Against the background of the current situation in the electric power industry and important issues that are being discussed today in the company, the fact of the publication of the updated Development Strategy of KEGOC JSC for 2022-2031 remained unnoticed.

This document is a Long-term strategic document, which defines the vision and mission of the System Operator to achieve strategic goals and strategic directions of development of KEGOC JSC for the long term. Developers explain the need for a new Strategy by the influence of global trends related to the energy transition, especially decarbonization and changes in the country's macroeconomic environment.

The Strategy of KEGOC JSC clearly defines the current trends in the global energy agenda that affect the state of our country's energy system. Thus, it is noted that as a result of climate policy, the energy sector is undergoing major changes from a unidirectional system with several large power plants and passive consumers to a fragmented and bidirectional system that

includes both large-scale and small intermittent renewable generation facilities and small, flexible electricity consumption assets. Grid companies and system operators around the world are facing new types of "off-grid" confrontation and competition from non-traditional energy suppliers. At the same time, grid companies and system operators play a Leading role in ensuring the energy transition, taking on the main problem of integrating renewable energy and the reliability of the power system, ensuring the quality and reliability of power supply to various sectors of the economy and consumers.

There are four key trends (megatrends) that affect energy systems and energy companies in the world: decarbonization; digitalization; decentralization; instability of demand. Demand dynamics will have an increasing impact on energy systems. In the future, when there will be many players in the market and some of them will be very small, it will be necessary for all processes to work automatically. In turn, this will require significant investments in digital platforms and processes.

As part of the SWOT analysis, the developers of the KEGOC Strategy attributed the development of renewable energy to the category of threats and risks for the energy system. In particular, it is noted that the threat to the security of the energy system when integrating the growing volumes of unstable renewable energy sources, taking into account the reduction of stable energy sources (coal-fired power plants) in the conditions of Kazakhstan's commitments to reduce greenhouse gas emissions and processes to achieve carbon neutrality.

STRENGTHS

• KEGOC JSC is a backbone company of the electric power industry with unique experience and high managerial competencies.

• The significant role of KEGOC JSC for development of the country's electric power industry as a System Operator of the National Grid of Kazakhstan.

• Experience in implementing major projects for the construction, modernization and reconstruction of substations and 220-500 kV overhead lines covering all regions of the country with the involvement of funds from international financial institutions (EBRD, IBRD) and Development Bank of Kazakhstan JSC. KEGOC JSC has professional and experienced management.

• KEGOC JSC has achieved high standards of corporate governance, an Integrated Management System (IMS) has been implemented.

• As a result of the introduction of advanced solutions in the field of business process automation and the long-term development of existing systems (SCADA, ACEMS, ERP, etc.), KEGOC JSC has a prepared platform for the transition to new generation technologies within the framework of building an intelligent power system.

• The availability of its own Competence Center in the field of ITK.

• Technological equipment of substations is corn parable with technological equipment of the similar leading companies in the world.

WEAKNESSES

• The condition of the overhead lines of the N EPS of the Republic of Kazakhstan is characterized by significant wear (for 2020, the length of the 110-1,150 kV overhead lines, which have worked for more than 30 years, is 74LS% of the total length).

• Poor electrical connection between the Northern and Southern zones, which, with the growth of electricity consumption in the long term, limits the possibility of covering the energy deficit of the Southern zone from northern energy sources, limits the transit and export potential of the N EPS of Kazakhstan.

• Lack of electrical connection to the Western Zone.

OPPORTUNITIES

• Improvement of reliability and efficiency indicators through the introduction of advanced technologies, application of the best world practices in terms of equipment operation, staff development.

• Process optimization, opportunities for digitalization of production processes_ Diversification of business and obtaining additional profit, including from the provision of high-speed channels on the FOCL to third-party entities, the provision of additional system services.

• Further improvement of corporate governance, support from Samruk-Kazyna JSC.

• The availability of interstate electric networks provides an opportunity to increase export and transit potential.

• Conduction of electricity imports from Russia in the conditions of a medium-term shortage of electric energy (subject to amendments to the current legislation).

THREATS AND RISKS

• Wear of ETO equipment and power transmission organizations can lead to a decrease in reliability and the occurrence of emergency situations in the National grid of Kazakhstan.

• Failure of production assets of the National Grid of Kazakhstan

• Most of the generation structure is represented by coal-fired generation. The emergence of a shortage of electric energy and power in the Republic of

• Kazakhstan in the medium term due to an unpredictable increase in loads (including due to digital mining).

• Unavailability of the National Grid of Kazakhstan to work in an isolated mode due to dependence on frequency and power regulation provided by the National Grid of Russia due to the lack of its own manoeuvrable generating capacities_

• Risks of consumers' failure to pay for the financial settlement of electricity imbalances. Currency risk and, as a result, the rise in the cost of large investment projects.

• The threat to the security of the energy system when integrating the growing volumes of unstable renewable energy sources, taking into account the reduction of stable energy sources (coal-fired power plants) in the conditions of Kazakhstan's commitments to reduce greenhouse gas emissions and processes to achieve carbon neutrality. Cybersecurity threats.

• The impact of coronavirus.

Renewable energy facilities (solar and wind power plants), as is known, are characterized by typical instability of generation, which, in conditions of an acute shortage of maneuverable generating capacities in the National Grid of Kazakhstan, leads to the need for additional measures to ensure the stability and reliability of the power system. To ensure the balance reliability of the National Grid, all available reserves of manoeuvrable generation are already involved in the power system of Kazakhstan. With the growth of RES volumes in conditions of a shortage of manoeuvrable generation in the power system, the problem of ensuring a balance of power will worsen. In this regard, it is extremely necessary to implement measures to introduce a new manoeuvrable generation.

Moreover, in accordance with the requirements of the legislation on the support of the use of renewable energy sources, KEGOC JSC provides services for the transmission of electric energy without payment for ETO using renewable energy sources. In order to further ensure the levelling of losses of energy transmission organizations, the Company plans to provide an alternative compensation scheme at the legislative level.

According to KEGOC JSC, in order to ensure further safe integration of growing volumes of RES into the energy system and achieve the share of RES at the level of 15% by 2031, it seems necessary to adopt the following basic requirements for WPP and SPP projects:

• construction of hybrid RES (WPP + SPP + Energy storage systems);

• ensuring the predominant share of wind power pants compared to SPP (with ratio of installed capacity of WPP and SPP - 80% and 20%); gradual introduction of renewable energy capacity with the separation of the stages of commissioning by years;

• equipping renewable energy facilities (SPP and WPP) with energy storage systems;

• RES dispatching on a general basis (without priority); exclusion of free transit of electricity produced by RES; RES responsibility for imbalances within the framework of the introduced balancing power market;

• ensuring high-quality generation forecasting by equipping renewable energy facilities with forecasting systems and/or purchasing relevant services from specialized organizations; reducing dispatch planning horizon from 24 hours to 1 hour;

• other requirements to generating installations from renewable energy sources provided for by the legislation of the Republic of Kazakhstan.

"Qazaq Green" RES Association shared its opinion on a number of the above-mentioned initiatives, which are currently being legislated by the Ministry of Energy of the Republic of Kazakhstan. Thus, on the issue of eliminating priority dispatching, members and accredited observers of the Association expressed a negative opinion on this initiative. They note that in case of cancellation of dispatching for renewable energy facilities, the renewable energy market will not be able to continue to develop systematically, International financial institutions (EBRD, ADB, hereinafter referred to as IFIs) note that if this initiative is adopted, IFIs will not have reasoned justifications for providing financing for renewable energy projects. The companies noted the current lack of alternatives for priority dispatching of renewable energy facilities.

Regarding the cancellation of free transportation of renewable energy, the players of the renewable energy market note that in the wholesale and retail electricity market, ultimately, the consumer must pay for transportation. At the same time, the provision for free transportation should exist for contracts concluded with PSC of RE LLP. International financial institutions note that for the sector of corporate RES (bilateral contracts) in terms of electricity transportation, KEGOC JSC needs to provide a clear understanding of how this sector will be regulated, a broad picture of the mechanism of this regulation is needed.

Regarding the transition from daily planning of renewable energy generation to hourly, the renewable energy business community expressed a common opinion on supporting this initiative, which will entail more responsible planning and more accurate forecasts for the generation of electricity by renewable energy stations. In turn, this will reduce the negative impact on imbalances in the National Grid of the Republic of Kazakhstan.

In conclusion, it should be noted that the current state of the world economy and the geopolitical environment puts forward new strategic risks, including for the energy system of Kazakhstan. It seems that a redistribution of forces will take place in the energy market in the near future, and the European Union, as the leader of "green" development, will accelerate the processes of energy transition to renewable energy sources. The facts speak for-themselves - at the beginning of this March The United States refused to import oil and gas from Russia, following this decision, the United Kingdom will abandon oil from Russia by the end of the year (this has already been done by the giant companies Shell and British Petroleum), and Italy announced that it will abandon Russian gas within 30 months.

This is against the background of the problem of dependence of the National Grid of Kazakhstan on power exchanges from Russia. If earlier we talked about power exchanges for balancing purposes in the system, now the power exchanges are used to cover the electricity shortage.

• In the whole story, probably, the most important thing is that now is the time for a change in the attitude of state bodies and the System Operator to the renewable energy sector, which, unfortunately, still consider renewable energy as a threat to the country's energy system.

Written by Nadezhda Shayakhmetova