Talgat Temirkhanov, Chairman, ALE Kazakhstan Electric Association

The Association of Legal Entities "Kazakhstan Electric Association" has existed for almost a quarter of a century - since January 1999. All these years, the Association helps in conducting a dialogue between representatives of the energy industry and government agencies. The Association is actively working on the creation and adoption of a strategy for the development of the energy sector of Kazakhstan.

The global campaign against climate change has grown to an unprecedented scale, which has led to increased pressure on the energy sector. A year of 2020 was a new turning point and “accelerated” this process under the influence of a whole range of new factors. Today, the energy industry of our country is facing a number of large-scale challenges, questions, and uncertainties, both accumulated in previous years and newly emerged. Large-scale changes in the regulatory framework and market structure, as well as growing pressure from the public and the judiciary, are forcing companies and individuals to mobilize.

The response of businesses to the "energy transition", including energy companies, information technology and other companies, as well as financial institutions and even individual citizens, is complex and multifaceted.

In the Republic of Kazakhstan, as in many other large hydrocarbon-producing countries, the government, while striving for carbon neutrality, simultaneously relies on hydrocarbon revenues as a source of replenishment of state budgets. This confluence of competing interests and goals highlights the challenges facing the energy transition and the importance of sustained foreign investment in the energy sector of producing countries in the short to medium term.

Kazakhstan remains one of the most energy intensive countries in the world as upstream accounts for 50% of the industry. Nearly 70% of the electricity production still depends on coal. A complete refusal to finance coal projects and a shift in emphasis from natural gas and oil products to the use of hydrogen in the foreseeable future will have a significant impact on hydrocarbon exporting countries. In the world export of energy resources, Kazakhstan occupies a significant place, and the decrease in demand for those resources is a challenge for the entire economy of the country.

Serious problems have accumulated in the energy sector of Kazakhstan due to the unprofitability of companies, high wear and tear of equipment and networks, high staff turnover, limited opportunities for tariff setting, lack of profit in tariffs for business and social development, and low wages.

The energy sector in Kazakhstan is regulated by various state bodies. Of relevance for Kazakhstan today is the use of a systematic approach to planning of the development of the republic's energy sector.

While maintaining a multidirectional regulation model, the country as a whole and the energy sector in particular are waiting for the most negative scenarios, among which may be the final degradation of the industry and the complete loss of energy independence, failure to fulfill international obligations (such as the Paris Climate Agreement).

The Association of Legal Entities "Kazakhstan Electric Association" (Association or KEA), established on January 7, 1999, as a non-government, non-profit organization, realizing the responsibility to its customers, directs all efforts to eliminate risks beyond the control of the subjects through a dialogue between representatives of the energy industry and government agencies.

The Association at the venues of energy committees under the AMANAT party and Atameken RPE, working groups of government agencies with the participation of experts, entrepreneurs, representatives of government agencies, large corporations and regional enterprises discuss the problems of the energy industry: to improve legislation in the field of electricity, including powers between government agencies and return to the sectoral ministry a number of functions to approve and harmonize technical norms and regulations, determine the technical conditions for non-discriminatory access, and carry out licensing. To date, the Association unites more than 100 organizations in the energy industry, including the generation, transmission, and supply of electrical and thermal energy: regional power grid companies, generating companies, a system operator, a centralized trading operator, major industry research and design institutes, manufacturers of power equipment, United States Energy Association, etc.

In our opinion, the following fundamental positions can be distinguished for the energy industry: ensuring the energy security of the country, fulfilling international climate obligations, modernizing and developing the energy sector, and resolving the problems of the current tariff regulation.

We are aimed at the development of the energy industry through the solution of problematic issues of natural monopoly entities (NME), as well as energy supply organizations. Together with interested parties, proposals are formed and sent to state bodies on amendments and additions to regulatory legal acts on the issues of the electric power industry, natural monopolies and socially significant markets, taxation, energy saving, fire safety, renewable energy sources, and the environment.

To date, the Association is actively working on the development of a profile law on heat supply, on solving issues of implementing the norms of the Environmental Code of the Republic of Kazakhstan in the energy industry, on initiating, improving, and adopting a strategy for the development of Kazakhstan's energy sector with a separate program for the development of combined generation plants (CHP) in accordance with the Master Plans for the Development of Cities and Regions of the Republic of Kazakhstan, because CHPs are socially significant facilities that provide regions with thermal energy.

We have developed a number of proposals to the state authorized bodies on introducing amendments and additions to some legislative acts, implementation of which will allow the energy industry to solve the issues of NME, in terms of increasing the wages of production personnel (based on the normative number of personnel of the subject and the average monthly salary that has developed according to statistics for the year), inclusion in the tariffs of all reasonable costs incurred by NME (when taking networks into ownership or trust management, taking into account corporate income tax, etc.), the development of renewable energy sources, and the implementation of environmental initiatives without a negative impact on the energy industry.