Assessing the economic effect introduction of energy-saving technologies in the field of heat supply

ISSN 0040󰀎6015, Thermal Engineering, 2012, Vol. 59, No. 3, pp. 250–257. © Pleiades Publishing, Inc., 2012.Original Russian Text © V.A. Malakhov, 2012, published in Teploenergetika.Assessing the Economic Effect from Introduction of Energy󰀎Saving Technologies in the Field of Heat SupplyV. A. MalakhovEnergy Research Institute, Russian Academy of Sciences, ul. Nagornaya 31, korp. 2, Moscow, 117186 RussiaAbstract—An aggregative analysis of the economic effect from the main measures for making heat supply aless energy consuming process is presented. The economic indicators of a heat supply company obtained afterputting in use energy󰀎saving technologies are analyzed. The sensitivity of these indicators to measures stim󰀎ulating the use of energy󰀎saving technologies is investigated.DOI: 10.1134/S0040601512030093Securing reliable and efficient supply of heat toconsumers on the side of power companies is usuallyconnected with introduction of various measures(energy󰀎efficient technologies). In order to select thetop󰀎priority ones from them, a power company musthave information characterizing the economic effectfrom implementation of these measures under thespecified external conditions. The economic analysiscarried out in this study was performed with respect tomeasures that on one hand reflect differentapproaches used in the field of energy conservationand on the other hand, are of practical interest for anyheat supply company. The list of these measuresincludes the following ones:(i) replacement of old pipes with mineral woolinsulation by tubes made of cross󰀎linked polyethylene(XLPE) and steel pipes with polyurethane foam (PF)insulation, due to which considerably smaller techno󰀎logical losses of heat are achieved during its transmis󰀎sion;(ii) achieving more efficient control of heat supplyto consumers in accordance with the temperatureschedule [retrofitting the control and accounting unitsat central heat supply stations (CHSSs), fitting CHSSswith automated control systems, installing plate󰀎typeheaters, and the like], due to which smaller consump󰀎tion of thermal energy at consumers is achieved;(iii) fitting heat supply stations with adjustable󰀎fre󰀎quency drives (AFDs), due to which smaller con󰀎sumption of electric energy for auxiliaries of a heatsupply company is achieved; and(iv) improving the efficiency of boilers at thermalstations (boiler houses) by retrofitting or replacingthem, which makes it possible to decrease the con󰀎sumption of fuel for production of heat.The studies were carried out as applied to OAOUnited Moscow Power Company (MOEK), one ofthe largest heat supply organizations in Moscow, basedon the official information from this company [1].AN ECONOMIC ANALYSIS OF INVESTMENT PROJECTS FOR USING ENERGY󰀎EFFICIENT TECHNOLOGIES IN THE FIELD OF HEAT SUPPLYIn this section, the above󰀎listed measures for mak󰀎ing heat supply more energy efficient are discussed.Replacement of pipes in heat󰀎supply networks.According to the MOEK data, the loss of heat per kmof existing pipes with mineral wool insulation in 2008was equal to 1056.3 GJ, whereas that for new XLPEpipes and those with PF insulation, 93.4 GJ [1]. Inaddition, each kilometer of new pipes made it possibleto save additionally up to 11600 m3 of gas and up to5200 kW h of electric energy per annum that were usedfor producing and transmitting heat. In 2008, the costof replacing 1 km of old pipes by new ones made ofXLPE and with PF insulation was around 18.4 millionrubles when laid in a two󰀎pipe manner.It should be pointed out that expenditures forreplacement of pipes are usually considered at heatsupply companies as costs for supporting the mainactivity aimed at supplying heat to consumers ratherthan purpose󰀎oriented investments in energy conser󰀎vation. Old steel pipes are replaced by new ones madeof XLPE or by pipes with PF insulation only in thecourse of scheduled works on re󰀎laying heat󰀎supplynetworks with exhausted service life or in emergencycases. Therefore, the economic effect from replace󰀎ment of tubes must be considered in carrying out anoverall assessment of the efficiency of the entire heatsupplying activity of the company and not only frommaking heat networks more energy efficient. Invest󰀎ments in the replacement of tubes are repaid byincome of money from the main activity on sellingheat to consumers. An analysis has shown that, withthe tariffs for heat that existed in 2008, the reductionof heat losses resulting from the use of new pipes com󰀎pensates the costs for laying them by no more than1.5% for a year and by no more than 15.4% for theentire service life. The saving due to smaller losses in250ASSESSING THE ECONOMIC EFFECT FROM INTRODUCTIONTable 1.Economic effect from using AFDs at heat supply stations [per 4.19 GJ (1 Gcal) of supplied heat]IndicatorTariff for purchased electric energy, rubles/(kW h)Expenditures for putting in use AFDs per kWh of saved electric energy, rubles/(kW h)Expenditure of electric energy in producing heat, kW hSaving of electric energy owing to the use of AFDs, kW hDecrease of expenditures owing to smaller consumption of elec󰀎tric energy, rublesExpenditures for installation of AFDs, rublesCash flow, rublesDiscounted cash flow, rublesAnnual discount rate, %Payback period, daysInitial values (in 2008)1.815.285.000––––251For the For the entire period first yearof operation (25 years)1.815.283.751.252.276.61–4.3–3.91012101.815.2893.7531.2556.676.6150.0614.57new heat󰀎supply networks can fully cover the costs forlaying them only in the hypothetical case of 20%annual growth of the price for thermal energy duringthe entire service life of new pipes, but even in this casethe payback period will last for more than 20 years.Achieving more efficient control of heat supply atcentral heat supply stations. The modernization ofeach CHSS that was carried out at MOEK in 2008resulted in the average saving of around 2346.8 GJ ofheat per heating season and that the heat losses inheat󰀎supply networks were additionally reduced by94.3 GJ. In addition, modernization of one CHSSmakes it possible to save up to 80000 m3 of gas and up to10800kW h of electric energy per annum in producingthermal energy. The average cost of modernizing oneCHSS was 1.89 million rubles.Projects for achieving more efficient control ofheat supply are a priori unprofitable for a heat supplycompany because they result in that smaller usefulamounts of heat are supplied to consumers and, con󰀎sequently, smaller potential proceeds are receivedfrom sales of heat. It should be noted that, the largerthe fraction of own production in the total amount ofheat supplied to consumers, the more expensive themeasures on achieving more efficient control of heatsupply become for the heat supply company. Due tothe difference between the wholesale price for heatand the price at which it is sold to end users, the com󰀎pany would suffer losses even if it would have no ownproduction. In view of this fact, measures aimed atachieving more efficient control of heat supply needstimulating support from the state. State subsidy tocover the losses borne by heat supply companies con󰀎nected with application of regulated state tariffs onsales of heat to population is one of such stimulatingmeasures. The sum of this subsidy [per 4.19 GJ(1Gcal) supplied to population] is approved everyyear by the regional energy commission. Matters relat󰀎THERMAL ENGINEERING Vol. 59 No. 3 2012ing to the effect from the use of stimulating measuresin implementing energy conservation measures in thefield of heat supply are analyzed below in more detail.Installation of AFDs at heat supply stations. As iswell known from field experience, the use of AFDsmakes it possible to decrease the consumption of elec󰀎tric energy at heat supply stations by 25% [2]. The costof installing one AFD can vary in wide limits depend󰀎ing on its power capacity. Therefore, it is advisable tocorrelate the expenditures for installation of AFDswith 1 kW h of electric energy saved as a result of usingthem. In 2008, the above󰀎mentioned cost made5.28rubles per kWh of saved electric energy on theaverage in the company.The performed analysis has shown that, out of thefour selected energy conservation measures, installa󰀎tion of AFDs is the only measure the use of whichmakes it possible not only to compensate the invest󰀎ments for implementing it, but also to obtain addi󰀎tional profit due to achieving better energy efficiency.As regards the costs spent for fitting heat supply sta󰀎tions with AFDs, they are paid back in less than3.5years on the average (Table 1).Achieving better efficiency of boilers used at heatsupply stations. Gas is used in Moscow as the main fuelfor producing heat. In 2008, the specific consumptionof gas at the city’s heat supply stations made32.8m3/GJ; i.e., the average efficiency of boilersreached 91%. The efficiency of boilers can beincreased to 95% as a result of retrofitting (replacing)them, which corresponds to decreasing the specificconsumption of gas to 31.4 m3/GJ. In 2008, the cost ofreplacing or retrofitting one boiler in Moscow wasequal to around 13.1 million rubles.Investments in retrofitting and replacement ofboilers are paid back owing to cash flows from sellingheat to consumers. Calculations have shown that thesaving of money due to achieving smaller specific con󰀎252MALAKHOVOther proceeds(18%)Heat to population(54.5%)Electric energy(0.4%)Hot water(7.1%)Heat to other consumers(20%)Structure of proceeds received by the Moscow UnitedPower Company in 2008.sumption of gas in a new boiler compensates for nomore than 1% of its cost a year, which will make only10.1% of the initial capital outlays for the entire servicelife. The gain due to smaller specific consumption ofgas can cover all expenditures for replacement ofboiler only in the hypothetical case of 35% annualgrowth of the cost of gas during the entire service lifeof a new boiler (25 years). But even with such a hugegrowth of the cost of gas, the payback period of theproject will be more than 22 years.As in the case of re󰀎laying heat networks, heat sup󰀎ply companies not regard the expenditures for replace󰀎ment or retrofitting of boilers at heat supply stations aspurpose investments in energy conservation. Boilersare retrofitted or replaced only when they becomefully worn out. In view of this circumstance, compa󰀎nies analyze the economic effect from replacement ofboilers only in estimating the overall efficiency of theentire heat supply activity.ANALYZING THE ECONOMIC INDICATORS OF HEAT SUPPLY ENTERPRISES AS A RESULT OF USING ENERGY EFFICIENT TECHNOLOGIESAt present, the Moscow market of heat supply isrepresented by two large companies: OAO MoscowUnited Power Company (MOEK) and OAO Mosen󰀎ergo, which are two large companies performing cen󰀎tralized supply of heat to consumers. This market alsoincludes a multitude (more than a thousand) indepen󰀎dent boiler units supplying heat to individual buildingsor to small groups of buildings.The activity of MOEK extends to all segments ofthe thermal power market of Moscow and Moscowregion, including the production, distribution, andsales of heat, as well as generation of electricity. Thejoint󰀎stock company supplies heat and hot water to70% of residential and office buildings, industrialenterprises, and social facilities of Moscow. In 2008,MOEK sold 251.6 million GJ of heat, 36.1% of whichwas produced by the company itself and 63.9% waspurchased from OAO Mosenergo. In 2008, MOEKhad the following main performance indicators::Own production ofthermal energy, million GJ96.93electric energy, million kW h 300.4Purchased energy:heat, million GJ167.03electricity, million kW h1115.7including that for supplying power to network 313.2pumps at heat supply stationsSupply of heat to heat network, million GJ261.79Technological expenditure (losses in heat net󰀎works), million GJ10.12Useful supply of:heat, million GJ 252.28includingthermal energy proper231.12hot water 21.16electric energy, million kW h242.8Consumption of gas at thermal power stations, 3178million m3In 2008, the sum of proceeds received by MOEKfrom sales of energy totaled 51.26 billion rubles, 74.5%of which was from the sales of heat (see the figure) and0.4% from the sales of electricity.Apart from the proceeds due to sales, state subsidiesconstitute a considerable fraction in the overallincomes gained by MOEK (which totaled 10.07 bil󰀎lion rubles in 2008), which are received from the stateto cover the losses connected with application of regu󰀎lated state tariffs for heat consumed by the population.The net cost of sales exceeded the proceedsreceived by the company by 10.01 billion rubles. Thepurchase of heat from Mosenergo accounts for thelargest fraction of net cost (40.4%). In 2008, MOEKpurchased a total of 167.43 million GJ of heat at anaverage price of 618 rubles for 4.19 GJ (1 Gcal). Asregards the purchases of fuel and energy resources(FERs), the purchase of gas for producing heat occu󰀎pies the second place in the fraction of costs (10.5%),and the purchase of electric energy accounts for 3.3%(Table 2).The low fraction of depreciation deductions in thenet cost of sales at MOEK is due to an insignificantcost of the fixed assets on the company’s balance. Thisis because this company rents almost all operatingfixed assets related to supplying heat for consumers:engineering infrastructure, heat networks, gas pipe󰀎lines, units for accounting the expenditure of thermalenergy, buildings and equipment of central heat supplystations, etc. OAO Mosteploenergo, OAO Mos󰀎gorteplo, OAO Teploremontnaladka, and the MoscowDepartment of Property are the renters. It should beTHERMAL ENGINEERING Vol. 59 No. 3 2012ASSESSING THE ECONOMIC EFFECT FROM INTRODUCTION253noted that the Moscow Department of Property owns100% of shares of the first three companies, which arepart of the authorized capital of MOEK. It should alsobe noted that the city of Moscow represented by theMoscow Department of Property owns 83.78% of theauthorized capital of MOEK. As of late 2008, MOEKrented more than 98% of the initial cost of the mainassets used for performing its main activity. In view ofthis circumstance, the rent payments are almost a fac󰀎tor of 19 higher than the depreciation deductions andcomprise 7.4% of the net cost. Of the 4.5 billion rublesof the company’s rent payments, 2.5 billion rubles ispaid for renting main assets owned by Mosteploen󰀎ergo, 1.6 billion rubles for renting main assets ownedby Mosgorteplo, and slightly more than 100 millionrubles is paid as rent to Teploremontnaladka. Despitethe names of these joint󰀎stock companies (meaning athermal energy company, a municipal heat company,and a company for repair and adjustment of heat sup󰀎ply facilities), the main kind of their economic activityconsists of leasing their property, the rent paymentsreceived from MOEK being almost the only source ofincome (proceeds) for these companies. In 2008,Mosteploenergo and Mosgorteplo gained a profit fromsales in renting their assets, but it should be recognizedthat the amount of this profit was an order of magni󰀎tude smaller than their proceeds from sales and negli󰀎gibly small as compared with the loss suffered byMOEK.The described scheme of interrelations in the city’smarket of heat supply was in all likelihood organizedfor the possibility to relate capital outlays for modern󰀎ization and repair of the main thermal power capaci󰀎ties to current costs. Two objectives are pursued withsuch a scheme. First, the taking of capital outlays intoaccount in the net cost makes it possible to gain a sortof 100% depreciation bonus for the borne expenses inthe form of additional proceeds from providing ser󰀎vices on retrofitting the rented assets (7.05 billionrubles), which fully compensates for the expenses onthe maintenance of rented assets (7.01 billion rubles).If the key thermal power capacities were owned by theheat supply company, no less than 10 years would berequired for returning the money spent for repair andmodernization. Second, increasing the current costsdue to tremendous rent payments, the companyincreases its possible loss, due to which it can claim forgetting a larger aid from the state in the form of statesubsidy to cover the losses borne by heat supply com󰀎panies. Of course, were the key thermal power capaci󰀎ties in the ownership of a heat supply company, therent payments would become considerably smaller andthe depreciation deductions would become muchhigher. But an analysis of bookkeeping reports drawnby Mosteploenergo, Mosgorteplo, and Teploremont󰀎naladka allows us to state that the depreciation deduc󰀎tions would in this case be approximately equal to4.0billion rubles, i.e., by 500 million rubles smallerTHERMAL ENGINEERING Vol. 59 No. 3 2012Table 2.Structure of the net cost of sales at OAO MoscowUnited Power Company in 2008Net costMain components of net costmillion rubles%Purchase of:fuel (gas)642110.5electric energy20233.3heat2469340.4Depreciation2400.4Rent payments45427.4Measures for repairing and modernizing the rented main assets700711.5Including the expenditures for introduc󰀎tion of energy󰀎efficient technologies:56549.24replacement of pipes52058.5modernization of CHSSs3740.6installation of AFDs at heat supply stations230.04achieving better efficiency of boilers (by replacing or retrofitting them)520.1Other conditionally fixed expenses1624226.5Total61168100.0than the rent payments reflected in the bookkeepingreports of MOEK.Of the 7.01 billion rubles spent for repair and mod󰀎ernization of rented main assets, around 5.65 billionrubles were forwarded for implementing the above󰀎described four measures aimed at putting energy󰀎sav󰀎ing technologies in use. Of this sum, the companyspent 5.2 billion rubles for replacing 566 km of oldpipes with mineral wool insulation by XLPE pipes andpipes with PF insulation (see Table 2). As a result, theheat losses in the networks were decreased by545000GJ. For achieving more efficient control ofheat supply to consumers, 198 CHSSs were modern󰀎ized. A total of 374 million rubles was spent for thispurpose, as a result of which 465000 GJ of thermalenergy was saved at consumers. In 2008, 23.2 millionrubles was spent for installing AFDs at heat supply sta󰀎tions, due to which the technological expenditure ofelectric energy for driving network pumps at heat sup󰀎ply stations was reduced by 4.39 million kW h. In 2008,MOEK spent 52.4 million rubles for retrofitting andreplacement of boilers at heat supply stations. Thismade it possible to save 262000 m3 of gas.The author of this paper studied the economiceffect for MOEK from more extensive use of theenergy󰀎saving technologies considered above.The possibility of replacing 50% of old heat networksIncreasing the rate of re󰀎laying worn heat networks.used at MOEK by new ones made of XLPE pipes andpipes with PF insulation for five years was studied. The254MALAKHOVTable 3.Decrease of the consumption of energy carriers as a result of speeding up the introduction of all energy󰀎savingtechnologies as compared with the version of their usual applicationEnergy󰀎saving measureSaving of heat, thousand GJDue to decrease of:heat losses in heat networksuseful supply of heatSaving of electric energy, billion kW hIncluding:own produced electric energy due to decrease ofexpenditures for heat supply system auxiliariesproduction and technological expendituresuseful supply of electric energypurchased electric energy:including the decrease of technological consumption of electric energy for driving the network mumps at thermal power stationsSaving of gas, million m3For the first year612.6380.5232.114.490.700.030.110.5713.7911.9219.8For 5 years912556393486213.8410.440.441.568.44203.40175.49293.1For 10 years27 77915 01212 766583.6131.801.354.7525.70551.81466.85997.6analysis was carried out on the assumption that theuseful supply of heat to consumers was retained in thesame amount. It was found from this analysis thatspeeding up the work on replacing the old networks bynew ones results in the saving of approximately15.1million GJ of thermal energy, 80.4 million kW hof electric energy, and 180 million m3 of natural gas for10 years. Around 8760 billion rubles per annum willhave to be spent for implementing this project.Speeding up modernization of CHSSs. It is sup󰀎posed that 50% of the CHSSs operated by MOEK willbe retrofitted for 10 years to achieve more efficientcontrol of thermal energy supplied to consumers. Tothis end, 297 CHSSs must be modernized a year(against 198 CHSSs in 2008). As a result, it will be pos󰀎sible to save 13.4 million GJ of heat, 71.2 million kW h ofelectricity, and 160.5 million m3 of gas for 10years.Around 560 million rubles must be invested every yearfor implementing the accelerated version of modern󰀎izing CHSSs.Speeding up the fitting of heat supply stations withAFDs. The possibility of decreasing the specific con󰀎sumption of electric energy by the pumps installed atheat supply stations by 25% for five years throughtheuse of AFDs from 1.2 (kW h)/GJ in 2008 to0.89(kW h)/GJ in 2013 was considered. With therates at which AFDs were put in use at heat supply sta󰀎tions operated by MOEK in 2008, the specific con󰀎sumption of electric energy at these stations wouldmake 1.11(kW h)/GJ in five years. Thus, owing tospeeding up the introduction of AFDs, the amount ofelectric energy saved for 10 years can be increased by450.7million kWh. The annual expenditures ofmoney for implementing this version will make82.7million rubles.Speeding up the work on making boilers moreenergy󰀎efficient. It is assumed that the efficiency of allboilers at the heat supply stations operated by MOEKwill be increased to 95% for 10 years. As was alreadynoted, the specific consumption of gas will decreaseowing to this from the current 32.8 to 31.4 m3/GJ. Atotal of 686 million m3 of natural gas will additionallybe saved as a result of speeding up the work on improv󰀎ing the efficiency of boilers. The amount of moneythat will have to be annually invested for implementingthis version is around 2550 million rubles.The results of studies on analyzing the effect frommore rapid introduction of energy saving measures aresummarized in Table 3. This table contains data onadditional saving of energy carriers obtained frommore rapid introduction of the four consideredenergy󰀎saving technologies as compared with theusual dynamics of putting them in use at MOEK.It should be pointed out that the effect from simul󰀎taneously speeding up the use of all the four consid󰀎ered technologies is not equal to the sum of effectsfrom speeding up the introduction of each technologytaken individually. This is because the replacement ofheat networks and especially modernization of CHSSresult in that useful heat is supplied and, consequently,produced in smaller amounts, due to which smalleramounts of gas can potentially be saved.Speeding up the introduction of all energy󰀎savingtechnologies will result in that 27.7 million GJ of ther󰀎mal energy, 583.6 million kW h of electric energy, and997.6 million m3 of gas will additionally be saved for10years, and it should be noted that 51.1 million GJ ofthe saved thermal energy is due to smaller losses inheat networks, and the amount of purchased electricenergy is reduced by 551.8 million kW h.THERMAL ENGINEERING Vol. 59 No. 3 2012ASSESSING THE ECONOMIC EFFECT FROM INTRODUCTION255Studies have shown that speeding up the introduc󰀎tion of energy󰀎efficient technologies considerablyincreases the expenditures of heat supply companies,especially in the first five years covered by the predic󰀎tion analysis unless stimulating measures are taken(Table 4). It should be pointed out that the financialstate of the heat supply company will worsen in thefirst five years even without speeding up the introduc󰀎tion of energy󰀎efficient technologies, which is due tothe growth of interest payments for loans taken tocover the growing losses. These losses result from adrop of proceeds and growth in the net cost of produc󰀎ing goods when energy󰀎efficient technologies arebeing put in use.In the case of speeding up the introduction ofenergy󰀎saving technologies, the net loss suffered bythe company for the 10󰀎year period of time increasesby almost a factor of 2 and can be covered only due toadditional state subsidies (in addition to the existingsubsidy to the price for heat supplied to the popula󰀎tion), the total amount of which from the fourth to thetenth predicted years makes more than 62.4 billionrubles.Additional state subsidies are required because thepossibilities of attracting external loans becomesmaller, since the autonomy ratio of MOEK (the frac󰀎tion of own capital in the company’s liabilities) dropsbelow the normative level of 50%; i.e., signs of bank󰀎ruptcy appear. In view of this circumstance, a versionwas considered that involves various stimulating mea󰀎sures aimed at improving the financial position of thecompany when it takes measures for intensifying theuse of energy󰀎saving technologies. In so doing, thesensitivity of the main economic indicators of thecompany to the use of the following stimulating mea󰀎sures was analyzed: growth of all tariffs for heat,increasing the rate of subsidy to the price of heat sup󰀎plied to population (for covering the losses suffered byheat supply companies), and subsiding interest ratesfor the attracted loans.This list does not contain stimulating measuresconnected with depreciation deductions (accelerateddepreciation etc.), because the company includes allits expenses for introducing energy󰀎saving technolo󰀎gies into the net cost of its product, and the companyreceives additional proceeds from providing servicesfor modernizing the rented main assets (i.e., for mak󰀎ing them more energy󰀎efficient). These proceeds,which are in fact a 100% depreciation bonus, are muchhigher than all possible profits gained by MOEK fromaccelerated depreciation.It should be pointed out that the growth of tariffsfor heat affects the tariffs for not only the suppliedheat, but also for the heat the company purchases fromMosenergo. The actual tariffs, prices, and subsidies forTHERMAL ENGINEERING Vol. 59 No. 3 2012energy carriers sold and purchased from Mosenergo in2008 are listed below.Average tariff for supplied heat, rubles/GJ:for the population 152.78for other consumers 212.76Subsidy for covering the losses suffered by heat supply companies, rubles/GJ 55.14Average tariff for supplied hot water, rubles/GJ171.21Tariff for purchased heat, rubles/GJ147.70Price for purchased gas, rubles/m32.02Tariff for electric energy, rubles/(kW h)supplied0.826purchased1.813Subsidizing the interest rates for attracted loans isthe most effective measure for achieving a growth ofnet profit of the company in intensifying the use ofenergy󰀎saving technologies (Table 5). In the analysis,the interest rate for loans was taken equal to 12%, andsubsidies were paid in accordance with the CentralBank’s refinancing rate averaged over 2008 (11%). Inthe case of subsidizing the interest rate for attractedloans, the net loss decreased by 69% for the 10󰀎yearperiod. However, this is insufficient for the companylosses were decreased to the levels obtained in the ver󰀎sion without speeding up the introduction of energy󰀎saving technologies.In order to decrease net losses suffered by the com󰀎pany in the first years covered by the forecast to thelevel corresponding to the version without speeding upthe use of energy󰀎saving technologies, the growth oftariffs for heat and growth of subsidy to the price ofheat supplied to the population (to cover the losses suf󰀎fered by heat supply companies) were used as stimulat󰀎ing measures. Calculations showed that with all otherthings being equal (i.e., if there is no inflation andgrowth of costs), the growth of tariffs and increase ofthe rate of subsidy to the price of heat in only the firstpredicted year makes it possible to reduce the losses forfive years to their level in the version without speedingup the use of energy󰀎saving technologies. Moreover,this results in that a stable profit at a level of 3.7 billionrubles is gained from the sixth to the tenth year. Torelieve the burden from the state budget, the rate ofsubsidy to the price for heat supplied to the populationwas decreased by 36% in the sixth year. As a result, thenet profit gained by the heat supply company in thelast predicted years did not exceed 200 million rubles(Table 6). The fraction of own money in the com󰀎pany’s total capital exceeded 70% in the entire period.CONCLUSIONS(1) Of all measures for putting energy󰀎efficienttechnologies in use that are considered above, installa󰀎tion of AFDs at heat supply stations is the only mea󰀎256MALAKHOVTable 4.Influence of speeding up the introduction of energy󰀎saving technologies on the incomes and expenditures of a heatsupply company, billion rublesIndicator2008200951.1/51.061.1/67.35.7/11.9201150.9/50.860.9/66.95.7/11.9201350.8/50.660.8/66.55.7/11.92018For 10 yearsTotal net proceeds from sales51.2/51.2Net cost of sales61.2/61.2Expenditures for introduction of ener󰀎5.7/5.7gy󰀎saving technologiesProfit/loss from sales–10.0/–10.0Interest payments0.4/0.4State subsidies for covering losses10.1/10.1Balance of other incomes and expen󰀎–3.4/–3.4dituresProfit before taxation–3.7/–Net profit for the accounting period–3.8/–3.8Attracted loans6.0/6.0Additional state aid (subsidies)0.0/0.0Autonomy ratio0.801/0.80150.4/50.0507.3/505.255.3/57.1582.1/621.30.4/3.130.4/75.3–10.0/–16.2–10.0/–16.1–10.0/–15.9–4.9/–7.1–74.8/–166.10.6/0.61.6/3.33.4/6.55.6/1.433.8/35.510.1/10.010.0/10.010.0/9.99.9/9.899.7/99.2–3.4/–3.4–3.4/–3.4–3.4/–3.4–3.4/–3.4–34.1/–34.1–4.0/––5.1/––6.9/––4.0/– –43.0/––3.8/–9.9–4.7/–12.0–6.3/–14.6–3.2/–0.3–37.3/–74.23.6/9.76.5/16.610.9/4.811.2/2.487.5/76.80.0/0.00.0/0.00.0/19.60.0/1.20.0/62.40.780/0.7320.722/0.5610.641/0.4550.567/0.455–Note:The numbers in the numerator and denominator are for versions without and with speeding up the use of energy󰀎saving technologies.Table 5.Dependence of the economic results from speeding up the introduction of energy󰀎saving technologies on variousstimulating measuresCoefficient of sensitivity to the change of, %Indicatornet profitnet cost of salesfor the first yearfor the 10󰀎year periodfor the first yearfor the 10󰀎year periodTariff for heatSubsidies for covering lossesPrices for purchased gasTariff for electricitySubsidizing the interest rate3.01.6–1.0–0.3–2.01.3–0.8–0.269.14.00.01.00.3–6.10.01.60.5–sure that makes it possible to fully compensate themoney invested for implementing it and obtain addi󰀎tional profit due to achieving better energy efficiency.The time for which the money invested in installationof AFDs at heat supply stations is repaid is as a rulemore than three years.(2) The investments for replacing pipes in heat sup󰀎ply networks and achieving higher efficiency of boilersinstalled at heat supply stations cannot be compen󰀎sated only by decreasing the flowrate of heat carriers.In view of this circumstance, heat supply companiesconsider the advisability of implementing these mea󰀎sures only in estimating the effectiveness of their over󰀎all heat supply activity (in particular, achieving morereliable heat supply).(3) Projects on modernizing CHSSs and achievingmore efficient control of heat supply are a prioriunprofitable for heat supply companies because theirimplementation results in smaller amounts of heatsupplied to consumers and, consequently, in smallerproceeds from selling heat. Thus, heat supply compa󰀎nies will likely to face financial difficulties in imple󰀎menting these technologies without receiving statesupport in the form of stimulating measures.(4) In view of unprofitability of the heat supplyactivity declared by companies performing it (due tohigh operating costs and high cost of investmentprojects, which is in frequent cases profitable for heatsupply companies because under such conditions theycan receive certain additional preferences from thestate), speeding up the introduction of energy󰀎savingtechnologies in the absence of stimulating measuresfrom the state leads at present to a considerable growthof financial burden on the companies. An analysis ofstimulating measures shows that subsidizing the inter󰀎est rates for the used loans is the most effective oneamong these measures for reducing the losses sufferedby the company in speeding up the introduction ofTHERMAL ENGINEERING Vol. 59 No. 3 2012ASSESSING THE ECONOMIC EFFECT FROM INTRODUCTION257Table 6.Incomes and expenditures of a heat supply company in the case of using measures stimulating accelerated intro󰀎duction of energy󰀎saving technologiesIndicator2008200961.573.411.9–11.90.612.6–3.4–3.4–3.33.10.00.784201161.272.911.9–11.80.712.5–3.4–3.4–3.14.50.00.748201360.972.511.9–11.60.812.4–3.4–3.4–3.06.20.00.715201860.263.03.1–2.80.27.8–3.41.40.22.10.00.764For 10 years608.0681.375.3–73.34.5101.8–34.1–10.0–14.836.60.0–51.2Total net proceeds from sales, billion rublesNet cost of sales, billion rubles61.2Expenditures for introduction of energy󰀎saving tech󰀎5.7nologies, billion rublesLoss from sales, billion rubles–10.0Interest payments, billion rubles0.4State subsidies for covering losses, billion rubles10.1Balance of other incomes and expenditures, billion –3.4rublesProfit before taxation, billion rubles–3.7Net profit for the accounting period, billion rubles–3.8Attracted loans, billion rubles6.0Additional state aid (subsidies), billion rubles0.0Autonomy ratio0.801energy󰀎saving technologies. The net losses suffered bythe company for the 10󰀎year period of time aredecreased by a factor of 2 as a result of using this mea󰀎sure.(5) With all other things being equal, the growth oftariffs for heat by 25% in the first year of the periodcovered by prediction will make it possible to bring thelosses suffered by the heat supply company due tospeeding up the introduction of energy󰀎saving tech󰀎nologies to zero for five years and gain profits in thesubsequent. At the same time, further growth ofenergy and financial expenditures of the company willinevitably generate the need to noticeably raise thecost of heat supplied to consumers in the consideredtime horizon if no measures are taken to achieve betterenergy efficiency.(6) The role of the state is seen in creating condi󰀎tions stimulating (and in the necessary cases forcing)heat supply companies to decrease operating costs andthe cost of implementing investment projects, includ󰀎ing those for putting in use energy󰀎saving technologieswhile complying with the regulatory requirements forreliability and quality of supplying heat to consumers.REFERENCES1.Annual Report of OAO Moscow United Power Companyfor 2008, www.oaomoek.ru/rus.2.S. A. Chupin, “Use of Adjustable󰀎Frequency Drives:An Efficient Solution of the Energy ConservationProblem at Facilities of Heat and Water Supply andVentilation,” ESKO, No. 6 (2005), http://esco󰀎eco󰀎sys.narod.ru.THERMAL ENGINEERING Vol. 59 No. 3 2012