On July 1, 2023, a single electricity buyer model was introduced in Kazakhstan, and the balancing electricity market began to operate in real time.

These innovations have raised many questions in the renewable energy sector, in particular issues related to the effective planning (forecasting) of electric energy production and the financial responsibility of renewable energy facilities for imbalances between planned and actual values of electric energy generation. This review examines these issues in order to attract the attention of participants in the renewable energy market, including regulatory authorities, to finalize relevant regulatory legal acts aimed at creating an investment-attractive renewable energy market in the Republic of Kazakhstan.

The Single Purchaser Model

The Single Purchaser is LLP "Settlement and Financial Center for Support of Renewable Energy Sources". The Settlement and Financial Centre, as a Single Purchaser, buys electricity from energy-producing organizations (including renewable energy facilities) for its sale to energy supply, energy transmission organizations, consumers and other market entities.

From July 1, 2023, the Single Purchaser purchases planned, and not the actual volume (electric energy produced by renewable energy facilities and supplied to the power grid of the Republic of Kazakhstan) of electric energy from renewable energy facilities that have concluded a long-term electric energy purchase agreement with the Single Purchaser, as it was before.

This change is aimed at stimulating renewable energy facilities to carry out effective forecasting of electricity generation and imposes an obligation on renewable energy facilities to provide planned volumes of electricity generation for inclusion in the daily schedules of production and consumption of electric energy approved by KEGOC JSC.

Renewable energy facilities with electricity purchase agreement must submit a sales application in the system of balancing electricity market on the operational day before 8:00 a.m. in order to include it in the daily schedule of electric energy production approved by the System Operator. The daily schedule regulates the hourly values of production and consumption of electric energy for each calendar day.

At the same time, renewable energy facilities can make adjustments to increase the daily schedule no later than 2 hours before the hour of actual production of electric energy, provided that the production-consumption balance is maintained in the specified daily schedule.

It should be noted that electricity supplies from renewable energy facilities have priority in the formation of daily schedules (except for renewable energy facilities that participate in the capacity market or do not have the electricity purchase agreement). Priority generation is important for renewable energy facilities, because if the hourly volumes of the daily consumption schedule are exceeded, the System Operator can reduce the hourly volumes of applications for the sale of facilities not included in the priority generation schedule.

The daily schedule is the final document for settlements with the Single Purchaser. The Single Purchaser pays only for the planned amount of electric energy approved by the System Operator in the daily schedule. Payments to renewable energy facilities that have concluded the electricity purchase agreement after July 1, 2023, must be made daily (no later than 12:00 p.m. of the operating day), but renewable energy facilities receive part of the payment within 45 calendar days of the month following the billing month.

However, taking into account that the generation of electric energy by renewable energy facilities is subject to changes, providing objective and accurate forecasts by renewable energy facilities is a difficult task, and the actual data of electric energy production may differ significantly from the planned volumes. Such deviations from planned volumes (imbalances) are subject to regulation at the balancing electricity market.

Imbalances of renewable energy facilities

The balancing electricity market has been operating in real time since July 1, 2023, which involves the physical and financial settlement of hourly electrical energy imbalances that occur on an operational day.

The imbalance is the difference between the planned and actual balance of generation-consumption of electric energy in kWh. Accordingly, two goods are bought and sold at the balancing electricity market:

·                 balancing electricity to cover positive imbalances (an imbalance whose value is greater than zero (not negative), in kWh); and

·                 negative imbalances (for an imbalance whose value is less than zero (negative), in kWh).

If the specified planned volume of a renewable energy facility exceeds the actually generated volume of electric energy, then a positive imbalance appears; conversely, if the specified planned volume of a renewable energy facility is lower than the actually generated volume, then a negative imbalance appears.

The financial settlement of imbalances from renewable energy facilities is carried out by the Single Purchaser. This means that renewable energy facilities will be financially responsible for deviations from the planned daily schedule of production and consumption of electric energy by:

·                 to cover positive imbalances by purchasing balancing electricity from the Single Purchaser; and

·                 sales of negative imbalances to the Single Purchaser.

For this purpose, renewable energy facilities that have concluded the electricity purchase agreement and are included in the list of subjects of the wholesale electricity market must conclude a liability transfer agreement with the Single Purchaser.

The price of a positive imbalance is the price for the sale of electric energy indicated in the electricity purchase agreement multiplied by an increasing coefficient, and the price of a negative imbalance is the price for the sale of electric energy multiplied by a decreasing coefficient.

It is important to note that the Single Purchaser, within the framework of contracts on the transfer of responsibility with renewable energy facilities that concluded the electricity purchase agreement before July 1, 2023, does not carry out transactions for the purchase and sale of balancing electricity and negative imbalances. For such renewable energy facilities, a coefficient of one is applied for the entire period of validity of the electricity purchase agreement. This means that these renewable energy facilities do not bear additional financial burden for their imbalances.

However, the question of the financial responsibility of renewable energy facilities concluding the electricity purchase agreement with the Single Purchaser after July 1, 2023 remains open. Thus, it is currently envisaged that for such facilities an acceptable deviation from the planned value of the supply of electric energy to the grid, included in the daily schedule, will be determined, if not exceeded, these facilities should not be financially responsible for their imbalances (permissible deviation). That is, the increasing and decreasing coefficients will be equated to one for the corresponding hour of the operating day. At the same time, the size of such an acceptable deviation has not yet been established, so it is currently unknown what financial burden new renewable energy facilities will bear in connection with participation at the balancing electricity market.

Thus, the implementation of the Single Purchaser model and the participation of renewable energy facilities at the balancing electricity market suggest that renewable energy facilities should have effective methods and technical solutions for forecasting electricity production. In the absence of such methods, renewable energy facilities that conclude the electricity purchase agreement after July 1, 2023, may be financially responsible for their imbalances. However, the size of the permissible deviations and the corresponding coefficients for renewable energy facilities currently amount to an uncertain amount, which makes it difficult to assess the investment attractiveness of projects in the renewable energy sector, develop a financial model, and determine the conditions for financing renewable energy projects.