Russia offers unique opportunities for investors who want to implement projects in the energy efficiency (“EE”) sphere and, more particularly, for representatives of countries that already possess experience of implementing EE and energy saving (“ES”) technologies.
The main piece of legislation for EE matters is Federal Law No. 261-FZ “On Energy Saving and Energy Efficiency Increase and Amending Certain Legislative Acts of the Russian Federation” dated 23 November 2009 (the “EE Law”). It created a legislative, economic and organisational stimulus for ES and increasing EE.
To facilitate the efficient use of energy resources and to support and encourage ES, the EE Law provides for several groups of EE requirements applicable to various sectors, notably including the construction (EE requirements as to buildings, structures and installations) and the public sectors.
EE requirements for buildings, structures and installations
According to Russian EE rules, buildings, structures and installations (with only a few exceptions) must comply with the obligatory requirements. The Russian Ministry of Construction, Housing and Utilities is responsible for setting these requirements1 in accordance with the special rules adopted2 by the Russian Government. The EE requirements are to be revised at least once every five years and should cover:
- the maximum energy consumption limits for buildings/structures;
- requirements relating to the architectural, functional, technological, construction, engineering and technical solutions influencing the EE of buildings/structures; and
- requirements relating to specific construction elements of buildings/structures, applicable equipment, technologies and materials.
These EE requirements on design, construction, reconstruction and major repairs identify the parties (developers/builders/owners) responsible for implementation. Failure to comply with them may result in administrative liability3.
EE requirements for public sector
One of the main priorities of the EE Law is the public sector. For instance, energy consumption reduction targets are set for publicly financed institutions. Moreover, companies with state participation and companies carrying out regulated types of activities are also obliged to adopt and implement programmes aimed at increasing EE.
All purchases by state or municipal clients must be made in accordance with ES and EE requirements fixed by the Russian Ministry of Economic Development with the agreement of the Russian Ministry of Energy, the Russian Ministry of Industry and Trade, and the Russian Federal Anti-monopoly Service. These requirements which concern the public procurement of certain types of goods, works and services whose performance requires considerable amounts of energy consumption, include, in particular:
- limits on energy consumption; and
- technological solutions influencing the EE of goods/works/services ordered.
The federal authorities referred to above must monitor and analyse the EE of publicly procured goods, works and services on an annual basis, and they must prepare annual proposals for reviewing the EE requirements for public procurement.
Energy service agreements
Energy service agreements are entered into between a customer (private or public sector) and a contractor to provide works and services aimed at ES and greater EE.
These agreements must include the following mandatory conditions: (i) the volume of ES guaranteed by the contractor; (ii) the expiration date (which may not be less than the term necessary to achieve the ES set by the agreement); and (iii) other mandatory conditions required under Russian legislation.
The discretionary terms of an energy service agreement may include, among other things (i) a clause setting the price for the works and services, subject to the results attained or expected to be attained upon the performance of the contract (e.g. the value of ESs); and (ii) a clause stipulating the obligation of the contractor to install and commission energy meters.
Clauses containing the essential elements of an energy service agreement may be included in contracts of sale and purchase, supply and transport of energy resources (except natural gas not used as motor fuel). Model terms of these contracts have been approved by the Russian Ministry of Economic Development.
Energy audit mechanisms
Previously, the EE Law provided for two main types of energy audit: voluntary and obligatory. According to Federal Law No. 221-FZ4, there now is only one type of energy audit, namely voluntary.
Energy audits may only be conducted by companies and individual entrepreneurs who are members of self-regulated organisations. The audit should be aimed at:
- collecting objective data on the volume of energy used;
- defining EE indicators;
- defining the ES potential and increasing EE; and
- developing and evaluating a list of possible programmes which target EE increase.
The results of the energy audits must be reflected in an energy passport comprising information on the presence of energy meters, the volume of energy used and the variations of such volumes, etc. Copies of energy passports are forwarded to the Russian Ministry of Energy which is responsible for processing, systematising and analysing the information contained in these passports.
Instead of obligatory energy audits as provided earlier by the EE Law, state and local authorities as well as state-owned and municipal institutions now have to submit annual declarations of electric power consumption.
In order to encourage private investors to participate in the EE programme, the EE Law proposes a range of financial/tax incentives.
Such incentives for commercial companies include, in particular:
- investment tax credits of up to 100% for companies investing in EE and ES technology;
- accelerated depreciation of assets categorised as having high EE or assets classified in the top EE class (“Qualifying Assets”);
- three-year corporate property tax exemption on newly accounted for Qualifying Assets; and
- partial compensation of interest on loans granted by Russian banks for the purpose of investing in ES and increased EE technology.
 Order of the Russian Ministry of Housing and Building No. 1550/pr dated 17 November 2017. Back ↑
 Russian Government Decree No. 18 dated 25 January 2011. Back ↑
 A “per breach” penalty for company officials at the rate of RUB 20,000 - 30,000 (EUR 286 - 429); for individual entrepreneurs – RUB 40,000 - 50,000 (EUR 572 - 715); for legal entities – RUB 500,000 - 600,000 (EUR 7,150 - 8,580). Back ↑
 Federal Law No. 221-FZ “On Amendments to the Federal Law “On Energy Saving and Energy Efficiency Increase” and Amending Certain Legislative Acts of the Russian Federation” and article 9.16 of the Administrative Offences Code of the Russian Federation” dated 19 July 2018. Back ↑