On May 26, a meeting on development of the electric power industry was held under the chairmanship of the President Kassym-Jomart Tokayev. During the meeting, reports were presented by Minister of Energy Nurlan Nogayev, Minister of Industry and Infrastructure Development Beibut Atamkulov, Minister of Ecology, Geology and Natural Resources Magzum Mirzagaliyev, Chairman of the Sovereign Welfare Fund Samruk-Kazyna Almasadam Satkaliyev, Chairman of the Board of Directors of Solar Power Association of Qazaqstan Nurlan Kapenov, General Director of Total Energies Kazakhstan Alem Friga-Noi.

The issue under consideration on the agenda is of extreme importance, since the viability of the industry and the country's economy as a whole depends on electric power industry. In accordance with global trends in the energy sector, Kazakhstan has joined the so-called 4th energy transition, which provides for change in the structure of primary energy consumption and gradual transition fr om the existing energy supply scheme to new energy system, wh ere the main leitmotif is set by renewable energy.

Currently, about 70% of the country's electricity is generated by traditional coal-fired thermal power plants. However, renewable energy sources account for 3%. According to the country goals, RES share in electricity generation in 2025 should be 6%, and by 2050, the share of alternative energy and RES should reach 50%.

Electricity problems

For three decades, a lot of problems have arised in the Unified Energy System of Kazakhstan. These are imbalances and shortage of maneuverable capacities, power exchange fr om neighboring countries, obsolescence of generating equipment and an increase in emergency repairs, isolation of the Western Energy Zone, shortage of electricity in the Southern zone. Development of renewable energy, especially over the past few years, has exacerbated the existing problems in the electric power industry and has actually become a driver for modernization and further development of the energy system. Solar Power Association of Qazaqstan presents the main results of the last meeting.

1. Development of the country directly depends on the stability of the power industry

One of the main tasks is to ensure energy security. Energy consumption rate in Kazakhstan is growing from year to year. However, the new energy sources that are being launched do not correspond to the growth rate. Kazakhstan is one of the most energy-intensive countries in the world. The Kazakh economy is three times more energy-intensive compared to the OECD countries, despite the fact that the services sector occupies the main share in the structure of our GDP. This indicates that fixed assets and equipment at industrial enterprises do not meet modern standards of the OECD and other advanced countries. Often there is an imitation, and not a real modernization of the fixed assets of our industry.

The fairness and affordability of tariffs is an important economic and social issue. In order to mitigate the negative impact of the pandemic, all tariffs were fixed until the end of the first quarter of this year. At the same time, it is impossible to keep the tariffs at the same level all the time. Tariffs should cover reasonable costs and give the industry the opportunity to develop.

It is common knowledge that any increase in tariffs is usually set first for business and budget organizations. In some areas, the difference reaches 400%! This not only distorts the market, but also does not create incentives for lean energy consumption. Energy efficiency and reducing energy intensity tasks are not fulfilled. Why use more expensive energy-efficient materials and equipment, if electricity can simply be "burned", as they say. In addition, the main principle - targeted social assistance is not observed. As a result of such a dilution, the really needy categories of citizens do not receive benefits in the required amount.

Noting the importance of modernizing and launching new generating capacities, the President specially focused on the project of converting Almaty CHPP-2 to gas. This issue is of strategic importance. The ecology of the city of Almaty and, of course, improving the quality of life of citizens depends on solving this problem. Therefore, the Government, Samruk-Kazyna Fund, together with the Akim's office were instructed to finally decide on project of modernization of CHPP-2 and to start implementing it as soon as possible. As the President noted, delaying this project is absolutely unacceptable.

There is a steady trend in the world - decarbonization of industry and economy. The European Union countries plan to reduce greenhouse gas emissions by 55% by 2030.

Kazakhstan plans to achieve complete climate neutralization by 2060. Since 2023, the European Union has been introducing a carbon tax, which can significantly complicate the export of our products. Taking into account the new realities, technical regulations, standards and requirements for goods will change. Therefore, we must be ready. It is obvious that adaptation process will not be simple.

Kazakhstan is one of the largest emitters of greenhouse gases in Europe and Central Asia. This is due to the fact that coal accounts for 70% of electricity production, and clean energy sources such as natural gas (20%), hydropower (7%) and renewable energy sources (3%) account for about one-third of Kazakhstan's energy balance. Therefore, the country will have to rely on traditional energy sources for quite a long time. This is reality. If we need to choose between them, we should choose cleaner ones, that is, water and gas. In this regard, work on development of electric power industry must be correlated with development of gas market as a key source of primary fuel. The Ministry of Energy of the Republic of Kazakhstan and JSC "Sovereign Welfare Fund "Samruk-Kazyna" should pay special attention to this issue.

“Clean” coal

As to coal generation, it is important to ensure the introduction of new technologies, such as "clean" coal, modern combustion and filtration systems at stations. The main emphasis should be placed on a systematic and consistent increase in use of clean energy sources, primarily hydropower and renewable energy sources. It is important to understand that at this stage of global change, the status, authority and, accordingly, the international capabilities of any country will largely be determined by the contribution to the decarbonization of the world economy. In particular, this will be one of the criteria determining the possibility of our country's admission to the OECD.

Thus, the "green" vector of development is determined by both internal and external factors. In last year's message, the President instructed to develop a concept for low-carbon development of Kazakhstan until 2050. This document should contain a concrete vision of the deep and structural decarbonization of the economy. The Government is working on a national project for development of the electric power industry. This applied document should become the basis for development of the industry for the next five years as a minimum. It is necessary to ensure the mutual correlation of the two documents. These documents should be thoroughly discussed with international and domestic experts.

2. In order to ensure energy security, it is necessary to clearly understand when the launch or disposal of power facilities, their repair and modernization will take place.

According to the instruction of the President of the Republic of Kazakhstan K.-J. Tokayev, the country's energy balance until 2035 is being prepared. At the meeting, its main characteristics and parameters were presented, which were generally approved. At the same time, these are estimated figures. It is important to have a true picture of energy generating facilities. The main generating capacities in Kazakhstan, including thermal power plants, have beenin operation for forty or more years. According to experts, their total wear is more than 50%. This leads to an increase in technological disturbances at the stations. In 2019 -4010 disturbances, in 2020 -4458 disturbances; thus, an increase of 11%. There is a need for a large-scale technical audit of energy sources. The results of audit will become the basis for improving public policy, as well as further investments in the industry. Digitalization will allow carrying out this work qualitatively. The President drew attention to the fact that it is necessary to clearly understand wh ere and when the launch or disposal of power facilities, their repair and modernization will take place. It is necessary to create a full-fledged digital map of power generation facilities, which will allow monitoring the condition of facilites in near real-time mode.

3. Sustainable course for development of renewable and alternative energy sources.

Our country has taken a steady tack towards the development of renewable and alternative energy sources. Due to a smart policy and progressive implementation, Kazakhstan managed to achieve a qualitative increase in RES' share in total energy balance, which reached 3%. This is a reasonable good result for our country. The previous target was to achieve 10% by 2030. Taking into account the new realities and the current positive dynamics, the President set the task to increase the RES' share in electricity generation to 15% by 2030. The country's power balance should proceed fr om this task. In addition, within the framework of program documents, the necessary measures of regulation and support of the industry should be provided for unconditional achievement of this target.

Next issue. It is important to use the potential of alternative energy as efficiently as possible. At the meeting of the National Council of Public Trust held in February, the President of the Republic of Kazakhstan K.-J. Tokayev instructed the Government to develop a new Law on the development of alternative energy sources, such as hydrogen, industrial gases, coal-bed gas methane and others. Kazakhstan, being a large energy country, should maintain its leading position in the new energy sector in the future. The Ministry of Energy, together with all interested parties, should work out this issue as thoroughly as possible within the framework of the working group. According to the President, it is necessary to invite representatives of the industry and domestic experts, international organizations, and involve science in this work. There are few similar laws in the world, so our law should be a model.

The share of Kazakh content in renewable energy sources projects is still extremely small. We will have to learn notonly how to build new sparkling stations, but also how to develop local production, science and technology, and train qualified local personnel. Otherwise, it will turn out that the whole country invests in foreign goods and technologies, paying for it through tariffs. The Government was instructed to carefully study and use the best international experience of localization in the field of renewable energy sources and energy in general.

The next issue - projects in the field of clean energy and the economy- undoubtedly requires due attention from development institutions. The Government is instructed to prepare proposals together with JSC NM H Baiterek for support of state policy in the field of "green" energy and "green" economy.

Pilot projects

Promoting the use of renewable energy among the population plays a significant role. Distributed generation has long been practiced in the European Union, the United Kingdom and a number of other countries. Within the framework of development of "smart" cities, the President of the Republic of Kazakhstan K. -J. Tokayev instructed to implement pilot projects for operation of solar panels and micro-power plants for use of distributed generation by the population of the country. This is especially true for the southern regions. Within the framework of the pilot, when planning and constructing new residential complexes, it is necessary to provide the possibility for installing and operating solar panels for clean energy.

It is important to simplify the procedure of permits for generating clean electricity by households as much as possible. It is necessary to improve the mechanism for subsidizing capital costs for low-power home installations. The President instructed the Government of the Republic of Kazakhstan to make the necessary amendments to the legislation.

According to a number of experts, it is premature and wrong to completely put out of commission the nuclear power industry. Developed countries rely on nuclear energy. Phobias are out of place here. However, it is necessary to carry out persistent explanatory work among citizens. We will not rush to construction of nuclear power plants, but we should not be late with this matter either.

4. Reliability of power supply, reduction of electricity losses and physical wear of networks.

In addition to generation, electric grid companies are of great importance. The need to instil order into activities of electric grid companies was noted. In particular, it is necessary to minimize the number of enterprises that do not have the technical means and personnel to maintain the power grid. The companies were instructed to consolidate a long time ago, more than five years ago. This task is implemented with insignificant results. More than 32 thousand km of electric grids have not been transferred to the balance of large energy transmission organizations. They are still on the balance of local executive bodies. The normative electricity losses of national networks are kept at the level of 6% and have not decreased since 2014. In regional networks, losses are almost twice as high. High wear of power transmission lines. As to national networks, this indicator reaches 67%. This is a serious issue, which affects the security of supply. The Governments and Regional Akimats were instructed to take a set of measures to gradually reduce the level of physical wear and tear of electric networks.

5. The importance of attracting international investors for the development of the industry.

There is a lack of electricians, repairmen of high-voltage lines and other specialists. And this is despite the fact that there are 24 universities in Kazakhstan that train personnel for the energy industry. The average age of engineering and technical personnel is about 50 years old. This situation is also complicated by the insufficient level of average wages. As a result, staff turnover increased from 4% to 15% in 2015-2020. This issue needs to be resolved promptly, otherwise we may face a personnel shortage in the near future.

The Government was instructed to implement measures to form the professional human resources for the industry and competitive level of wages.

6. The importance of attracting international investors for the development of the industry.

According to the instruction of the President, negotiations are underway with investors from the United Arab Emirates, France and other European countries. The President instructed to speed up this work and make agreed investment proposals by this September 1.

7. The stability of supply and affordability of tariffs are the key components of national competitiveness.

Power industry is important first of all as a supplier of the most important resource - electricity. The stability of supply and affordability of tariffs are the key components of national competitiveness. Therefore, it is important that the price of electricity is based on its fair market value. Today, only three companies dominate the wholesale electricity market, occupying 70% of the market. This is not quite right. The wholesale sale of electricity under bilateral agreements creates barriers for new retail companies, hinders the development of competition in the retail electricity supply market. This is a direct path to inflated prices for end users. The President previously instructed to take measures to develop exchange trade, including electronic trading. This is civilized and transparent mechanism that promotes competition and, as a result, reduces prices. Unfortunately, now the share of tender through the electronic and centralized KOREM platform is less than 1% of the total volume of the wholesale electricity market. The Ministry of Energy, together with the Competition Protection Agency, has been instructed to carefully study this issue. In particular, it is necessary to determine the share of electric energy that is subject to mandatory sale through centralized platforms.

8. Environmental protection issues are of particular relevance in the development of the industry.

One of the tools to encourage enterprises to reduce the negative impact on the environment is the system of emissions trading for greenhouse gas emissions. The system will allow enterprises to implement energy-efficient measures in a flexible way. Previous efforts to launch the domestic emissions trading market did not bring serious results. The Government was instructed to ensure the restart of the entire emission trading system. At the same time, it is necessary to provide for synchronization with similar global platforms.

9. It is necessary to gain experience in using high-tech innovations in the energy sector.

In addition to tactical measures in development of power industry, it is important to forecast for medium-term period. New technologies for generating and storing energy are emerging and being tested in the world. Given the abruptness of technological progress, they may soon become a reality. In particular, we are talking about a possible breakthrough in the development of hydrogen energy. We must be prepared for such a scenario. It is necessary to have a pool of specialists who are able to work with such technologies. The President proposed to create a Competence Center for New Power Industry, wh ere the experience of using high-tech innovations in the energy sector will be developed in an experimental mode.

In conclusion, the President recalled the importance of a proper and modern regulatory environment. In 2018, the amended Law "On Natural Monopolies" was adopted. The Law was developed jointly with the European Bank for Reconstruction and Development and was supposed to solve a number of systemic problems of the industry, such as the constant overstatement of tariff estimates and investment programs, lack of incentives to reduce tariffs. But not everything was implemented in practice. The Government has been instructed to deal with this issue and, if necessary, prepare appropriate amendments.

Growth in population and economy will inevitably require the introduction of new capacities. However, the possibilities are not unlimited, so reducing the energy intensity of the economy is the most important task. Solution of this task will have the most direct effect on the competitiveness of Kazakhstan's goods and industries. Therefore, the need to improve energy efficiency should be fully taken into account in development of relevant strategic documents and in implementation of practical measures. The President instructed the Government to keep this issue under control.

Written by Nadezhda Shayakhmetova