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48 Lights Out? The Outlook for Energy in Eastern Europe and the Former Soviet Union

should therefore be limited to those with optimal energy efficiency


To set the example, governments should undertake energy effi-

ciency programs in the public sector, disseminating the results

through long-term information campaigns. Such a step would stimu-

late consumer interest and help develop an energy-efficiency indus-

try. Designing cities with alternative means of transport in mind is

another important way for governments to raise energy efficiency.

Globally, the technical potential for better energy efficiency

through 2030 is greatest in construction (30 percent), followed by

industry (21 percent) and transport (17 percent) (IEA 2006a). Reli-

able projections for the region are not yet available, but given the

region’s generally poor record on energy efficiency, its potential is

believed to be much higher.

Commercial banks are ideal vehicles for financing energy effi-

ciency. But so far the region’s banks have shown limited appetite for

this line of business. And experience in several OECD countries shows

that a dedicated energy efficiency fund is essential as a lender of last

resort and originator of bankable projects. Energy service companies

are a good solution for large energy consumers (the public sector,

industry, pooled residential projects), but they require sophisticated

clients and a good legal and contractual framework. There is a broad

range of business models for these companies, so countries should

assess which have the greatest potential for their market.

Utility demand-side management programs have worked well in

some OECD countries in which the regulatory framework provides

the proper incentives for utilities. Together with integrated resource

planning and electronic markets, utility demand-side management

deserves a new look. It is one of the quickest and most effective ways

to boost energy efficiency, especially in reaching small consumers

with standard solutions—say, through efficient lighting and appliance

replacement programs.

The Potential Benefits of Energy Efficiency

Energy efficiency became a major policy issue after the 1973 OPEC oil

embargo and the second oil price shock of 1979. The issue was par-

ticularly important in Japan and the European Union, both major net

importers of energy. Energy efficiency languished during the 1990s,

when oil and natural gas prices were low and stable in real terms.

Concerns about climate change, energy security, and rising energy

prices have again made energy efficiency a worldwide focus.

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The Potential Demand Response: Increasing Energy Efficiency 49

The terms energy intensity and energy efficiency are often used

together. Energy intensity refers to the total energy consumed per unit

of GDP, sometimes measured at purchasing power parity prices.

Energy efficiency refers to the amount of energy derived from a given

level of physical output. Higher energy efficiency usually reflects tech-

nological or process improvements. Energy efficiency is expressed

through a variety of ratios, such as lumens/watt, gigajoules/square

meter, and kilometers/liter.

Equating high energy intensity with inefficient use of energy is

common but incorrect. Much depends on the structure of the econ-

omy, the concentration of the population in climate zones, distances,

and other factors. An economy or sector can be both energy efficient

and energy intensive if many industries consume a lot of energy.

Although the International Energy Agency (IEA) uses the energy

intensity concept to compare energy use across countries and over

time, the aggregate indicators can be misleading. For example,

Russia’s energy intensity dropped significantly between 1999 and

2006 because its GDP grew on average 6.5 percent a year while the

share of manufacturing fell from 49 percent to 40 percent. It made

little, if any, progress on energy efficiency, however.

Although the 30-year-old market for energy efficiency remains

immature, the energy efficiency investments undertaken so far have

made a huge difference. The IEA calculates that between 1973 and

1998, energy use in 11 of its member countries grew by 20 percent.

These countries would have used 50 percent more energy had they

not increased energy efficiency (IEA 2005) (figure 4.1).

Estimated Effect of Energy Efficiency Improvements on Energy Use
in 11 OECD Countries, 1973–97

Source: OECD/IEA 2005

1973 1976 1979 1982 1985 1988 1991 1994 1997











energy use

without savings


energy use

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Index 129

thermal power generation
See also coal-fired electricity

generation; electricity
capacity, 26, 27f
investment requirements, 39, 40t
regional cooperation on, 42

transaction costs, 59, 63
transit countries, 35
transmission facilities

investment requirements, 40, 40t
as natural monopolies, 98
technical losses and, 101
vertical unbundling of, 102–4

transparency, 93, 97
transport sector

access to, 97
coal and, 19
energy efficiency, 53, 53t
energy efficiency improvements,

48, 59–62
treaties, 97

carbon emissions, 75, 75f, 76
Clean Technology Fund

programs, 82
coal reserves, 11, 18, 18t, 20–21
electricity imports by, 28
geothermal power, 86
hydropower, 31, 87
nuclear power, 30
pricing of energy, 51
solar power, 86
wind power, 86


exports, 4, 12, 14, 29
flaring and venting, 43–44, 43f
investment requirements,

reserves, 11, 12, 12t, 13, 14f

exports, 4, 31n2
reserves, 11

regional pipelines and, 35
vertically integrated power

monopolies, 104

pipeline, 35
Turkmenistan–China pipeline,

35, 36


biomass energy, 87
carbon emissions, 75, 75f

Clean Technology Fund
programs, 82

coal reserves, 11, 18, 18t, 20–21
district heating, 55b
electricity exports, 42
emissions trading and, 80
gas reserves, 12, 12t
nuclear power, 29, 87
uranium reserves, 30, 32n8
wind power, 86

underground mining, 18
Union for the Co-operation of

Transmission of Electricity
(UCTE), 41

United Kingdom
eco-city planning, 62b
energy efficiency subsidies, 52b
energy services, 66
gas production, 22

United Nations, 74
United States, energy efficiency

in, 65
uranium reserves, 30, 32n8, 87, 88
urban planning, 59, 61, 61–62b

demand-side management,

as natural monopolies, 98
price caps, 68

carbon emissions, 75, 75f
collection rate, 100
commercial losses, 44

exports, 4
flaring and venting,

43–44, 43f
reserves, 12, 12t, 14

nuclear power, 87
oil exports, 4
technical losses, 44
uranium reserves, 30, 32n8
vertically integrated power

monopolies, 104

variable energy use fees, 55b
venting, 43–45, 43f, 79, 88
vertical integration, 55b, 103, 104
vertical unbundling, 102–4, 103f
very low-energy buildings, 54b

waste disposal, nuclear, 87, 88
waste reduction, 43–45

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130 Lights Out? The Outlook for Energy in Eastern Europe and the Former Soviet Union

Western Europe
coal imports by, 19
energy imports by, 7–8
gas imports by, 12, 14, 22
oil imports by, 23–24

white certificate system, 68
wholesale power market, 41
wind power, 29, 86
World Bank

Bulgarian Energy Efficiency
Fund, 64b

district heating optimization
program, 55b

on emissions trading, 79
energy efficiency retrofit project, 54

Global Gas Flaring Reduction
public-private partnership,
43, 44

HEP Energy Service Company
and, 67b

Serbia Energy Efficiency Project,
51, 57–58b

Yukos, 17

zero net energy buildings, 54b

Environmental Benefits Statement

The World Bank is committed to preserving
endangered forests and natural resources.
The Office of the Publisher has chosen to
print Lights Out? The Outlook for the
Energy Sector in Eastern Europe and the
Form er Soviet Union on recycled paper
with 30 percent postconsumer fiber in accor-
dance with the recommended standards for
paper usage set by the Green Press Initiative,
a nonprofit program supporting publishers in
using fiber that is not sourced from endan-
gered forests. For more information, visit

• 4 trees
• 1 million Btu of

total energy
• 333 lb. of net


• 1,604 gal. of waste

• 97 lb. of solid waste

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