USSR: INVESTMENT TRADE-OFFS BETWEEN ENERGY PRODUCTION AND CONSERVATION, 1986-95

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP08S01350R000401350002-3
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• Original Classification: S
• Document Page Count: 55
• Document Creation Date: December 22, 2016
• Document Release Date: March 1, 2012
• Sequence Number: 2
• Publication Date: October 1, 1987
• Content Type: REPORT

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Directorate of Secret
Intelligence 25X1
USSR: Investment Trade-Offs
Between Energy Production
and Conservation, 1986-95
Secret
SOV 87-10059
October 1987
256
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Directorate of Secret
Intelligence 25X1
USSR: Investment Trade-Offs
Between Energy Production
and Conservation, 1986-95
This paper was prepared by
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Soviet Analysis, L
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Comments or queries are welcome and may be
addressed to the Chief, Economic Performance
Division, SOYA,
Secret
SOV 87-10059
October 1987
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and Conservation, 1986-95
USSR: Investment Trade-Offs
Between Energy Production
sectoral fuel consumption by type lies beyond the scope of this study.
This paper focuses on the investment trade-offs between energy production
and conservation. On the production side, our information allows us to
assess the investment outlook for each type of fuel-oil, gas, and coal. On
the conservation side, we are limited in our knowledge of how much of each
type of fuel is consumed in each sector and, thus, how much of each fuel
could be conserved. The quantitative forecasts of energy use and conserva-
tion are, therefore, discussed in terms of total energy. In the discussion of 25X1
potential investment savings, we have made some assumptions as to how
much of this energy would be oil, gas, and coal, but a detailed analysis of
Secret
SOV 87-10059
October 1987
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and Conservation, 1986-95
USSR: Investment Trade-Offs
Between Energy Production
Summary With investment resources taut and energy production costs rising, the
Information available Soviets are increasingly aware of the need to trim outlays for energy
as of 30 January 1987 production and to spend more on energy conservation. The cost of oil
was used in this report.
production is rising steeply, and the nuclear power program will incur
added costs as a consequence of the Chernobyl' nuclear power plant
accident. As the economy grows, energy consumption will continue to rise.
Energy exports will remain both a necessary support to Eastern Europe and
other client states and the Soviets' main source of hard currency earnings.
handling.
Gorbachev's industrial modernization program provides a framework for
improved conservation through introduction of new, more efficient machin-
ery and faster retirement rates for aging capital. Investment aimed at both
upgrading capital equipment and saving labor and raw materials may
contribute, in the long run, to energy efficiency. But, in the short run, these
investments may well increase energy use. This seeming anomaly is
because of the relatively high growth planned in energy-intensive sectors of
the economy, particularly machine building, and the efforts to boost labor
productivity through further mechanization in agriculture and materials
Reacting to the growing economic burden of energy production costs,
Moscow will probably try harder than in the past to find a workable
combination of increased energy production, improved energy conserva-
tion, and interfuel substitution (notably, natural gas for oil). Decisions will
be based in part on comparisons of the investment requirements for the al-
ternative courses of action. But they will also reflect compromises between
long- and short-run objectives and between the needs of the energy sector
and the needs of other sectors of the economy. The energy investment
burden is already substantial: investment in oil, gas (including pipelines),
coal, and electric power together claimed one-sixth of total Soviet invest-
ment in 1981-85. In the 1986-90 plan period, investment in energy
production is slated to rise by 42 percent, half again as fast as the growth in
total investment. 25X1
We have estimated the marginal investment requirements for new energy
production capacity and for a range of specific energy conservation
measures in several major energy-using sectors of the economy. Observing
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the extent to which the Soviets are implementing these measures will
provide indications of how seriously Moscow is pursuing energy
conservation.
Our estimates of the marginal investment requirements `for new energy
production capacity covered oil, gas (including new pipeline construction),
and coal. These account for about 95 percent of Soviet primary energy
production. (New energy production capacity not only provides for output
growth but also offsets declines in output from the stock of wells or mines
existing at the end of the previous period.) Our estimates indicate that
investment requirements for oil (previously the lowest per ton of standard
fuel) now exceed those for gas. Coal will remain the most costly of the three
fuels.
Projections of energy use for 1986-95 under two conservation-oriented
scenarios were compared with energy use based on past trends, which
emphasized energy production. The results indicate that, by 1995, under
scenarios calling for roughly 1-4 billion rubles in annual investment in
conservation, potential energy savings could reach 130-250 million tons of
standard fuel annually. The investment saved by not producing that
amount of energy would be on the order of 10-15 billion rubles in 1995-
roughly half as much as is invested in the oil, gas (including pipelines), and
coal industries together in 1985.
The value of conservation becomes clearer when we compare conservation
costs (which should not change dramatically over time) with our projections
of rapidly rising production costs. We expect 1991-95 investment require-
ments for new energy production capacity to average about 270 rubles per
ton-more than double the 1985 level. Furthermore, because of the annual
depletion of production capacity, producing an extra 130-250 million tons
of standard fuel in 1995 would mean adding an additional 180-350 million
tons of new production capacity over the 1986-95 period.
Despite the potential for saving investment resources, energy conservation
in the USSR will continue to be hampered by the lack of incentives to con-
serve; a tradition of low retirement rates for obsolescent capital equipment;
and the difficulty of achieving coordinated implementation of thousands of
individual actions. Other factors also work against Soviet efforts to
improve energy efficiency. The continuing degradation in the quality of
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raw-material supply (lower oil well flows and poorer grade ores) requires
the use of more energy and other inputs in extraction activities. In areas
such as oil refining and metal processing, the demand for improved quality
of output necessitates an increase in energy-intensive processing. Energy
consumption is increased further by the rising average distances that
goods-fuels as well as other products-must be transported. These factors
add to the risk involved in an all-out effort to shift the emphasis of energy
investment strategy from production to conservation.
Projecting investment requirements for energy conservation in the USSR is
difficult and complex. Lacking adequate Soviet data, we used US experi-
ence to provide benchmarks for a detailed examination of the costs and po-
tential benefits of energy conservation in oil refining, ferrous metals, and
chemicals. assessed the relevance and potential impact 25X1
of these investments for the USSR, given Soviet plans and the state of
Soviet technology. he cost of substantial 25X1
energy conservation ranges from virtually zero for "housekeeping" types of
improvements to high for the installation of new processes. 25X1
energy savings by only 3 percent.
Only a small portion of potential energy savings is dependent on the very-
high-cost measures. For the entire range of measures, investment costs in
the three industrial activities studied in detail averaged about 120 rubles
per ton of standard fuel conserved annually. Eliminating the six highest
cost measures would, however, cut the conservation investment costs to just
over 85 rubles per ton of standard fuel conserved, while reducing potential
earn on the world market.
Our calculations show that imports of Western conservation equipment
would be an efficient way to conserve energy. When weighing the
estimated lifetime energy savings from the use of such equipment against
initial investment and discounted operating costs, all but two of the
measures surveyed would cost less in dollars than the energy saved would
The conservation potential of the other major energy-consuming activities
in the Soviet economy (agriculture; construction; residential; transporta-
tion; and, in industry, cement, electric power, fuels, machine building, and
nonferrous metallurgy) were examined in less detail. We found a wide
spectrum of possibilities. In some sectors-particularly the residential,
vii Secret
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agricultural, and fuel-producing sectors-conservation is potentially sub-
stantial and relatively cheap, but depends on thousands of small actions.
Elsewhere, notably in cement and electric power, major improvements in
conservation are tied to extensive transition to expensive new technologies.
The Long-Term Energy Program published in 1984 and the 1986-90 Five-
Year Plan both assert the importance of energy conservation. Our analysis
supports Soviet contentions that energy conservation is economical. The
Soviets are not likely, however, to realize anything close to our estimated
potential savings of energy and, hence, of investment. Efforts to achieve
large-scale energy conservation during the next 10 years will continue to be
inhibited by many factors, including: the limited supply of energy-
conserving equipment; the high front-end costs of introducing new technol-
ogy; the managerial and incentive deficiencies affecting implementation of
low-cost measures; and the risk that midlevel managers will continue to
concentrate resources on boosting output.
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Energy Investment Alternatives: Production Versus Conservation 1
Investment in Energy Conservation 5
The Soviet Potential for Energy Conservation 6
Methodology for Assessing Soviet Energy 6
Conservation Potential
Results of Case Studies on Oil Refining, Ferrous Metals, and 10
Chemicals
The Energy Conservation Option 14
Potential Energy Savings 15
B.
Analysis of Energy Conservation Potential in Selected Activities 25
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USSR: Investment Trade-offs
Between Energy Production
and Conservation, 1986-95
Energy Investment Alternatives:
Production Versus Conservation
Moscow faces a combination of rising energy-
production costs, rising domestic demand for energy,
and continued need for energy exports. The Soviets
can handle this situation by altering the mix of energy
produced and consumed (gas-for-oil substitution, for
example), by continuing to emphasize production in-
creases despite the rising costs, by improving energy
conservation through greater efficiency, or by some
combination of these. What energy choices the Sovi-
ets make and how successful they are in implementing
those choices will affect the strength of the Soviet
economy as well as the availability of energy for
export
The Soviet energy sector is one of the most important
elements in the Soviet economy. Energy exports are
essential-providing in recent years over half of Sovi-
et hard currency earnings and roughly 70 percent of
Eastern Europe's oil and gas consumption. The USSR
is quite limited in its ability to offer alternative
exports for hard currency, and Eastern Europe would
find it difficult to pay hard currency for substantial
energy imports from other suppliers. Domestically,
even with improved energy efficiency, some increase
in domestic energy availability is necessary to support
economic growth, modernization in industry, and
further mechanization of agriculture.
The energy sector is also one of the most expensive
components of the Soviet economy. In the early 1980s
this sector absorbed about one-fourth of Soviet invest-
ment and about one-seventh of the labor force.' Soviet
authors note that the energy sector consumes about 15
percent of machine-building output, 65 percent of
' The "energy sector" here is broadly defined to include all elements
of the economy involved in the production, transformation, and
distribution of energy; in the associated transportation and other
infrastructure in support of energy; and in the production and
operation of boilers and other major heat-producing equipment.
steel pipe output, up to 20 percent of other ferrous-
metal production, 15 to 20 percent of copper and
aluminum production, and 13 to 16 percent of
cement.'
The investment requirements for energy production
depend in large measure on identifiable factors such
as well-flow rates, drilling depths, pipeline require-
ments, and pumping requirements. In most cases,
historical Soviet data permit approximation of the
relationships involved. Taking uncertainty into ac-
count, energy-related investment requirements can be
forecast, particularly for the USSR, where production
is close to capacity and where output does not respond
to market forces to the same degree as does energy
production in the West. Using this approach, we
estimated investment requirements per ton of coal,
gas, and oil for the 1986-95 period.
Forecasting energy consumption and energy conserva-
tion is considerably more uncertain. The outlook for
energy consumption depends not only on changes in
the efficiency of energy use but also on the structural
composition of the economy, the weather, the level of
mechanization in the economy, and the population's
attitude toward energy use. The increase in energy
efficiency per unit of gross national product in the
United States since the mid-1970s, for example, was
in part because of a structural shift away from
energy-intensive heavy industry and toward the less-
energy-intensive service industries. In addition, an
increase in the severity of a winter increases energy
consumption relative to industrial output, although
the general efficiency of energy use may have risen.
The importance of these factors and their interactions
make historical data less useful in forecasting energy
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consumption or conservation than in forecasting ener-
gy production. Moreover, the effect of higher energy
prices, which stimulated much of the conservation in
the West, is far less important in the planned Soviet
economy.
We address conservation narrowly defined to mean
using less energy to obtain the same product-wheth-
er through the introduction of new, more efficient
equipment or through better operating techniques to
ensure smoother, waste-free utilization of existing
equipment and structures. The Soviet definition is
much broader, including gains made by restructuring
and substitution, and including organic fuels "saved"
by the increased use of hydroelectric and nuclear
power.'
In addition to the complexity of forecasting energy
conservation, there is a scarcity of relevant data.
Although the Soviets have an extensive literature that
discusses hundreds of energy-conservation measures,
information on the investment required for individual
measures or on the energy savings associated with
them is minimal. Moreover, Soviet literature gives
very little indication as to which measures are to be
accorded priority and which will probably be funded.
To the extent that actual conservation gains (as
opposed to meeting plan targets) are treated, the
discussion is usually either at a very generalized level
or so specific to a single plant that generalized
conclusions are difficult to draw.
Furthermore, many investments discussed for their
energy-conservation merits (such as the plan to in-
crease the share of continuous-casting output in the
steel industry) are being made for reasons such as
improvements in product quality or savings of labor
and raw materials in the energy-using industry. Ener-
gy conservation is often only one of many reasons for
making one investment and not another.
Projections of energy conservation levels were made in
two steps. First, energy consumption was forecast over
the 1986-95 period, based on past trends in the five
basic energy-consuming sectors of the Soviet economy
Figure 1
USSR: Growth in Energy Production
and Investment
(industry, construction, transportation, agriculture,
and residential), as well as in the nonfuel category of
energy use (principally, industrial feedstocks). We
estimated gains in energy efficiency by 1995 from the
contractor study and our own survey of energy-
consuming sectors. These gains were then incorporat-
ed into the basic forecast to calculate projected energy
savings. The future benefits of this energy conserva-
tion were then viewed in terms of both lower invest-
ment in energy production and greater availability of
energy for export.
Investment in Energy Production
Although Soviet energy production has grown rapidly
since 1960, it is increasingly more expensive (see
figure 1). The Soviets possess large resources of coal,
gas, and oil, but these are becoming more difficult to
locate, produce, transport, and process. Investment in
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coal, gas, oil, and electric power industries absorbed
over half of the increase in Soviet industrial invest-
ment in 1981-85, although these sectors accounted for
only about one-fifth of the increase in the industrial
component of GNP. Furthermore, the work force in
these sectors increased by about 200,000 workers-
growing at a faster rate than the national average.
Figure 2
USSR: Investment in Primary
Energy Production
While Moscow recognizes that the cost of energy
production is escalating, we believe it may be underes-
timating the rate of increase. For example, the Soviet
Long-Term Energy Program, issued in 1984, projects
that direct investment in the production, transforma-
tion, and distribution of energy will average 20 to 22
percent of total capital investment during the rest of
the century-up from a share of about 18 percent in
1985.4 Our assessment of energy-production targets
and investment requirements suggests that direct
investment in the production of oil, gas, and coal alone
will rise from 13 percent of investment in 1985 to 21
percent in 1991-95
Oil Investment. The rise in oil investment is the
principal force behind the rise in overall energy
investment (see figure 2). In brief, virtually all of the
factors that affect oil production are worsening: new-
well flow rates are falling, well depths are increasing,
the share of free-flowing (easy maintenance) wells is
falling, and the importance of expensive offshore and
high-sulfur onshore oilfields is growing. As a result,
we project that oil industry investment will have to at
least double between 1985 and 1990 to keep produc-
tion from falling sharply.
The principal factor that could change these trends,
the discovery of a giant or supergiant oilfield, would
have little effect on production over the next 10 years
?Osnovnyye Polozheniye Energeticheskoy Programmy SSSR na
Dlitel'nyyu Perspektivy (Moscow: Izdatel'stvo Politicheskoy Liter-
atury, 1984), p. 29.
'Our projections of oil and gas investment are based on our
assessment of the efforts required to produce the amounts of oil and
gas that we forecast, while the coal projection is based on analysis
of two scenarios-one a high-cost option of developing Eastern coal
basins and the other a continuation of previous trends. Details on
the projection methodology are available upon request to the Chief,
Economic Performance Division, National Issues Group, Office of
because of the long leadtimes required to bring new
oilfields into full production-particularly if the dis-
covery is in deep water offshore.) 25X1
Indications from the 1986-90 plan, as well as from the
1986 plan, suggest that the Soviets are planning large
investment increases in oil production. Both develop- 25X1
ment and exploration drilling in the principal oil
region (West Siberia) are to double in 1986-90, com-
pared with drilling in the 1981-85 plan. Investment in
infrastructure to support the production efforts is also
slated to increase substantially. Indeed, the invest-
ment increment planned for the oil industry in 1986
was about as large as the increase in the entire 1981-
We estimate that oil investment requirements will
continue to increase rapidly throughout the period.
Our estimates are based on the investment require-
ments for producing 11.3-12.0 million barrels per day
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Figure 3
USSR: Estimated Investment
Requirements for New Oil, Gas, and
Coal Capacity -
Rubles per ton of standard fuel in 1970 prices
Gas Investment. The exploitation of natural gas re-
sources involves coping with technically challenging
problems that require expensive solutions. Gas from
the new fields of the pre-Caspian Depression is excep-
tionally high in corrosive hydrogen sulfide and other
contaminants, requiring the use of state-of-the-art
production and processing equipment from the West.
Gas from the West Siberian fields has to be transport-
ed to the European USSR through 2,500 to 3,500
kilometers of large-diameter pipeline, most of which
has been constructed with imported pipe. Roughly 10
percent of the gas transported such distances is used
Nevertheless, gas production is in some respects a
simpler matter than production of either oil or coal.
Reserves are abundant. Gas Ministry drilling require-
ments are about one-tenth of those of the Oil Ministry
(because of the high flow rates of gas wells, and lower
depletion rates). Labor productivity is far higher for
gas than for other fuels, and no new technology-such
as the long-distance slurry pipelines or liquefaction
facilities being considered for coal-is required for
the production and transmission of most Soviet gas.
in 1990-investment in drilling, oilfield equipment,
and production infrastructure in West Siberia, invest-
ment for exploration drilling, and investment to sup-
port production in regions outside West Siberia.6 A
similar analysis was used to project investment re-
quirements in the 1991-95 period. We estimate that
oil investment requirements per ton of new capacity
will double in 1986-90 compared with investment
requirements in 1981-85, and will increase again by
about 30 percent in 1991-95 (see figure 3). The slower
increase in 1991-95 is because of two factors-a
projected tapering off of the decline in the flow rates
of new oil wells in West Siberia and the availability of
additional infrastructure established in 1986-90.'
Our projections show that gas-industry investment
requirements will rise slowly in 1986-90 (see figure 3).
Although the Soviets will be moving increasingly
offshore, into high-sulfur fields, and farther north in
West Siberia in 1991-95, they can build on existing
infrastructure in West Siberia and apply experience
already gained in developing high-sulfur fields at
Astrakhan' and Tengiz. Pipeline investment require-
ments will probably continue to account for about 60
percent of the gas investment total.
Coal Investment. The outlook for coal investment
depends on whether the Soviets carry out their plans
' Soviet data show that new-well flow rates in West Siberia fell by
57 percent between 1980 and 1985. We estimate that they will fall
by nearly 30 percent between 1985 and 1990, and by another 25
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to develop extensively the low-quality Siberian and
Kazakh coals.' We project two coal scenarios:'
? A low option in which coal investment grows at its
historically low annual rate (3.5 percent since 1970)
and coal production falls to roughly 700 million tons
by the early 1990s.
? A high option in which the coal industry receives an
increase in investment and accelerates development
of its eastern coal basins. Under this scenario, coal
production rises to as much as 800 million tons by
1995.
In the high coal option, we project that the investment
costs per ton of new capacity will increase rapidly in
the late 1980s, as the expensive front-end investment
in eastern coal is made with little initial gain in
output. By the 1990s, however, investment is project-
ed to decline slightly, as investment costs per ton of
new capacity decline. In the low-investment case,
costs rise in 1987, but grow only slowly through 1995
(see figure 3). Although the high option is more
expensive, the Soviets may see the potential gain-an
additional 400 million tons of coal above the low coal
option during the 1987-95 period-as worth the cost,
particularly given the enormous resource base in coal
(reserves widely estimated to be some 200 times as
large as current annual production) and the increasing
difficulty in maintaining the level of oil output at a
relatively high level.
In both coal scenarios, we estimate that coal produc-
tion remains well below Soviet targets. The 1986-90
Five-Year Plan calls for production of 780-800 mil-
lion tons of coal in 1990. Press reports indicate that
the Soviets are looking at a 1995 coal production
' Coal production has stagnated until recently due in part to the
necessity of working thinner and deeper coal seams in the older coal
regions, especially in the Donets Basin, which still produces some
25 percent of Soviet coal. There are abundant, easily mined but
largely low-grade coal deposits in Siberia and Kazakhstan. Large-
scale production from these regions, however, awaits expensive
technological solutions to problems of transportation and quality
enhancement.
target in the range of 850 to 900 million tons-6 to 13
percent higher than our high estimate. Our estimate
reflects an assessment of the difficulties that the
Soviets will have in overcoming the technical prob=
lems related to the transport, conversion, and use of
coal from the eastern regions.
Despite rapidly rising costs and little or no growth in
the production of oil, investment in the oil industry
was for long the cheapest way for Moscow to increase
new energy capacity (see inset). For example, as late
as 1985 a ruble of oil investment bought about 10
percent more energy than a ruble of gas investment
(including gas pipelines).10 But nearly all of the steep
rise in oil investment offsets depletion-without this
rise, oil production would decrease markedly.
The conclusion that gas was the more expensive fuel,
but that oil is surpassing it, agrees with published
Soviet energy discussions." This cost trend is only one
of the factors that favor an emphasis on gas produc-
tion. Other factors include: the relative ease of pro-
duction, the abundant reserves, and the long-run
benefits of pipeline investment (compared with invest-
ment in new oil wells or pumping equipment).
Investment in Energy Conservation
The growing awareness of energy's burden on the
economy's investment resources has intensified inter-
est in energy conservation. Soviet writers repeatedly
stress the relative cheapness of energy conservation
measures. They commonly assert that the investment
required to boost net energy production by one unit is
two to three times as great as the investment required
to conserve an equivalent amount of energy. Figures
cited for the investment cost of conservation measures
are in the range of 35 to 80 rubles per ton of standard
'? In 1985, for example, 11.5 billion rubles (1984 rubles) were
invested in the oil industry, and new production capacity of an
estimated 100-110 million tons of standard fuel was created. Gas
industry investment of 4.2 billion rubles for production and 5-6
billion rubles for pipelines added an estimated 80 million tons of
new capacity.
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Comparison of Investment Costs
The forecasts of investment-to-new-capacity ratios
for individual fuels can be converted to a standard-
fuel-equivalent basis and then compared (see figure
3). The following conclusions can be drawn:
? Oil investment requirements per ton (standard fuel)
of capacity were the lowest among the three major
fuels through the 1981-85 period, although they are
growing considerably faster than those for gas.
Beginning with the 1986-90 period, however, invest-
ment requirements for oil will exceed those for gas.
? Investment requirements for a given amount of new
energy capacity from gas (including pipelines) were
greater than those for oil before the 1986-90 period.
These requirements were high initially (in relation
to investment in oil) because of the high capital
outlays required for gas pipelines.
? Coal investment presents the greatest uncertainty.
The trend in investment requirements depends
heavily on the priority given to the sector and on the
Soviets' ability to solve the technological and trans-
portation problems relating to use of the cheaper
eastern coal. The results of both scenarios exam-
ined, particularly when the falling average energy
content of coal is taken into account, suggest that
coal is the most expensive option. Even in the low
case for coal, investment per ton of standard fuel is
higher than that in the high scenario for oil in 1995.
Given Gorbachev's concern about slowing the
growth in investment in energy production, the
chances for adoption of the intensive coal option
appear less likely when the other investment alter-
natives are examined.
fuel." This range is lower than our estimates of 75 to
95 rubles of average investment required per ton of
capacity to offset depletion and provide net growth in
output (including gas pipeline investment). In addi-
tion, gains from conservation investment normally
have a longer lifespan than those from production
investments.
The Soviet Potential for Energy Conservation
Despite many obstacles to conservation (see inset), the
Soviets still have considerable potential for imple-
menting energy savings. Overall, they do not use
energy efficiently. The general structure of Soviet
energy production, transformation, and consumption
as of 1980 is illustrated in figure 4. The Soviets at
that time converted into usable energy only 37 percent
of the original energy content of the energy pro-
duced-compared with 45 to 55 percent for most
industrialized countries in the mid-1970s."
Moreover, overall measures of efficiency hide some
relative inefficiencies. The Soviets are highly efficient
in supplying electricity and heat because of the high
percentage of cogenerational power plants," but are
considerably less efficient than the West in areas such
as oil refining and production of chemicals
A striking fact emerging from examination of the end
uses of Soviet energy is that the energy sector (includ-
ing production of fuels, refining, electric power, and
heat production) is itself the largest energy consumer,
accounting for nearly one-third of overall energy
consumption." Hence, energy conservation by other
sectors not only reduces energy consumption directly
but also offers a potential for reducing the energy
sector's internal use of energy.
Methodology for Assessing Soviet Energy
Conservation Potential
We used a four-stage process to assess the outlook for
energy conservation through 1995. As a first step, we
"Joy Dunkerly, Trends in Energy Use in Industrial Societies, An
Overview (Washington, D.C.: Resources for the Future, 1980),
14 Cogeneration is the process of capturing and using heat generated
in an industrial process, particularly in the production of electric
power. This heat can be used for space heating or for industrial
steam needs.
cheskogo Kompleksa (Moscow: Energoizdat, 1981): p. 20.
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Factors Hindering Soviet Energy Conservation
Limited Investment. Investment in energy conserva-
tion has been slighted. In 1983, according to the
Soviet press, ministries were allocating only 0.5
percent of their investment allocations to energy
conservation.
Emphasis on Output. Despite the assigning of energy
conservation indicators, an enterprise's success still
depends on output. Energy conservation measures
that impede output, even if only in the short run, thus
receive low priority. Changes in the prices of inputs
generally have failed to alter managerial behavior or
provide incentives for increased efficiency.
The Nature of the Problem. Large-scale energy con-
servation requires thousands of small-scale actions.
Conservation measures are often plant-specific, rely-
ing heavily on individual initiative. The problem is
not well suited to a centralized national approach.
The Lack of a "Conservation Industry. "Although the
installation of control devices, such as thermostats, is
one of the simplest and cheapest ways to conserve
energy, a 1983 press report indicated that the Minis-
try of Instrument Making was supplying industry
with only 10 percent of that year's requirements for
such conservation equipment.
Poor Implementation. Even when the equipment is
available, it is often poorly used, not working, or
never installed. One press report, for example, dis-
cussed heat-recovery boilers that were delivered to
several plants but never installed. In one case, the
boiler was left in an equipment yard for over 10
years.
Poorly Developed Energy Norms. A plant's
`norms'-the amount of energy required to produce
a unit of output-determine its energy allocation.
Inflated norms, encouraged in part by the lack of
measuring instruments, appear to be widespread. At
the plant level, inflated norms can mean greater
assurance of supply and easier attainment of conser-
vation targets. At the national level, these false
norms can lead to energy shortages and false indica-
tions of energy savings.
Long Leadtimes. Many conservation measures take a
long time to implement. The replacement of old
processes with new energy-efficient ones can take
seven to nine years, according to one Soviet energy
expert.
The Aging Capital Stock. Retention of obsolete
capital also makes conservation gains difficult. Re-
tirement rates have been especially low in some of the
most energy-intensive sectors (electricity, ferrous
metals, machine building, and chemicals). Gorbachev
calls for turning the situation around, but it will be
difficult.
Decreasing Quality of Raw Materials. A degradation
in the quality of raw materials is compounding the
structural and administrative problems already cited.
Lower quality metallic ores, lower flow oil wells,
deeper and more remote coal mines, all require
increased efforts, including increased energy use, per
unit of output.
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Figure 4
USSR: Energy Use Patterns, 1980
Heating furnaces,
domestic ap-
pliances (10%)
Motors and
machinery (18%)
Industrial
furnaces (18%)
Direct fuel-using
installation (46%)
Energy
supplies
Electric power
stations (38%)
Steam and hot
water (22%)
Note: The energy remaining following the energy transformation process is
37 percent, 1 percent higher than the energy in end use. This is because
about 1 percent was used for the electric power sector's own needs.
Source: Promyshlennaya energetika (Number 9, September 1984): p. 6.
High temperature
process (8%)
Mid- and low-
temperature
processes (21%)
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assessed the potential for energy conservation not
requiring added investment. Second, we assessed the
potential for energy conservation entailing investment
in new plant and equipment. Next we assessed how
far the Soviets are likely to proceed with the different
conservation approaches, given our perceptions of
their priorities and the availability of investment
resources. Finally we compared the potential gains
from energy conservation measures against offsetting
factors that would increase the energy used per unit of
output.
Many potential energy conservation measures involve
little or no investment. These involve only greater
attention to an activity and more efficient manage-
ment of energy use within the given technological
environment. The resulting savings would reflect the
"human factor" that Gorbachev has often stressed.
Studies performed by the contractor found a range of
low-cost, essentially "no-investment," energy-efficien-
cy improvements that could yield savings equivalent
to about 5 to 10 percent of energy use in 1980, based
on assessments of Soviet technology and US experi-
ence in energy conservation with such technology."
We estimate that Soviet potential would be near the
bottom of this range, on the basis of evidence from
comparison of individual industries. Although the US
experience may understate the potential savings in the
more wasteful Soviet economy, the savings achieved
in the United States were in part because of substan-
tial financial incentives and the availability of suffi-
cient metering instruments and other essential low-
cost devices. Such equipment is in short supply in the
USSR, and incentives appear to be insufficient at
both the managerial level and the household level to
have the kind of impact on energy use that was seen in
the United States.
We also assessed potential gains in energy efficiency
because of investment in new plant and equipment-
in considerable detail for the three sectors evaluated
by the contractor and in a more summary fashion for
16 In one case, ammonia production, the contractor's study estimat-
ed that no-cost efficiency gains could reach 20 percent. Of this
estimated potential gain, however, 12 percentage points were
because of the removal of bottlenecks that have impeded an
increase in production capacity. In actuality this effort would
the other major energy-using sectors of the Soviet
economy. The investment options examined ranged
from inexpensive modifications of existing equipment
to high-cost shifts to totally new technologies. These
investment-based gains in energy efficiency were then
added to the low-cost conservation potential to provide
an estimated upper bound of energy conservation
potential.
Next, we combined our estimate of conservation
potential with our assessment of Soviet priorities and
availability of investment to estimate a "more likely"
range of conservation gains, a range that falls below
the upper bound of potential conservation. This step
involves a consideration of the side effects of conser-
vation. If, for example, the conservation measure
results in substantial savings of labor or raw material,
or if it results in improved quality, then even expen-
sive measures are more likely to be implemented than
if there are no positive side effects. We also examined
other factors, such as what else is happening in a
given sector, that may influence conservation
decisions.
Finally, we assessed offsetting elements-factors that
could cause the energy intensity of the Soviet econo-
my to rise. Energy use per unit of output can increase
for several reasons:
? A degradation in the quality of raw material inputs
or an increase in the difficulty of obtaining them
may require more energy that in the past (iron ore
and crude oil extraction are examples).
? Demands for higher quality output may require
more energy in processing activities (oil refining and
metal processing).
? Labor-saving innovations (such as increased mecha-
nization in agriculture or in materials handling)
substitute energy for labor and can increase the
energy used per unit of output.
These increases may well more than offset conserva-
tion gains that are occurring at the same time.
Even net conservation gains do not mean that energy 25X1
consumption will decrease, energy use may simply
grow less rapidly. For example, according to Soviet
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statistics, the electricity and heat consumed to pro-
duce 1 ton of ammonia dropped substantially, by over
20 percent, between 1981 and 1985. Output of ammo-
nia, however, grew by about 27 percent, so the total
amount of energy used in ammonia production actual-
ly increased.
Results of Case Studies on Oil Refining, Ferrous
Metals, and Chemicals
The sectors chosen for the contractor studies-oil
refining, ferrous metals, and chemicals-were select-
ed on the basis of their importance to the Soviet
economy, their high energy-intensiveness, and their
potential for conservation (evaluated in the light of
Western experience).
The methodology entailed examination of conserva-
tion measures taken in the corresponding sectors of
US industry, focusing on technology comparable to
current Soviet technology. The assumption was then
made that the energy savings in the USSR from a
given conservation measure would be the same as on
comparable US equipment. Although Soviet problems
in implementing these measures could lessen the
impact, the potential of the conservation measures
should be roughly comparable. The impact of each
conservation measure (energy saved per unit of out-
put) was multiplied by that portion of Soviet produc-
tion capacity where the relevant measure was deemed
applicable. Total investment requirements and annual
energy savings were computed. We then converted the
1980 dollar costs provided by the contractor to 1970
rubles to make the investment requirements compara-
ble to those for production investment." We used
1970 rubles rather than 1984 rubles because of the
limited availability of some essential details in 1984
prices (see inset).
On 1 January 1982 the Soviets changed prices from
those that existed in the 1970s to a new price base.
Over the past four years changes have continually
been made in this new price base, and we do not as yet
know many of the prices.
This paper uses 1970, rather than 1982 or later,
prices for two principal reasons:
? The calculations in this paper require the use of
ruble-dollar ratios for numerous components of the
complex machine-building sector. Prices at this
level of detail are not yet available in 1982 or later
prices.
? In this paper we focus on the marginal, comparative
investment requirements for energy production and
conservation. Both types of investment involve the
purchase of machinery, either for producing or
saving energy. The fact that in 1982 energy prices
rose relative to machinery prices enhances the gains
from both types of investment, but it is not clear
that these increases favor one type of energy invest-
ment over another. Soviet internal prices for crude
oil prices rose by 130 percent in 1982, but prices of
refined oil products rose by only 12 to 51 percent.
To the extent that energy price increases are not
fully passed on to the energy consumer, the price
increases would somewhat favor energy production
over energy conservation.
Both the nature of measures requisite for conservation
and the resulting energy-savings potential differ wide-
ly from sector to sector. In oil refining, for example,
the recapture of waste heat and the more careful
monitoring of energy use can yield big energy savings.
In another area-ammonia production-the major
sources of conservation are in simply operating exist-
ing equipment more efficiently. In still other cases-
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Table 1
Summary of Results of
Conservation Case Studies
Investment Required Investment Cost
(million rubles) (rubles per ton
standard fuel)
Energy Saved
(million tons
standard fuel)
Weighted average (based on per-ton investment cost weighted by
energy saved for each sector shown).
steel and methanol-many gains are expensive and
made by a transition to new, more energy-efficient
processes and technologies. Furthermore, the type of
energy saved varies. Conservation in oil refining saves
principally oil, while efforts in ferrous metals will save
principally coking coal. Conservation gains in many
areas of the chemical industry will principally reduce
the industry's consumption of natural gas.
Energy conservation in ferrous metals is the most
expensive among the industries surveyed, yielding
only about 60 percent of the aggregate energy savings
for over 90 percent of the investment. We believe this
finding to be typical of sectors of the Soviet economy
such as electric power, cement, and nonferrous met-
als, where older technology is generally used efficient-
ly and improvements are linked to the expensive
transition to new technology. The energy conserved as
a percentage of the sector's 1980 consumption is
highest for chemicals (25 percent) and lowest for
ferrous metals (12 percent).
Overall, implementing all of the measures surveyed by
the contractors would potentially save about 55 mil-
lion tons of standard fuel annually (about 2.5 percent
of primary energy production) at an average invest-
ment cost of 120 rubles per ton (see table 1 and figure
5). Eliminating the six highest cost measures (repre-
senting 3 percent of the potential energy saved, but 30
percent of the investment required for the whole
package of conservation measures), would reduce the
investment required to 85 rubles per ton. Housekeep-
ing and other measures requiring little or no invest-
ment account for nearly 30 percent of the potential
energy saved.
Some actions the Soviets are discussing, such as the
move to continuous casting of steel, appear to be too
expensive if only the energy-saving aspects are consid-
ered. However, the improvements in labor productivi-
ty and the savings in metal, as well as product-quality
improvements, make the process appealing.
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The results noted above assume that new machinery 25X1
and processes replace (rather than add to) old, less
efficient machines and processes. The addition of an
energy-efficient machine or process, if it is used for
new capacity without retiring any less efficient ma-
chine or process, increases total energy use. Energy is
"conserved" only in the sense that less energy is used
than if additional capacity based on the older process
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Figure 5
USSR: Investment Trade-Offs
Between Incremental Energy
Production and Energy Conservation
in Selected Industries, 1991-95--
Investment in production or conservationb
Steel (to reduce
use of oil and gas)
5 10 15 20
Cummulative energy conserved,
in million tons standard fuel
Note: The curves for steel, oil refining, and
ammonia show marginal investment cost for
energy savings as progressively more expensive
measures are employed.
In the steel industry, for example, investment in
the less expensive conservation measures leading
to reduced use of oil and gas is cheaper than
investment in more oil and gas production-up
to savings of about 9-10 million tons of standard
fuel.
a For illustrative purposes, incremental energy
investment is assumed constant for the period
1991-95.
b Rubles per kilogram/standard fuel.
were built instead of the new one. Such "savings" are
indeed included in the Soviet definition of conserva-
tion. Such improvements on the margin will probably
continue-new refinery units will probably be built
closer together so that less heat is lost, new ammonia
and methanol plants are being imported or copied
from the West, and new steel plants will use electric-
arc and basic-oxygen furnaces rather than open
hearth. Such marginal improvements, however,
change the average efficiency of a large industry only
slowly.
Analysis of Conservation Potential in Other Activities
We also conducted a more general survey of the
energy conservation potential and investment outlook
in the other major energy-consuming sectors-agri-
culture, construction, electric power, urban-residen-
tial, transportation, and four industrial sectors (con-
struction materials, fuels, machine building, and
nonferrous metals). These activities, together with the
three evaluated in detail, account for 90 to 95 percent
of total Soviet energy consumption. The results of this
broader survey, discussed more fully in appendix B
that, while substantial conservation po-
tential is present, the costs tend to be high after initial
gains.
In some activities-notably elements of the residen-
tial, agricultural, and fuel-producing sectors-conser-
vation potential is substantial and relatively cheap,
but relies on thousands of small actions, each of which
has little impact by itself. These actions include the
installation of meters and other control devices, insu-
lation, and improved piping and storage equipment. In
sectors such as cement, aluminum, and electric power,
big improvements are tied to the transition to new
technologies-a very expensive and long-term propo-
sition. In some cases, such as the energy-inefficient
housing built after the mid-1970s when insulation
standards were lowered (standards have since been
raised), change will occur slowly over several decades.
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Table 2
Summary Evaluation of USSR
Potential for Energy Conservation a
Principal
Energy
Source(s) b
Efficiency
Relative to
US Activity
Conservation
Potential
of Fuel Use
Conservation
Cost
Low
High
Low
High
High
Medium
Medium
High
Nonferrous metals
Electricity, heat
Medium
Low
High
Oil refining
Oil, gas, heat
Low
High
Low
a The information on ferrous metals, chemicals, and refining was
provided by the contractor. The terms low, medium, and high are
used to give a qualitative characterization of the situation in each
sector. In terms of relative efficiency, the Soviet sectors are rated as
being less efficient (low), about the same (medium), and more
efficient (high), compared with their US counterparts. In terms of
conservation potential low implies potential energy savings of less
Moscow will find no easy solution in the trade-off
between energy production and conservation: Soviet
energy use will rise whether the leadership empha-
sizes production or conservation. Investment costs,
moreover, are rising sharply for production of fuels:
? For oil, because of sharply diminishing returns to
drilling and increasing difficulties at existing wells.
? For gas, because new wells are deeper, offshore, or
are in gasfields where corrosive gases are also
present (also because of the continued burden of
pipeline investment required for expansion of West
Siberian gas production).
? For coal, because of worsening mining conditions in
the western USSR and the expensive technological
solutions required for the development of low-quali-
ty eastern coal.
than 5 percent; medium implies savings of 5 to 10 percent; and high
implies savings of over 10 percent. With regard to conservation
cost, low implies average costs of less than 50 rubles per ton of
standard fuel; medium implies average costs on the order of 50 to
100 rubles per ton; and high implies costs of over 100 rubles per ton.
b Heat refers primarily to steam generated in boilers.
Given the rising trends in marginal investment re-
quirements for production of oil, gas, and coal, the
Soviet emphasis on meeting incremental energy needs
with gas appears to be the best production choice over
most of the 1986-95 period. Oil is rapidly becoming
more expensive; large reserves of gas are readily
available and gas is easier to produce than oil in the
USSR; and a large expansion of coal production calls
not only for high investment but also new technology.
We estimate that achieving the energy conservation
potential in the Soviet economy would reduce energy
consumption by 5 to 10 percent from trend level by
1995, freeing investment resources for other uses. The
advantages of this course of action could appeal to
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Moscow because it grapples with the need for greater
investment in industrial modernization. So far, how-
ever, Moscow has shown little inclination to move in
this direction.
The Energy Conservation Option
Energy conservation presents risks and penalties as
well as rewards. Soviet policymakers averse to near-
term risks may try to avoid these risks and penalties
by continuing their traditional emphasis on produc-
tion. The heavy emphasis on energy production in the
1986-90 plan, along with continued discussion of the
importance of energy conservation, may represent a
less risky choice than an all-out drive for energy
conservation. Low energy-production targets, coupled
with high conservation expectations, could lead to
energy shortages and economic disruption if conserva-
tion efforts are not markedly more successful than in
the past. The Long-Term Energy Program's goal of a
transition to an "energy-efficient growth path" could
require a rather painful transition period, just as
adjustments elsewhere in the world after the 1973 oil-
price shock were disruptive.
Moscow may also be concerned about the indirect
costs of measures that, while entailing little or no
direct expenditure, call for additional investment in
supporting industries, transportation or other infra-
structure, or training. Perhaps more significant in the
long run-and the most difficult to bear-would be
the political and social costs of providing effective
incentives to alter the behavior of managers and
workers in ways that promote energy conservation.
Conservation efforts could follow two tracks. First,
the Soviets will probably continue their efforts to
improve energy efficiency by means not requiring
additional investments. Such efforts include turning
off equipment when not in use, better monitoring and
control of energy use, and better operational proce-
dures such as maximizing use of production capacity
and avoiding frequent stopping and starting of units.
Although some efforts may be cost-free or very cheap,
large-scale implementation continues to be hampered
by the lack of necessary monitoring equipment, the
continuation of raw-material bottlenecks that prevent
efficient utilization of machinery, a shortage of skilled
workers, and insufficient incentives to those who must
implement the measures. Second, Soviet planners
have numerous energy-conserving options that require
substantial investment. Many of these involve the
introduction of new technology and, as discussed
above, often depend on ancillary advantages to justify
a large share of their cost.
Since investment resources are scarce, Moscow will
presumably rank in order of priority the allocation of
resources for conservation. We do not know what
these priorities will be or exactly how they will be
determined. But we can make two basic assumptions:
(a) oil is the scarcest fuel, followed by coking coal, and
(b) energy is not the only scarce resource-capital,
labor, and other materials (metal, for example) will be
in relatively shorter supply in the coming years than
they were in the past. We believe that Soviet econom-
ic planners faced with these conditions would proba-
bly give priority to some of the following measures:
? Continuous casting of steel (expensive, but steel
quality would be improved and labor productivity
would be higher during a period of increasing
demand for steel).
? Further installation of heat-recovery boilers and
heat exchangers, especially in the refining, ferrous
metals, and chemicals industries (widespread imple-
mentation of a relatively cheap and simple technol-
ogy can yield big energy savings).
? Increased dieselization of trucks (light oil products
are saved).
? Low-cost coke-saving measures in the ferrous metal
industry.
? Surfacing of dirt roads. (More asphalt is used, but
trucks will be more fuel efficient. The potential
reductions in agricultural losses are probably more
important than the energy savings)."
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? Improved oil-storage equipment-floating roof
tanks, for example. (Oil savings from this measure
could be substantial, particularly in the agriculture
and fuel sectors.)
? Attempts to replace small, inefficient boilers in the
heating sector with centralized heat supply wherev-
er possible (big potential savings).
In addition to implementing a number of these mea-
sures, the Soviets could make more widespread use of
energy-efficient processes and structures in new con-
struction and in industrial expansion. Benefits from
this option may be slow to materialize, however.
Gorbachev's plans for modernization focus heavily on
retooling and renovation rather than on new construc-
tion. As in the West, incorporation of efficient designs
and processes is usually cheaper in an initial installa-
tion than in retrofitting older units.
A Role for Western Technology? The Soviets have
expressed interest in importing conservation technol-
ogy from the West. Given the considerable problems
Moscow has had implementing conservation measures
and the relatively primitive status of the Soviet "con-
servation industry," imports would be an efficient
alternative where equipment compatibility problems
are not prohibitive. Computing estimated lifetime
energy savings, investment, and discounted operating
costs and using an estimated 1990 oil price of $20 per
barrel as a benchmark (deflated to $13.54 in 1980
dollars), all but two measures (measures representing
about 5 percent of the total annual energy savings)
would cost less than the saved energy could earn on
the world market. If energy cost savings were the only
consideration, we would thus expect the Soviets to
seek Western conservation technology actively. Other
hard currency import requirements, for industrial
machinery and grain imports for example, will limit
the Soviets' ability to import energy efficient
equipment.
Potential Energy Savings
Despite uncertainties about data and Soviet inten-
tions, we can obtain a rough estimate of potential
energy savings for 1995 by comparing the energy
requirements projected for 1995 (based on an estimat-
ed range of energy conservation measures) with those
based on no improvement in energy conservation.
Using projected data on population, GNP, and capital
stock from our macroeconomic model of the Soviet
economy, we projected trends in energy use after 1980
in the six basic economic sectors, assuming no in-
crease in energy efficiency. The projection for 1981-
85 was, on average, within 1 percent of reported total
energy consumption, suggesting that little conserva-
tion had occurred in 1981-85. This finding is further
supported by published Soviet data on 1981-85 energy
efficiency in the production of 28 goods and services,
which showed little or no improvement in nearly all
we have estimated gains in energy efficiency
by 1995 (see table 3). The simulations show that, for
the same level of economic output in 1995, Soviet
energy consumption could be lowered by roughly 5 to
10 percent if our estimated range of energy conserva-
tion measures are taken, compared with no improve-
ment in efficiency relative to 1980. The prospective
energy consumption and savings are summarized in
the following tabulation:
Million tons of
standard fuel
The indicated savings are lower than those implied for
1995 by the Soviet conservation goal of 540-580
million tons for the year 2000 included in the Long-
Term Energy Program. The higher Soviet estimate of
energy savings probably results from the Soviets' use
of assumptions concerning economic growth, the im-
pact of economic reform, and plant-level commitment
to conservation that are more optimistic than ours (see
inset).
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Table 3
USSR: Conservation Potential
by Economic Sector
Potential Estimated
Conservation Attainable
(percent relative Conservation a
to 1980
consumption)
a Includes estimated impact of energy-intensifying factors.
b Weighted by share of industrial energy consumption in 1980.
Estimated Share Weighted
of Industrial Average b
Energy Consumption
in 1980
The Bottom Line: Conservation, Investment,
and Hard Currency
The aggregate potential for energy saving from con-
servation in the USSR can be roughly quantified in a
simple example: if the economy grows at roughly 2 to
3 percent per year through 1995, a stable energy-
GNP ratio would require 200 to 250 million tons more
standard fuel in 1995 than if the ratio declined by
only 10 percent (half of the 1970-81 decline experi-
enced in the United States). This added amount of
energy is equivalent to 10 to 13 percent of total Soviet
energy consumption in 1985.
The impact of conservation on investment can be
calculated by allocating the savings among oil, gas,
and coal, and examining the investment that could be
saved by not producing the saved energy. We current-
ly estimate that the Soviets will invest over 30 billion
rubles in 1990 and 40-45 billion rubles in 1995 in the
oil, gas, and coal industries. Assuming for illustrative
purposes that half of the savings in our forecast are in
oil and the rest is split evenly between gas and coal,
investment in energy production could be about 5-10
billion rubles less in 1990 and 10-20 billion rubles less
in 1995 with the conservation assumptions.
This calculation does not take account of the invest-
ment required to achieve the conservation. Taking as
typical the 85 to 120 ruble-per-ton range of energy-
saving costs in the case studies, and assuming the
Soviets increase conservation by 15-30 million tons of
standard fuel annually, we estimate conservation in-
vestment at 1-4 billion rubles each year-cheaper
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Considerations Affecting the Estimates
-Ten-year forecasts of GNP and capital stock are
used to estimate future sectoral energy consump-
tion. These rough forecasts are based on a specific
set of Soviet resource allocation policies. Changes
in these policies would change the forecasts.
-Major structural shifts in the Soviet economy
reflecting differential rates of growth for the vari-
ous sectors could have a large impact on overall
energy consumption.
-Investment allocations-amounts and whether for
energy conservation or production-will affect en-
ergy consumption.
-Soviet capabilities and resolve to maintain high
levels of oil output even at a high cost could lessen
the emphasis on conservation.
-Improved East-West relations leading to increased
trade could increase the import of Western technol-
ogy either to speed conservation or to improve
energy production. Alternatively, a trend toward
greater autarky could slow energy conservation.
-Economic reforms that emphasize enterprise initia-
tive and that move away from the predominant
production orientation of planning would probably
encourage conservation.
-A serious effort by the machine-building sectors to
manufacture sufficient energy-efficient equipment
and energy monitoring devices is essential for
much of the easy "low-cost" conservation. Our
forecasts assume that, over the next 10 years,
efforts will be made to improve the situation. A
failure to do so could severely hamper conservation
efts.
than production, but still expensive. The net reduction
in energy investment would, nevertheless, mean that
billions of rubles of investment could be reallocated to
other sectors of the economy.
Alternatively, if higher energy production levels were
maintained, but the energy saved in the Soviet econo-
my were to be exported for hard currency, additional
earnings would be $85 million in 1990 and $105
million in 1995 per million tons of standard fuel
annually." Actual earnings would be less because of
the sensitivity of energy prices to large increases in
supply. The benefits of energy conservation-either
reduced investment in energy production or increased
earnings from energy exports-therefore appear to be
substantial enough to justify considerable investment
in energy conservation.
With respect to energy savings available from the
industries discussed earlier, our projections indicate
that-even under the harsh assumption that invest-
ment must be paid back in one year-nearly all of the
conservation measures evaluated become efficient
choices relative to our estimated 1995 investment
requirements for energy-production capacity (figure
5). Some of the more expensive measures, such as the
continuous casting process, could be attractive to the
Soviets if nonenergy-saving benefits are substantial.
More generally, however, the Soviets may be expected
to choose conservation measures that offer the great-
est savings at the least cost. Relatively low-cost
opportunities abound. In refining, for example, con-
servation measures requiring investment of less than
50 rubles per ton account for 80 percent of our
estimated energy savings relative to 1980, but only 14
percent of the estimated total investment required to
implement all measures surveyed for that sector. In
steel, measures requiring less than 50 rubles per ton
accounted for about half of the estimated potential
savings, but only 7 percent of total investment re-
quired to implement all measures surveyed. In the
ammonia industry, the virtually cost-free measures
accounted for 69 percent of the estimated energy
savings. Our survey of other activities suggests that
such conclusions are typical. While the financially
cheaper measures account for the bulk of the potential
energy savings, they may be among the most difficult
to implement (see inset on factors hindering Soviet
energy conservation, page 15).
30 These estimates of earnings assume a change in gas and coal
prices proportional to the forecasted change in oil prices-$20 per
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Appendix A
Soviet Energy Conservation:
Plans Versus Performance
The USSR is a large and inefficient consumer of
energy: with a GNP only about half as large as that of
the United States, it consumes about 70 percent as
much energy. Soviet energy consumption is higher
relative to output than US energy consumption for
three basic reasons:
? On average, the climate of the USSR is colder.
? In the USSR the energy-intensive sectors of indus-
try account for a larger share of GNP.
? The Soviets are, in many cases, less efficient in their
use of energy than are their US counterparts.
Energy consumption can be reduced by reducing the
level of economic activity (either closing factories or
rationing energy); by restructuring the economy in
favor of low-energy users (such as trade and services
and food processing); by substituting oil or gas for
coal, which burns less efficiently; and by implement-
ing energy conservation.
The Soviets look increasingly toward energy conserva-
tion as the best solution to competing claims on
expensive energy. But Moscow's record to date is
wanting, largely because the economic structure con-
tinues to be dominated by energy-intensive sectors of
heavy industry. Indeed, the energy-intensive sectors'
share of GNP rose from 41.5 percent in 1970 to 48.6
percent in 1981. This share, like the energy-GNP
ratio, then remained relatively stable until 1984, when
both rose." As a result the energy-to-GNP ratio (see
figure 6) rose during the 1970s and early 1980s.
The Soviet experience contrasts markedly with that of
Figure 6
USSR and US: Energy-GNP Ratios
0 1970 75 80 85
a The index of energy efficiency for each country
is calculated by dividing on index of energy
consumption by an index of GNP.
same period.
trade and services, rose from 42 percent to 47 per-
cent.ZZ These structural shifts supplemented the ef-
fects of conservation measures to produce the down-
ward trend of the US energy-GNP ratio over the
the United States, where over the 1970-83 period the With GNP measured in 1983 dollars, the Soviet
share of the energy-intensive sectors of mining, manu- energy-GNP ratio is about 20 percent higher than the
facturing, and transportation fell from 31 percent to
28 percent, and the share of low energy users, such as 22 U.S. Bureau of the Census, Statistical Abstract of the United
Z' The energy-intensive sectors are energy, electric power, ferrous
and nonferrous metallurgy, construction materials, and
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US ratio." This is explained in part by the higher
share of energy-intensive sectors in the USSR, as well
as the greater share of energy used to provide heat in
the colder climate. In 1980 the residential sector in
the USSR used over 300 million tons of standard fuel
(about 18 percent of total energy consumption).24 In
the United States, despite the greater predominance
of single-family dwellings, air-conditioning, and other
household appliances, residential energy use is less
than 13 percent of total energy consumption." Even
with the conservation gains that can be made in space
heating (see the discussion of the residential sector in
appendix B), residential energy use will remain a
larger share of total energy use in the USSR than in
the United States.
The Soviets have made substantial progress in con-
serving energy in electric-power production and rail-
road transportation (see figure 7). According to a 1983
Soviet monograph, improvements in the railroad and
electric power sectors, along with the shift from coal
to oil and gas, accounted for 75 percent of the energy
conservation achieved in the 1960s and 1970s, but
further gains from these sources will be small .16 In
heat production, which accounts for about 40 percent
of energy consumption, the Soviets appear to have
reached the efficiency limits of their current ap-
proach. In addition, other factors, such as the increas-
ing mechanization of agriculture, the rising average
distance of freight hauls, the need to substitute capital
for labor in industry, and the rising amount of energy
required for qualitative improvements in activities
such as steel-rolling-mill operation and oil refining,
will tend to further increase energy requirements per
unit of output.
Energy Conservation Plans and Policies
Energy conservation is not a new concept in Soviet
economic planning. Indeed, it is an element in
Moscow's drive to move away from extensive growth
(where growth in output is sought by means of a
growth in inputs) to intensive growth based on more
efficient use of inputs-a dominant theme of Soviet
economic literature over the past 20 years.
Figure 7
USSR: Energy Efficiency in
Selected Sectors
Electric Power
Kilograms standard fuel per kilowatt hour
0.1
Heat Production
Kilograms standard fuel per gigacalorie of heat
0 1965 70 75 80 85
Railroad Transport
Kilograms standard fuel per million ton-kilometers
0 1965 70 75 80 83
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Energy conservation goals have been specifically in-
cluded in Soviet five-year plans since at least 1971-75,
but little overall progress has been made. Neverthe-
less, statements by Gorbachev and others in early
1985' suggested that conservation would be the major
focus of the 1986-90 energy policy. The 12th Five-
Year Plan, however, shows a continuation of the
production-oriented energy policy the Soviets have
followed in the past. The plan, combined with our
estimates of minor energy sources not mentioned in
the plan, indicates that the increase in energy produc-
tion from 1985 to 1990 is slated to about 400 million
tons of standard fuel, compared with the actual
increase of about 250 million tons from 1980 to 1985.
Energy conservation in the 1986-90 plan calls for
savings in 1990 of 125-140 million tons of standard
fuel (after deducting energy counted by Moscow as
"saved" by increases in hydroelectric and nuclear
power output). These savings are less than the corre-
sponding savings envisioned in the 1981-85 plan (146
million tons after deducting hydroelectric and nuclear
gains). See inset for planned measures that directly or
indirectly affect conservation.
On the whole, the 1986-90 conservation goals appear
to be relatively modest, compared with the energy
production goals. The Soviets may be attempting to
be more realistic in their conservation expectations,
reflecting the disappointing results of the 1970s and
early 1980s. For example, the Soviets achieved about
70 percent of the energy conservation planned for the
1981-85 plan period, according to official Soviet
statistics. Furthermore, the emphasis on machine
building and other energy-intensive industries in the
1986-90 plan will have a tendency to boost energy use
relative to output, at least in the short run.
The-more modest approach to conservation reflected
in the 1986-90 plan appears to be in line with the
conservation goals set forth in the Long-Term Energy
Program. These goals called for energy use to support
natural income to be 540-580 million tons of standard
fuel less than if 1980 levels of efficiency were to
persist. This conservation is to be accomplished
through higher efficiency levels (excluding "conserva-
tion" gains due to increased nuclear and hydroelectric
Conservation Measures in the
12th Five-Year Plan (1986-90)
-Ferrous metallurgy is to be restructured and mod-
ernized, including a 30- to 40 percent increase in
production from the more efficient basic-oxygen
and electric-arc furnaces but little increase in pig
iron production, implying a substantial increase in
the share of output from the more efficient process-
es. The share of production from continuous cast-
ing process is to double.
-The output of diesel trucks is planned to increase
to 40 to 45 percent of the total truck output
(compared with 18 percent of the total truck output
in 1980).
-The nonferrous metals industry is to conserve 3
billion kWh of electricity and I million tons (stan-
dard fuel equivalent) of fossil fuels.
-The electric power industry is to dismantle 25
million k W of inefficient capacity and modernize
another 25 million kW. Total capacity in 1984 was
304 million kW.
-Railroad electrification is to increase by 8,000
kilometers (a 17 percent increase over the total
length of electrified rail in 1984).
-Aircraft fuel consumption per kilometer is to de-
cline by 3 to 5 percent.
-Fuel efficiency in agricultural equipment is to
improve by 3 to 5 percent.
-Capital retirement rates are to double compared
with 1981-85. Over one-third of existing active
capital stock is to be renewed.
-The output of instruments for monitoring and
regulating energy is to increase.
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production). An additional 400-500 million tons of
standard fuel are to be "conserved" by increasing the
use of hydroelectric and nuclear power and nontradi-
tional energy sources-considerably more than our
estimate.
Although some gains-from nuclear power in particu-
lar-may be in question, the principal sources of
conservation laid out in the Long-Term Energy Pro-
gram are still being touted as the current game plan:
? A transition to energy-conserving technologies.
? A decrease in the material-intensiveness of produc-
tion (lowering the metal content of machines, for
example).
? Better organization of production processes.
? Improvement of energy equipment.
? Retirement and reconstruction of outmoded
equipment.
? Improvement in the use of secondary energy (cap-
turing the heat now lost from chemical processes,
for example).
? Reduction in energy losses of all types.
? More rational location of energy consumers in
Figure 8
USSR: Energy-GNP and Energy-
National Income Ratios a
Energy/
National
Income
I I I I I I I I I I I I I I
0 1970 75 80 85
0 These rates are calculated by dividing an
index of energy consumption by indexes of GNP
and National Income.
relation to energy producers.
To implement the measures aimed at raising efficien-
cy of energy use, the machine-building industries are
tasked with large-scale production of energy-efficient
equipment and regulating devices. No energy sector
of the economy is excluded from the program. But
despite the attention to conservation in plans and in
the media, the actual priority of energy conservation
thus far is not clear. Furthermore, information on the
investment requirements or the energy savings associ-
ated with these measures is minimal. To the extent
that actual conservation gains are discussed in the
literature, the discussion is usually either at a very
generalized level with few details, or at a very specific,
technical level (one plant's experience, for example).
In the Long-Term Energy Program, as in other
discussions of long-term energy conservation, conser-
vation is generally seen as proceeding in two phases.
The first will emphasize organizational measures,
closer monitoring of energy use, and other measures
that require relatively little capital investment. The
second will be characterized by the introduction of
more energy-efficient processes and equipment requir-
ing significant capital outlays.
The Record to Date: Little Success
Despite Soviet claims of success in conservation and
the energy savings achievements now published in
official statistics, the effort has in fact met with
relatively little success. The implied success is due
largely to Soviet use of national income, rather than
GNP, to measure the amount of economic activity per
unit of energy used (see figure 8 and inset). The
majority of ministries and departments missed their
conservation targets during 1981-82, according to the
Soviet press." Reports since then indicate similar
failure for the nation as a whole.18 Because conserva-
tion goals are included in each year's energy balance
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Soviet "Success" in Energy
Conservation A Statistical Artifact?
Soviet perceptions of success in energy conservation,
as reported in official statistics, are likely to be more
optimistic than an energy-efficiency index based on
GNP suggests. Because the basic Soviet measure of
economic activity, national income, grew faster than
our estimated GNPfor the USSR, trends in the
GNP-based energy efficiency index differ markedly
from trends in the index based on national income.
National income grows faster than GNP, partly be-
cause the product of the slowly growing services
sector of the economy is not included as part of
national income.
More important, however, is the existence of hidden
inflation in Soviet national income data, primarily
because of the overpricing of new products. a To
indicate the extent of this hidden inflation, we can
compare growth rates of GNP in current and constant
prices for the only two years available-1970 and
1982. Using current prices, GNP grew at 5.4 percent,
considerably faster than the 2.8 percent growth rate
when measured in constant prices. Soviet conserva-
tion plans to meet 75 to 80 percent of the increase in
1990 demand for energy through conservation (rela-
tive to the 1985 energy-national income relationship)
are thus less ambitious than projections based on
GNP would suggest. b
and factored into the planning of energy supplies,
failed conservation goals result in overconsumption of
energy and can lead to energy shortages. A 1984
Izvestiya editorial, for example, blamed energy short-
ages on failed conservation measures.29
Several obstacles are apparent in the failure to
achieve planned conservation of energy. These include
policy issues such as investment allocations and prob-
lems in implementation (for example, the difficulty of
obtaining the large numbers of meters and equipment
needed), as well as the difficulty of properly installing
and using conservation equipment once delivered (see
inset on page 7). Although some can be modified with
time, many of these problems will continue through-
out the 1986-95 period.
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Appendix B
Analysis of Energy Conservation
Potential in Selected Activities
Conservation in the Oil-Refining Industry
The Soviet oil-refining industry is energy intensive
(consuming about 2.5 percent of Soviet energy) and
presents considerable opportunity for introduction of
conservation measures.30 Although the basic refining
processes used are generally similar to those in West-
ern refineries, the Soviet product mix is substantially
different. For example, in the United States about 45
percent of total output is gasoline, with less than 10
percent residual fuel oil. In the USSR residual fuel oil
accounts for 35 to 40 percent of total output, and
gasoline's share is less than 20 percent. This differ-
ence in product mix reflects the markedly different
historical patterns of use for oil products in the two
economies. The dominant theme in Soviet plans relat-
ing to refining is the need to shift the refinery mix
away from fuel oil and to produce more light prod-
ucts, principally diesel fuel and gasoline. The demand
for these lighter fuels is expected to grow considerably
over the next decade, and the demand for fuel oil is to
decline because of fuel substitution.
At any refinery, oil flows initially through primary
distillation columns, which segregate the basic compo-
nents of the oil. The rest of a refinery essentially
purifies and alters these components in various sec-
ondary operations, most of which are more energy-
intensive than primary distillation Thus,
the higher the level of secondary processing, the
greater the energy-intensiveness of the overall process.
When individual processess are compared, the Soviets
use considerably more energy per ton of refined oil
than do the US refiners. Overall, however, the Soviets
refining industry uses less energy per barrel of crude.
In the United States, the capacity of secondary
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primary distillation capacity, because of the large and
fluctuating demand for a wide variety of light prod-
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capacity, reflecting the larger share of heavy products
and a simpler product mix." This sharp difference
means US refineries consume on average more energy
per barrel of oil refined than do Soviet refineries,
because the energy requirements for secondary refin-
ing are so much greater than those for primary
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refining. For example, in 1981 energy used by US
refineries represented about 11 percent of the energy
contained in the oil received by the refineries. In
contrast, the comparable share for Soviet refineries in
1980 was about 6 percent, according to a Soviet
journal.12 Implementation of Soviet plans to expand
secondary processing will tend to increase the energy
use per ton of oil refined."
The greatest opportunities for energy conservation in
oil refining are in the recovery of waste heat. Among
the techniques used are improvements in the heat-
exchange system, recovery of heat from stack gases,
process-heat integration, and added insulation on
product lines, furnaces, tanks, and other units. Addi-
tional energy can be recovered by improving boiler
and heater efficiencies and optimizing steam bal-
ances. Computer-optimizing control and other instru-
mentation and monitors can also contribute to energy
efficiency. Another source of saving is recovery of flue
gas that can be used as fuel. These and other mea-
sures taken in the United States and considered
relevant to the USSR are listed in table 5. These
measures involve only the retrofitting of older refiner-
ies. Although the Soviets have retired some of their
oldest refining units, the replacement of older units
with new ones remains a small share of total construc-
tion of Soviet refineries.
Each of the conservation measures was assessed
against the amount of Soviet refining capacity we
believed to be relevant for application of that
measure. For example, air preheaters were considered
relevant only for the larger crude-oil units.
Clearly the largest impact is possible from the
measure with the greatest uncertainty-better
housekeeping. This concept requires a greater watch-
fulness, awareness, and guarding against energy waste
by all parties, as well as the introduction of relatively
inexpensive meters and valves. Such measures allowed
pp. 74-75.
1981-1985 Godakh (Moscow: Energoizdat, 1981): pp. 56, 94.
Table 5
Estimated Conservation Measures:
Soviet Refining Industry
Energy Saved
(million tons of
standard fuel)
Total annual saving of energy if all
measures are taken
9.69
Housekeeping
5.05
Sour gas recovery (delayed coking)
0.09
Revamp heat exchanger (catalytic
cracking)
0.03
Flow control on heat exchanger (catalytic
reformers)
0.28
Conductivity analyzer (crude unit)
0.17
Direct charge of naphtha (catalytic
reformer)
0.12
Convection section (crude unit)
0.64
Preheat exchanger (catalytic cracking)
0.02
Heat exchanger (catalytic reformer)
0.08
Soot blowers on CO boilers (catalytic
cracking)
0.04
Preheat exchangers (crude unit)
0.89
O2 analyzers on heat exchangers (catalytic
reformer)
0.02
Heat exchanger (alkylation unit)
0.004
Replace feed heater (catalytic cracking)
0.05
Air preheater (catalytic reformer)
0.34
Process monitor (alkylation)
0.003
Heater improvements (crude unit)
0.72
Flue-gas analyzers (crude unit)
0.19
Computer control (crude unit)
0.06
LP steam system
0.03
Air preheater on CO boiler
0.004
a Measures are listed approximately in order of increasing cost per
unit of energy saved. (For simplicity, applications of the same
measure on the same type of unit were combined, although costs
differ, depending on the capacity of the unit involved.)
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the US refineries to reduce their energy use by 7 to 10
percent in the 1970s. We estimate that, despite the
larger potential for savings in Soviet refining, the
realized savings will be close to the bottom of this
range, because of implementation problems and the
difficulties in obtaining even simple monitoring equip-
ment. If the Soviet refineries implemented all of the
measures evaluated, they could save 9.7 million tons
of standard fuel, or 13 percent of their 1980 energy
use; the total cost of implementation would be 428
million rubles.
Conservation measures discussed by the Soviets (see
inset) focus on many of the points cited above-heat
exchangers, direct feed, waste-heat boilers. They also
emphasize other directions, such as increased empha-
sis on centralized combination units (which colocate
the distillation and cracking processes to maximize
energy efficiency) and improved catalysts. There is,
therefore, probably some conservation potential in
Soviet oil refining that our estimate does not capture.
In view of the savings achieved in US refining, the
less-efficient operation of Soviet refineries and the
implementation problems (such as the cited failure of
several refineries to install heat-recovery boilers that
had been delivered) that have hampered conservation
measures thus far, we believe that the conservation
supply curve in figure 5 represents an achievable level
of conservation for the Soviets:
? We believe that the Soviets will attempt to imple-
ment conservation measures in refining. This indus-
try is a good candidate for conservation, and a
relatively large percentage of energy can be saved
through inexpensive measures such as metering and
better organization. Organizational measures fit
well with the low investment "first stage" of energy
conservation discussed in the Long-Term Energy
Program and the "human factor" emphasized by
Gorbachev. Moreover, most of the energy saved will
be oil-the Soviets' prime conservation target.
? The Soviets could, however, fail to make the most
efficient conservation choice. The refining industry
has been slow to modernize, despite plans to do so
since the early 1970s. Its failure probably reflects a
Conservation Measures Planned for
Oil Refining in the USSR a
-Reconstruct active units.
-Introduce system of industrial heating.
-Replace steam-driven technical units with electric-
drive units.
-Transfer power system to direct electric feed in-
stead of intermediate transformers.
-Use new, more efficient catalysts.
-Cut losses through floating-roof storage tanks,
automated product transfer.
-Increase use of waste heat, particularly in com-
bined refining units.
-Eliminate intermediate heating of raw materials
through better unit location.
-Install 1 50 waste-heat boilers.
-Install 450 air preheaters.
-Reconstruct 12 installations of thermal blocks.
-Provide better heat exchange in distillation
columns.
-Improve tray placement in distillation columns.
-Improve reformer furnaces-achieve better sealing,
install controls and regulators for furnace exhaust,
improve injector nozzle, reequip air cleaners.
a Soviet planned conservation measures are taken from four princi-
pal sources: D. G. Zhimerin, ed., Sovremennyye Problemy Energe-
tiki. (Moscow: Energoatomizdat, 1984); D. B. VolYberg, ed., Effek-
tivnoye Ispol'zovaniye Toplivno-Energeticheskikh Resursov.
(Moscow: Energoatomizdat, 1983); L. A. Melent 'yev and A. A.
Makarov, eds., Energeticheskii Kompleks SSSR (Moscow: Ekono-
mika, 1983); and A. M. Nekrasov and A. A. Troitskiy, Energetika
SSSR v 1981-85 Godakh (Moscow: Energoizdat, 1981).
combination of relatively low investment priority,
the difficulties of maintaining the existing level of
operations, and other factors. These influences may
well continue to impair conservation efforts. Fur-
thermore, the industry's main task-boosting the
yield of light products-may absorb nearly all of, the
investment resources and designers' time over the
decade. Even so, given the importance of saving oil,
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we believe that savings could be large-on the order
of 10 to 15 percent of refinery energy consumption
relative to 1980.
Steelmaking. There are three basic types of steelmak-
ing furnaces-open-hearth (OH), basic-oxygen (BOF),
and electric-arc (EAF). The Soviets rely far more
heavily on the OH process, the oldest, and least
efficient process, than do other major steel-producing
Overall, however, these potential energy savings prob-
ably would be offset by the continuing shift in refining
toward lighter and higher quality products. This shift
was behind a 4-percent rise in energy intensity be-
tween 1981 and 1985, after a decline in intensity
during the 1970s. We estimate that this structural
shift could increase the energy intensity by another
5 to 10 percent between 1985 and 1995, essentially
offsetting the gains from conservation.
Conservation in the Ferrous Metals Industry 34
The ferrous metals industry is one of the most energy-
intensive in the USSR, consuming about 11 percent of
the domestic energy supply in 1980,35 and the Soviets
have focused considerable attention on the sector as a
conservation target.
Steelmaking includes four basic stages of production:
cokemaking; pig-iron production; steelmaking; and
casting, forming, and finishing. Each process has its
own relevant conservation measures:
Cokemaking. The coking process transforms
metallurgical-grade bituminous coal into a carbona-
ceous residue called coke. Besides providing chemical
reagents for reducing iron ore, coke is the principal
fuel used to produce heat required for smelting in the
blast furnace. Data presented in Soviet technical
journals and reports indicate that the technology for
cokemaking in the USSR does not deviate significant-
ly from typical world practice.
Pig-iron production. Pig-iron production is the most
energy-intensive process in the industry. The focus of
attention in pig-iron production in the USSR and
elsewhere has been on reducing the coking rate
through the increased use of hydrocarbon fuels, prin-
cipally natural gas.
countries.
Casting, forming, and final finishing. This stage
includes several operations, of which the remelting of
ingots is the most energy intensive. The continuous
casting process saves reheating of ingots, and thus
saves substantial energy. Although the Soviets in-
stalled the world's first commercial continuous caster,
the proportion of steel cast by this process in the
USSR is low relative to that in other steel-producing
countries.
The conservation measures deemed relevant to the
Soviets' situation are presented in table 6. The Soviet
technical literature on conservation discusses many of
these measures, emphasizing "big-ticket" items, such
as new BOFs, EAFs, and continuous casters, as well
as less expensive measures such as better insulation
and increasing the flow of oxygen to the furnace (see
inset).
The 12th Five-Year Plan includes ambitious plans for
modernizing the steel industry. Some 30 million tons
of open-hearth furnace capacity is to be replaced,
while the share of output from continuous casting is
slated to double by 1990. The pattern of steel industry
investment in this plan contrasts sharply with that in
earlier plans. According to the Soviet press, 50 per-
cent of investment is to be used to renovate existing
plants, 30 percent of improving product quality, and
only 20 percent for expanding production capacity.
Past five-year plans allocated up to 75 percent of
investment for growth in output. We expect that plans
will be hampered by the inability of Soviet machinery
producers to supply the necessary equipment and on
the Soviet's limited ability to import equipment from
the West
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Table 6
Estimated Conservation Measures:
Soviet Ferrous Metals Industry
Energy Saved
(million tons of
standardfuel)
Total annual energy conserved for all fuels
if all measures are taken
34.01
Energy conserved if all measures are taken
23.65
High-scrap option (retrofit)
2.40
Scrap preheaters/offgas hoods
(retrofit)
3.38
External desulfurization (retrofit)
4.14
Coal injection (retrofit)
4.46
Scrap preheaters/offgas hoods (new)
3.38
Installation of top (retrofit)
0.37
Direct reduction-gas recovery (new)
3.07
Formcoke (new)
1.48
Natural gas injection (new)
0.57
Installation of top (new)
0.32
Preheat coal and wet coke
0.08
Other fuel savings
Energy conserved if all measures are taken
10.36
Increase oxygen injection (retrofit)
1.73
Auto-ignite coke oven flare (retrofit)
0.16
Auto-combustion control (retrofit)
0.34
Preheat scrap, add hoods (retrofit)
1.17
Add offgas hood (retrofit)
0.60
Dry quenching of coke (retrofit)
4.75
Conversion to q-BOP (retrofit)
0.11
Monobeam furnace with heat
recuperator (new)
0.03
a Measures are listed in order of increasing cost per unit of energy
saved.
Given the tight investment outlook and the anticipat-
ed growth in major ferrous-metal-consuming activi-
ties (such as machine building and energy production),
the Soviets may be hard pressed to retire as much
open-hearth furnace capacity as planned. Further-
more, the dramatic loss in oil revenues over the past
Conservation Measures Planned for the
Ferrous Metals Industry a
-Replace open-hearth furnaces with basic oxygen
converters or electric-arc furnaces (30 million tons
of furnace capacity in 1986-90 plan).
-Increase use of continuous-casting process.
-Use dry-coking process.
-Increase temperature of blast-furnace gas.
-Increase pressure of gas at top of blast furnace.
-Improve insulation of blast furnace and associated
pipes.
-Improve heat exchangers.
-Increase iron content of the charge.
-Blow oxygen into the blast furnace.
-Make fuller use of waste heat from all processes.
-Increase capacity of coke batteries through build-
ing new units and reconstruction of old ones.
-Increase share of iron pellet production relative to
share of agglomerate.
-Lower the moisture content of the charge.
-Use dry flux from the charge.
-Remove outmoded, small-capacity furnaces.
-Use compressorless turbines to generate electricity
from waste gases.
a Soviet planned conservation measures are taken from four princi-
pal sources: D. G. Zhimerin, ed., Sovremennyye Problemy Energe-
tiki. (Moscow Energoatomizdat, 1984); D. B. Voljberg, ed., Effek-
tivnoye Ispol'zovaniye Toplivno-Energeticheskikh Resursov.
(Moscow: Energoatomizdat, 1983); L. A. Melet 'yev and A. A.
Makarov, eds., Energeticheskii Kompleks SSSR (Moscow: Ekono-
mika, 1983); and A. M. Nekrasov and A. A. Troitskiy, Energetika
SSSR v 1981-85 Godakh (Moscow: Energoizdat, 1981).
year may curb imports of equipment for ferrous-metal
production. Conservation in this sector will be expen-
sive.
tons of standard fuel (12 percent of 1980 energy
consumption in this sector) could be saved, at a cost of
nearly 200 rubles per ton (figure 5). A Soviet study of
measures to conserve energy in the ferrous metals
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industry found that it can be quite expensive. Focus-
ing on new construction, the report found that energy
could be saved (how much was not specified) at a cost
of 1,623 rubles per ton of standard fuel.
We forecast two conservation paths for the steel
industry. In the low case, investment is tight, steel
demand remains high, and few of the older plants are
closed. In this case, we estimate that the Soviets can
achieve energy savings of about only 5 percent, rather
than the 12 percent total In
the high case, the Soviets proceed with their modern-
ization efforts, although they fall short of plans, and
by 1995 we project energy conservation of about 10
percent. In both cases we assume that general upgrad-
ing at equipment and structural shifts toward more
efficient processes will roughly offset increased energy
use because of poorer-grade iron ore or higher stan-
dards for output. (This was roughly true between 1981
and 1985.)
Conservation in the Chemical Industry
The chemical industry accounted for about 6 percent
of total Soviet energy consumption and 14 percent of
electric power and heat use in 1980. It used a total of
99.5 million tons of standard fuel in that year, of
which 55 percent was used as raw material, and the
rest was used for heat and power.37
The Soviet chemical industry has considerable poten-
tial for conservation. In the United States, for exam-
ple, the chemical industry has had great success in
energy conservation, increasing overall energy effi-
ciency by over 34 percent from 1972 to 1984, accord-
ing to a survey by the Chemical Manufacturing
Association." Conservation measures planned for the
Soviet chemical industry focus on the introduction of
more efficient processes and the capture of waste
heat. Of the energy savings planned for 1981-85, over
half were to come from the use of improved technical
processes, one-fourth from various "organizational-
technical" measures (better monitoring and control of
processes, for example), and about one-fifth from
" 0. I. Balabaychenko, et al., Povysheniye Effektivnosti Ispol'zo-
vaniya Energii v Tekhnologicheskikh Ustanovkakh Khimicheskoy
Promyshlennosti (Moscow: Khimiya, 1983): p. 4.
38 Hydrocarbon Processing, (September 85): p. 13
somewhat the potential for improvement.40
improved capture of waste heat and energy.39 By 1980
the industry was already using 75 percent of the
secondary energy that was considered economically
usable, according to one Soviet text, thus limiting
The chemical industry is probably the most complex
in the industrial sector of the economy. Thousands of
chemicals are manufactured in a vast array of pro-
cesses. Each process has its own energy-conservation
potential. We chose for analysis three major industrial
chemicals-caustic soda, ammonia, and methanol.
The first, caustic soda, is a basic industrial product.
Its output is growing slowly. The last two are, in
addition, rapidly developing export products, increas-
ingly based on imported technology. Unlike the case
for oil refining, there is no apparent increase or
decrease in the relative share of the more energy-
intensive components of the chemical industry to
offset or reinforce estimated conservation gains.
Caustic Soda. Caustic soda and chlorine are produced
by the electrolysis of a sodium chloride (common salt)
solution. The chlorine gas is removed, and an aqueous
solution of caustic soda remains. The purity and
concentration of the caustic soda depend primarily on
the type of electrolytic cell used-mercury, dia-
phragm, or permionic membrane. In the United
States, the mercury cell has been almost entirely
phased out because of the environmental hazard
associated with the use of mercury. Over 75 percent of
US capacity uses the diaphragm cell, with the newer
membrane cells accounting for the rest. In contrast, in
the USSR about two-thirds of production is based on
diaphragm cells, with virtually all of the rest based on
mercury cells. Annual production of caustic soda is
about 3 million tons in the USSR, compared with
about 10 million tons in the United States. The
relatively small tonnage limits the overall impact of
conservation measures in this area.
(Moscow: Energoatomizdat, 1984): p. 81.
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Table 7
Caustic Soda Production:
Estimated Energy Conservation Options
Energy Saved
(million tons of
standard fuel)
Energy Conservation Measures in the Caustic Soda
Industry Discussed by the Soviets a
-Introduce membrane method (30 percent savings).
-Introduce diaphragm method.
-Replace graphite anodes with metal anodes (10- to
20 percent savings).
-Improve the quality of the purifying solution.
are taken -Improve operating procedures for using
Diaphragm cell: install metal anodes
0.15
0.14
Diaphragm cell: install membrane
cell
0.56
Mercury cell: install metal anodes
0.11
Diaphragm cell: go to four-effect
evaporation system
0.10
Cogeneration in a diaphragm cell
plant
0.06
electrolyzers.
-Capture secondary heat more fully, especially hy-
drogen in the electrolysis process and heat from the
chlorine and hydrogen gases.
a Soviet planned conservation measures are taken from four princi-
pal sources: D. G. Zhimerin, ed., Sovremennyye Problemy Energe-
tiki. (Moscow Energoatomizdat, 1984); D. B. Voljberg, ed., Effek-
tivnoye Ispol'zovaniye Toplivno-Energeticheskikh Resursov.
(Moscow: Energoatomizdat, 1983); L. A. Melet 'yev and A. A.
Makarov, eds., Energeticheskii Kompleks SSSR (Moscow: Ekono-
mika, 1983); and A. M. Nekrasov and A. A. Troitskiy, Energetika
SSSR v 1981-85 Godakh (Moscow: Energoizdat, 1981).
Conservation measures involve transition to the more
efficient cells, use of improved anodes, better use of
waste heat, and the recovery of hydrogen (see table 7
and figure 5). Housekeeping measures-simply better
operating and maintenance procedures-could pro-
vide estimated savings of about 5 percent. The conser-
vation measures discussed by the Soviets (see inset)
closely correspond to the conservation measures that
appear to be most appropriate to their technology.
The specific measures applicable to caustic soda
production are relatively few-changing cells, chang-
ing anodes, hydrogen recovery, and cogeneration.C
The major source of conservation is the electricity
saved by replacing the mercury and diaphragm cells
with membrane cells. A direct changeover from mer-
cury to membrane cells is both technically and eco-
nomically feasible and is being done in Japan, for
example. Instead, the Soviets plan to expand the
diaphragm process, developing the membrane process
as a long-term objective. A 1985 press article, for
example, complained that, after years of effort, the
successful development of the membrane cell is still
"somewhere on the distant horizon."" This is a case
where a decision to import could allow the Soviets to
leapfrog directly to a newer technology.
Shortfalls in production of caustic soda suggest that
this part of the chemical industry may not have the
investment priority required to permit changeover
from the electrolytic cells. Production last year missed
the original 1985 production target of 3.5 million tons
by 13 percent.42 Although potential conservation gains
are relatively large-equivalent to saving nearly one-
Ifourth of the energy used in 1980, the total gains from
all of the measures would be only about 1 million tons
of standard fuel, made at a relatively high investment
cost (figure 5). Moreover, hard currency constraints
may preclude the use of imported technology. We
estimate that the Soviets may adopt the virtually cost-
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free measures and perhaps three-fourths of the mod-
erate cost measures-yielding savings on the order of
5 to 15 percent compared with 1980 efficiency levels.
Ammonia. Soviet production of ammonia has grown
rapidly-from 7.6 million tons in 1970 to about
23.6 million tons in 1986. The USSR is the world's
leading exporter of ammonia, with annual sales of
3.5 million tons anticipated over the next several
years. Nearly all of the remaining ammonia output is
further processed into fertilizer. Although other fuels
can be used as a feedstock, natural gas is used for over
90 percent of Soviet ammonia production. The natu-
ral gas is also used as fuel in the process.
Essentially, the natural gas is converted to hydrogen
in gas reformers (using high temperatures and pres-
sures in the presence of catalysts) and is then com-
bined with nitrogen, purified, compressed, and liqui-
fied. Large unified, single-train plants built since the
mid-1960s have improved the energy efficiency of
ammonia production considerably. In contrast to the
caustic soda industry, the Soviet ammonia industry is
relatively modern, since about 75 percent of current
Table 8
Estimated Conservation Measures:
The Soviet Ammonia Industry
Energy Saved
Per Year
(million tons of
standard fuel)
Total annual energy saved if all measures 9.12
are taken
Increase online operation time 2.53
Increase capacity by 10 percent by 3.80
removing bottlenecks
Preheat process air
Use absorbent in final purification 0.30
Superheat and/or reheat steam 0.57
Preheat combustion air 0.40
a Measures are listed in order of increasing cost per unit of energy
saved.
capacity was built after 1970.
Despite their relative newness, Soviet large-scale am-
monia plants consume on average about 25 percent
more total energy (feedstock and fuel) per ton of
ammonia than comparable US plants. Fuel usage
itself appears to be excessive-about twice as high per
ton of ammonia as in US plants. This condition is
attributable to poor operating practices in Soviet
plants. Since 1980, capacity use rates averaged only
72.5 percent-an inefficient level of operation. The
idle time appears due principally to unscheduled
downtime resulting from an inadequate supply of
properly trained labor and material-supply problems
traceable to the transportation network. The severity
of the industry's problems is illustrated in a Soviet
progress report on the large-scale plants. The report
recommended that, because of operators' unfamiliari-
ty with the equipment, 30 extra days be scheduled for
preventative maintenance in addition to the world-
standard 34-day shutdown for scheduled mainte-
nance. Such a change by itself would reduce maxi-
Energy savings in the production of ammonia can be
substantial and cheap. Simply improving operations
and maintenance, together with removing unneces-
sary bottlenecks, can increase capacity, improve the
flow of the process, and save some 6.3 million tons of
standard fuel annually, primarily natural gas. This
technologically simple step will not be easy, since it
requires an increase in the skill and the motivation of
the operational and maintenance personnel. Clearly it
will take time, even if little or no investment is
required. Measures entailing investment include the
recapture of waste heat, adding gas turbines, and
using molecular sieves to aid in the final purification
process (see table 8). These additional measures bring
the total potential energy savings to 9.1 million tons,
or about 30 percent of total energy consumption in the
ammonia industry (figure 5). Soviet measures dis-
cussed for this sector generally parallel those cited
above (see inset).
mum operating capacity by nearly 10 percent.
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Energy Conservation Measures in the Ammonia
Industry Discussed by the Soviets a
-Retire outmoded plants.
-Increase the capacity of large plants through orga-
nizational measures and increasing the between-
repair time of the units.
-Introduce unified 450,000 ton/year units that more
fully capture and use heat from the chemical
reactions.
-Use improved catalysts that increase the complete-
ness of the conversion and methanization process-
es, the degree of utilization of natural gas, and
improve the natural gas combustion.
-Ensure better use of byproduct combustible gases.
-Develop catalysts for new production process that
is faster and operates with higher pressures, there-
by cutting natural gas use by 20 to 30 percent.
a Soviet planned conservation measures are taken from four princi-
pal sources: D. G. Zhimerin, ed., Sovremennyye Problemy Energe-
tiki. (Moscow Energoatomizdat, 1984); D. B. Voljberg, ed., Effek-
tivnoye Ispol'zovaniye Toplivno-Energeticheskikh Resursov.
(Moscow: Energoatomizdat, 1983); L. A. Melet'yev and A. A.
Makarov, eds., Energeticheskii Kompleks SSSR (Moscow: Ekono-
mika, 1983); and A. M. Nekrasov and A. A. Troitskiy, Energetika
SSSR v 1981-85 Godakh (Moscow: Energoizdat, 1981).
Because the measures undertaken to conserve energy
in the manufacture of ammonia also result in more
efficient use of capacity and an increase in output, we
believe that the Soviets will proceed to implement
conservation in this branch of the chemical industry,
because of the value of ammonia as a hard currency
export and its use in fertilizer production. Further-
more, as the newer plants are "broken in" and as the
labor force becomes better educated, some of the
indicated improvements should gradually occur. We
project that the by 1995, the Soviets can gain 70 to 80
percent of the capacity improvements and 50 to 75
percent of the remaining energy-saving measures,
yielding conservation gains on the order of 17 to 23
percent.
Methanol. Methanol (methyl alcohol) provides a base
for the production of a variety of other products. The
USSR produced 2.9 million metric tons of methanol
in 1985, making it one of the largest producers in the
world. Production should increase to about 3.5 million
tons annually as two new large plants, imported from
the United Kingdom, are brought to full capacity.
Before the 1970s methanol was principally manufac-
tured by a high-temperature, high-pressure catalytic
process in which synthesis gas made up of carbon
dioxide, carbon monoxide, and hydrogen was com-
pressed to a pressure of 300 atmospheres (atm) at
temperatures of 330 to 370 degrees C. Although coal
was the original source of synthesis gas, most of this
gas now comes from the reforming of natural gas.
In the Western methanol industry, improved catalysts
have resulted in process changes that have lowered
both the temperature and pressure required in the
methanol conversion step. In 1966 a new low-tem-
perature, low-pressure methanol process was devel-
oped based on a new, highly active, long-life copper
catalyst. Operating at a pressure of only 50 atm and
temperatures less than 300 degrees C, this process
offered several advantages over the older process,
including large energy savings:
? Steam-driven centrifugal compressors can be used.
These compressors are cheaper and more energy-
efficient than the electrically driven reciprocating
compressors required by the high-pressure process.
Electricity requirements per ton of methanol are
reduced by 60 percent in this step. Operation and
maintenance costs are also lower for the centrifugal
compressors. Moreover, centrifugal compressors can
be driven by steam from the reformer, and steam
from the compressors can then either be returned to
the reformer or used in the methanol-purification
section of the plant.
? In the low-pressure process, the hydrogen-rich syn-
thesis gas stream contains sufficient carbon dioxide
for the methanol synthesis, so that additional carbon
dioxide is not required.
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? The low-pressure synthesis also has the advantage
that fewer byproducts are formed, thus producing
more methanol per unit of feedstock and also simpli-
fying the purification step.
Potential energy savings are substantial, because the
low-pressure process in a 50,000-ton-per-year plant (a
size typical of many of the Soviets' older plants) uses
only 4 percent as much electricity as the high-pressure
process. Most new plants built in the United States
and Western Europe use this more efficient process.
With the exception of two imported 750,000-ton-per-
year plants, nearly all Soviet methanol plants are
based on the older, high-pressure synthesis technol-
ogy. This technology is comparable to US technology
of the late 1960s. Energy use in the Soviet methanol
industry was reported to be 2.2 tons of standard fuel
per ton of methanol (including natural gas used as
both feedstock and fuel) in 1980-high by Western
standards. Total energy consumption by the methanol
industry was 4.9 million tons of standard fuel, about
5 percent of the chemical industry's total energy use
in 1980. Over 95 percent of the industry's methanol
energy supply is now natural gas.
The conversion from high-pressure to low-pressure
methanol synthesis is the single most important con-
servation measure that the Soviets can undertake.
This conversion would offer all of the advantages
noted above. The typical low-pressure synthesis retro-
fit could include other energy-saving modifications-
raising the operating pressure of the synthesis loop,
and preheating the purge gas. These add-ons would
logically accompany any retrofits. The basic retrofit
would account for about half of the investment and
70 percent of the energy savings. Other measures can
also be taken at the high-pressure plants short of a
complete conversion to the low-pressure process: bet-
ter refractories, flue-gas heat recovery, preheating the
combustion air and natural gas, and insulating the
reactor. These other measures vary greatly in both
cost and energy savings from plant to plant, and are
therefore not considered in this analysis.
The complete low-pressure retrofit would only be
undertaken at a moderate-size plant-one with a
capacity of about 300,000 metric tons per year. Only
four Soviet-built plants fall into this category. Plants
with a smaller capacity, but at least 100,000 tons per
year, would probably only be retrofitted in connection
with a capacity expansion. The potential savings at
these older plants are thus relatively small-a total of
only 0.4 million tons of standard fuel per year, or
about 8 percent of 1980 energy consumption in the
methanol industry (figure 5).
Soviet discussions of conservation measures in the
methanol industry focus almost exclusively on the
benefits from adding the larger capacity units and the
retirement of some older, inefficient units. They also
referred to some recapture of waste heat. Overall,
Soviet plans called for a 15-percent reduction in the
energy use per ton of methanol between 1980 and
1985. The plan to roughly double methanol output
between 1980 and 1985 would mean that 1985 energy
consumption in the methanol industry would have
been substantially higher than in 1980, despite the
planned reduction in energy use per ton. Most of the
conservation in Soviet plans will, therefore, come from
this structural shift-from the growing share of pro-
duction from newer plants, rather than any major
conservation at existing plants. This approach appears
to be rational since conservation in existing plants will
be expensive, some 100 to 105 rubles per ton of
standard fuel conserved. By 1995, then, we could see a
15- to 20-percent reduction in energy use per ton of
methanol.
Agriculture
Agriculture consumed about 120 million tons of stan-
dard fuel in 1980, about 7 percent of total Soviet
energy use.43 Oil, particularly light products, accounts
for more than half of agricultural energy use. Energy
use in the sector is expected to rise for the foreseeable
future because of planned increases in mechanization,
local transportation capabilities, and increased pump-
ing requirements for irrigation. Despite rapid growth
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in tractor support, for example, the USSR lags well
below the mechanization level reached in the United
States.
Press reports of poor storage of oil products, poor
accounting practices, and a general deficiency in
energy measuring and control devices suggest that
agriculture has conservation opportunities. About 3 to
5 percent of fuel supplies are lost in storage and
distribution, according to a 1984 Soviet report."
Furthermore, many of the conservation measures
discussed in the Soviet technical literature (see inset)
are inexpensive, particularly those relying primarily
on administrative measures or the installation of
metering devices.
The success of conservation in this area will depend
not only on investment but also on the ability to
implement thousands of decentralized actions at the
local level. We do not believe that the incentives and
the necessary equipment will be available for this
sector to reduce its 1995 energy consumption by more
than 2 to 5 percent (relative to past trends). The
overall trend for an increase in fuel use because of
greater mechanization, irrigation, and transportation
will continue throughout the period.
Though a principal consumer of some of the econo-
my's most energy-intensive products, the construction
sector itself consumes relatively little energy. In 1980
this sector accounted for only about 2 percent of total
Soviet energy use.45 Nearly 40 percent of the energy
used is oil, principally used to operate machinery and
to supply heat and electricity to construction sites.
The work of this sector has, however, major conse-
quences for energy use. The incorporation of conser-
vation principles in new construction, including the
w 13 May 1984 Vremya TV broadcast, reported in FBIS V3,
number 96, 16 May. These losses may include some fuel that was
stolen and used elsewhere in the economy. In terms of energy use,
this theft would not be a true "loss" to the economy.
-Increase fuel efficiency of tractors, other machin-
ery (improve engine design and transmission).
-Improve roads (1- to 3 -percent improvement in fuel
economy).
-Improve storage and transport of oil products (save
2 to 3 percent of the fuel).
-Reduce use of tractors for hauling freight, from 10
to 7 or 8 percent of the total.
-Increase deisel truck share of truck hauling.
-Use shallower plowing techniques (saves 9 kg stan-
dard fuel per hectare).
-Use of multipurpose machines to combine tractor
operations, completing different activities in same
pass (2 to 17 kg standard fuel per hectare).
-Improve grain drying and feed production-better
recovery of waste heat and reduce the moisture
content of grain before drying (planned savings by
1985 was 1.45 million tons standard fuel).
-Introduce electricity metering equipment (planned
1985 savings, 0.8 billion kWh).
-Replace incandescent lamps withfourescent lamps
(planned 1985 savings 0.45 billion kWh).
-Introduce electric heat thermostats (planned 1985
savings, 1.34 billion kWh).
-Measures to improve organization (use of right
capacity machines for the job, turning off lights
when not in use, and other similar no-cost
measures).
-Better construction of greenhouses, increased use
of secondary heat in greenhouses.
a Soviet planned conservation measures are taken from four princi-
pal sources: D. G. Zhimerin, ed., Sovremennyye Problemy Energe-
tiki. (Moscow: Energoatomizdat, 1984); D. B. VolYberg ed., Effek-
tivnoye Ispol'zovaniye Toplivno-Energeticheskikh Resursov.
(Moscow: Energoatomizdat, 1983); L. A. Melent'yev and A. A.
Makarov, eds., Energeticheskii Kompleks SSSR (Moscow: Ekono-
mika, 1983), and A. M. Nekrasov and A. A. Troitskiy eds.,
Energetika SSSR v 1981-85 Godakh (Moscow: Energoizdat, 1981).
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installation of insulation and proper sealing of build-
ings, has implications for energy use long after con-
struction is completed.
Aside from improved equipment operations and elimi-
nation of unnecessary motor idling, there are few
direct energy conservation measures that can be taken
in this sector. Soviet discussions have focused on more
efficient use of construction materials and the incor-
poration of conservation measures in building designs.
The impact of better insulation and improved building
designs is discussed below in the residential sector.
The issue of conserving energy-intensive materials
(such as curbing waste of materials, cutting down on
steel content of machinery, and substituting less
energy-intensive materials whenever possible) is a very
important source of energy savings, although beyond
the scope of this study. The importance of such
conservation is evident from the large amount of
materials used in construction. In 1984 the construc-
tion program was scheduled to consume 110 million
tons of cement, 37 million tons of fabricated metal,
12 million tons of steel pipe, 245 million square
meters of glass, 100 million cubic meters of lumber
products, and 58 billion bricks. The energy used to
produce the cement and metal alone was greater than
the total direct energy consumption by this sector.
Direct energy conservation in the sector will probably
be relatively low-less than 5 percent-given the
relatively low level of savings opportunities.
efficiency improved during the 1960s and 1970s with
the switch from coal to the more efficient oil and gas,
energy efficiency stagnated in the 1980s as substitu-
tion opportunities have diminished. The Soviets' inef-
ficiency is due primarily to the structure of cement-
making capacity. While most of the world's cement
industries converted to the more efficient "dry" pro-
cess (which consumes only 55 percent as much energy
as the older "wet" process), some 90 percent of Soviet
cement is still produced by the wet process." The
efforts to switch to the dry process are hampered by
problems in the raw material base. The requirements
for raw material quality (low moisture and homoge-
neous composition) for the dry process are stringent;
as of the mid-1970s, however, only 4 percent of
explored limestone deposits in the USSR met these
requirements." According to a 1984 press report, only
seven of the 30 new cement production lines installed
during the previous 10 years used the dry process-no
doubt in part because of the raw material quality
problem." Moreover, a Soviet economic journal stated
in mid-1985 that the share of production from the wet
process had risen to about 90 percent, up from 85
percent in 1981.5?
Major energy savings in cement production depend on
the continued transition to the dry process, which not
only would be expensive but also may not be feasible
on a large scale. Small savings can be made at the
margin, but they will be subject to the same con-
straints in supply of heat exchangers and other such
equipment as are encountered in other sectors using
this kind of equipment (see inset).
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The production of construction materials-principally
cement, bricks, and glass-is highly energy-intensive,
accounting for about 7 percent of Soviet energy use.
Cement is the largest energy consumer of these
products, using about 45 million tons of standard fuel
in 1980, and has been targeted by the Soviets for
energy conservation."
The Soviets are, by world standards, inefficient in
energy use in cement production. Although energy
Conservation measures in the construction materials
sector are, on the whole, expensive. One Soviet study
cited costs of 968 rubles per ton of standard fuel saved
as the average for several conservation measures in
the construction materials sector as a whole." A new
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dry process cement plant could be built at a cost of
500 to 600 rubles per ton of energy saved, according
to a 1984 Pravda article." Other approaches are
cheaper-the use of additives and waste byproducts,
such as slag and ashes to reduce the clinker content
(95 percent of the energy used to produce cement is
used in the production of clinker), improved heat
exchangers and heat-retaining screens, and improved
burner design.
Investment in the cement industry was low in the
1981-85 plan.53 Future plans will have to increase
investment and/or lower planned production increases
if major energy savings are to be achieved. Given the
existence of some low-cost, energy-saving measures
and the raw material constrained on the dry process,
we estimate that energy conservation in this sector
will be small-on the order of 5 percent.
The electric power industry is the largest consumer of
energy in the Soviet Union. In 1985 thermal plants
burned nearly 350 million tons of standard fuel-
nearly 20 percent of the country's total energy con-
sumption. Hydroelectric and nuclear power plants
represented the equivalent of another 110 million tons
of standard fuel. Overall, the electric power sector
accounted for nearly 25 percent of 1985 Soviet energy
consumption. This sector is efficient by world stan-
dards. Efficiency gains have slowed in recent years
(figure 8), and the Soviets may have pushed existing
technology about as far as possible.
The Soviets continue to emphasize conservation in
electric power production, which annually uses about
125 million tons of oil-over one-fourth of Soviet oil
consumption. Gas substitution is being emphasized as
the primary way to reduce oil usage, but conservation
is a second means. In addition, because this sector
consumes so much energy, even small percentage
gains can add up to big savings in the amount of
energy used. Furthermore, the share of total energy
Conservation Measures in the Cement Industry a
-Convert to dry process.
-Use of plasticizers to lower clinker content of
cement.
-Use of slag, ash, other waste material to lower
clinker content (use of 30 percent slag lowers ener-
gy requirements by 22 percent).
-Increase furnace operating rates.
-Use of additives to reduce moisture of slurry
(]-percent reduction in moisture yields ]-percent
reduction in energy use).
-Begin production with low-temperature saline
process.
-Improve heat recovery by using heat exchangers
and heat screens.
-Increase output of new, less energy-intensive port-
land cement (a 2.4 percent reduction in the average
grade of cement was planned for 1981-85).
-Modernize burners.
-Add surfactants to intensify grinding process.
-Use electrostatic precipitators to lower material
losses (indirect energy savings).
-Use large filters to advance the drying process.
-Improve operation of grinding units to cut electric
power use.
-Reconstruct rotating furnaces (wet process) to in-
crease capacity.
-Use pneumatic batchers to directly feed ground
clinkers into kiln heat exchanger.
a Soviet planned conservation measures are taken from four princi-
pal sources: D. G. Zhimerin, ed., Sovremennyye Problemy Energe-
tiki. (Moscow: Energoatomizdat, 1984); D. B. VolJberg ed., Effek- 25X1
tivnoye Ispol'zovaniye Toplivno-Energeticheskikh Resursov.
(Moscow: Energoatomizdat, 1983); L. A. Melent 'yev and A. A.
Makarov, eds., Energeticheskii Kompleks SSSR (Moscow: Ekono-
mika, 1983); and A. M. Nekrasov and A. A. Troitskiy, Energetika
SSSR v 1981-85 Godakh (Moscow: Energoizdat, 1981).
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-Modernize existing turbines.
-Reconstruct existing condensation blocs, in
European USSR plants with 150- to 300-megawatt
capacity, to further develop cogeneration.
-Introduce 500- and 800-megawatt units based on
coal (2- to 3 -percent improvement over 300-mega-
watt units).
-Retire one-third of small outmoded boilers (1985
goal: save 8 million tons standard fuel).
-Rely more heavily on centralized heating system.
-Reduce transmission losses from 9 to 8.5 percent
(savings of 2 million tons standard fuel).
-Improve operating procedures on existing units to
minimize downtime and restarts.
-Improve transport, handling, and processing of
fuels, especially low-grade coal, to ensure smooth-
er operations.
-Improve current distribution in sequentially regu-
lated transformers.
-Use sectioning to eliminate unfavorable current
distribution in networks of different voltage.
-Increase the degree of compensation of reactive
loads with additional compensators/equaliz-
ers/condensers.
-Add boiler units to cogeneration plants to improve
variability of output (20 to 25 grams standard
fuel/kWh improvement).
-Raise steam pressure from 540' Celsius to 565 ?
Celsius.
-Improve flexibility of 300- to 800-megawatt
blocks.
-Increase air intake in fuel oil burning bloc (1,000
tons standard fuel per 300 megawatts).
-Install air preheaters.
-Keep boiler heating surfaces clean.
-Renovate regenerative heaters; for example, up-
grade seals.
-Improve sealing of boiler furnaces and flues.
-Increase operation time of individual units (500-
megawatt units operate only 74 to 75 percent of the
time).
-Introduce mechanical heating and cooling system
for electric power buildings (1,000 to 1,200 tons
standard fuel per 500- and 800-megawatt unit).
a Soviet planned conservation measures are taken from four princi-
pal sources: D. G. Zhimerin, ed., Sovremennyye Problemy Energe-
tiki. (Moscow: Energoatomizdat, 1984); D. B. Voljberg ed., Effek-
tivnoye Ispol'zovaniye Toplivno-Energeticheskikh Resursov.
(Moscow: Energoatomizdat, 1983); L. A. Melent'yev and A. A.
Makarov, eds., Energeticheskii Kompleks SSSR (Moscow: Ekono-
mika, 1983); and A. M. Nekrasov and A. A. Troitskiy, Energetika
SSSR v 1981-85 Godakh (Moscow: Energoizdat, 1981).
going to this sector is expected to rise over the next
decade as Soviet use of electric power intensifies.
reach one-third of total installed capacity." Problems
since the Chernobyl' nuclear power plant accident
have heightened this problem of relying on older
equipment. Modernizing and replacing some of this
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Realizing the continued potential for conservation in
electric power production will be expensive. Low
retirement rates have resulted in an aging capital
stock. A 1983 press report warned that the share of
operating capacity representing thermal power plants
working beyond their rated service life could soon
capacity would in itself be expensive.
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Basic methods of conservation in the electric power
industry include measures that lead to steady opera-
tion of equipment, eliminating the incidence of unnec-
essary downtime and restart operations, which require
additional fuel (see inset). Many Soviet power plants,
however, lack flexibility and are capable of producing
electricity at only one output level; that is, they cannot
adjust to the daily fluctuations in electricity demand.
Flexible units make up only 0.4 percent of total
generating capacity, compared with a minimum tar-
get of 8 to 10 percent, according to the journal of the
State Planning Committee." As a result, much equip-
ment has to be shut down at night, necessitating
energy-intensive daily startups. In Moscow, for exam-
ple, the load is one-third less at night than during the
day.
Another potential source of energy saving in this
sector is increasing the share of 800-megawatt tur-
bines relative to that of the 150- to 200-megawatt
turbines. The larger units are some 10 percent more
efficient.56 The replacement process is slow, however.
By the mid-1980s, the Soviets had installed only 15 of
the 800-megawatt turbines-less than 5 percent of
total electricity generation capacity
Efficiency also depends on the fuel used. Natural gas
is about 4 percent more efficient than fuel oil in power
plants. Gas-for-oil substitution would, therefore, pro-
vide some efficiency gains, just as any long-run
increase in the share of coal (a less efficient fuel) in
power plant fuel use would have a negative impact on
efficiency. For the next decade, however, substitu-
tion-which would increase the share of gas in total
power-plant fuel use-will probably have an overall
positive impact on efficiency.
In summary, conservation will be expensive in this
industry. Because of the efficiency gains the Soviets
have already made in electricity power, there are few
easy steps to take. Replacing equipment is costly, and
the Soviets may be hard pressed to make the requisite
investment, given the rising demands for electricity,
May 1984): pp. 2-5.
the need to improve the reliability and flexibility of
the power supply, and the setback caused by the
Chernobyl' disaster. Efficiency should improve on the
margin with increased reliability and flexibility, and
meters and other conservation equipment may be
installed when other equipment is upgraded (see in-
set). On the basis of our estimate of the future
structure of the Soviet electric power industry and the
level of new construction, we estimate that energy
used to generate electric power and heat will decline
by only about 2 percent between 1985 and 1995.
Energy conservation in the production and transporta-
tion operations of the oil, gas, and coal industries adds
another dimension to the discussion of efficiency
measures. In addition to promoting the more efficient
use of energy in other economic activities, conserva-
tion efforts focus on controlling the direct losses of
energy at the production sites-for example, captur-
ing gas that is now flared and preventing spillage in
the oilfields (see table 9).
Oil producers use energy to provide heat for oilfield
processing facilities and electricity for operating the
equipment that drills the wells and pumps the oil. The
oil industry uses less than 2 percent of national
electricity output and less than 0.5 percent of heat
production." Conservation measures focus on cutting
down on oil spillage (now about 2 percent of produc-
tion), use of more efficient burners and better capture
of process heat in oilfield operations, installation of
gas turbines to use gas now often flared, and greater
use of automation and metering. Measures such as
metering and reducing energy use in pumping by
keeping the pipelines clean are not expensive; but,
because these measures require equipment and man-
power that is in short supply, gains may be difficult.
Reducing oil spillage by replacing pipes and valves
will be expensive and labor intensive. Press reports
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Table 9
Conservation Measures in the Fuels Sector
Use wellhead pressure more fully
Use vacuum stabilizers in oil collection systems
Use more economical heating units
Use meters and automated control more widely
Keep pipelines clean of paraffin deposits
Equip mobile power plants with heat-recovery equipment
Use gas-turbine power units in fields where gas is now
flared; use heat from the turbines
Gas Replace gas turbines with electric motors in compressor
stations
Use automatic regulation in gas processing plants
Install heat recovery equipment
Use energy of gas pressure to pump liquids in gas
separation plants
Improve compressor cleaning operations
Increase use of inhibitors to keep pipelines clean
Keep heat exchanger surfaces clean
Increase metering
Use computers to optimize field operations
Coal Capture and use methane gas
Use more efficient boilers and ventilation equipment
Raise level of automation of energy systems
Improve energy efficiency of mining equipment
a Soviet planned conservation measures are taken from four princi-
pal sources: D. G. Zhimerin, ed., Sovremennyye Problemy Energe-
tiki. (Moscow: Energoatomizdat, 1984); D. B. Vol'fberg ed. Effek-
tivnoye Ispol'zovaniye Toplivno-Energeticheskikh Resursov.
(Moscow: Energoatomizdat, 1983); L. A. Melent'yev and A. A.
Makarov, eds., Energeticheskii Kompleks SSSR (Moscow: Ekono-
mika, 1983); and A. M. Nekrasov and A. A. Troitskiy, Energetika
SSSR v 1981-85 Godakh (Moscow: Energoizdat, 1981).
indicate that the spillage problem is getting worse in
West Siberia because of advanced corrosion in pipes.
Conservation in this area may, however, be accorded
low priority because of the small share of total energy
consumption it represents and the difficulty of per-
forming the thousands of operations that are required.
Gas production itself uses relatively little energy,
because of the high well-head pressures of many
Soviet fields and the absence of major separation
problems, with the notable exception of gas from
high-sulfur fields, including Astrakhan'. Several mea-
sures can be taken, however, to improve the energy
efficiency of processing efforts-the use of larger,
more efficient units, the use of heat exchangers,
improved cleaning operations, and the use of comput-
ers and improved metering. Gas pipelines are, howev-
er, major consumers of energy. Major gas lines com-
ing out of West Siberia, for example, use about 12 to
13 percent of the transported gas to power the
pipelines." Soviet studies show that replacing the gas-
turbine drives for the compressors with electric motors
can save substantial energy at a relatively low cost-if
excess electric power is available in the area.59
Conservation in gas production and transport will
probably be slow. As with oil, but to a much lesser
extent, numerous operations at hundreds of fields will
be difficult to implement. Many operations will be
hampered by the same lack of metering and other
control devices plaguing other industries. Finally, the
largest single measure identified-the use of electric-
ity rather than gas to power the pipelines in areas with
excess generating capacity-may have a low priority
because of the abundance of gas and the relative
tautness of the electricity supply.
Coal producers' energy requirements depend substan-
tially on the type of mining operation-open pit mines
require only about 12 percent of the energy per ton of
coal needed for deep mining, although coal from
underground mines generally has a higher energy
content.60 The rising share of open pit mining, along
with other measures, in the 1981-85 plan was expect-
ed to cause a 3-percent decline in heat used and a 0.5-
percent decline in the electricity used per ton of coal
82861 (15 February 1983): pp. 15-16).
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mined.61 The deterioration in coal quality is, however,
raising the energy requirements for coal processing.
Between 1972 and 1982, for example, the electricity
requirements for coal enrichment rose by 37.5 per-
cent; for briquetting, 27.4 percent.62 These trends are
expected to continue.
Coal production is a rather small energy user, but
there is some potential for conservation. Conservation
measures include the use of methane gas from the
mines as a fuel source, improved boiler efficiency,
increased use of automation, and the use of more
efficient mining and ventilation equipment. Given the
coal industry's production problems and low invest-
ment priority since the mid-1970s, conservation in this
area will require a substantial turnaround in invest-
ment policy and a change that forces the investment
into channels that enhance energy efficiency.
For the fuels sector as a whole, conservation depends
principally on the ability to control losses, particularly
of oil and coal, in storage and transportation. The
greater capture of associated gas in oilfields and the
increased use of methane gas in coalfields is more a
matter of increasing production than of energy con-
servation, in the sense that the latter concept has been
used in this paper. Therefore, we estimate that the
realistic conservation potential for this sector is rela-
tively low-limited to tightening up the effort, better
metering, greater care, and so on. These changes
could yield savings up to 5 percent, savings that could
well be cut in half by the negative factors of lower
flow oil wells, longer gas transport, and lower grade
coal. Thus, overall, we expect energy savings of 2 to 3
percent by 1995.
Machine Building
Machine building, a diverse combination of civilian
and defense industries producing machinery and
equipment, consumes about 7 to 8 percent of Soviet
energy. Its consumption of electric power and heat
(16.5 percent of total Soviet consumption) is especially
61 Nekrasov and Troitskiy, op. cit.: pp. 55, 94).
62 Promyshlennaya energetika, op. cit: p. 9.
Conservation Measures in the
Machine-Building Sector a
-Increase oxygen to steel-smelting furnaces (open-
hearth type).
-Preheat scrap for electric furnaces (10 percent sav-
ings in electricity).
-Use liquid sew hardening mixture in casting.
-Use automatic forging complex instead of steam
hammers (cuts energy use by three-quarters).
-Preheat charge to forge (650 to 800? Celsius).
-Replace electric furnaces with gas-fueled furnaces
(15- to 20 percent boost in energy efficiency).
-Equip large furnaces with heat recovery unit (10-
to 15 percent energy savings).
-Use recovered heat to preheat air.
-Equip furnaces with automatic regulators and gas
jets (8- to 10 percent improvement).
-Reconstruct large drying furnaces, recirculating
the heat.
-Replace noncontinuous furnaces with continuous
action furnaces.
-Use "hot threading" of pieces, rather than milling.
-Use cold stamping instead of hot stamping.
-Use automated production lines when relevant.
-Expand use of numerically controlled equipment.
-Replace metal with plastic.
-Replace electric current with pneumatic drive in
several operations.
-Improve operations of plant electric power stations.
-Improve operation of compressors.
a Soviet planned conservation measures are taken from four princi-
pal sources: D. G. Zhimerin, ed., Sovremennyye Problemy Energe-
tiki (Moscow: Energoatomizdat, 1984); D. B. VolYberg ed., Effek-
tivnoye Ispol'zovaniye Toplivno-Energeticheskikh Resursov.
(Moscow: Energoatomizdat, 1983); L. A. Melent 'yev and A. A.
Makarov, eds., Energeticheskii Kompleks SSSR (Moscow: Ekono-
mika, 1983); and A. M. Nekrasov and A. A. Troitskiy, Energetika
SSSR v 1981-85 Godakh (Moscow: Energoizdat, 1981).
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important. Machine building made substantial con-
servation progress in the 1970s-the electric power
and heat used per ruble of output declined by one-
fifth and one-third, respectively. Although Soviet
plans call for direct energy conservation gains in
machine building, the principal opportunity for ener-
gy conservation is in the production of machinery that
is more energy efficient and contains less metal.
Conservation measures discussed by the Soviets (see
inset) focus principally on capturing secondary heat
given off in production processes, notably forging and
casting. The 1981-85 plan called for the utilization
rate of secondary energy, principally in the form of
low-temperature heat and steam, to rise from 14
percent to over 30 percent of the potential.63 Such a
gain will be difficult. Much of the currently uncap-
tured heat appears to be from small units, for which
there is neither suitable recovery equipment nor
steady use for the low-grade heat or steam that would
be captured.64
Some plants in this sector are so large that they
include their own furnaces and power plants. For
these plants, some of the conservation measures dis-
cussed under metallurgy and electric power should be
relevant.
The 1986-90 plan calls for a rapid expansion of
machinery output-40 to 45 percent, including ener-
gy-conserving equipment. The scramble to meet high
output targets may push conservation measures aside.
Finally, energy costs represent only a small part
(about 3 to 4 percent) of total expenditures in machine
building.65 The emphasis on growth of output suggests
that energy conservation measures that have no labor-
saving or quality-improving side benefits will probably
have a very low priority in this sector.
Despite the emphasis on expanding machine-building
output, the progress already made in the 1970s (limit-
ing the potential for conservation), and the emphasis
6' V. A. Gol'strem and Yu. L. Kuznetsov Spravochnik Po Ekonomi-
kii Toplivno-Energeticheskiky Resursov (Kiev, Tekhnika, 1985):
p. 7.0
1 S. P. Sushon, et al., Vtorichnyye Energeticheskiye Rusursy
Promyshlennost'SSSR (Moscow: Energiya, 1978): p. 1 O6.
66 Narodnoye khozyaystvo SSSR, 1985: p. 126.
on improved quality (often accompanied by increases
in energy requirements wherever metal is concerned),
we believe that the availability of energy conservation
opportunities, some of them identical to those in
ferrous metals production, can lead to conservation
gains on the order of 5 to 10 percent, depending on the
impetus to conserve. Success in conserving metal in
this sector (another element of the Soviets' overall
efficiency campaign) will have a reinforcing effect on
energy conservation prospects.
The production of nonferrous metals consumed about
3 percent of Soviet energy consumption in 1980.66 We
selected aluminum for review because it is the most
electricity-intensive of these metals, some of the con-
servation measures for aluminum are relevant to other
metals, and the information is somewhat more avail-
able (because of the importance of nonferrous metals
in defense applications, the Soviets publish little data
on production or reserves of most of them).
The aluminum industry in the USSR has made
efficiency gains, but it remains less efficient than that
in the West. Aluminum is one of the most electricity-
intensive of all industrial products-consuming about
17,000 kWh per ton (down from 18,146 kWh per ton
in 1965).67 The industry's efficiency in use of electric-
ity is roughly comparable to that in the United States
in the early 1970s. The high energy consumption is
because of the high temperatures required to separate
aluminum from alumina (aluminum oxide).
A special problem that can affect aluminum produc-
tion is damage caused by electric power outages.
Power outages have occurred in the past, causing one
plant to shut down its smelting pots. Shutting down
66 Promyshlennaya energetika (No. 11, 1977): pp. 2-7 and Promysh-
lennaya energetika (No. 11, 1984) p. 12.
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the pots is expensive-the pots can be damaged, and
restarting them is time consuming. Therefore, assur-
ing a reliable supply of electricity probably has a
higher priority than conservation of electricity in this
sector.
Some relatively inexpensive conservation measures
can be taken. For example, a 1981 Soviet press article
discussed heat recovery units that were installed at a
cost of only 8 rubles per ton of standard fuel saved.68
A measure used heavily in the West is the recycling of
aluminum. Recycling aluminum requires less than 5
percent of the energy needed to produce aluminum
from bauxite.69 It is not clear, however, that major
sources of aluminum for recycling exist in the USSR.
Other conservation measures discussed (see inset)
include. general efficiency measures that apply in
almost any industrial process-reduce machinery
idling time, tighten the insulation and fittings on
furnaces, and increase the use of automation.
Soviet plans call for about 7 million tons of standard
fuel in energy savings in the 1980s for all of the
nonferrous metal industries.70 This total represents
about 15 percent of total Soviet nonferrous energy
consumption in 1980. The completion of the new
Sayansk aluminum plant and a variety of measures to
recoup secondary heat should result in achieving
energy savings for the entire nonferrous sector of 2.5
to 5 percent by 1995.
This sector, one of the largest consumers of energy in
the USSR, in 1980 used 336 million tons of standard
fuel (nearly 20 percent of total national consumption).
Of this amount 250 million tons were used for space
heating, air-conditioning, and hot water heating.
Nearly 57 million tons were used for electricity and
29 million tons for food preparation." This sector's
energy demand will continue to rise, because housing
69 EKO (No. 7, July 1985): p. 144.
? Planovoye khozyaystvo (No. 1, January 1981): p. 39.
-Recycle aluminum (recycled metal has 5 percent of
the energy requirement of bauxite).
-Improve use of secondary heat from furnaces.
-Improve preparation and use of fluxes.
-Reduce idle running of equipment.
-Modernize furnaces during overhauls (9- to 30.6-
percent reduction in fuel use).
-Improve direct directional heat (3- to 15 percent
reduction in fuel use).
-Improve gas furnaces by improving fittings, install-
ing insulation, and improving durability of
construction.
-Use exhaust gases to preheat air to furnaces.
-Install heat recovery units.
-Improve electric furnaces by using heat from dry-
ing aluminum chips increase capacity of
transformers.
-Transfer aluminum as liquid whenever possible
(savings of 500 kWh/ton).
-Introduce automation.
-Expand gas use in roasting furnaces.
-Use prebaked anodes (reduce kWh/ton 5 to 8
percent).
-Add copper salts to electrolysis solution.
-Use heat exchangers more widely in making alumi-
num oxide.
-Use high-temperature leaching for aluminum oxide
(allows lower bauxite concentration, less heat).
a Soviet planned conservation measures are taken from four princi-
pal sources: D. G. Zhimerin, ed., Sovremennyye Problemy Energe-
tiki. (Moscow: Energoatomizdat, 1984); D. B. Vol7berg ed., Effek-
tivnoye Ispol'zovaniye Toplivno-Energeticheskikh Resursov.
(Moscow: Energoatomizdat, 1983); L. A. Melent'yev and A. A.
Makarov, eds., Energeticheskii Kompleks SSSR (Moscow: Ekono-
mika, 1983); and A. M. Nekrasov and A. A. Troitskiy, Energetika
SSSR v 1981-85 Godakh (Moscow: Energoizdat, 1981).
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is projected to grow throughout the period. Waste is
substantial in this sector, and the potential for conser-
vation is great, although implementation may be
difficult:
? Stories abound of overheated apartments cooled by
open windows in the winter because of the lack of
valves and thermostats.
? Per capita hot water consumption in the USSR was
50 to 67 percent higher than in other countries,
according to a 1981 press report.72
? Insulation standards were lowered in the 1970s by
10-20 percent, so that residences constructed during
the 1970s required more energy to be heated than
buildings built 25 years earlier, according to a 1980
Soviet economic journal." Standards had apparently
been raised by 1982, according to a later report in
another journal .14
? Heat-supply lines reportedly lose 13 percent of their
heat in transit, because of poor insulation. (The
Soviet standard is 5 to 6 percent loss, according to a
1983 Soviet monograph.)
Soviet plans for conservation in this area (see inset) for
the most part parallel measures taken in the West
over the past 10 years-better insulation, the use of
building materials with better heat-retaining proper-
ties, better building designs, adding thermostats, and
the recapture of vented heat. Much of the conserva-
tion gain realized in the West was based on individual
actions in response to rising prices. In the USSR the
availability of nonmetered or nominally priced energy,
together with the lack of private ownership of resi-
dences, sharply reduces individual incentive to
conserve.
There are nearly 5 billion square meters of housing
(urban and rural) in the USSR, with over 100 million
square meters being built annually." Although new
construction methods and materials can reportedly
72Izvestiya (24 July 1981): p. 2.
EKO (No. 9, September 1980): p. 119.
14 Stroitel'naya gazeta (8 September 1982): p. 3.
Conservation Measures in the Urban-Rural
Residential Area a
-Insulate walls, doors, windows, and heat pipes.
-Modernize existing buildings (18- to 20 percent
reduction in heat losses).
-Use new construction techniques such as new de-
signs, better insulation, better materials (15- to
20 percent reduction in heat losses, compared with
current conditions).
-Recapture vented heat (1985 goal was to recapture
30 million tons of potential 65 million tons).
-Install individual thermostats (save up to 15 per-
cent of heat loss).
-Reduce temperatures in unused rooms and after
working hours (11 million tons per year).
-Use high-efficiency furnaces.
-Use hot water flow regulators.
-Reduce use of small inefficient boilers; increase
reliance on centralized heat.
-Build larger buildings, when possible, to reduce
relative outside exposure.
a Soviet planned conservation measures are takenfrom four princi-
pal sources: D. G. Zhimerin, ed., Sovremennyye Problemy Energe-
tiki. (Moscow: Energoatomizdat, 1984); D. B. Vol yberg ed., Effek-
tivnoye Ispol'zovaniye Toplivno-Energeticheskikh Resursov.
(Moscow: Energoatomizdat, 1983); L. A. Melent 'yev and A. A.
Makarov, eds., Energeticheskii Kompleks SSSR (Moscow: Ekono-
mika, 1983); and A. M. Nekrasov and A. A. Troitskiy, Energetika
SSSR v 1981-85 Godakh (Moscow: Energoizdat, 1981).
cut heat loss by 15 to 20 percent, new construction
will affect the total energy efficiency only slowly."
Modernization of existing buildings can also cut heat
losses by up to 20 percent, but, as in the West, such
retrofitting tends to be expensive." Making a substan-
tial improvement in the older housing stock will be a
slow and expensive process. The implementation of
new designs will take even longer. As noted earlier in
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tion measures into account.
our discussion of poor Soviet implementation of con-
servation, a recent Soviet survey of new building
designs showed that the designs did not take conserva-
impetus given to the effort.
In view of the recent low priority given to housing
investment, the lack of nonenergy side benefits, the
disparate nature of the problem, and the long lifetime
of the housing stock, we believe that conservation
progress in the sector will be considerably slower than
in the West, perhaps improving energy efficiency on
the order of 2.5 to 7.5 percent, depending on the
The transportation sector has an importance well
beyond that suggested by its relatively small (about
7-percent) share of total Soviet energy consumption."
Transportation accounts for about one-third of total
oil consumption and nearly half of the scarcest energy
commodity-light oil products." Fuel requirements
are expected to grow as transport distances continue
to increase and the level of freight and passenger
traffic continues to grow. Overall, the Soviet transpor-
tation sector is quite efficient by Western standards,
largely because of the high degree of railroad electri-
fication and the high share of total freight that is
hauled by rail (see table 10). In the USSR, the more
efficient modes of transportation (pipeline, rail, and
inland waterway) account for over 90 percent of
freight handled, compared with only 75 percent in the
United States. The structure of transportation use
largely explains the basic energy-use pattern in this
sector. Many of the opportunities for efficiency gain
available in the past-the rapid increase in rail
electrification and the replacement of the steam loco-
motives-have largely been exhausted. Furthermore,
a major source of energy savings in the United
States-voluntary reductions in driving and improved
energy efficiency in private cars-is a relatively minor
factor in the USSR.
' Makarov and Melent'yev, op. cit.: p. 43.
Izvestiya (15 April 1982): p. 2.F__
Table 10
Relative Fuel Expenditure,
by Type of Transportation
Index of Fuel Use
Per Ton-Kilometer
Transported
(US Experience)
Percentage of Total
Inland Freight
Handled in 1983
Oil pipelines
100
24 25
Railroads
149
63 36
Inland waterway
151
5 15
Truck
844
8 24
Sources: Narodnoye Khozyaystvo SSSR 1983 (excluding maritime
shipping and gas pipelines to make the data comparable with US
data); Statistical Abstract of the U.S. 1985; Hammond, et a!.,
Energy and the Future, (Washington, D. C., AAAS, 1973): p. 137.
Despite Soviet achievements in transportation, further
energy conservation potential still exists, although
rather expensive. Most conservation measures dis-
cussed by the Soviets (see inset) involve either conver-
sion to new equipment (the dieselization of trucks,
improved engines and better design for aircraft) or
measures that require very widespread implementa-
tion (surfacing dirt roads and improving railroad track
conditions, for example). Two examples illustrate the
extent of need for such measures:
? The Soviets cite dieselization of the truck park as a
major source of conservation. The greater cost and
higher maintenance requirements of diesel engines
are offset by better fuel efficiency. Soviets claim
that diesel engines can be 30 to 35 percent more fuel
efficient than internal combustion engines." The:
1986-90 plan calls for the share of freight handled
by diesel trucks to reach 60 percent, with fuel
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Conservation Measures in Transportation a
Railroads:
? Improve organization to maximaze use of locomo-
tive and car capacities.
? Improve construction of engines and railroad cars.
? Install new, improved bearings on cars.
? Further electrify railroad lines (savings of over 2
million tons annually per 10,000 km of track).
? Further electrify urban transport.
? Improve recovery of electricity from rails (potential
savings of 1.1-1.5 billion kWh per year).
? Improve transmission of electricity to rails.
? Use larger capacity trains.
Trucks and automobiles:
? Expand dieselization (savings of 25 million tons
1980 to 1990).
? Improve roads (paving dirt roads).
? Improve internal combustion engine.
? Increase role of larger trucks.
? Improve organization to maximize capacity.
a Soviet planned conservation measures are taken from four princi-
pal sources: D. G. Zhimerin, ed., Sovremennyye Problemy Energe-
tiki. (Moscow: Energoatomizdat, 1984); D. B. Vol1berg ed., Effek-
tivnoye Ispol'zovaniye Toplivno-Energeticheskikh Resursov.
(Moscow: Energoatomizdat, 1983); L. A. Melent'yev and A. A.
Makarov, eds., Energeticheskii Kompleks SSSR (Moscow: Ekono-
mika, 1983); and A. M. Nekrasov and A. A. Troitskiy, Energetika
SSSR v 1981-85 Godakh (Moscow: Energoizdat, 1981).
savings of 18 to 20 percent by 1990 (compared with
1985). The relative share of diesel trucks is rising
rapidly." There is room for improvement, since in
1984 less than 20 percent of Soviet trucks were
diesel."
? Surfacing dirt roads improves fuel mileage by 25 to
30 percent.83 Between 1980 and 1985 hard-surfaced
81 W. Kelly and H. Shaffer, Trends in Fuel Consumption Rates
Among Trucks in the 1980s (Battelle Columbus Laboratories:
November 1983).
'2 Kommunist' (No. 14, October 1984: p. 128.
81 Vol'fberg, op. cit., p. 68.~
River and maritime:
? Improve organization of shipping operations.
? Use more efficient diesel engines.
? Increase maritime ship capacity (35 percent in-
crease over 10 years).
? Improve mechanization of freight handling.
? Increase use of barges for river freight.
Air:
? Use better organization-operational procedures,
aircraft tasking.
? Improve engines.
? Use better aircraft construction (smooth surfacing,
for example).
? Increase aircraft capacity (replace smaller planes
on longer runs with larger planes).
roads' share of total roads rose from 68 to 73
percent. Still, in 1985 there were about 415,000
kilometers of non-hard-surfaced roads in the
USSR, virtually unchanged since 1980. Despite
some progress, surfacing a large percentage of these
roads will be slow.
Conservation progress in transportation will continue
to maintain a high profile because, in nearly every
case, the conserved fuel is a light oil product. Conser-
vation will probably be impeded somewhat for the
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the transport sector.
reasons noted. Progress will probably result principal-
ly from the slow but steady increase in rail electrifica-
tion and from the more rapid gains in truck dieseliza-
tion. Perhaps some improvement in operations at all
levels to maximize capacity use and minimize fuel
losses will also contribute to conservation progress in
for the transport sector as a whole.
Trucks handle only about 6 percent of freight mea-
sured in ton-kilometers (tons times the distance
hauled). Therefore, gains in dieselization, perhaps of
10 to 15 percent, will be largely offset by the limited
potential in other areas where tightening of operations
may yield improvements of some 5 percent. We
project improvements of about 5 to 7 percent by 1995
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