Kazakhstan is witnessing accelerated growth in renewable energy sources (RES) as part of its efforts to achieve carbon neutrality and diversify its energy portfolio. In 2024, the share of RES in Kazakhstan accounted for 6.4% (7.58 billion kWh) of total electricity generation. In 2025, the country plans to commission 9 renewable energy projects with a total capacity of 455.5 MW.

A major barrier to the efficient and economical integration of renewables into the unified energy system is the intermittency of solar and wind power, as these sources are not available around the clock.

The most widely recognized solution to this issue is the implementation of energy storage systems (hereinafter – ESS), which are designed to accumulate electricity and release it during peak demand periods. As global practice shows, energy storage systems (ESS) are successfully used in various applications, including grid stabilization and frequency regulation, peak shaving and load shifting, integration of renewable energy sources, backup power and resilience, support for microgrids, and integration into electric vehicle charging infrastructure. Currently, lithium-ion batteries are the most popular choice for battery-based energy storage systems. They are characterized by high energy density, long service life, and fast charging capability, and are used in residential, commercial, and grid-scale storage applications.

The growth rates of ESS exceeded all expectations in 2024, with ESS installations totaling 205 GWh globally. According to BloombergNEF's forecasts, the global market for battery energy storage systems (BESS) will grow by 21% annually until 2030, highlighting the increasing demand and commercial viability.

A pilot project for the implementation of ESS is planned based on the signed agreement between KEGOC JSC, China Power International Development Limited, China Power International Holding Limited, and the Union of Legal Entities "Association of Renewable Energy of Kazakhstan". This pilot project will allow for the study of the practical characteristics and potential of using ESS within the unified power grid. 

Additionally, the construction of wind and solar power plants is expected based on intergovernmental agreements, which outline the terms for the implementation, development, construction, and operation of power plants, utilizing an energy storage system with a minimum capacity.

Current regulatory framework

According to the Concept of Development of the Fuel and Energy Complex of the Republic of Kazakhstan for 2023-2029 (hereinafter referred to as the Concept), it is planned to reduce the negative impact of growing renewable energy capacities on the country's power grid by introducing energy storage capacities totaling 11.7 gigawatts by 2029.

The Concept also outlines an Action Plan for its realization, which includes a provision for the implementation of renewable energy projects with a total capacity of 4000 megawatts, including ESS.

As of today, the main regulatory acts that currently govern, to varying extents, the relations related to the installation and operation of ESS in the renewable energy sector are as follows:

·       The Law of the Republic of Kazakhstan "On Supporting the Use of Renewable Energy Sources" dated July 4, 2009, No. 165-IV (hereinafter referred to as the "Renewable Energy Law");

·       The Order of the Minister of Energy of the Republic of Kazakhstan dated December 18, 2014, No. 210 "On Approving the Electric Grid Rules" (hereinafter referred to as the "Electric Grid Rules"); and

·       The Order of the Minister of Energy of the Republic of Kazakhstan dated March 30, 2015, No. 247 "On Approving the Rules for the Technical Operation of Electric Stations and Networks" (hereinafter referred to as the "Technical Operation Rules").

Definition of ESS

The Renewable Energy Law defines ESS as "a technical device with an automated control system designed for the accumulation, storage, and discharge of electrical energy, along with the associated structures and infrastructure required for its operation in accordance with the legislation of the Republic of Kazakhstan".

The Renewable Energy Law also includes ESS in the definition of auction trading, meaning that in certain cases, the selection of projects for the construction of new renewable energy facilities will be carried out with consideration of equipping such facilities with ESS. The definition of "auction trading" does not imply that all renewable energy projects participating in auction trading must be equipped with ESS.  It should be noted that the Renewable Energy Law does not include a mandatory requirement for equipping renewable energy facilities with energy storage systems—whether these are renewable energy projects based on auction trading or other renewable energy facilities.

Operation and Management of ESS

Amendments and additions made to the Electric Grid Rules and the Rules for the Technical Operation regulate the technical aspects of ESS operation, including: the formation of the conceptual framework for ESS, the tasks and requirements for comprehensive testing of ESS, the requirements for ESS management through automated control systems, maintaining a certain charge level to prevent a decrease in ESS technical characteristics, requirements for ESS accessibility, ESS requirements for frequency regulation and power flows, and others. 

The Electric Grid Rules were also amended with provisions stipulating that, at the stage of developing and agreeing on the Power Output Scheme of a power plant, the selection of the following types of ESS is determined:

·       Mechanical;

·       Electrochemical;

·       Chemical;

·       Electric;

·       Thermal.

When developing the Power Output Scheme, the project developer must adhere to the requirements of the Rules for the Technical Operation of Electric Stations and Networks, which define the procedures for the technical operation of power plants and networks, including renewable energy plants.

Expected developments in ESS regulation

As outlined in the draft Law of the Republic of Kazakhstan "On Amendments and Additions to Certain Legislative Acts of the Republic of Kazakhstan Regarding the Development of Alternative Energy Sources" (hereinafter referred to as the "Draft Law"), amendments and additions are expected to be made to various regulatory legal acts with the goal of enhancing the legal framework governing ESS.

Functioning of ESS in the Power System

The Draft Law introduces the concept of an energy storage system operator to clearly define a specialized market participant responsible for the management, operation, and integration of storage facilities into the energy distribution system.

The concept of the electric capacity market is being expanded to include a new participant—ESS operators—who are in a state of readiness to store and discharge electrical energy. This inclusion is intended to ensure the return on investments made in the ESS sector. Furthermore, under the proposed amendments, the ESS operator provides a service to the single buyer for the availability of energy storage system capacity, thereby ensuring the system’s readiness to deliver load.

In addition, according to the Draft Law, participants involved in the generation, storage, transmission, and consumption of electricity will bear mutual obligations for financial settlement in the balancing electricity market. These obligations will be based on the differences between contracted and actual volumes of electricity generation and consumption, as determined by the system operator through calculations of balancing electricity volumes resulting from the physical settlement of energy imbalances. Thus, ESS will be integrated into the balancing electricity market.

Types of ESS

The terminology section of the Renewable Energy Law will be supplemented with the following types of ESS, which are expected to reduce grid load, promote the expansion of distributed generation, and ensure stable energy supply for various categories of consumers: 

·        Household energy storage system – an energy storage system intended for domestic use;

·        Battery energy storage system – an energy storage system based on rechargeable batteries.

·        Behind-the-meter energy storage system – an energy storage system installed in residential, commercial, or industrial facilities, located beyond the point of interconnection (behind the electricity metering device) on the consumer side, and designed to fully or partially meet the facility's own electricity demand through the accumulation, storage, and discharge of electrical energy.

Support Measures

Guaranteed Offtake

The amendments provide for the guaranteed purchase by the single buyer of the service for the availability of energy storage system capacity. This measure will enable the integration of ESS into the electric capacity market and ensure long-term financial support. It is proposed that the tariff for the service of energy storage system capacity availability be approved for a period of 15 (fifteen) years. The maximum tariff (price) for this service will include the recovery of capital expenditures and interest on relevant loans obtained for the project implementation, a rate of return on invested capital (subject to annual indexation), adjusted either by the inflation rate as determined by the authorized body in the field of state statistics, or by annual indexation based on changes in the exchange rate of the national currency to foreign currencies as determined by the National Bank of the Republic of Kazakhstan, as well as operational expenses.

Access to Power Grids

According to the Draft Law, transmission companies will not have the right to deny ESS entities access to the electrical grid for the purposes of energy storage and subsequent discharge. Thus, non-discriminatory and transparent access of ESS to the power grid will be ensured.

Cap Tariff for Balancing Electricity

Entities using ESS, operating under the automatic frequency and power flow regulation system, will be granted the same rights to sell all their negative imbalances to the balancing market settlement center at the cap tariff for balancing energy, the value of which will remain unchanged for 5 years starting from March 1, 2025. Thus, the establishment of a non-decreasing cap tariff for balancing electricity will ensure the return on investment.

The Draft Law stipulates that all positive imbalances caused by the automatic frequency and power flow regulation system will be covered by entities using ESS through the purchase of balancing electricity from the balancing market settlement center at a price of 0.01 tenge/kWh, the same price applicable to other participants in the balancing electricity market.

ESS Auctions

The Draft Law proposes the introduction of a competitive selection mechanism for ESS investors through the organization and holding of auction tenders.

The Draft Law provides for the determination by the authorized body of the volumes of regulating electricity capacity that have been or will be created by energy storage system operators, as part of the plan for the placement of generating units with flexible generation modes. To implement this plan, auction tenders will be organized.

Auction tenders for selecting ESS projects will be organized and conducted by the auction organizer in an electronic system, based on an auction aimed at selecting ESS projects and determining their individual tariffs for the service of energy storage system capacity availability.

The process of organizing and conducting auction tenders for the selection of ESS projects will follow this procedure:

1.      Defining the cap tariff for the service of ESS capacity availability.

2.      Submission by the applicant of copies of the founding documents and proof of financial resources.

3.      The commission, formed by the authorized body, will verify the documents submitted by the applicant for compliance with the requirements for ESS auction tenders and make a decision regarding the subsequent admission for registration in the electronic system of the auction organizer.

4.      After the commission verifies the documents, the authorized body will send the information and the list of applicants who have been granted registration approval to the auction organizer.

5.      No later than six months before the planned date of the auction tender, the authorized body will develop and publish on its website a schedule for holding auction tenders for the selection of energy storage system projects.

After the results are concluded, the single purchaser will sign a contract for the purchase of the energy storage system capacity availability service with the auction winner for a term of ten years from the date of its first certification, at the individual tariff for the energy storage system capacity availability service, determined based on the results of the auction tender for the selection of ESS projects.

Regulation within the framework of intergovernmental agreements

To implement the Action Plan for the deployment of ESS within the framework of the Concept, the construction of large-scale renewable energy projects based on intergovernmental agreements (hereinafter - IGAs) is planned. For example, the installation of ESS is provided for by the following IGAs:

·       the Agreement between the Government of the Republic of Kazakhstan and the Government of the United Arab Emirates on the implementation of a wind power plant project;

·       The Agreement between the Government of the Republic of Kazakhstan and the Government of the Kingdom of Saudi Arabia on the implementation of a wind power plant project.

·       The Special Agreement between the Government of the Republic of Kazakhstan and the Government of the French Republic on the implementation of cooperation in the field of combating global warming.

The above-mentioned intergovernmental agreements also define indicative prices for the sale of electricity, taking into account ESS. At the same time, the principle for calculating the tariff (price) for ESS is determined based on different approaches.

According to the IGA with the Government of the French Republic, the sale of electricity will be carried out at an indicative price, which includes the tariff for ESS.  A similar approach is outlined in the IGA with the Government of the United Arab Emirates, where a unified tariff is defined for each project. Thus, in these IGAs, the ESS tariff is included in the overall electricity sale price.

In the IGA with the Government of the Kingdom of Saudi Arabia, however, a different approach is outlined, where the single buyer will make separate payments to the seller for electricity and for ESS.

Considering the provisions of the Law on "Legal Acts," all such provisions in the IGAs regarding the possibility of concluding a power purchase agreement by the single buyer outside of an auction, tariff models for electricity and ESS, which help compensate for ESS costs, take precedence over the existing national legislation of the Republic of Kazakhstan. 

Recommendations

Investment preferences

Currently, ESS are not listed among the priority activities for the implementation of investment projects approved by the Government of the Republic of Kazakhstan. The inclusion of Energy Storage Systems (ESS) in this list would make the ESS sector more attractive to investors by offering various forms of support, such as exemption from customs duties, state grants in kind, and tax preferences, including reductions in corporate income tax, land tax, and property tax.

Increase in Local Content

It is recommended to set tariffs on fully imported lithium-ion battery modules, cells, racks, and semi-assembled BESS blocks in order to stimulate local assembly and job creation. Higher tariffs on fully assembled BESS products will enhance the competitiveness of local assembly and manufacturing.

PPP

The use of public-private partnership (PPP) potential is seen as one of the ways to achieve public benefit for the public partner by gaining international experience in financing, developing, and managing/operating BESS projects from the private partner, while a more balanced risk allocation between the partners will positively affect the interests of both sides.

In the World Bank’s Guidelines to Implement Battery Energy Storage Systems under PPP frameworks, four types of agreements are considered:

·        A tolling agreement, in which the buyer pays a fee for access to the capacity provided by the ESS project and is also responsible for supplying and paying for the energy used to charge the ESS.

·        A capacity agreement, in which the buyer pays for capacity or availability. The agreement will specify what the purchase of capacity entitles the buyer to, i.e., whether it is limited to the provision of certain services.

·        The "capacity plus energy" agreement, where the buyer pays both for the capacity and for the energy.  This may be appropriate if the project is responsible for paying for the energy used to charge the battery. In this case, the energy losses on the way to and from the battery essentially become variable costs, which are passed on to the off-taker through the energy charge;

·        the Hybrid PPA, which is an extended PPA for renewable energy projects, for implementing a hybrid project that combines a VRE generator with a BESS installation. The PPA of this kind may compensate for energy production based on measured output (similar to a standard VRE project), while also setting conditions for the project, such as restrictions on growth rates or limited dispatchable capacity during specific timeframes.

For the successful implementation of PPP projects in the energy storage sector, it is crucial to conduct a thorough techno-economic evaluation, choose the appropriate technology, and establish a suitable project management system for both partners.

National standards

In terms of technical regulation, it is recommended to develop national standards for energy storage systems (ESS) in accordance with international standards, such as IEC (International Electrotechnical Commission) and ICC (International Code Council). Such national standards should regulate issues related to the parameters of ESS installations and testing methods; planning, installation, and efficiency evaluation of energy storage; guidelines on environmental issues and safe use of ESS, including fire safety, and other related aspects.

Conclusion

Energy storage systems (ESS) are becoming a crucial element of the energy system in Kazakhstan and Central Asian countries, aligning with the broader regional goals of developing clean energy and ensuring future energy security.

In 2024, Uzbekistan successfully completed the installation of a battery energy storage system (BESS) for Energy China's 150 MW/300 MWh project in the Fergana region. ACWA Power, in collaboration with the authorities of Uzbekistan, plans to build large-scale renewable energy projects with a total capacity of over 1 GW, including energy storage systems in the Tashkent, Samarkand, and Bukhara regions, with a projected total capacity of over 1 GW.

The acceleration of the implementation of progressive legislation and government support measures will make Kazakhstan more competitive and attractive to investors in the ESS sector.