Institutional innovation in the energy business enterprises.

Dr. Irina Petrovna Mamiy, Ph.D.(in economics), Professor for Statistics

The statistics chair of Economic Faculty

Moscow State University named after M. V. Lomonosov,

Leninskie Gory, 3-d Humanitarian Building, Moscow, Russia 119992,

Cell: +7 916 1442241

Office: +7 (495) 9393575, +7 (495) 9391850

Fax: +7 (495) 9390877

E-mail: imamij@yandex.ru; mamij@econ.msu.ru

Content area: Management of technological innovations

(Statistics of Innovation, Energy business)

Methodological Area: qualitative approach

Institutional innovation in the energy business enterprises.

Russia energy complex modernization revealed the need of the adequate statistic base. Existing indicators of innovation statistics does not correspond to the stated targets of development. New directions of innovation statistics in the energy sector are proposed, in particular biotechnological methods of recycling and transformation of waste into useful products. Statistical study of public sector energy tariffs contradicts with the right entrepreneurs don’t discover pricing information. Social significance of this problem required the development of methodological principles of institutional and energy innovation statistics as a new branch of statistics in general to ensure Energy security strategy 2030 in Russia.

Institutional innovation in the energy business enterprises.
1. The mission and targets of the economic modernization in Russia.
The global nature of energy problems as the most important today’s issues identified priorities of unusual and innovative methods to solve them. One of these tasks - the creation of adequate information and statistical framework, corresponds to the international recommendations for energy and innovation statistics.
The strategic goal of Russia's economic modernization on the basis of innovation includes the transition to a rational model of energy consumption and increasing energy efficiency through innovations in all spheres of national economy and production. A model of transition includes all levels of the society activity: from national organizations to small businesses.
According to opinion of Dr. V. A. Yazev, the President of the Russian Gas Society, the main obstacle innovative transformation of the energy sector of the national economy are the political, legal and institutional but not technological or technical reasons. First of all there are necessities to create a set of the institutional innovations in the regulation of the energy sector business and its interaction with state and federal entities. The next step is the development of energy statistics, which should become the institutional resource of exhaustive Information for innovation management of Russia “Energy security strategy 2030”. The current system of statistical indicators of the energy as well as innovation statistics do not correspond the stated targets of development.
In Russia the energy consumption current trend has 3% annual growth rate. In the nearest future such grows rate will double energy consumption in 2035 compared with 2000 and triple by 2055. These data requires the innovative solutions for the extraction, production and rational use of energy power resources as well as adequate information and statistical reflection these activities.

2. Methodological approaches to Innovation Statistics in Russia.
In accordance with the methodology of the Russia Federal State Statistics Service of (FSSS ) statistical observation of innovation focuses on four sectors of activity: government, business, higher education, nonprofit organizations.

The government sector includes: the various ministries and departments in the system of governance; as well as nonprofit organization which are financed and controlled by the government, wholly or mainly.
The enterprise sector includes: all organizations whose main activity is the production of goods or services for sale, including state-owned, private, non-for-profit organization serving the above-mentioned organizations.
The sector of higher education includes: universities and other high education organization, regardless of financial source and legal status, as well as the associated research institutions, medical clinics, experimental stations.
Sector non-for-profit organizations includes: private organizations such as professional societies, community organizations, agencies, autonomous non-for-profit organizations, foundations, etc.
3. Basic concepts and definitions of innovation in the enterprise sector.

In Russian statistics the innovative activities are reflected most completely in the enterprise sector by economic activities and the organization engaged in such activity.
The formal definition "Innovation" is described as an activity associated with the transformation of research and development (or other scientific and technological results) in technologically new or improved products or technological processes. Technological innovations in the energy business represent the final result of innovation activities, be transformed into a new or improved product, new or improved manufacturing process. When the innovation is introduced on the market or in the production process it is considered implemented.
In the energy industry there are two types of technological innovation: consumer product itself or processing.

1. Product innovations include the introduction of technologically new or improved products. Technologically new product is a product whose technological characteristics or intended use are fundamentally new or significantly different from those previously produced products. Technologically improved product is an existing product, which quality or market characteristics were significantly improved by the use of more efficient components and materials, the partial change of one or a number of technical subsystems.
Process innovations include also the development and introduction of technologically new or significantly technologically improved production methods. Such kind of innovations may be based on new manufacturing equipment, new methods of organizing the production process or their combination, as well as on the results of research and development.
In the energy business organizations process innovations include an effective use of existing machine-tools and technology; implementation of existing, but improved and less energy-intensive facilities and technology, development and introduction of new innovative materials the decommissioning of existing equipment which modernization is impossible. Process innovations also include new or improved production methods already implemented in the manufacturing practices of other companies and distributed through technological exchange (licenses, know-how, consulting, etc.).
It should be noted that in the USSR different biotechnological innovations were developed. At present time they are highly demanded. On the basis of such technology for example the waste of timber and agriculture may be used as a renewable source of energy. Biotechnology-based models and innovative methods of recycling have been developed, the essence of which is the conversion of energy production waste into a useful product.
Obviously the recycling of waste innovative technology, assessment of their economic, social and environmental performance, requires adequate statistical information. At present, there are scattered, isolated data about the content of valuable metals in the power plants dumps. For example, in one ton of dumps there are 100 grams of the Germanium (For comparison, 7 grams per ton of the Germanium there are in the exploit natural deposits). The content of Vanadium there is 2800 g/t in the power plant waste and 150 g/t in the exploit natural deposits respectively. The content of Silver – 2 g/t and 0, 07 g/t, Beryllium - 300 g/t and 6 g/t respectively. Almost all the rare and extremely valuable metals contained in concentrated form, not only in the plants waste, but also in dumps of mining and ore-processing plants. At present time there are not statistical indicators, which characterize the economic value of waste dumps. Creating a system of statistical indicators of the innovative recycling acquires especially relevant problem because the willingness of foreign investors to invest their resources in recycling as new inexhaustible source of material and energy resources.
The cost of technological innovation in the actual prices in 2008 increased by 10,1% compared with 2007 and amounted to 207,5 billion rubles. However, when evaluating the costs of their value in 2008 in constant 2000 prices they decreased by 3% compared with the previous year and amounted to only 71.8 billion rubles.
The organizational innovation - it is implemented new methods of production and business, creating new working conditions or to enhance the corporate culture. This kind of innovation aimed at improving organizational effectiveness through reduced administrative and transaction costs, including new logistic scheme.
The marketing innovation in the energy business environment - is the use of new methods of advertising, PR - technology, presentations, and sales of energy products, energy-efficient goods, works and services, promoting them on the internal and external markets, creation of new pricing strategies. This type of innovation is aimed to complete consumer’s demands in energy and energy products, as well as the expansion of product customer’s number to increase sales. One of the objectives of such innovation is the strengthening the Russian position at the international energy market, energy products and modern technologies of energy, including nuclear, solar and others.
4. Criteria for evaluating the effectiveness of innovations.
The cost-effectiveness of innovation in the energy sector depends on the ability to promote innovative product to market. The organization conduct development and marketing of innovative technologies and products independently in accordance with the legislation requirements.  Certainly the cost of advertising and presentation of innovative technologies are reflected in the accounting and statistics. However, there are no indicators that would reflect the costs of research in the field of bioenergy, training and retraining of scientific and technical personnel in this field. There are also no indicators of the cost of energy saving measures and innovative technologies in this area. Meanwhile, in the opinion of international experts, most of the demand growth in fuel and energy after 2010 will be achieved through energy efficiency measures.
5. Innovations in science and higher education.
In our opinion the innovative activities on ecology and environmental protection should be studied in the sector of science and higher education. For the modern world, this problem has a primary importance, as well as the problems of hunger and widespread epidemics. These problems have so far not been found reflections in the innovation statistics in the sector of science and higher education.
In the sector of higher education innovations associated with the creation of unique educational programs to train professionals in demand of the labor market. It is claimed differentiated technology education for students who interested in science and for those who are planning a career in business. Particularly innovations are demanded by contemporary society to find talented high school graduates motivated for higher education.
6. Innovations in the government and public sector.
The concept of innovation in the public sector is the institutional changes that must be described in statistical categories. These innovations will ensure the effective functioning of the Fuel and Energy Complex at all links of the market chain: between organizations, between organizations and state, between different branches and levels of government, as well as between states.
The institutional innovation is the improvement of existing and creation of new legislation and regulatory framework, as well as development of energy statistics, taking into consideration the best world achievements in this field.
            The development of such innovations aimed at increasing confidence and transparency of transactions between participants of the energy and energy products market, on the one hand and to optimize their understanding of global environmental problems, on the other side.
7. Economic and social innovation.
Priority institutional innovations are needed in the field of labor relations, property and capital, including interest rate as a regulator of financial flows. Innovation must be developed and implemented a system of coordination interests private business and government regarding the provision of social needs, formalize the concept of social responsibility and its legislative consolidation. The state is interested in lowering tariffs on energy products in the social sector, especially in health, education, public utilities, electric vehicles, etc. Opposite the private sector are not interested in it. The purpose of Russian big business is to increase profits but not social responsibility. The State can regulate the private business social responsibility by improving the institutional sphere on the basis of innovation.
Innovative approaches in the energy statistics is to develop a system of indicators in line with international recommendations on calculation of energy accounts as satellite accounts of the SNA (System of National Accounts), taking into account the needs of business and the state. These financial - economic indicators of the energy market should be corresponded with the data of accounting and tax accounting and records. The innovativeness of this approach that will be optimized price-list formation in the domestic and international energy and energy products markets.
       The involvement of Russia in global energy processes, including export - import of energy products, as well as the solution of environmental problems associated with power generation, using the latest recycling technology to return the waste of energy in economic turnover all this makes the demand for energy statistics as an institutional information resource for Russia's energy strategy 2030. Such statistics should based on new methodological approaches and careful use of the Soviet statistical achievements in the past.
Literature:

1. Energy Strategy of Russia until 2030, Russian Federation Government Order of November 13, 2009 № 1715-p.

2. Mamii I.P. «Complex approach to development of statistic database for innovative recycling technologies». Proceedings of International Scientific Conference «Structural Transformations in Economy: A Shift to Innovative Development», pp. 89-97. M.: TEIS, 2008.

3. Mamii I.P. «Problems of statistical study of energy sector innovations». Proceedings of Second International Scientific Conference «Innovative Development of Russian Economy: resources of maintenance » pp. 114-121, St. Petersburg. University Press, 2009.

4. Methodological Guidelines on Statistics. Issue 1 – 5. M.: FSSS, 1996 – 2006.

5. O. I. Obraztsova, O. V. Kopeikina “System of National Accounts”, Textbook, University -School of Economics Publishing House, 2008.

6. Yazev V. A. Report on VI Russian Energy Forum "Fuel and Energy Complex of Russia in ХХI century." 01.04. 2008. http://www.yazev.ru/speech%5B21%5D.html

7. http://www.gks.ru