Favorable conditions are created in Kazakhstan for the development of renewable energy

On November 26, the plenary session of the Senate of the Parliament of the Republic of Kazakhstan approved in the first reading, the draft law “On Amendments and Additions to Certain Legislative Acts of the Republic of Kazakhstan on Supporting the Use of Renewable Energy Sources and Electric Power Industry.

The main conceptual innovations of the proposed legislative draft are:

1) Stimulation of the construction of flexible facilities.

Today the surplus of electric power (2000 MW) is accompanied by a shortage of flexible capacities in the Republic. Electricity consumption during the day is irregular, with an increase in the evening hours and a decrease at night, requiring an operational variable energy production by power plants. The existing regulatory capabilities of the existing power plants are insufficient, and therefore the system operator is forced to use the regulation from the Russian energy system. The imbalances covered by the UPS of Russia reach 600-800 MW.

The development of flexible capacities to apply them to regulate production-consumption imbalances will make it possible to redirect the purchase of a part of services for compensating deviations at power plants in Kazakhstan, instead of using Russian regulation.

The selection of projects for the creation of flexible generation will be carried out through auction selection, which will give impetus to the construction of such capacities, to select the most effective projects with minimal impact on prices for end users.

2) Establishment of through rates for the support of renewable energy sources.

With the commissioning of new RES facilities, rates and shares of electricity purchase by acting energy producing organizations (EPO) from the Accounting and Finance Center (AFC) for the support of RES are increasing. In this connection, traditional energy producing organizations incur non-reimbursed losses until the appropriate adjustment to the cap rates. Changes in the costs associated with the development of renewable energy sources require constant and timely adjustment of the EPO cap rates.

In this regard, there is a need to separate the costs of purchasing electricity from the AFC for the support of renewable energy sources from the cap rates and consider the costs of renewable energy sources as a surcharge above the cap rates.

3) Creation of favorable conditions for the development of renewable energy.

Currently, significant investment are being made in the development of renewable energy.

Target indicators for increasing the share of renewable energy sources in total electricity production provide for bringing its share to 3% in 2020, to 6% in 2025, and 10% by 2030. By 2050, renewable and alternative energy sources should account for at least half of total energy consumption.

To achieve these indicators, the draft law proposes to introduce the following:

1. Providing financial support from the Government to the Accounting Financial Center (AFC) in case of failure to fulfill its payments obligations to renewable energy projects (in order to increase the creditworthiness of the AFC).

This norm will reduce the risks of investors and, accordingly, will reduce the price at the auction for electricity generated by renewable energy facilities. In addition, the introduction of this norm will increase the investment attractiveness of the renewable energy sector in Kazakhstan.

2. Extension of the contract for the purchase of electricity from the current 15 years to 20 years.

This mechanism is necessary in order to increase the attractiveness of the RES market for future investors, and will lead to a decrease in auction prices.

3. Implementation of centralized purchase and sale of flood electricity through AFC.

In accordance with the current Law "On the Power Sector", it is stipulated that energy producing organizations - hydroelectric power plants are obliged to sell at centralized auctions the electric energy generated during the period of environment conservation water flow augmentation. According to the system operator, the annual volume of the actual balance of production and consumption of electric energy is on average 300 million kWh, while about 50% of flood electric energy is bought out at centralized trading by traders, the pricing of which is not regulated by the state.

Taking into account the above factors, it is proposed to legislate the obligation of energy producing organizations (hydroelectric power plants) to sell flood electric energy to AFC, which in turn will distribute this inexpensive flood electric energy among all consumers of the Republic of Kazakhstan through the existing mechanism of centralized sale of RES electricity.