trade and business cooperation in the transfer and adaptation of low-carbon technologies, due to limited technical capacity to develop and manage projects and high perceived risks about technology costs and performance in the Russian context. Institutional technical knowledge and capacity for LCT transfer remains inadequate to meet the needs that could ensure faster pace of LCT transfer and deployment in the RF. The large and rapid increase in staff requirements for federal and regional energy and environmental programs have generated great demand for technical skills and capacity upgrade that only partially has been met so far. Many program officials, at all levels, are still faced with significant knowledge gaps and lack of adequate expertise to effectively work to the development and implementation of policies and programs for low-carbon technology transfer and deployment. The transfers of low carbon technologies does rely on and is the result of multiple actors from the Government, the public sector, the private and financing sector, interacting and working together along the LCTT chain. Dialogue and collaboration between the Government and various stakeholders is critical to put in place the right set of policies and programs that can make a difference. The Government has made in recent years bold steps and major progress in supporting stronger stakeholders engagement and facilitating public-private partnerships in the area of technlogy innovation through the establishment of Skolkovo and Skoltech, but no initiative or mechanism has been put in place to facilitate the same type of interaction also for public and private stakeholders and market actors for LCT transfer. Financial barriers Access to long-term financial resources at viable interest rates remains a key barrier for companies seeking to invest in LCT transfer and pplication projects, especially SMEs. To a good extent this problem is the result of knowledge gap and capacity deficit on the side of financial institutions and the business


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community, which usually grows proportionally with the novelty of the technology considered. Financial institutions lack or have very limited experience in financing leading-edge and state-of-the-art technology projects and often over-estimate the risks involved. The risks of lending for energy efficiency, renewable energy and other LC technology transfer projects are generally perceived as high, and even higher if these projects are proposed by SMEs. On the top of that, SMEs very often face difficulties to meet banks credit standards with the results of being requested levels of bankable collaterals that in most of the cases they are unable to provide. 2) Baseline Scenario At COP_17 (December 2011) the Russian Federation (RF) President Dmitry Medvedev reaffirmed the RF's objective to cut GHG emission by 15% to 25% by 2020 compared to the emission levels of 1990. While the Russian Government has taken very active steps to enact policies and measures to reduce energy intensity and, to a lesser extent, to increase the share of renewable energy, results have been limited so far and substantial work remain to be done to complete policy and regulatory frameworks, to operationalize them through incentives and programs and to support and work with market players and stakeholders. Policy Framework Presidential Decree #889 sets strategies and goals for energy efficiency, and the federal law “On Energy Efficiency Improvement and Energy Saving” (Federal Law #261-FZ of November 23, 2009) provides an overall framework for promotion and support of energy-saving technologies in all economic sectors. Progress in implementing these policies and programs is to be monitored under RF Government Resolution No. 391 "On the regulations on developing a federal information system on energy conservation and energy efficiency and on the conditions for its operation". The Federal Program of Energy Saving and Energy Efficiency Improvement until 2020 (approved by the government) and the Action Plan on EE and Energy Saving (issued as Government Order #1830-p as of December 1, 2009) provide support for energy efficiency measures. Basic instruments of the Federal Program include the following: • Specification of energy efficiency targets and indicators; • Promotion of regional programs implementation through federal co-financing; • Promotion of energy conservation and energy efficiency measures for energy intense activities through federal loan guarantees for energy efficiency projects; • Promotion of typical energy efficiency projects; • Financing for R&D in energy efficiency; • Financing for education and training activities; and • Financing for informational support to energy efficiency projects. In the area of renewable energy, the Government has set the goal to increase the share of renewable energy (except large hydropower) to 4.5% of total power generation by 2020. The Government has passed Government Resolution of June 3, 2008, No.426 "On the qualifications of a generating facility operated on renewable energy.” However, policies to promote and support renewable energy tehnologies are still largely under development. The Russian Government Order of April 25, 2011, No. 730-r “On approving the plan to realize the Climate Doctrine of the Russian Federation,” outline the current "Climate Doctrine" of the RF and it focuses on developing and promoting low-carbon technologies, with special emphasis on energy efficiency. The Climate Doctrine includes reference to some specific technologies and interventions such as increased application of CHP technology; modernization of ammonia production and petroleum refinery technologies, blast furnaces, and cement production; the development of technologies to reduce methane


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losses in natural gas production and transportation systems along with methane capture and utilization; the promotion of hybrid and alternative-fuel vehicles; implementation of passive buildings demonstration projects. The RF Government Resolution of July 12, 2011№ 562 "On approving the list of facilities and technologies with high energy efficiency, investing in the creation of which is the basis for granting the investment tax credit" provides for investment tax loan for organizations that invest in specific energy efficient technologies and projects. The current revised list of eligible technologies consists of 56 items (used to be originally 4), including technologies for the production of high-temperature superconductors, cars, cardboard, paper, cellulose, synthetic rubber, fertilizers, electro ferroalloys and LED lighting.

The order of the RF Ministry of Industry and Trade No. 769 of September 7, 2010 “On the categories of goods for which information on the energy efficiency class is to be included in the technical documentation” specifies categories of goods for which information on their energy efficiency class is to be included in the technical documentation attached to the goods, on labels and stickers; and a list of goods that are exempted from the energy labeling requirement. Federal Law No. 261, the Order of the RF Ministry of Regional Development No. 262 "On the energy efficiency requirements for buildings, structures and facilities" and associated building codes regulate the construction and buildings sector, one of those most deeply regulated by the energy efficiency legislation in force. However, currently no policy and regulation promoting and supporting passive and zero-energy houses are in place (although there are few private initiatives on the ground). Market Landscape for Low-Carbon Technology Transfer The level and dynamic of business activity and investments in clean and environmental technologies has steadily increased since year 2000 and accelerated over the last few years despite the economic crisis. Though, when compared with the overall market opportunity, the untapped potential remains huge. In the period 2000-2009, progress in the development of markets for energy-efficient equipment and appliances were particularly visible (production of heat meters and heat consumption regulating devices went up 12-fold; production of electricity meters increased from 1.67 to 5.77 million units; production of thermal insulation for industrial applications grew up from 285,000 to 1.03 million m3; production of efficient fluorescent lamps increased from 172,000 to 2.11 million; the share of cement produced by energy-efficient technologies increased from 14% in 2000 to 16% in 2009; and the share of open-hearth steel declined from 27% to 8%). It shall be mentioned that such progress were mainly the results of efforts taken by non-governmental institutions, regional governments, municipalities and businesses, with hardly any support from the Federal Government. Renewable energy technologies have gained momentum only in recent years, with increasing electricity generation from and use of renewable energy resources, in particular wind, biomass and geothermal. National renewable technology production capacity is still limited, mainly confined to waste-to-energy and biogas technologies, and with few new small scale production of solar photovoltaic, wind power (on-shore) and geothermal. The market for LCTs expert services is still at an early stage, largely self-regulated and with significant gaps with respect to the range of technical/technology expertise and services available and the average quality of services provided. The level of awareness between potential users of LCTs benefits (economic, environmental, quality, productivity, health, etc.) remains poor. During the last years energy and environment are the areas in which the largest number of patents have been filed, in particular in renewable energy and waste management, including solid waste and wastewater treatment. However the LCTs market, including institutions and investors, have so far largely failed in bridging the gap between research and the development and commercialization of new products and services. Financing and technical cooperation for low-carbon technologies in Russia


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In terms of financial institutions, both international financial institutions (i.e. the IBRD, the IFC, and EBRD) and Russian banks lend to business and municipalities that are upgrading their facilities and therefore have an opportunity to make marginal reductions in resource consumption, including energy consumption that results in GHG emissions. Outside the programs supported by international financial institutions (IFIs), Russian banks so far have not specifically focused on energy efficiency or environmental or climate change mitigation technologies in their business lines, but some banks have started to show interest and size the opportunity. Each of the IFIs working in Russia has developed specific programs that combine technical assistance and lending to reduce GHG emissions. These programs, primarily focused on energy efficiency and all part of a GEF-funded umbrella program, fund projects that reduce energy consumption in sectors ranging from industry to communal services. In the area of renewable energy, the IFC is currently implementing a GEF-funded project on renewable energy promotion in Russia and EBRD has funded investments in renewable energy resources, such as the geothermal power plant in Mutnovsky (in the Russian Far East). UNIDO is currently implementing three GEF projects in the Russian Federation. Two projects are supporting the phase-out of ozone depleting substances (GEF ID 3541 and 4387) and both projects involves the transferring of technologies that are relatively new to the Russian market and to Russian companies. Noteworthy is the project “Phase-out reduction of hydrochlorofluorocarbons (HCFC) consumption and the encouragement of transition to HCFC-free energy efficient refrigeration and air conditioning equipment through technology transfer in the Russian Federation”, in which UNIDO is taking an innovative approach by integrating the goal of reducing ozone-depleting substances with increased energy efficiency. The third GEF project being implemented by UNIDO in Russia is the “Market Transformation Program on Energy Efficiency in GHG-Intensive Industries in Russia” jointly implemented with EBRD (GEF ID 3593). The project promotes and supports the introduction of energy management systems and standards in energy intensive SMEs as well as large companies; provides capacity building, EE investments preparation, policy and regulation development support for industrial energy efficiency. 2) Baseline Project Activities The proposed GEF project will build on the following baseline project activities: • To support the implementation of its Energy Strategy and Federal Program on Energy Savings and Energy Efficiency improvement until 2020 the Russian Government has committed federal funding at the level of approximately 1 billion USD for the period 2011-2015; 1 billion USD for the period (2016-2020) and 3 billion USD for the overall 2011-2020 period for providing federal loan gaurantees. Increased use and accelerated transfer and deployment of energy efficienct LCTs will remain the guiding driver for the Ministry of Energy, the Russian Energy Agency and other relevant ministries in planning work and resources for developing and implementing policies and initiatives to achieve set goals and targets. • The Ministry of Economic Development coordinates the fulfillment of the task assigned by D. Medvedev, President of the Russian Federation, on reducing the energy intensity of GDP by 40% by 2020 and takes part in the activities of the Energy Efficiency Working Group within the Commission on technological development and modernization of the Russian economy under the President of the Russian Federation. The Ministry current economic development priorities include innovation promotion, technological development and the creation of a system of support to foreign economic activities in the field of modernization and technological development of Russia. Through the Department of Innovative Development and Corporate Governance and the Special Economic Zone and Project Financing Department the following programs are implemented:

1. Assistance to modernization


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2. Innovative development of state-owned (fully or partially) enterprises

3. Creation of technological platforms

4. Development of institutions to build an innovation driven economy

Currently these institutions include:

i. The Russian Venture Company

ii. The Foundation for Assistance to Small Innovation Enterprises

iii. The Bank for Development of the Foreign-Economy Activity (Vnesheconombank)

• The Ministry of Education and Science is the Nationally Designated Entity for the UNFCCC Climate Technology Centre Network (CTCN). The Ministry is in charge of developing and implementing laws and policies related to education and science, including scientific innovation. In this capacity, it coordinates most of government-funded scientific R&D programme. It is also the lead government agency for nanotechnologies and intellectual property issues. In these capacities, the Ministry of Education and Science and its CTCN will provide a base to which link the LCTT Platform and a channel through which identify, network and secure best academic institutions, researchers and experts of the Russian Federation for the LCTT Expert and Advisory Panel and the specific LCT specialists Groups.

• The Ministry of Energy, the Russian Energy Agency (REA) and the Ministry of Natural Resources and Environment are and will remain at the forefront in the implementation of the Federal Program on Energy Savings and Energy Efficiency as well as of renewable energy programs and initiatives aimed to enact the RF Climate Doctrine. The Ministry of Energy, REA and the Ministry of Natural Resources and Environment have preliminarily identified some leading-edge low carbon technologies highly relevant to and with substantial potential for the Russian market given their energy savings, environmental and socio-economic benefits. Promotion and support of these leading-edge low-carbon technologies or others LCTs with equal or similar potential would and could be integrated in existing and planned LCT educational, dissemination, promotional and incentive programs. • The new Energy Efficiency law and the newly announced energy efficiency building codes for new construction are meant to considerably raise the standard of energy efficiency performance in the residential and non-residential sector. While the new Climate Doctrine of the Russian Federation calls for the implementation of passive buildings demonstration projects, no policy is yet pursued to promote passive energy houses or zero energy buildings. There are some initiatives though, including a Federal fund to promote “21st century house” construction. • At the Regional level, the budget allocated for the implementation of the Energy Strategy and Federal Program on Energy Savings and Energy Efficiency improvement until 2020 is of approximately 6 billion USD over the period 2011-2015 and 12 billion USD over the period 2016-2020. Likewise to Federal authorities, regional governments and institutions will shape their policies and interventions around the main objective of increasing use and accelerating deployment of energy efficient LCTs and additional goals such regional/local socio-economic development. But unlike Federal authorities, regional governments and institutions will generally face greater capacity and expertise constraints and consequently more responsive to technical assistance. • The defintion of the priority climate technologies to be promoted and supported through the competitive platform will be integral part of the platform set-up and processes that will be detailed during the PPG phase. However, in order to respond to some priority climate technologies proposed by Russian


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counterparts, some initial technology assessments were carried out by UNIDO during the PIF preparation (please see Annex I). These initial technology assessments looked into aspects such as market potential, GHG emission reduction potential and other enviromental benefits, socio and economic potential, manufacturing capacity transferability, and potential to contribute to other national priorities in sector modernization and regional development. Based on these initial assessments, the three priority technology areas proposed by Russian counterparts:

1) LC and energy efficient construction materials and technologies for residential and building sector; 2) Bio-methane equipment for agriculture sector; 3) Co-generation technology using bio-methane from sewage treatment.

have shown subtantial potential. With regard to these three technology areas potential baseline project information and activities would include the following:

• Livestock breeding in Russia is based on old technologies with a low percentage of processed manure. A recent document by the RF Government recommends that agricultural producers use bio-methane generation and zero waste technologies. The few small pilot projects of this type launched on Russian farms have so far used imported technologies mainly. There are Russian biogas equipment producers but their technology has limitations with regard to feedstock flexibility and suitability for power generation. There are plans to start new biogas plants in the near future of a high capacity in several regions. • Russian technology for bio-methane co-generation from sewage treatment is not widely applied (with existing and more representative plants mainly concentrated in the Moscow region). This is due to various factors, including i) lack of confidence in the adaptability of related technology to Russian conditions, including the cold, long winters and the composition of sewage treated by municipal treatment facilities; ii) lack of confidence in the commercial viability of this technology and in the capability of the co-generation facility to generate a sufficient amount of income. Though a number of regional energy efficiency programs promote and support the use of this technology, i.e. Khanty-Mansiysk Autonomous and Yamalo-Nenets Autonomous Okrugs, Tyumen, Kurgan and Chelyabinsk oblasts. If successfully demonstrated, new proven technologies capable to process unstable municipal sewage and with a stabilizing methane factor critical for stable power generation could be widely disseminated in the regions.

• Ongoing and forthcoming programmes and credit lines established by international financial institutions (IFC, EBRD and others) targeted to provide financing and facilitate investments in EE and RE technology applications will offer additional opportunities to access loans and financing for the LCT transfer and deployment projects to be stimulated and supported by the present project. National commercial banks are increasingly interested in including EE and RE projects in their loans portfolio. • Leading national financing institutions have established innovative mechanisms to enhance access to financing by SMEs for capital investments for technology upgrade and modernization of the production processes. SME Bank, an agent of thhe Bank for Development and Foreign Economy Activity, has developed and it is operating a credit-guarantee scheme for medium-size companies. In order to be eligible for guarantees, projects must have a capital investment component of at least 70% of the total project costs. Guarantee is provided up to 50% of the loan amount granted to the enterprises by other Russian banks partners in the scheme. The Guarantee period is from 2 to 10 years. 3) + 4) Project alternative scenario and incremental reasoning The project aims to reduce greenhouse gas emissions in the Russian Federation by increasing and accelerating the transfer and deployment of low-carbon technologies through the establishment and


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demonstration of mechanisms to promote, facilitate and support transfer and deployment of state-of-the-art or leading-edge low-carbon technologies while reinforcing the existing enabling conditions to promote and support LCT market. The project proposes the establishment of a National Competetive Platform to stimulate, reward and facilatate LCT transfer and deployment projects in selected climate technologies priority areas to be identified on the basis of experts' analysis and defined criteria. The Platform is intended to establish close cooperation and synergies with the Russian Federation CTCN NDE and to enhance its institutional and functional capacity. LCT transfer and deployment projects that will be awarded through the Platform will receive technical assistance from the project in order to bring them towards and to the investment and implementation stage. The project would work with partner Russian financial institutions to establish a financial mechanism to leverage funding available from private and public financing institutions and investors. A loan-guarantee scheme is envisaged and has been initially discussed with partner financial instutions.. Project Approach Russian federal and regional programs and activities to promote and support transfer, deployment and commercialization of energy efficiency, renewable energy and other low-carbon technologies are bound to continue. However, considering the size and diversity of the LCT market and the mismatch between Russian Federation policy goals, corresponding capacity and existing enabling environment, many technical and economic opportunities offered by state-of-the-art or leading-edge LCTs will be delayed or lost and companies and consumers, in some cases, will continue to be “locked” with sub-optimal technologies for a significant number of years. The project will use a combination of institutional and stakeholders mobilization, technical assistance, policy dialogue, and investment support to address barriers at institutional, policy, financing and market level as well as awareness, knowledge and capacity barriers. The project aims to strike an effective balance between generating immediate tangible results and paving the way for sustainable impact. In order to achieve that the project takes a dual-track approach:

i. On the one hand, it provides support to strengthen the overall enabling environment for LCTs transfer and deployment by focusing on the establishment and demonstration of mechanisms to stimulate and facilitate LCT projects and investments in general and enhance institutional capacity.

ii. On the other hand, it provides focused support for LCT manufacturing capacity transfer and deployment projects to be awarded through a national competitive process in order to generate lighthouse projects and short-term tangible direct GHG emission savings.

The proposed National Competitive Platform will include a primary focus on localizing the production and accelerating deployment of LCTs with the key objective of substantially reducing their cost to potential RF users/buyers and in so doing significantly mitigate the persistent barrier of low energy prices. By localizing production and accelerating deployment, the perceived risk of the LC technologies would be also mitigated, with consequent positive impact on the financial viability and attractiveness of the subject LCTs applications.

Looking at innovation, development, transfer and deployment of LCTs, UNIDO acknowledges the fact that the support of Governments and public funding plays a critical role for success and sustainability, and therefore it is greatly needed. It is also understood that Governments’ support is granted taking into account a variety of policy objectives, cost-benefits criteria related to social, economic, environmental and other potential impacts of supported research, innovation and technologies. The results of such “multivariate” cost-benefits analysis and the decisions that go with it are inevitably characterized by a greater purposive rather than neutral content. The role of UNIDO is that of enhancing Governments’ drive and priorities with technical, experience and processes best practices.

The Project will work closely with RF counterparts, LCT stakeholders, and private sector partners to


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establish and test mechanisms to scale up transfer and deployment of LCTs while enhancing institutional capacities and overall policy framework effectiveness. Component 1. National Competitive Platform and strengthened framework for low-Ccarbon technology transfer This component is designed to enhance the existing enabling environment and capacity for LCTs transfer and deployment at the institutional and programmatic level. It is also meant to improve LCTs knowledge management and to provide key Government institutions with recommendations on possible improvements and updates of existing policy, legal and incentive framework for LCTs transfer. The activities described below for each output are the results of initial consultation and discussion with various Russian counterparts and analysis of the Russian context. The Platform's design and relevant Component's activities will be finalized and further detailed during the project preparation grant period. Key proposed outputs and activities Output 1.1: National Competitive Platform to reward and facilitate LCT transfer and deployment projects for identified climate technology priorities is developed and established. The Platform is the core element of the proposed project. The Platform to be estaslished and piloted during the project implementation is envisaged to consist of the following elements:

1. A LCT Transfer Expert and Advisory Panel (hereinafter simply the LCTT Panel) will be appointed the task to define the priority climate technologies for which transfer or deployment projects shall be stimulated through competitvely awarded rewards. The LCTT Panel will include representatives of the following counterparts and stakeholders: Ministry of Environment, Ministry of Energy, Ministry of Economy, Ministry of Industry, Ministry of Regional Development, Ministry of Education and Science/CTCN, Russian Energy Agency, Russian Union of Industrialists and Entrepreneurs (RSSP), SMEs Associations (OPORA Russia), Russian Academy of Science, Vnesheconombank (Bank for Development and Foreign Economic Affairs), SME Bank, Russian Consumer Federation (SPROS) and the other GEF Agencies with Climate Change Mitigation and LCTs related projects (i.e. UNDP, EBRD, WB-IFC). In addition to these public and private institutional members the Panel will include 6-8 recognized leading Russian experts and 4-6 recognized international leading experts. The members of the LCTT Panel will be professionals with demonstrated and recognized leading expertise and experience in the fields of LCTs (EE, RE and other) development, demonstration, transfer and deployment. The selection of the priority climate technologies to be promoted and supported during the first competition is envisaged to take a top-down approach, based on existing policy and strategy documents, technology potential assessments and market surveys, literature and information, and it may include a consultative process with LCT specific stakeholders groups. The criteria that will be used in selecting the climate technologies would include:

i. Alignment with key policy, legal and strategy documents ii. Estimated market size

iii. Estimated GHG emission reduction potential iv. Readiness of legal and regulatory framework v. Federal and regional resources available

vi. Technology and manufacturing capacity baseline vii. Readiness of relevant market infrastructure, including financing for LCTs application

viii. Environmental (other than GHG emission reductions), economic, social and other benefits

ix. Complementarities and synergies with other ongoing relevant programs


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A core list of selection criteria will be defined during the PPG phase, but the full list will be finalized by the LCTT Panel only during the project implementation. Considering that, at this stage is not possible to indicate specific regions in which the Competitive Platform will focus on. However, it is envisaged that Platform and associated outreach activities will be focused especially in those regions that meet one or more of the following criteria:

i. the region has a strong manufacturing capacity baseline in one of the following sectors (machine building, household electronics and appliance, construction and new materials)

ii. the region has a special economic zone

iii. the region has high-tech parks

Regions that meet two of the above criteria and that have been therefore identified as potential priority regions to be targeted by the LCTT Platform are the Moscow region, St. Petersburg region, Lipetsk region, Tomsk region, the Republic of Tatarstan, Sverdlovsk region and Samara region. It is not excluded though that one or two different regions might be added or targeted as result of the selected priority climate technology areas and its specificities. For instance, in case LC construction materials should be selected as priority climate technology area, regions in the Russian North such as Arkhangelsk or Siberia and in the Russia Far East could become a very relevant target of promotional and outreach activities (in relation to timber based construction material and technologies). The LCTT Panel will closely cooperate with the Russian Federation Nationally Designated Entity (NDE) for the UNFCCC Climate Technology Centre & Network (CTCN). During the PPG phase consultations will be held with the Ministry of Education and Science (hosting the Russia CTCN NDE) and other relavant project counterparts to discuss how to maximize synergies between the CTCN, the LCTT Panel and the whole project. As results of the priority climate technologies selection process, the LCTT will develop proposals and recommendations, to be submitted to the Russian Government counterparts, on methodological approaches for structured and more substatiated prioritization of climate technologies.

2. LCT transfer and deployment Specialists Groups (hereinafter simply referred as LCTtd Groups). For each priority climate technology selected by the LCTT Panel, a group of Russian and international specialists in the subject technology will be formed to detail the criteria that will guide and regulate the competition. It is anticipated that quantitative criteria related to the GHG emission reduction and other enviromental impacts of each transfer or deployment project will be key in the awarding process.

3. LCT Transfer Competition. The Project will work with partners to set-up a national competition for LCT transfer and deployment projects. It is envisaged that the one Competition round will have only 3-4 priority technology areas and to the extent applicable, for each area there will be two categories8: i) transfer of manufacturing capacity; ii) deployment and diffusion business models9. The competition will consist of three stages:

I. Application 8 Although there may be value in adding additional categories (and winners) to the Competition, care shall be taken vis-à-vis the need to maximize impact under the project. At this early stage it is considered more appropriate not to aim for more than 4 priority technology areas and 7 competition categories. During the PPG phase further analysis and discussion will take place with partners and stakeholders to make a final decision regarding the targeted overall number of categories and awards. 9 In the context of the proposed Competitive Platform and LCTs, a “business model” describes the structure and strategy to create value through the increased penetration of (specific) LCTs in the Russian Federation market, and it includes elements such as value proposition, key activities, key resources, cost structure and revenue streams.


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During the PPG phase special attention will be given to the design of this initial critical stage, including consideration of possible early incentives for project proponents passing a first screening phase

II. Selection The judging process will see the involvement of the LCTtd Specialists Groups and it will be designed to ensure transparency and objectivity.

III. Award A winner for each priority technology catergory and an overall Competition winner are envisaged. A total of 6-7 winners per competition round is envisaged at the moment. The reward for the winners is envisaged to be a combination of technical assistance for project finalization (technology advice, business/commercial advice, legal advice, IP advice and others), for investment access (preparation of project financing, documentation for loan request, etc.) and grant funding depending on the needs of the awarded projects. The monetary value of the award granted to the winners is envisaged to be in the range of 200-250,000 USD per winner. During the PPG phase the reward options and relevant delivery procedure will be defined based on further analysis and discussion with Government counterparts, prospective project partners and potential beneficiaries.

Two competition rounds are envisaged to take place during the project implementation period. The periodicity of the competition cycle is envisaged to be 12 months (with an application, selection and awarding process of 4-6 months). The Competitions’ awards to be granted during the project implementation period will be partially funded through the GEF project (but under Component 2). While during the GEF project implementation period the Competitive Platform would focus on a limited number of priority technology areas and competition categories, the Platform will be established with a view to become easily “expandable” to more technology areas and categories, once solidly established and resourced.

4. Networking with potential investors. The Platform will organize dedicated events to bring together the competition winners as well as non-awarded projects with prospective and potential investors or sources of financing.

The LCT Competitive Platform will be established and operated with the contribution and collaboration of the following partner institutions and stakeholders: Ministry of Environment, Ministry of Economy, Ministry of Energy, Ministry of Education and Science/CTCN, Ministry of Industry, Russian Union of Industrialists and Entrepreneurs (RSSP), SME associations, Vnesheconombank (Bank for Development and Foreign Economic Affairs), SME Bank, Skolkovo Foundation and other technology promotion, knowledge and business actors The institutional set-up that would host and run the competition will be defined during the PPG phase given the fact that substantial consultations are needed with multiple relevant institutions and prospective partners. The following options have been identified and preliminary discussed with regard to the institutional set-up that would host and run the Platform:

• National Competitive (NC) Platform hosted and operated by one the partner Government/ Public institutions

• NC Platform hosted and operated by one of the partner leading industrial associations • NC Platform hosted and operated by a not-for-profit organization established as public-private

partnership (foundation or other) During the PPG substantial consultations and discussions will be carried out with all key partner institutions and stakeholder groups to identify the best solution in terms of feasibility, effectiveness and sustainability.


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It is to mention that whatever institutional set-up will be selected during the PPG, GEF resources will not be used to fund either the establishment or day-to-day operations of the institution that will host the Platform. GEF resources under this output are envisaged to fund and contribute to activities such as the preparation of all guidance and application documents, the organization and management of the Competitions, the work of the independent international and national experts and specialists of the LCTT Panel as and LCTs Specialists Groups, the management and administration of the technical assistance (Award) provided to the winning projects, the Competition Award ceremony As for the sustainability of the Competitive Platform beyond the project completion, the Platform has been conceived as an instrument to pursue public goods and global goals such as Climate Change mitigation, more transfer and use of environment friendly technologies and employment creation; while supporting and working for increased modernization, diversification and growth of Russian manufacturing industry and economy, and greater international technology trade. Considering that, the financial sustainability of the Competitive Platform is envisaged to be secured, once the Platform will have demonstrated to be effective in facilitating and securing implementation of LCTs transfer and deployment/diffusion projects; through a majority stake of resources coming from the Russian Federal budget and other public sources/institutions for the modernization and development of the Russian economy, and a minority stake of resources coming from the corporate private sector, industry associations and investors. During the PPG initial activities to mobilize and/or secure long-term funding from public and private sector sources will be carried out. A fund mobilization strategy to be implemented during the whole project implementation period will be also developed during the PPG. Output 1.2: Design and build-up of Database of state-of-the-art and leading-edge LCT for priority transfer and deployment in Russia. The proposed database aims on the one hand to capitalize the information generated by the work of the LCTT Panel, the LCTtd Groups and the Platform in general (studies, research and data collected by and provided to the LCTT Panel for identify the priority technology areas to be supported through the competitions; project proposals submitted to the competitions); on the other to add value to and enhance the available tools for knowledge management and information dissemination for low-carbon technology transfer in Russia.

At the moment several web-based information systems related to energy technologies (energy efficiency more than renewable energy) are available in the public domain, developed and maintained by different public institutions and private sector associations (Russian Energy Agency, Russian Union of Industrialists and Entrepreneurs, and others). However, information available on these websites are focusing on dissemination and diffusion of commercial LCT applications and not on issues and aspects associated with transfer of manufacturing capacity.

The project will work with government counterparts, the CTCN NDE and other relevant partners and stakeholders to design and start building-up a database that could serve the purpose of increased awareness, better understanding, identification of business and project opportunities for LCT transfer and deployment by SMEs, large enterprises and investors.

The database is envisaged to have different level of accessibility for different users, stakeholders and Platform partners, in order to reflect the different purposes and levels of information confidentiality. The database is meant to provide a tool for:

i. Promoting and enhancing LCTs transfer information sharing and coordination between different Ministries and other key LCTs stakeholders;

ii. Managing knowledge and disseminating information on awarded projects; iii. Non-awarded projects to become “visible” and get connected to LCTs stakeholders, Government

institutions and investors that could be interested in and willing to support them through non-GE funding.

Envisaged project activities under this output include dialogue facilitation between relevant parties and


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direct expert support for the design of the LCTT database and its operationalization. During the PPG phase discussion with Government and institutional counteparts will be focused on the possibility for the LCTT Database to be hosted, since its outset, by one of the institutional partners. Output 1.3: Extensive advocacy and outreach activities organized at the federal and regional level for promotion and stakeholders engagement

Outreach activities will be carried out both before and after setting-up the Competitive Platform in order to raise awareness about the competition, engage stakeholders, promote LCT and highlight the economic and business potential for LCT in Russia. Envisaged activities will include briefing sessions, press releases, social media activity and advertising, participation in major conferences. The mix of these activities be detailed during the PPG but it is expected to have an adaptive approach to reflect local conditions and target audiences.

Output 1.4: Proposals developed for reinforcing or expanding existing policy and legal frameworks in support of transfer and deployment of specific LCTs, focusing on investment tax credit and fiscal incentives The Platform's operations, through the LCTT Panel, the Competition, the technical assistance provided to the awarded projects and the monitoring and review of their performance once implemented,will generate valuable insight on possible gaps in the existing policy, legal and regulatory frameworks and recommendations for consequent adjustments and improvements. Special attention will be given to lever Resolution № 562. At this stage it is envisaged that energy efficiency priority climate technologies selected for the Competition will be most likely later proposed for inclusion of the list of technologies covered by/included in Resolution № 562 "On approving the list of facilities and technologies with high energy efficiency, investing in the creation of which is the basis for granting the investment tax credit". For non-energy efficiency LCT, the project and the Platform are envisaged to focus on developing proposals for similar investment tax credit and other fiscal incentives. Component 2: Demonstration of leading-edge Low-Carbon Technologies Transfer Under this component the project will wok with and provide technical assistance to the developers of the LCT transfer and deployment projects that will be awarded and rewarded by the Competition. The goal will be to bring at least three of the winning projects at the implementation stage during the GEF project implementation period. An important goal and planned output for each LCTT demonstration projects will be to track and determine the economic, energy, environmental and climate performance in current Russian operating conditions.

Key proposed outputs and activities Output 2.1: At least three leading-edge LCT are transferred to the Russian market and manufacturing capacity is installed. Activities under this output will vary depending on the project and its stage of development. Project support may include developing detailed site report and engineering plans; finalizing the financing arrangements determined under the project preparation process; obtaining necessary licenses; conducting environmental impact assessments; completing necessary approval and testing for the imported technologies; developing technical specifications and tender documentation; constructing and commissioning facilities; and training staff in operations and maintenance. GEF project support will be limited to the soft-type of work (i.e. technical assistance) that will be required for these pilot projects. Capital investment requirements will be entirely born by the project developers and/or other possible private or public sector partners. Access to the financing mechanism to be developed


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under Component 3 and/or other sources of financing will be facilitated. Output 2.2: Energy, climate and other performance of the projects is monitored and measured Activities under this output will include creating a monitoring, measurement, and reporting framework and plan; conducting regular monitoring of the economic performance, energy performance and associated emissions from the pilot facilities and technologies; and regular reporting on the performance. Output 2.3: Technology transfer projects, their performance and lessons learnt are reviewed, documented and disseminated to relevant stakeholders and market players Activities under this output aim to inform decision-making within the Platfrom, to enhance knowledge management and build-up the LCTT database, to reduced developers' and investors' perceived risks for LCTT projects, to outreach stakeholders and promote replication through presentation of results and lessons learnt. The monitoring, review and documentation of the LCTT projects will also inform the preparation of possible recommendations to strengthen policy and legal frameworks for specific LCT. Project support will consist primarily of national experts' assistance to document experiences and national and international expertise to review and make possible recommendations. Component 3: Investments for low-carbon technology transfer Under this component the project will work with Russian financial institutions to increase mobilization of commercial financing for investments in low-carbon technology transfer projects, especially by SMEs. Based on the initial analysis and consultations with financing institutions and counterparts carried out to date, the establishment of a loan-guarantee scheme is the mechanism that will be further analyzed and developed during the PPG phase. Under the implementation of its Energy Strategy and Federal Program on Energy Savings and Energy Efficiency improvement until 2020 the Russian Government has committed 3 billion USD for the 2011-2020 period for providing federal loan gaurantees. In addition to that the State program of financial support for small and medium-sized businesses financed by the Ministry of Economy through Vnesheconombank (the Bank for Development and Foreign Economy Activities) is providing public resources to finance a number of credit initiatives for SMEs. Loan-guarantee schemes have proven effective in ensuring increased access to financing, particularly for SMEs. The project will work with Russian banks that have some experience in setting up and operating loan-guarantee schemes such as the SME Bank (an agent of the Vnesheconombank) and its partner banks. SME Bank currently operates a credit guarantee scheme for medium-size enterprises. UNIDO staff held meetings and discussions with SME Bank which confirmed willingness of partnering with the project in order to strengthen and expand its focus on LCT transfer and application projects. During the PPG phase UNIDO will work with SME Bank and other financial institutions to carry out analysis and discussion in order to detail the design of a loan-guarantee scheme that would add value to the RF financing landscape for LCTT projects. To that end the scheme design will take into account the design of the Competitive Platform for LCTT as well as any existing or planned financing mechanisms for LCT transfer or application operated or being established by Russian or international financial institutions. Key Proposed Outputs and Activities Output 3.1: Financial mechanism to leverage funding from financial institutions to support LCTT projects in Russia established. Activities will be targeted to support the set-up of a loan guarantee scheme for LCTT projects. The scheme would build on the SME Bank experience and enhance its existing credit guarantee program. The scheme would be accessible to all partner banks of the SME Bank (23 distributed over the entire Russian


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Federation). The detailed design of the guarantee scheme will be defined during the PPG phase based on substantive and in-depth discussion with SME Bank, partner banks, enterprises and other financing institutions. The project will design a guarantee scheme targeting LCTT projects by SMEs with conditions that would be more favorable than those for other non-LCTT investments in order to incentivize enterprises to borrow for LCTTs projects. The project currently considers using GEF funding to provide a discount of the LCTT guarantee fees to be paid by the enterprises. This option will be studied and detailed during the PPG. Activities that will be funded and supported by the GEF grant during the project implementation would include preparation of LCTT guarantee scheme relevant documentation and legal agreements; promotion and awareness raising about the scheme between SME Bank's partner banks; addressing capacity building needs of partner banks associated with the operation of the loan guarantee scheme and contributing directly to the incentive element of the scheme. At this stage it is anticipated that at least 65% of the GEF funding under Component 3 will be used to cover the scheme's incentive. During the PPG, as integral part of the detailing of the guarantee scheme's design and incentive, the project will identify and define with the SME Bank and key Government counterparts the resources and modalities to ensure that the sustainability of the incentive beyond the GEF funding and project duration. . Rigourous quality standards will be used in designing the scheme and its operations in order to minimize defaults (a targeted net average rate of default will be also defined during the PPG based on SME Bank track records, analysis of the Russian financial sector, consultations with international finance institutions, and review of international best practices). It is envisaged that once the scheme will have been proven successful through the GEF project, its sustainabilty and funding replinishment will be ensured through the State program of financial support for small and medium-sized businesses financed by the Ministry of Economy through Vnesheconombank. Component 4: Monitoring and Evaluation This component is designed to establishing an evaluation and monitoring framework for the whole project, to carry out an independent mid-term and final evaluation and undertake some project visibility and dissemination activities targeted to the general public.

Table 1. Summary of key barriers identified and proposed GEF project interventions

Problem faced by stakeholders Existing Actions GEF Project intervention

1. Inadequate coordination between institutions and policies for promotion and support of LCT transfer projects

Energy Efficiency Working Group within the Commission on Technological Development and Modernization of the Russian Economy under the President of RF

The LCTT Competitive Platform to be established by the project will work to catalyze more coordination between key institutional LCTT players and become a reference point. It is not excluded that between the proposals for improvement that will be generate by the Platform and the LCTT Experts and Advisory Panel there will be recommendations on such aspects. For sure proposals for policy and regulatory frameworks improvements and capacity building substantiated by the work and analysis of the LCTT Plane and Specialists Groups are expected to be generated by the project

2. Insufficient institutional capacity and inadequate tools/methodologies for developing LCT transfer action plans and policies

No established use of technology needs and impact assessments between relevant Ministries. Limited use of simplified technology/sector roadmap methods

3. Overall policy and regulatory framework for promotion and support of EE, RE and LCT is incomplete and institutions face resources constraints to meet targets and objectives

Substantial efforts by many ministries to enhance frameworks and operationalize them. Some cases of “Straight” adoption of international/foreign policies and solutions led to poor results and need for amendments


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4. Lack of institutional mechanisms to support transfer of LCT manufacturing capacity

Government Resolution № 562 provides for investment tax credit for organizations that invest in specific energy efficient technologies and projects. 56 technologies are eligible at the moment. No institutional mechanism or public-private platform for promoting or supporting transfer of LCTs manufacturing capacity.

The LCTT Expert and Advisory Panel will take into account Resolution № 562. At this stage it is envisaged that technologies listed in Resolution № 562 will not be selected as priority climate technologies to be promoted and supported by the Platform. On the contrary, proposals to the RF Government for inclusion of the selected climate technologies in Resolution № 562 are very likely to be made. However, a final decision will be made by the LCTT Panel, since it cannot be excluded a this stage that strong rationale for selecting a technology listed in Res. № 562 may exist. In that case the reward system for that technology would be reviewed and adjusted accordingly.

5. Lack of market examples and proven methodologies/models for international transfer of LCTs manufacturing capacity

No methodologies or examples of LCTs manufacturing capacity reported or identifiable. LCTs market still at early stage.

Promote the emerging of proposals and examples to be selected and supported through the Competitive Platform. Demonstration projects and testing models/ methodologies for transfer of LCTs manufacturing capacity. Thoroughly document performance and lessons learnt

6. Limited or no knowledge and capacity in the RF market for leading-edge LCTs; i.e. market services are basically available only for mature and mainstream LCTs

Leading-edge technologies application largely based on international experts and suppliers services. International and bilateral cooperation programs to fill technology expertise and competencies gaps through training and technical assistance

The outreach activities and the road-shows to be organized before and after the competitions will lift-up the knowledge threshold on leading-edge LCTs. The database to be establish within the Platform will also help to mitigate awareness and knowledge barriers

7. Limited or lack of examples of leading-edge LCTs application and performance in the RF

Ministries and Governments (federal and regional) to work with international and bilateral cooperation partners to pilot applications of LCTs. Few private sector independent initiatives.

Thoroughly document performance and lessons learnt from all LCT transfer and deployment supported projects and thoroughly disseminate key information between relevant stakeholders and market players

8. Low level or lack of awareness between financing institutions about the "performance" and market/business potential of many leading-edge LCTs in the RF

International Financial Institutions (IFIs) programs havebuilt awareness and capacity for financing mainstream EE and RE technologies applications and will continue to do so. Few government supported initiatives to bridge the knowledge gap but more from an overall modernization perspective

Comprehensive information campaign and packages for financing institutions about LCT technology transfer investments and about the supported and demonstrated LCTs will be carried out. Information packages will include estimates of overall market size in terms of investments and services. Training


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will be provided.

9. High perceived risk (though varying from technology to technology) of LCT investments by financing institutions

International Financial Institutions (IFIs) programs to build capacity for EE and RE financing and to support piloting of credit lines and demonstration of technical assistance facilities. Government efforts to increase incentives for LCTs investments (EE and RE). Support from the Bank for Development and the Foreign Economy Activity for technology innovation and modernization investments.

Loan-guarantee scheme to be established building on existing examples and experiences of Russia SME Bank (agent of the Bank for Development and Foreign Economic Activity) and other partner banks. Comprehensive information campaign/ packages tailored to investors, training provision.

Project management: Project management will focus on supporting the project implementation arrangements on a day-to-day basis; managing the staff and experts involved in the pilot projects and other activities; coordinating with all stakeholders, including other GEF-funded projects under implementation; monitoring and evaluating project progress and capturing lessons learned; and communicating with all stakeholders, both in Russia and internationally, about the project’s activities and results. 5) Global Environmental Benefits While addressing barriers to scaling up transfer and deployment of energy efficiency, renewable energy, and other low-carbon technologies, the project will bring about substantial reduction in GHG emissions. The project will lead to considerable direct GHG emission reductions through the demonstration technology transfer and deployment projects being supported under Component 1 and 2. Direct GHG emission reductions will result also from the financial mechanism in Component 3. In addition, the project will produce indirect reductions through the continued operations of th Platform beyond the project duration and the technical assistance activities that would support enabling policies and incentives for the development, transfer and use of low-carbon technologies. An estimate of the GHG emission reductions to be generated by the project it is at this stage very problematic due to the fact that priority climate technologies have not been selected yet. As a proxi, an estimate of potential GHG savings has been done making the assumption that three of the LCT transfer projects supported and demonstrated by the proposed project would have potential like that of the three technologies proposed so far by the Russian government coutnerparts. In the case of Bio-methane equipment for agriculture sector using swine manure only, the total technical and economic biogas production potentials in the agriculture sector (all sources) in the RF are estimated respectively at 129 and 69 million tce per year. It is estimated that 30-40% of this potential originates from swine farming. The corresponding total annual potential for GHG emission reductions from utilization of biogas produced by the swine farming sector is then estimated at the level of 30-60 million ton CO2eq10. Asfor the cross-laminated timber technology for energy efficient constructions in the residential and building sectors, about 215-225 thousand buildings are annually built in Russia with overall floor space in the range 91-102 million m2. Of that volume, 202-209 thousand buildings are residential (70-72 million

10 This estimate is based on a top-down approach and it is based on the total swine manure production, the ratio between estimated overall biogas potential and biogas-to-energy economic potential and the assumption that biogas produced and used for energy purposes would avoid both methane emissions and natural gas consumption for energy uses (please see Annex I.1 for more information)


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m2) and 10-11 thousand buildings are for the commercial sector (14-16 million m2). Assuming for the cross-laminated timber (CLT) technology a market penetration rate of 5% of the total annual new housing constructions, the annual production/use of CLT would amount to 5 million m2 of CLT construction elements. Assuming then for a CLT house a annual specific energy consumption for heating of 15 kWh per m2 against a baseline average of 115 kWh per m2, it is estimated that 500 millions kWh of primary energy for heating would be saved per year11. Assuming natural gas as primary source of energy for heating in the residential and commercial sector, this would correspond to 150,000-200,000 ton CO2eq of GHG emission reductions per year. Taking into account the production capacity of the current largest production facility of CLT elements, which is about 1 million m2 of LCT, the annual potential GHG emission reductions generated by a LCT production facility of the same size would be 30,000 - 40,000 ton CO2eq (300,000 - 400,000 ton CO2eq over 10 years). This without counting GHG emission reductions that would derive from the displacement of cement use and production. Taking into account the two above technology potentials, it has been preliminarily and roughtly estimated that by transfering the manufacturing capacity of three LCTs the project could lead to direct GHG emission reductions to the level of 750,000-1,500,000 ton CO2eq (over a 10 years period) and indirect GHG emission reductions to the level of 2 – 5 million ton CO2eq. Estimates of GHG emission reductions will be consolidated during the PPG. 6) Innovativeness, sustainability and potential for scaling The project is regarded to be innovative for the following aspects:

• The project proposes a dual-track approach which combines support to strengthen the overall enabling environment for LCT transfer and deployment by establishing and demonstrating mechanisms at institutional and financing level; with tailored support for selected LCT manufacturing capacity transfer and LCT deployment projects to be awarded through a national competitive process

• The project has a primary focus on setting-up and testing mechanisms aimed to promote and support transfer of manufacturing capacity of LCTs to the Russian Federation.

• The project takes a combined top-down and learning-by-doing approach in developing mechanisms and institutional capacities to support LCT transfer and deployment

• The project proposes a focus on transferring manufacturing capacity of leading-edge LCTs that are not known or hardly used in the Russian Federation but which have substantial GHG emission reduction potential and socio-economic benefits if cost reduced and disseminated on a wide scale.

With respect to sustainability and scaling-up: • The project aims to achieve sustainability and to support replicability by hinging its interventions

on the goals, mandates and resources of the Russian Federation Government and relevant institutions with respect to increased energy efficiency, Climate Change mitigation, technology innovation and economy and industry modernization as integral part of the overall Russian Federation economic development strategy. Substantial resources (in the order of 10 plus billions of USD dollars) have been already allocated by the RF Government for the next 5-10 years to programmes for supporting enterprises, including SMEs, development and modernization; technology and entrepreneurship development and energy efficiency.

• The National Competitive Platform will be developed in close collaboration with relevant country leading institutions such as the CTCN of the Ministry of Education and Science, the Ministry of Natural Resources and Environment, the Skolkovo Foundation and others, who have expressed

11 Please see Annex I.2 for more information.


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their interest in partnering in the project and which are suitable potential candidate institutions to host and take over the platform, once the Competitive Platform concept will have been demonstrated and proven effective.

• With regard to the loan-guarantee scheme, SME Bank is already operating a similar general purpose scheme on behalf of the Bank for Development and Foreign Economy Activity of the Ministry of Economic Development and funds will continue to be channeled to foster SME investments in modernization and technology improvements.

A.2. Stakeholders. Identify key stakeholders (including civil society organizations, indigenous people, gender groups, and others as relevant) and describe how they will be engaged in project preparation:

The table below summarizes key stakeholders and their respective roles:

Stakeholder Relationship to Low-Carbon Technology Transfer and Role

Ministry of Natural Resources and Environment

The Ministry houses the UNFCCC and GEF focal points. It is the lead Government institution/agency in Russia on international cooperation on environmental issues, including global environmental issues. The Ministry is responsible for the formulation and implementation of policies and regulations related to waste management and waste disposal, which directly affect the market for bio-methane, as well as for forest management.

Role: The Ministry of Natural Resources will be the leading national executing agency, supervising the overall execution of the project. It will be directly involved in the setting up of the Competitive Platform and of the LCTT Expert and Advisory Panel, ensuring alignment with the RF Climate Change mitigation strategies and programs.

Ministry of Energy

The Ministry developed the Federal program “On energy conservation and improving energy efficiency until 2020,” approved by RF Government Decree of 27 December, 2010 No. 2446-r. The Program is expected to become a key instrument in pursuing the achievement of the goal of 40% reduction of Russia’s GDP energy intensity by 2020.

Role: The Ministry of Energy is one of the key government counterparts of the project. It will be directly involved in the Competitive Platform and its LCTT Expert and Advisory Panel and it will provide support on policy and institutional aspects. The Ministry is envisaged as one of the leading institutions in providing input information to the LCTT Expert and Advisory Panel through technology needs assessment and technology impact assessment carried out

Russian Energy Agency

Russian Energy Agency (REA) acts as the implementation body for the federal program “On energy conservation and energy efficiency until 2020.” Institutional resources and capacities for energy efficiency and renewable energy at the federal level are essentially concentrated in this agency.

Role: REA will be another key national counterpart. It will be involved in the Competitive Platform and its LCTT Expert and Advisory Panel. REA will be a supportive institution for the policy and institutional component of the project. REA will ensure consistency and support transposition of project outputs into the RF Federal program for EE as well as into programs for renewable energy support. REA will also directly benefits from the project through both training and guided hands-on experience.

Ministry of Economic Development

The Ministry of Economic Development coordinates the fulfillment of the task assigned by D. Medvedev, former President of the Russian Federation, on reducing the energy intensity of GDP by 40% by 2020 and develops jointly with other ministries and departments the main part of the regulatory framework and takes part in the activities of the Energy Efficiency Working Group within the Commission on technological development and modernization of the Russian economy under the President of the Russian Federation. The Ministry has a very broad policy-making and –implementation scope or interventions, which include responsibilities for: overall RF economic development, small and medium-sized business/enterprises, assistance to economy modernization, innovative development of state-owned (fully or partially) enterprises; development of institutions to build an innovation driven economy

Role: The Ministry of Economic Development is another key government counterpart of the


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project. It will be directly involved in the policy and institutional component of the project as well as in the establishment of the Competitive Platform. The Ministry will be the key government counterpart with respect to the establishment of the loan-guarantee scheme.

Ministry of Industry and Trade

The Ministry of Industry and Trade is responsible for Government order No. 769 of September 7, 2010 “On the categories of goods for which information on the energy efficiency class is to be included in the technical documentation”. Within its policy-making and –implementing functions, it develops and implements sector specific development strategies; it defines rules for and approve the certification of products and goods energy performance classes; it qualifies technologies that based on their energy efficiency and innovation are eligible for investment tax credit; it develops procurement plan and regulation for innovation and hi-tech products for state-owned industrial enterprises and the military sector.

Role: The Ministry of Industry is another key government counterpart of the project. It will be directly involved in the Competitive Platform and its LCTT Expert and Advisory Panel as well as in possible policy and institutional related activities of the project. The Ministry is envisaged as one of the leading institutions in providing input information to the LCTT Expert and Advisory Panel through technology needs assessment and technology impact assessment carried out. .

Ministry of Education and Science

The Ministry of Education and Science is in charge of developing and implementing laws and policies related to education and science, including scientific innovation. In this capacity, it coordinates most of government-funded scientific R&D programme. It is also the lead government agency for nanotechnologies and intellectual property issues. The Ministry of Education and Science is the Nationally Designated Entity for the UNFCCC CTCN.

The project will work closely with the Ministry of Education and Science and its CTCN staff in identifying and networking with best academic institutions and research centres in the Russian Federation that could provide experts and specialists for the LCTT Expert and Advisory Panel and the technology specific specialists Groups. It will be directly involved in the Competitive Platform and its LCTT Expert and Advisory Panel as well as in possible policy and institutional related activities of the project. The Ministry is envisaged as one of the key institutions in providing input information to the analytical work of the LCTT Expert and Advisory Panel.

Ministry of Regional Development

The Ministry of Regional Development is responsible for the Order No. 262 "On the energy efficiency requirements for buildings, structures and facilities" and building codes. It is responsible for specifying energy efficiency requirements for buildings, objects and facilities as well as rules for the energy efficiency classification of multi-family houses. It approves the list of measures and recommendations to promote savings of energy resources supplied to multi-family house as well as for infrastructure facilities and other common properties.

Role: The Ministry of Regional Development will be another government counterpart of the project. It will be involved in the Competitive Platform and its LCTT Expert and Advisory Panel as well as in possible policy and institutional related activities. .

Skolkovo Foundation

The Skolkovo Foundation is the principal agency responsible for the establishment of the Russian Skolkovo Innovation Center, a scientific and technological centre for the development and commercialisation of advanced technologies. It is a non-profit organization founded in 2010 and charged by Russian President Dmitry Medvedev with creating a new science and technology development centre in the Moscow suburb of Skolkovo. The Skolkovo innovation system comprises the Skolkovo Institute of Science and Technology (Skoltech) established in partnership with MIT, corporate R&D centres, business incubators, private seed and venture funds, and start-up companies, as well as residential space and social infrastructure. Skolkovo is governed by a special law which gives its resident companies special economic conditions for running their businesses. More than 300 companies have received the status of Skolkovo resident.

Role: Skolkovo Foundation is a key project stakeholder and prospective partner for the execution of the project and it will be directly involved in project component 1 and 2.

Industry and SMEs associations

Russian Agency for Support of Small and Medium Business (RA for SSMB) was established in 1992 by the RF Government of one of the key SME support infrastructure organizations. Among its stakeholders are the RF Chamber of Commerce and Industry and some of the RF leading industrial companies. RA for SSMB operates on the market of information, training,


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consulting services all over the country working with domestic and international partners. RA has significant practical experience in development and implementation of projects and programmes in support of SMEs export, young entrepreneurs, support infrastructure, quality management, institutional development, administrative reform and others. All-Russia Business Association "Business Russia" ("Delovaya Rossiya") - Union of Entrepreneurs of non-commodity sectors of the economy. This is the center of formation of the national elite non-commodity business. "Delovaya Rossiya" unites companies, representing more than 40 industries: construction, light industry, IT and high technology, engineering, agriculture, financial sector, etc. Members of "Delovaya Rossiya" include many dynamically developing companies with the best indicators of productivity and value-added production, which have significant potential for innovation and modernization. OPORA RUSSIA is non-profit organization representing the interests of about 400,000 small and medium enterprises, which create job opportunities for 5 million of Russian citizens. It has been created from the merging of two non-profit organizations: the “All Russian Union of Business Associations”, founded in 2001 and with more than 140 different industrial associations, regional unions, guilds of small and medium entrepreneurs; and the “All Russian Non-governmental organization of small and medium business", founded in 2002 and with regional departments in 81 regions of the Russian Federation. Russian Union of Industrialists and Entrepreneurs (RSPP) The Russian Union of Industrialists and Entrepreneurs is an independent non-governmental organization. The Union has a membership base of over 120 regional alliances and industry associations representing key industries of the economy. RSPP can count on more than 328,000 members representing industrial, scientific, financial and commercial organizations and individual members in all Russian regions. RSPP carries out a wide range of activities, from initiating new bill drafts and make continuous efforts to improve the existing legislation to maintaining regular contacts with authorities at the federal and regional level, to hold round tables, forums, conferences and public discussions on key issues of business development in Russia. Other sector and/or regional industry and SMEs associations (from the Republics and Oblasts of the Russian Federation) The project will work with industry, SMEs and entrepreneurs associations at federal and regional level to promote LCTT and the Competitive Platform.

Clean Energy and/or Environmental Technology Centers and NGOs.

Energy Efficiency Centers, Renewable Energy Centres and National Cleaner Production Centres (NCPCs) and other organizations are present in the Russian Federation carrying out clean energy and LCT technology promotion activities, offering expert services, providing trainings, and disseminating information about clean and low-carbon technologies. The project will liaise and strive to maximize collaboration with these Centres as sources of potential project developers and competition participants. These Centres will provide also useful channels and networks to promote the LCTT Competitve Platform, mobilize resources and disseminate information and best practices. Good synergies are especially envisaged with the UNIDO Cleaner Production Centres in Moscow (Clean Technologies Centre for the Oil and Gas Industry), St. Petersburg (North-western International Cleaner Production Centre) and Kazan’s NCPC.

Financial Institutions and SME Bank

International financial institutions such as the World Bank (IBRD and IFC) and EBRD have supported and made significant investments in municipal infrastructure and in key sectors (such as manufacturing, agribusiness, and SMEs more generally) that have introduced more efficient, lower-carbon technologies to the Russian market. They have also served as a means of providing investment funds, which is particularly important in a country with a shortage of affordable credit for sustainable energy. Some Russian commercial banks have recently increased their attention to business opportunities in the field of the EE and RE and expressed strong interest in engaging in pilot initiatives. SME Bank is an agent of the Bank for Development and Foreign Economy Activity (Vnesheconombank) of the Ministry of Economic Development. SME Bank has experience in setting up loan-guarantee schemes and it currently operates scheme targeted to medium-size enterprises investing in projects with a capital investment component of at least 70% of the total


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costs. Role: SME Bank will be a key project partner and executing partner for project component 3. International and national financial institutions will be key project stakeholders and potential partners for Component 3 and they will be involved across all project components.

As for other project stakeholders and prospective partners, these will include: Ministry of Agriculture, regional and local governments, innovation and technology centres, LCT and energy service providers, professional associations and NGOs.

The project will be executed by the Ministry of Natural Resources and Environment, as lead national executing partner, together with contributions from the Ministry of Education and Science, the Ministry of Energy and SME Bank.

UNIDO will be responsible for the implementation of the project and the overall management and monitoring, and reporting to the GEF. UNIDO will support national executing partners with respect to the procurement of international expertise, the facilitation of business and public-private dialogue and partnerships, and the provision of supplemental technical expertise.

A Project Steering Committee (PSC) will be established for periodically reviewing project implementation, provide guidance, ensure ownership as well as co-ordination between key project partners and counterparts. In addition to the Ministry of Natural Resources and Environment, Ministry of Energy, Ministry of Economic Development, Ministry of Education and Science, Ministry of Industry and Trade, Ministry of Regional Development, REA, Skolkovo Foundation and UNIDO, the PSC is envisaged to comprise representation from other possible relevant ministries, public institutions, private sector and NGOs. A.3 Risk. Indicate risks, including climate change, potential social and environmental risks that might prevent the project objectives from being achieved, and, if possible, propose measures that address these risks to be further developed during the project design (table format acceptable):

Project-related risks and proposed measures to address them are conveyed in the following table:

Type Risk Level Mitigation

Stakeholders’ response and engagement in the project

Lack of interest by enterprises, technology developers, start-ups, industrial associations and other key stakeholders to engage the LCTT Competitive Platform, resulting in limited participation, or entries with low quality, especially for the first year.

Medium Strong outreach, advocacy and communication programmes would be prepared with adequate resources allocated and carried out together with project leading partners to ensure effective and widespread promotion and initial engagement with the LCTT Platform. Workshops would be carried out and attended to deliver presentations User-friendly entry form would be prepared and possible incentives already at the application stage will be considered.

Policy-Related

Delays in completing the energy pricing reforms

Low to Medium

This is viewed as a relatively low risk because government commitment to pricing reforms and metering is demonstrated in Federal Law #261-FZ. The project has a special focus on the transfer of manufacturing capacity of LCT as a way to reduce LCTs’ cost to Russian consumers/users and make them more


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Slow implementation and enforcement of policies and regulations related to energy efficiency, renewable energy and LCT

Low to Medium

economically attractive or affordable. By doing that, the project approach aims to mitigate the negative impact of marginally subsidized energy prices on the economic benefits/returns (and consequently investments) of most energy related LCTs. Challenges associated to implementation and enforcement will persist. The project will work closely with partners and counterpart authorities to have regular reports about progress and problems with respect to those policies and/or regulations that will directly impact the priority climate technologies to be promoted and supported by the project. The risk associated with potential delays or other problems in the implementation of policies or enforcement of laws and regulations will be taken into account by the LCTT Expert and Advisory Panel in the selection of the priorities climate technologies.

Investment-Related

LCT service market is unable to offer viable models to generate strong portfolios.

Medium

Several donors and government initiatives have ongoing market development activities, and the project will coordinate its efforts closely with these activities. Through Component 3activities the project will directly intervene to mitigate this risk by enhancing the existing capacity of market players and bringing them to focus more and expand portfolios to LCT transfer and application projects

Climate Change

Climate Change Risk None at this stage

Climate Change will be taken into account by the LCTT Expert and Advisory Panel in the selection of the priorities climate technologies. At this stage no climate change risk is foreseen for the achievement of the project’s objectives.

A.4. Coordination. Outline the coordination with other relevant GEF financed and other initiatives: The Russian Federation Government climate change mitigation and energy efficiency agenda has been supported in recent years by several international organizations, including UNIDO, IFC, EBRD and UNDP. Many of their technical assistance programs are being funded by a combination of GEF grants, contributions from donor countries, and their own funds. In addition, there are ongoing projects implemented by bilateral donors and large industrial corporations that are present on the Russian market, though they are relatively small compared to those carried out by international organizations. The proposed project has been designed and will be finalized in a way that it complements the ongoing climate change mitigation initiatives and builds synergies among them. While sustainable energy projects, particularly those funded by GEF, have focused on commercial mature technologies, many of which are already available on the Russian market, the proposed project will have a focus on the promotion and transfer of leading-edge commercial technologies that nationally and internationally are at the beginning of their market deployment cycle. Through the establishment of an innovative dedicated mechanism such the LCTT Competitve Platform the proposed project aims also to strengthen the existing enabling environment at institutional and market level. For these reasons, the proposed project complements well ongoing efforts and it actually offers good opportunities for synergies; opportunties that will be analyzed and discussed in details with other agencies during the PPG phase, and the existing project infrastructure can actually serve as a conduit for providing exapnded information about new leading-edge commerciall technologies to potential investors and end-users in Russia.


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The largest ongoing initiative on sustainable energy and GHG mitigation is the Umbrella Program “Energy Efficiency in the Russian Federation” that is funded by GEF. Overall, it includes six projects initiated by UNDP, EBRD and UNIDO, and aims to improve energy efficiency in industry, buildings and lighting through regulatory support, investment, and capacity building at the federal and local levels. The proposed project will benefit from the projects under the Umbrella Program that among other things are supposed to bring down barriers and create the environment enabling energy efficiency investments in the residential sector; pilot ESCO models in public buildings; help industries embrace energy management practices; conduct public awareness campaigns; etc. This will increase overall awareness and demand for low carbon technologies on the consumer/user side as well as greater interest and enhanced ability of the banking sector to engage in financing LCT projects and investments. Another ongoing initiative from which the project will benefit is the IFC’s Cleaner Production program (RCPP), which stimulates investment in cleaner production projects, promotes cleaner production best practices and policies in Russia, and helps to advance the economic and environmental performance of Russian industry. . Besides above mentioned ongoing initiatives, the project will coordinate and wherever feasible cooperate/synergize with other GEF5 projects and initiatives currently under development. The proposed project will in particular look for opportunities for cooperation with the GEF-EBRD project "Regional Climate Technology Transfer Center" (GEF ID 4596). At this stage areas in which potential synergies seem more substantial are:

• Involvement/inputs/coordination with the LCTT Expert and Advisory Panel and the LCTtd Specialists Group

• Promotion of the LCTT Competitive Platform through the Regional Center and its network of industry and business partners

• Policy development and institutional strengthening for LCT • Market development support • Financing for LCT transfer

During the PPG phase UNIDO will discuss with EBRD to clearly identify complementarities and synergies and then define the scope of respective individual activities as well as possible joint activities During the PPG the GEF-UNIDO project will engage in substantive discussion and close dialogue with the Russian Federation NDE for the Climate Technology Centre & Network (CTCN) of the UNFCCC project in order to maximize integration and synergies of the proposed project with current and prospected activities of the CTCN NDE. At this stage it can be anticipated that the GEF-UNIDO project would offer and benefit from the following opportunities:

• Raising awareness about the CTCN • Strengthen the capacity of the Nationally Designated Entity –NDE (Ministry of Education and

Science) to serve as focal point of the UNFCCC CTCN • Involve the CTCN NDE and some of its members in the LCTT Expert and Advisory Panel and

LCTtd Groups to ensure that the work and analysis of the Panel and Groups is aligned with and feeds into the CTCN NDE climate technology agenda. In so doing the Platform Plane and Groups could benefit from the international experts network associated with the CTCN.

• Submit proposals and requests to the CTCN through the Russian NDE for direct collaboration with members of the CTCN consortium in some of the priority climate technologies to be promoted and supported through the Competitive Platform


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The present GEF-UNIDO project will ensure that effective coordination is established with the other GEF5 – UNIDO projects currently under development. At this stage no overlapping in expected with the project “Save the Source: Catalyzing Market Transformation of Breweries from a Major Natural Resource Consuming Industry to a Pro-active Steward for Resource Efficient Cleaner Production” (GEF ID 5293) and with the project “Transfer of Environmentally Sound Technologies for industrial climate change mitigation in the Republic of Tatarstan, Russian Federation” (GEF ID 5072). Strong complementarity and synergies are instead expected with the Cleantech Open Competition MSP that UNIDO is currently developing. During the PPG phase, when the detailed design of various GEF5 UNIDO projects will be at a more advanced stage, a thorough comparative analysis will be carried to ensure that duplication of efforts are avoided and synergies are maximized.

B. DESCRIPTION OF THE CONSISTENCY OF THE PROJECT WITH:

B.1 National strategies and plans or reports and assessments under relevant conventions, if applicable, i.e. NAPAS, NAPs, NBSAPs, national communications, TNAs, NCSAs, NIPs, PRSPs, NPFE, Biennial Update Reports, etc.: This project is highly consistent with the commitments of the Russian Federation as an Annex 1 member of the United Nations Framework Convention on Climate Change, and it reflects national priorities that are expressed in Russia’s policies and legislation on energy, climate change mitigation, economic development, and innovation in science and technology. Through the establishing of institutional and financial mechanisms to promote and support increased and accelerated transfer and deployment of state-of-the-art or leading-edge LCT, the proposed project is consistent with the Energy Strategy to 2030 and the Climate Doctrine of the Russian Federation. In the field of energy efficiency, the project is consistent with the Law on Energy Efficiency (2009), the Government Action Plan on Energy Efficiency and Energy Saving (December, 2009) and the State Program of Energy Saving and Energy Efficiency Improvement until 2020. The proposed project is also fully aligned with the RF Government economic development and modernization policies and goals. Energy efficiency and rational resource consumption has been established as the first of five strategic directions for the modernization of the Russian economy. In June 2009, President Medvedev formulated five target areas for technological breakthroughs. He named energy efficiency and energy savings as the first strategic area for modernization policy. Modernization was promoted to the top of the political agenda primarily due to the global economic and financial crisis. The crisis demonstrated the vulnerability of a strategy based on the growth of the oil and gas sector, the need to move away from an economic model based exclusively on raw material exports, and the need to replace it with a more advanced strategy of social and economic development drawing on knowledge and state-of-the-art technologies. As a part of economic modernization initiatives, there has been some research on technologies in particular sectors but no real technology needs assessment (TNA) exercise have been identified at the Federal level or reported. The project is also regarded as strongly aligned with the 5th National Communication (NC) to the UNFCCC. The 5th NC highlights the overarching goal of the RF Government to facilitate promotion of environmental sound technology and innovation factor in all economic sectors. It poses special emphasis on the industry, and in particular on traditional important energy and low value-added manufacturing sectors, but it clearly features also other economic sectors such as agriculture, transport, housing and land use. While 5th NC does not explicitly indicate specific mitigation technologies to pursue, it can be inferred that energy efficiency and renewable energy technologies, including biofuels, are subjects of priority attention across the economic sector board. The LCTT Expert and Advisory Panel to be created within the proposed LCTT Competitive Platform will ensure that strategies, plans, assessments and other official Russian Federation Gvoernemnt documents pertaining to Climate Change Mitigation and technology transfer will be duly reflected and address in the


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selection of the priority climate technologies to be promoted and supported by th Competitve Platform. B.2. GEF focal area and/or fund(s) strategies, eligibility criteria and priorities: As this project supports the development, demonstration, deployment, and transfer of innovative low-carbon technologies, it has a clear fit with the GEF-5 Climate Change Focal Area, Objective 1. It is also anticipated, however, that the project will generate benefits in the fields of energy efficiency and in biofuels, which are targeted in the Objective 2 and 4, respectively B.3 The GEF Agency’s comparative advantage for implementing this project: UNIDO is included in the Comparative Advantage Matrix for promoting energy efficiency in the industrial sector. Furthermore, GEF Council Document on Comparative Advantages of the GEF Agencies has recognized UNIDO’s extensive knowledge of SMEs in developing and transition countries. UNIDO has an established Centre for International Industrial Cooperation in the Russian Federation, based in Moscow, whose activities are mostly concentrated on investment promotion and technology transfer project development and implementation. The Centre would support the preparation and implementation of the project drawing upon its extensive experience of cooperation with major Russian stakeholders on identification and implementation of technical cooperation projects aimed at strengthening Russian industry and improving its competitiveness and productivity. UNIDO’s can rely also on a substantial pool of in-house expertise in non-energy/cliamate change sectors and services of relevance to the proposed project such as industrial policy, technology transfer, business and entreprenuship development, agribusiness and SME sector development, international trade and standards. UNIDO has successfully completed the implementation of a multimillion US$ portfolio of projects in the Russian Federation and it is currently implementing or working to develop more than 10 projectswith budgets ranging from 1 to 18 mln USD. These includes 3 ongoing GEF4 projects and 3 GEF5 projects, in addition to the present one, under preparation. As for GEF4 projects, two support the phase-out of ozone depleting substances (GEF ID 3541 and 4387) and one jointly-implemented with EBRD support market transformatin for industrial energy efficiency in GHG-Intensive Industries (GEF ID 3593). With regard to GEF 5, one project focuses on the transfer of environmentally sound technologies for industrial climate change mitigation in the Republic of Tatarstan (GEF ID 5072); one focuses on catalyzing market transformation for resource efficiency and cleaner production in the Brewery sector (GEF ID 5293); the third is a Cleantech Open MSP to promote and support clean technologies innovation and entrepreneurship The proposed project will build on experiences from past and ongoing projects in the Russian Federation as well as in other CIS and EurAsEC countries that seek/sought to promote and transfer energy efficiency, renewable energy and environmentally sound technologies as well as supported industrial development through process and product innovation. While these projects may target different domains and audiences from those that are or might be in the focus of the current project, lessons learned and best practices of other completed / ongoing projects will be expanded and reinforced by this project.


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PART III: APPROVAL/ENDORSEMENT BY GEF OPERATIONAL FOCAL POINT(S) AND GEF AGENCY(IES)

A. RECORD OF ENDORSEMENT OF GEF OPERATIONAL FOCAL POINT (S) ON BEHALF OF THE GOVERNMENT(S): (Please attach the Operational Focal Point endorsement letter(s) with this template. For SGP, use this OFP endorsement letter).

NAME POSITION MINISTRY DATE (MM/dd/yyyy) Rinat Gizatulin GEF Operational Focal

Point MINISTRY OF NATURAL RESOURCES AND ENVIRONMENT

11/18/2013

B. GEF AGENCY(IES) CERTIFICATION This request has been prepared in accordance with GEF/LDCF/SCCF/NPIF policies and procedures and meets the GEF/LDCF/SCCF/NPIF criteria for project identification and preparation.

Agency Coordinator, Agency name

Signature

DATE (MM/dd/yyyy)

Project Contact Person

Telephon

e

Email Address

Philippe Scholtès, Officer-in-Charge, Programme Development and Technical Cooperation Division, UNIDO GEF Focal Point

01/22/2014

Marco Matteini, Industrial

Development Officer

+ 431 26026 4583

[email protected]


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Annex I: A preliminary overview of low-carbon technology transfer in Russia

1: Bio-methane equipment for the agricultural sector

How the technology works: Bio-ethane generation is a promising new means of GHG reduction in the Russian agricultural sector. A series of technological solutions have been developed worldwide based on processing manure in methane tanks and using the captured methane to generate heat and electric power to be used for the needs of local agricultural facilities and residential buildings. Farm owners thus reduce heat and power costs while reducing their GHG emissions.

Biogas is methane fermentation of biomass. Biomass decomposition is influenced by three types of bacteria. In the food chain, bacteria of each type consume waste products of the preceding type. The first type is hydrolysis bacteria, the second acid-forming ones, the third methane-producing bacteria. The raw materials for biogas production may include cattle manure (38-60 m3 of gas per ton), swine manure (52-88 m3), poultry manure (47-130 m3), slaughter waste (blood, guts, paunch manure – 250-500 m3), fat (1,300 m3), stillage (50-100 m3), grain (400-500 m3), silage, tops, grass, weeds (200-400 m3), milk whey (50-80 m3), beets and fruit pulp (40-70 m3), glycerol (400-600 m3) and brewer’s grains (130-180 m3).

Status of the technology in Russia: Livestock breeding in Russia is based on old technologies with a low percentage of processed manure. Methane is not being utilized, but released into the atmosphere. With the new Russian Energy Efficiency Law, the national interest to bio-methane production is growing. A recent document by the RF Government recommends that agricultural producers use biomethane generation and zero waste technologies. The few pilot projects of this type launched on Russian farms use imported equipment as a rule. As of today, there are about 80 biogas production plants in Russia, mainly of a small capacity, and only one has capacity over 100 kW. There are plans to start another biogas plant in the near future, of a high capacity, in Kursk region.

There is a big demand for a technology to utilize a single source of raw material. Normally, a biogas plant works on a mix of different types of raw materials, including cattle, swine, and poultry manure, etc. The reason is a need to stabilize the share of methane, which is a condition for stable power generation. Changes in the Russian agricultural sector have made it unusual to have a mix of manure from cattle and pigs breeding, and thus projects based on more common biogas technologies have become unviable. The technology recently introduced in Canada and Germany includes innovative LIPP digesters, which allow farmers to capture and utilize methane either from swine manure or from mixed sources. Processing equipment also includes integrated biogas reserves, heat recuperation devices, and other equipment.

Potential: Considering the Global Warming Potential of methane (21 in CO2 equivalent), these emissions contribute heavily to climate change. The potential market for this type of bio-methane technology in Russia is huge; and therefore, there is a big room for the customization of existing international LIPP bio-methane technologies for Russia.

Annual volume of organic waste in Russia is estimated at 625 million tons12, and the larger part of it is not being utilized. By other assessments, up to 250 million tons of organic waste is annually produced in the agricultural sector (150 million tons in livestock farming and 100 million tons in plant-growing)13. It is estimated, that by 2020 the total mass of waste in the agricultural sector may amount to 1,600 million tons, of which 154 million will be energy containing waste.

There are various estimates of the biogas production potential. One of these estimates is 467 million tce overall capacity, of which 129 million tce technical capacity and 69 million tce economic capacity14. By other data, biogas production potential is estimated at 10-60 billion m3. Calorific value of 1 m3 of biogas is 22 MJ, which is equivalent to the combustion of 0.6 m3 of natural gas. Based on this figure, we can determine the equivalent capacity of 6-36 billion m3 of natural gas. Importantly, in 2010 Russian agricultural sector used only 45 thousand tce, or 39 million m3 of natural gas.

12 http://www.cleandex.ru/articles/2011/01/12/biogas_making_money_from_waste. 13 http://agrogold.ru/biogaz,_poluchenie_biogaza,_proizvo. 14 Akademia Energetiki #4 2008 p. 24


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For the following reasons dissemination of the biogas technology in Russia can be expected:

1. Growing gas production costs determined by a bigger share of costly gas fields. 2. Gas and electricity networks connection is difficult. The connection charge per 1 kW is up to 100-

200 thousand rubles, making alternative electricity supply options (biogas cogeneration) comparable to electricity grid supply in terms of capital costs.

3. According to the last agricultural census, only 37% of large- and medium-size farmers have access to gas distribution networks and 20% to district heating.

4. The Ministry of Energy has been developing a system of federal support for renewable energy by introducing a mark-up on the wholesale electricity price for biogas electricity producers (1.83 rubles per kWh) and by subsidizing the electricity network connection charge.

Markets for products. Waste recycling at a biogas plant can produce at the same time: biogas, electricity, heat, car fuel and fertilizers. 2.4 kWh of electricity plus 2.8 kWh of heat can be generated from 1 m3 of biogas in the generation plant. Micro-turbine plants, if working in a cogeneration mode, improve fuel efficiency by 15-25% compared to gas reciprocating engines, and micro-turbines operation costs are 1.5-2.5 times lower. Generation plants’ own consumption is 10-20% of energy generated. Thus, with 10-60 billion m3 of biogas consumption it is theoretically possible to provide 18-110 billion kWh. Currently, Russian agricultural sector production needs combined with rural population consumption amount to nearly 47 billion kWh, and this value is steadily going down. In other words, electricity generation market is not more than 45 billion kWh, bearing in mind primarily local electricity consumption. There are higher estimates (69 billion kWh of energy15), but then a substantial part of electricity will have to go to the main networks to be supplied to urban consumers. Federal energy efficiency program is expected to increase by 2020 electricity generation at biogas plants and stations to 22.5 billion m3. Thus, the potential use of biogas for power generation purposes can be estimated at about 25 billion m3.

With the use of 10-60 billion m3 of biogas in modern boilers about 43-260 million Gcal of heat can be produced. With the use of biogas at cogeneration plants 24-140 million Gcal of heat can be produced. Russian agricultural sector consumes nearly 10 million Gcal of heat, rural population consumes another 15 million Gcal. In other words, the market for heat generated from biogas amounts to 25 million Gcal. The main part of this demand can be covered by heat from cogeneration plants using no more than 10 billion m3 of biogas per annum. Heat from cooling down the generator or from biogas combustion can be used for space heating at the enterprise, for process needs, steam generation, seeds drying, wood drying, water boiling for cattle breeding, for running refrigeration evaporators and milk cooling on farms, or meat and eggs storing.

Additional purification turns biogas into bio-methane (90-95% methane), which after compression can be used as a motor fuel. The potential for compressed methane production is about 4-20 million tons of liquid motor fuel. However, there will be demand for it only if a network of filling stations is developed.

Summing up, we can estimate the potential for biogas production at 10-25 billion m3 per annum. By CENEf’s estimates, today biogas production stands at 2.2 million m3. By 2020, with a 20% annual growth, the amount of biogas produced may reach 8,6-10,7 million m3.

Fertilizers are an important product of biogas production. Normal manure, brewer’s waste, or other wastes cannot be effectively used as fertilizers for 3-5 years. With a biogas plant, fermented mass can be used immediately as a highly effective fertilizer. Such balanced fertilizers increase productivity by 30-50%.

Economic efficiency. For new systems, biogas plants can save on gas pipelines, power line, installation of a backup diesel generator and the construction of a lagoon. Capital costs savings may amount to 30-40% of the biogas plant costs.

Production costs of biogas in other countries vary in the range of 3-10 cents per kWh, and capital investments account for US$ 1,000-2,500 per kW of installed capacity. By Russian data, payback period of a biogas plant is 3 years, and production costs of 1 kWh of electricity produced from biogas fuel is only 0.15-0.25 rubles.

15 http://www.cleandex.ru/articles/2011/01/12/biogas_making_money_from_waste.


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Environmental efficiency. A biogas plant is the most active treatment system. No other treatment system produces energy instead of consuming it. Because the process takes place without access of air (fully sealed digesters), there is no stink, and so the sanitary zone (distance to the residential areas) from 500 m to 150 m.

Production of biogas allows it to prevent methane emissions, which have a greenhouse effect 21 times stronger than CO2. Biogas production of 10-25 billion m3 would reduce emissions to 136-340 million tons of CO2-eq.

Russian biogas equipment producers. Major manufacturers of biogas plants in Russia include: JSC “Tcentr “EkoRos”, JSC “Stroytechnika, “GNU VIESKh” (Moscow)," Company “LMW Vetroenergetika” (Khabarovsk), LLC “Transfin “(Rybinsk)”, JSC “Stroytekhnika - Tula plant”, LLC “Greentek”, JSC “Siberian Institute of Applied Research”, JSC “Energy biogas”, “BioGazEnergoStroy” Corporation, “Factor Ltd.” (Moscow), “SpetsEnergoSnab” (Moscow) and others.

“LMW Vetroenergetika” has developed biogas plants BEU-10 and BEU-20, LLC “TransFin” has developed a standard series of biogas methane tanks with a capacity of 1 to 25 m3, JSC “Stroytekhnika” a complex to produce fertilizers and biogas – CUB, “Factor Ltd”. (Moscow) has developed and implemented at the Balakhna poultry farm (Nizhny Novgorod region) a sample biogas plant with a reactor capacity of 5 m3. The company produces biogas plants with a capacity of up to 500 m3. LLC “SpetsEnergoSnab” (Moscow) offers consumers a standard series of biogas plants with 5-400 m3 capacity bioreactors and 20-1600 m3 daily output of biogas. JSC “Tcentre EkoRos” offers individual biogas plants IBGU-1 and autonomous biogas block modules BIOEN-1 for individual farmers or livestock farms. There are produced by JSC “Construction - Tula factory”.


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2: Cross-laminated timber construction technology for the construction sector

How the technology works. Cross-laminated timber (CLT) technology, which was recently developed in Western Europe, is considered to be the most advanced timber-based construction material available, combining robustness and energy efficiency. CLT panels are widely used as construction material for “passive houses” and other low-energy buildings. CLT sandwich panels, which are comprised of 2 CLT panels and a layer of insulation inside, are considered to be particularly efficient. The robustness of CLT technology allows for new energy efficient design features in prefabricated housing, such as wide, floor-to-ceiling windows, which enable a greater degree of solar heating, especially on the Southern-oriented side of buildings. In Europe, CLT panels are used to build private houses, town houses, office buildings, and condominiums, including multi-story buildings. The highest building built with CLT technology is the Stadthaus condominium in London. CLT have many benefits: up to 6 times lighter than concrete; cost competitive against steel and concrete; reduce overall construction time; save space – 1/3 thinner than concrete; primarily require carpentry skills and power tools.

In 2009, EU passed a directive asking that all states legislate Passive House construction by 2016 for new construction and renovation. Some European states have already done so, opening up a door for CLT penetration in Europe.

Status of the technology in Russia. CLT technology is not presently available in Russia. CLT manufacturing plants exist mainly in Germany, Austria, and some Scandinavian countries with annual production capacity of approximately 600,000 m3.

Some prefabricated houses built using specially processed timber and timber residues, modern construction solutions, and efficient insulation are regularly imported (basically from Germany and Finland) and then assembled in Russia. However, the high price (EUR 1,500-1,700 per m2 excl. finishing) makes these houses too expensive for most Russian citizens. At the same time, construction costs in Moscow stay presently in the range 1,500-1,600 $US/m2 and the average price for a new house is over EUR 1,100 per m2. Therefore, this technology may first find a market niche near Moscow and other regions with relatively rich population (cities located near oil and gas fields and near steel works).

Customizing the production of pre-fabricated houses in the Russian North (Arkhangelsk oblast, Republic of Karelia, etc.), as well as in Siberia could halve the costs, making energy efficient residential and non-residential buildings affordable for a greater number of people.

Potential: The potential for savings generated by application of energy efficient wood construction is largely determined by Russia’s size and the cold climate. The potential for local CLT production is large due to vast resources of timber.

The new Russian Energy Efficiency Law and the newly announced energy efficiency building codes for new construction are meant to considerably raise the standards of energy consumption in the residential and non-residential sector. This is especially important for the Russian Centre and North, where energy consumption for space heating is far above the national average.

No policy is yet pursued in Russia to promote passive energy houses or zero energy buildings. There are some initiatives though. The first zero energy building was built near Moscow. It was announced, that the design of “21st- century house” was done by the Federal fund to promote housing construction along with several other organizations.

About 215-225 thousand buildings are annually built in Russia with overall floor space in the range 91-102 million m2. Of that volume, 202-209 thousand buildings are residential (70-72 million m2) and 10-11 buildings are for the commercial sector (14-16 million m2). If CLT houses potential is taken close to 5% of the total annual construction, it may amount to 5 million m2, or 2,5-3,4 million m3 of CLT construction elements per annum, which is 4-5 times current German CLT panels manufacturing.

Technology application benefits. According to the new Building Codes for new construction, in 2012-2020 specific energy consumption for heating will be varying between 150 kWh per m2 and 50 kWh per m2. The passive house standard is 15 kWh per m2. Therefore, applying this technology to 5 million m2 of floor space would allow for annual savings of over 500 million kWh. In 2010, 1,1 trillion rubles were allocated from the consolidated budget of the Russian Federation for resource supply to public buildings. If public buildings are constructed using CLT technology, some of these costs may be eliminated.


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3: Co-generation technology using bio-methane from sewage treatment

How the technology works: Organic sediments formed in the process of water treatment go for anaerobic treatment in digesters at 50-55°C for decontamination and stabilization. This is accompanied by fermentation gas, which by 65% consists of methane. Electricity produced by mini-CHP from this bio-methane can be used to meet own needs of the treatment facilities, and the produced heat for the digestion of sludge and own needs as well. Produced electricity and heat can also be directed to other consumers. Organic sediments processed in digesters and reduced 10-fold by dehydration on the filter-presses are an excellent fertilizer for soil remediation.

Status of the technology in Russia: Russian technology for bio-methane co-generation from sewage treatment is not extensively applied. There are several reasons for that:

1. Lack of confidence in the adaptability of related technology to Russian conditions, including the cold, long winters and the composition of sewage treated by municipal treatment facilities.

2. Lack of confidence in the commercial viability of this technology and in the capability of the co-generation facility to generate a sufficient amount of income.

Potential: Considering the Global Warming Potential of methane (21 in CO2 equivalent), these emissions contribute heavily to climate change. Furthermore, the potential target market is quite large. Sewage treatment presents a major problem for small and medium size cities in Russia, which for the most part lack sufficient budgetary funds to support their treatment facilities constructed back in the 1960s and 1970s and urgently need modernization.

A number of regional energy efficiency programs include the use of this technology. For example, it is mentioned in the programs of Khanty-Mansiysk Autonomous and Yamalo-Nenets Autonomous Okrugs, Tyumen, Kurgan and Chelyabinsk oblasts. If successfully implemented, this technology may be wider disseminated in the regions.

Economic efficiency. According to Russian statistics, in 2010 10.6 billion m3 of waste water was drained through sewage plants. If the biogas technology is implemented at all treatment facilities, its production may amount to 454.1 million m3. CENEf estimates the costs of this potential implementation at 10.9 billion rubles.

Environmental efficiency. Purification of waste water containing a large amount of organic substances, including household waste, commercial and some industrial waste, can lead to significant emissions of methane and nitric acid. Emissions directly depend on several factors: population, industrial production and types of purification systems and, consequently, can have a large scatter depending on the value of these indicators.


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4: TCF (Total chlorine free) technology for the pulp industry

How the technology works: The most modern method of pulp bleaching does not use chlorine (TCF-bleaching). Instead of chlorine and its compounds, hydrogen peroxide breaking down into water and oxygen is commonly used. Chemically, oxygen is a colorless and tasteless gas, has no smell and is not toxic, explosive or flammable. Other reagents can be used for TCF-bleaching: oxygen, ozone, etc.

Status of the technology in Russia: With around 40 plants producing cellulose in Russia, only a few use TCF-bleaching today. The largest cellulose plants are:

• JSK «Kotlas pulp and paper plant»; • JSK «Arkhangelsk pulp and paper plant»; • JSK «Cardboard mill»; • Manufacturing group “Ust-Ilimskiy LPK”; • JSK “Mondi Biznes Pale Syktyvkaskiy LPK”.

These plants are responsible for more than a half of Russia’s pulp production.

Currently, market conditions motivate the plants to switch to chlorine-free bleaching, as it reduces production costs and allows for better competitiveness with foreign producers in the world market, where the larger part of the pulp produced in Russia is sold. In addition, according to the Decree of the RF Government of July 12, 2011 No. 562 “On approving the list of energy efficient facilities and technologies, investments in the introduction of which are a basis for granting an investment tax credit” this technology is included in the list (item 23), and thus has a preference for the introduction that may motivate pulp producers.

Potential: Great resource and energy consumption of traditional technologies is basically determined by relatively long process of chlorine bleaching and rinsing, large amount of water used and high energy consumption both for technology and waste treatment, because the waste contains extremely toxic organochlorine compounds (dioxins and chlorophenols)16.

In 2010, specific energy consumption to produce 1 ton of pulp was 592 kgce, which is about 1.7 times higher than international best practices. In the same year, about 6 million tons of pulp were produced, so the energy saving potential in the pulp and paper industry can be roughly estimated at 1.5 million tce. In part, it can be implemented through the use of TCF-bleaching, which brings down reduction of heat and water consumption, and therefore, the volume of waste effluents and pollution.

In 2010 the specific consumption of energy does not produce 1 ton of pulp amounted to 592 kgut, which is about 1.7 times higher than international best practice. In the same year produced about 6 million tons of pulp, so the energy saving potential in the pulp and paper industry can be roughly estimated at 1.5 million here. In part, its implementation can be obtained through the use in the production of TCF-bleaching, resulting in a reduction in the consumption of thermal energy, water and, consequently, a smaller volume of waste effluents and reducing pollution.

With a few exceptions, pulp production in Russia involves chlorine bleaching. At the same time, most plants fully or partially belong to foreign companies which are ready to invest in the facilities upgrades. Thus, there are significant opportunities in the pulp and paper industry to implement the energy saving and CO2 emission reduction potentials.

Economic efficiency. In economic terms, TCF-bleaching technology is more profitable than chlorine dioxide based processes, because the cost of a new TCF plant is lower, than ECF. Experience has shown,

16 Currently, there are examples of cellulose production without use of chlorine and its derivatives, by a completely closed production cycle (CTMP - chemithermomechanical pulp plants), which even better meet current environmental requirements.


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that projects already implemented in Russia in the transition to TCF-bleaching allowed for 114-186 tce per 1 ton of pulp savings, while the unit costs amounted to RUR 880-7,150 per ton.

Environmental efficiency. In terms of effluent toxicity, TCF systems produce a less toxic effluent, than elemental chlorine bleached processes, when realistic conditions using actual mill effluents are employed in the experiments as opposed to samples synthesized in the laboratory. Today’s estimates are that some 15-20 true TCF mills are in place. Recently however, effects have been identified in fish populations exposed to effluents from pulp mills producing both bleached and unbleached pulp. The chemicals responsible are not removed by advanced secondary treatment and are suspected to be plant sterols or their derivatives which have a strong endocrine disruptive effect.

In addition to significant emissions of carbon dioxide from cellulose production, there is a considerable damage to the nearby water bodies polluted by effluents from pulp and paper mills. The number of chemical elements in industrial effluents from these plants can reach 250, some of which are very harmful to humans (dioxins).


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5: Dry technology for the cement industry

How the technology works: While the sequence of technological processes in cement production by the dry method is the same as by the wet one, there are significant differences in terms of raw mix preparation depending on the humidity and hardness of the material. In “dry” cement production raw materials are dried before or during grinding, and the raw charge is produced in the form of fine dry powder, while with the “wet” method the raw materials are ground in an aqueous medium, and the raw charge is produced in the form of aqueous slurry with 30-50% moisture content. In the “dry” production, raw materials depending on their hardness are ground down to pieces of 20 to 30 mm in size, and if the moisture content is more than 8%, these pieces are dried in autogenous grinding mills (AGM). Dried materials are in required proportions fed to dry-grinding mills, where they undergo final drying and fine grinding. Most new plants, where “dry” method is used, combine drying, fine grinding, and mixing all raw materials in a ball-tube mill. The raw mix goes out of the mill in the form of fine powder (raw material meal) and is supplied to reinforced concrete tanks, where its contents are corrected to required parameters and homogenized with compressed air. Then the raw material meal is fed to a cement kiln. Rotary kilns in the “dry” method are equipped with external (cyclone) heat exchangers, which in a few dozens of seconds heat up the raw mix to 700-800°C, dehydrate and partially decarbonize it.

Status of the technology in Russia: In 2010, approximately 15% of Russian cement was produced by the “dry” method, while in Japan “dry” method is used by 100% of enterprises, in South Korea by 93%, in USA by 82%, in Western Europe by 92%, in China by 50%, in India by 50%, and in Africa by 66%17. The “dry” technology is used at the following Russian plants:

• JSC “Spasskcement”; • JSC “Lipetskcement”; • JSC «Slantsevskiy cement plant “Tsesla”»; • JSC “Nevyanskiy cementnik”; • JSC “Novoroscement”; • JSC “Kavskiy cement”; • JSC “Metakhim” (Volkhovskiy cement plant); • LLC “Kuznetskiy cement plant”; • JSC “Verkhneabakanskiy cement plant”; • LLC “Atakai cement”; • JSC “Podgorenskiy cementnik”; • JSC “Kamchatcement”.

Potential: By Russian data, specific energy consumption per ton of cement is 170-230 kgce, and in 2010 it amounted to 190 kgce, whereas in other advanced economies most clinker18 is produced with 120-130 kgce/t, and in best practices 100 kgce/t. With the “dry” method, heat consumption for clinker burning is 2,900-3,750 kJ/kg of clinker, while with the “wet” one 5,400-6,700 kJ/kg, and power consumption 110-130 kWh. In general, the “dry” method consumes 3,100-4,400 kJ/kg of clinker, including heat needed to dry raw materials.

In 2009, specific energy consumption for clinker production in Russia, where the “wet” process still dominates, was 6 GJ/t clinker versus 3.7 GJ/t in the European Union (62% gap); or 4.1 GJ/t in China; or 4.5 GJ/t in North America. Comparison of clinker outputs distributions by specific energy consumption in Russia, Europe and North America shows, that not only average consumption is higher, but the whole distribution curve for Russia is much above those for Europe and North America (Fig. 1). For the latter two regions, only “tails” of distributions are different, indicating that capital stock in Europe is newer. For 17 Tracking industrial energy efficiency and CO2 emissions. Energy Indicators. OECD/IEA. 2007. 18 Substance for cement production.


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Russia, much of the distribution comes even above average for Europe (3.7 GJ/t clinker) and for North America (4.2 GJ/t clinker), revealing the dominance of worn out industrial equipment.

FIGURE 1. DISTRIBUTIONS OF CLINKER PRODUCTION VOLUMES BY SPECIFIC ENERGY CONSUMPTION IN RUSSIA, EUROPE AND NORTH AMERICA

2,03,04,05,06,07,08,09,0

0 20 40 60 80 100share of clinker productionen

ergy

inte

nsity

(GJ/

t clin

ker)

North America Europe Russia

Sources: Energy technology transitions for industry. Strategies for next industrial revolution. OECD/IEA. 2009, and CENEf based on Rosstat data

If a tce price in Russia gets closer to the prices of competitors abroad, a switch to “dry” cement production will be the only alternative (excluding closing of production), because otherwise it would be cheaper to buy abroad cement. Besides, today part of cement demand is met through imports (despite the fact that about 30% of Russian cement production capacity is unloaded, which, ceteris paribus, have a competitive advantage over foreign products). Modernization and renovation of existing facilities is also a way to meet cement demand by using more energy efficient and environmentally friendly “dry” production method.

Economic efficiency. One of the major advantages of the “dry” method of cement production is a higher productivity of clinker per 1 m³ of a heating unit. This allows it to design and build furnaces 2-3 times more powerful, than for the “wet” method. Thus, overall technical and economic indicators (except for some shortcomings) of the “dry” technology are superior to those of the “wet” one. When using high capacity ovens, the “dry” method provides nearly two times reduction in specific fuel consumption for clinker burning, about 40% annual output growth per worker, 10% decrease in production costs, and 50% investment reduction for plant construction19.

Only two of 190 existing furnace units in Russia can be viewed as modern ones (JSC "Nevyansky Cement" (Sverdlovsk region) and JSC “Serebryakov cement” (Volgograd region)). The technological structure of cement furnace park in Russia is shown in Table 1.

Table 1. Furnaces park structure in the Russian cement sector

Type of furnaces Share, % Share of furnace overall capacity, %

Wet (arc) furnaces 33 26 Wet (long) furnaces 52 57 Dry 9 17 Blast 6 - Total 100 100

19 However, it should be kept in mind that the possibility of using the “dry” method is limited by the moisture content of raw materials: processing raw materials with a moisture content more than 20-25% is associated with a high cost of heat used for drying, and in this case the “dry” method is losing its economic attractiveness.


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Even those Russian plants which use the “dry” method are generally inefficiently using the technology, and so do not benefit from the cost savings typical for this technology in other countries. For example, almost all the cement and up to 90% of raw materials in the domestic industry is ground in open-ball mills with specific electricity consumption of around 40 kWh, while in the typical for other countries closed cycle it does not exceed 30 kWh. In addition, the use of highly efficient separators of the 3rd generation in the closed cycle makes it possible to modify the granulometric composition of cement as appropriate so as to obtain the desired properties, including in the production of multi-component cements.

The introduction of the “dry” technology at the Russian cement plants saves 87-103 kgce per 1 ton of cement, and the implementation costs estimated at 1,000-10,000 rubles per ton. In cement production, the share of fuel and electricity costs may be up to 70%, so introduction of the “dry” technology can potentially reduce the production costs.

Environmental efficiency. CO2 emissions take place in the process of clinker production, which is an intermediate product in cement manufacturing. In clinker production, limestone, which consists mainly (95%) of calcium carbonate (CaCO3), is heated (incinerated) to form lime (CaO) and CO2 as a by-product. Then CaO reacts with silicon, aluminum and iron oxides contained in the raw material, forming the main clinker minerals (dominated by hydraulic calcium silicates), but these reactions do not emit additional CO2. In practice, the default factor to assess emissions is 0.51 per ton of produced clinker. In 2010, about 40.7 million tons of clinker were produced, which generated 20.8 million tons of CO2 in emission. With an account of the share of cement produced in Russia by the “dry” method and the cost reduction resulting from its wider application, carbon dioxide emission reduction potential in the cement industry is estimated at about 7.1 million tons.


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6: The use of autogenous smelters in continuous copper production units

How the technology works: There are several autogenous (i.e. zero fuel consumption) copper smelting processes. One of them is called oxy-torch smelting, because sulphides undergo autogenous smelting in the form of a suspension and an oxygen torch is used. Pyrometallurgical smelting process of copper raw materials in this process is as follows. Dry concentrate and flux are supplied from two sides to the furnace by a stream of technical oxygen through two burners installed in the furnace end. This leads to the formation of a dust-and-gas torch, which oxidizes and melts materials. The process results in the formation of melt in the tank, which then splits into matte and slag. Exhaust gases leave for treatment through the chimney, located in the middle of the furnace. This process is quite flexible, and can be adjusted depending on the desirable content of copper in the matte.

The second process, which is also autogenous if blast enriched with up to 40% O2 is used, is oxygen-flash smelting of metal sulfides with the use of heated oxygen-air blast. The process of copper smelting in this case is as follows. The burner feeding dried concentrate and heated oxygen-air mix to the furnace is located in the center of the furnace. Particles of the fusion mixture leaving the burner as a suspension melt, and the drops fall into the bay of the furnace, precipitate and separate into matte and slag. The matte contains 45-75% of copper and is usually processed in converters, and sulfur dioxide from the flue gases is used to produce sulfuric acid. By regulating the amount of oxygen supplied to the furnace the technology allows it to get a stable and continuous flow of sulfur dioxide for cost-effective production of sulfuric acid. Fusion-weighted conversion is a variation of this method and allows for capture of up to 99.9% of sulfur in the flue gases, being the purest in the world.

The third process is autogenous smelting of copper sulfide and copper-zinc concentrates in the liquid melting bath, or by the name of the inventor, Professor A.V. Vanyukov, - Vanyukov melting. The method is as follows. So as to ensure autogenous smelting of the fusion mixture with a moisture content below 1-2% in the copper smelting bath, the oxygen content in the blast must be 40-45%; if the moisture content is 6-8%, the oxygen content needs to be 55-65%. Massive and moist fusion mixture is loaded directly to the surface of the melt. If necessary, fine dry pulverulent substances may be injected through the tuyeres. Thus, melting of the fusion mixture and the oxidation of sulphides in the liquid bath take place directly in the melt layer. The horizontal plane of the tuyeres axes the melt is divided into two zones: the upper (above the tuyere) and the lower (beneath the tuyere), where the melt is in a relatively stable condition. In the upper zone the fusion mixture melts, sulphides are oxidized, and small sulfide particles are consolidated. Large sulfide droplets quickly settle in the slag. Intense use of oxygen in this method makes it easier to vary matte composition and the ratio of oxygen supplied through the tuyere and concentrate downloads. Matte composition can be adjusted in a wide range, even to obtain blister copper.

Status of the technology in Russia: This technology is already partially used by Russian enterprises. Blister and refined copper in Russia is produced by the following plants:

Blister copper

• JSC “Sredneuralsk copper-smelting plant”; • JSC “Svyatogor”; • JSC “Uralelectromed”; • JSC “Mednogorsk copper-sulphur plant”; • JSC “Karabashmed”.

Refined copper

• JSC “GMK “Norilsk Nickel”; • JSC “Uralelectromed”; • JSC “Kyshtym copper electrolyte plant”; • JSC “Kolskaya ore mining and smelting plant”; • JSC “Novgorod steel works”;


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• JSC “Uralhydromed”.

Potential: Russian statistics do not provide data on non-ferrous metals production volume or corresponding specific energy consumption, therefore, it is impossible to compare specific energy consumption with the best international practices. It is a known fact, that in Chile it takes 685 kgce and 6006 kWh to produce 1 ton of copper throughout the production chain (from mining to refined copper production). It takes 341 kWh to produce 1 ton of refined copper in Chile, and 339 kWh in the United States20.

Introduction of autogenous smelting may reduce specific electricity consumption to 50% and generally increase copper and sulfur extraction rates compared to the widely used technologies. It also has a very good environmental performance.

Furnaces for liquid bath smelting (not widely used today) have the greatest potential due to the relative simplicity of the furnace design and the copper matte technology. The matte obtained in these furnaces is of a very good quality and does not require re-melting.

Economic efficiency. Introduction of autogenous copper smelting at Russian enterprises brings savings of 5-10 kgce per 1 ton of copper, and the implementation costs are 4,800-64,000 rubles per ton.

20 Tracking industrial energy efficiency and CO2 emissions. OECD/IEA. 2007.


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7: Pulverized coal injection technology in cast iron production

How the technology works: Pulverized coal is coal crushed to dust in special apparatus (mills), which are cylindrical drums with metal balls. Lumps of coal go to the spinning drum, where they are crushed down to 0.07-0.05 mm fractions by striking balls.

Pulverized coal can save up to 100% of natural gas21 and up to 40% of coke (see Fig. 2) in cast iron production. Importantly, it increases the furnace productivity and makes it possible to control the temperature. Therefore, the use of relatively cheap pulverized coal can help reduce the consumption of relatively expensive natural gas and coke.

Coke consumption, kg/t of cast iron

Pulverized coal consumption, kg/t of cast iron

Figure 2. The ratio of coke and pulverized coal consumption

One of the features of this technology is the need for high-speed (0.01 sec) gasification of coal particles in the oxidizing zone of the blast furnace. This requires low-sulfur and low-ash coal with low volatile contents, which has a solid pyrolysis residue with high reactivity. This would ensure a high coke replacement coefficient and reliable operation of the unit.

Status of the technology in Russia: The technology has no practical application in Russian steel works. Most cast iron is produced with the injection of natural gas, the price of which shows a steady growth and will keep growing increasing the attractiveness of this technology. In addition, pulverized coal injection is included (item 23) in the list of the RF Government Decree dated July 12, 2011, No. 562 “On approving the list of facilities and technologies with high energy efficiency, investments in the introduction of which are a basis for granting an investment tax credit”, and so has a preference for introduction.

Potential: Internationally, specific consumption of pulverized coal is on average 120 kg/t of cast iron. In 2010, Russia produced 48.1 million tons of cast iron. Given the fact that the entire output is produced by a different technology, the industry can potentially consume up to 5.8 million tons of pulverized coal. Modern technologies allow for even more meaningful results: 270 kg/t of hot metal, but they require significant investments in the upgrades of coke and sinter plants to increase the thermo-mechanical strength of coke and increase the iron content in the ore part of the fusion mixture. Apart from the ferrous metallurgy, pulverized coal can be used for electricity and heat generation by boilers and CHP.

The main barrier to launching pulverized coal production and to PVC application is transportation of the explosive mixture from coal deposits. Grinding coal at a plant is not difficult; it is difficult to deliver pulverized coal to the consumer over thousands of miles. Methane is gradually released from coal over the whole period of its existence until it is burned, so there are problems related to the delivery of pulverized

21 Pulverized coal is used instead of natural gas.


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coal by railway, which implies the need for special cars to ensure safe transportation and unloading of pulverized coal.

Fine char produced from lignite of Kansk-Achinsk basin (mainly produced at the largest surface mine “Berezovsky”) mixed up high rank coal of A and T grades has the optimal characteristics for pulverized coal production. By some estimates22, the market for fine char in ferrous metallurgy in the near future may vary from 2.6 to 8.0 million tons / year (now no more than 30 tons / year).

Economic efficiency. Introduction of the pulverized coal technology is twice cheaper, than coke oven batteries repair and 3-4 times cheaper than coke oven battery construction. The costs of transferring Russian plants to the pulverized coal technology account for 700-1,300 rubles per ton.

Environmental efficiency. Cast iron is produced by melting iron-oxide ores in blast furnaces, using carbon in the coke or charcoal (sometimes supplemented by coal or oil products) as a fuel and reducing agent. Additional emissions take place as limestone or dolomite flux emits CO2 while iron is melted in a blast furnace, but this category of emissions is viewed as emissions from the use of limestone. Except for a small amount of carbon retained in the cast iron, all the carbon in the coke and fluxes is emitted as a product of combustion and calcination. Carbon plays a dual role of fuel and reducing agent23.

Most Russian steel works use coal, so the emission factor can be estimated at 1.7 tons of CO2 per 1 ton of cast iron. Therefore, GHG emission from cast iron production, with an account of the 2010 output (48.1 million tons), can be estimated at 81.8 million tons. Conversion of cast iron industry to the pulverized coal technology, while bringing the rate of pulverized coal at the Russian plants up to 100 kg per ton of cast iron could reduce emissions by 26 million tons of carbon dioxide. Additionally, it is important to estimate CO2 emission reduction resulting from coke consumption decline (0.3 tons of CO2 per 1 ton of cast iron).

22 http://nacep.ru/novosti-energetiki/tek/o-syrevoj-baze-proizvodstva-pyleugolnogo-topliva-dlya-vduvaniya-v-gorn-domennyx-pechej.html 23 Coke is used by most Russian companies as a reducing agent for the production of iron and steel. The only exception is Oskol Electric plant.


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8: The use of membrane technology in the production of caustic soda in the chemical industry

How the technology works: The membrane technology is currently the most up-to-date method of producing caustic soda, which is about separating the electrolysis cathode from the anode by a synthetic membrane, which is only transparent for sodium ions. Membrane electrolysis is a series of plate anodes and cathodes. Between each anode / cathode pair there is a hydraulically impermeable ion-conductive membrane. Concentrated solution of sodium chloride is fed to the anode chamber. At the anode chloride ions are discharged, and gaseous chlorine is formed. From the anode compartment, low-content sodium chloride goes out, and a diluted solution of sodium hydroxide is fed to the cathode chamber. Water is reduced at the cathode to hydrogen and hydroxyl ions. These hydroxyl ions form liquid caustic soda with sodium ions, which have passed through the membrane from the anode to the cathode compartment. Concentration of sodium hydroxide solution supplied to the cathode compartment goes up, and a highly concentrated solution of sodium hydroxide is fed out.

In membrane electrolysis, hydrogen is produced at a pressure of 0.5 atmospheres, which in most cases eliminates the compression stage. The alkaline obtained in this manner, containing 35% sodium hydroxide and 30 ppm of sodium chloride requires boiling out, which is much simpler than the diaphragm method. In addition, this technology of caustic soda production does not need mercury.

Status of the technology in Russia: At present, there are 20 plants producing caustic soda in Russia, which basically use the diaphragm technology (to a lesser extent, the mercury one). To date, “Sayanskkhimplast” (Irkutsk region) is the only Russian company which has introduced the membrane technology, which has been recognized worldwide as the most efficient, least energy-intensive and most environmentally friendly.

Potential: In 2010, specific energy consumption per ton of caustic soda in Russia amounted to 433 kgce. It can be reduced by at least 15%, in the case of a transfer of production to the membrane technology. Membrane electrolysis is much more cost-effective in terms of energy consumption (compared to mercury by 25%, and to diaphragm by 15%), and electricity savings may amount to 50%. In addition, investment demand for the introduction of the membrane technology is smaller, than of the mercury or diaphragm technologies.

Russian caustic soda plants can produce about 1.6 million tons per annum (80% of capacities are concentrated on 13 plants). In 2010, they produced only 0.5 million tons of caustic soda. Apart from external factors (economic crisis), the decline in production is also related to an internal factor, namely the high production costs, which make it more attractive for consumers to buy caustic coda abroad. In this context, introduction of the membrane technology could help reduce caustic soda production costs and increase the competitiveness of Russian plants. According to forecasts, caustic soda production in Russia could grow up to 1.2 million tons by 2030.

Notably, by 2015 production of chlorine and caustic soda at mercury cathodes in the European Union is forbidden, and this fact cannot be ignored by the Russian manufacturers, who use the mercury process. They are likely to be thinking of the membrane technology more and more often in the near future.

The peculiarity of membrane technology application is that the electrolysis membranes need to be changed every 3-4 years. In Russia their production has not yet been established, and to buy them abroad very expensive, because foreign equipment not manufactured in a country is subject to customs duties. In this context, the transfer of membrane technology accompanied with organization of membranes production in Russia seems promising direction of development for the chemical industry.

Economic efficiency. Introduction of the membrane technology would save 14-98 kgce per 1 ton of caustic soda, and the implementation costs are estimated at 6,000-15,000 rubles per ton. The 2010 output was 475.4 thou tons. Apart from “Sayanskhimplast” plant, all the plants can transfer to the membrane technology.

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