Joint project of UNDP and the Ministry of Energy of the Republic of Kazakhstan "De-risking renewable energy investment" has been working in Kazakhstan for more than five years. What has been done within the project framework, what problems have yet to be solved and what is the benefit for consumers and small businesses? This is stated in an interview of our correspondent with Abai Kulanbay, Director of Renewable Energy Department, Ministry of Energy of the Republic of Kazakhstan.

-       In 2019, with the support of the UNDP-GEF project, site-specific auction was prepared and held for the first time. In your opinion, how successful was the practice of implementing such auctions and does the Ministry continue to use it?

-       Site-specific RE auction is one of the important achievements of initiative by the Ministry of Energy of the Republic of Kazakhstan and UNDP-GEF Project. The essence of this mechanism is that the participants, competing, offer the lowest tariff per kWh of "green" energy, based on volumes of energy planned for purchase, announced by the state and location of facility's construction, proposed by the potential investor. The pre-made documentation reveals the main technical aspects of the future construction site of renewable energy facilities, namely location, conditions for connecting future facility to the power grid and other aspects, that allows minimizing risks of investors participating in site-specific RE auctions.

Such a mechanism has proven to be successful, and now the Ministry of Energy of the Republic of Kazakhstan uses it independently. In particular, this year it is planned to hold site-specific RE auctions for implementation of wind power projects.

- Important direction of renewables development is the implementation of small-scale RE projects by the population and businesses of the country for their own needs. During the meetings on development of electric power industry in 2021 and 2022, the Head of State drew particular attention to need of stimulating this direction. What steps is the Ministry of Energy of the Republic of Kazakhstan taking to develop low-capacity RES?

- For consumers, use of small-scale renewable energy projects provides a lot of positive aspects. First, cost of generated electric energy will not depend on cost of energy carriers. Second, reducing energy consumption and, as a result, saving resources in the medium and long term. Third, improving the comfort of living.

Of course, at the current level of the cost of electric/ thermal energy, use of such systems is economically unprofitable without special support measures, but in the medium term, the use of such systems will be more than justified. Today, the Ministry, together with the UNDP-GEF Project, initiated a number of amendments to the legislation on support of renewables in terms of stimulating development of small-scale projects. They are related to simplification of procedure for connecting facilities to the grid, introduction of a conceptual framework for small-scale renewable energy projects and a number of other areas. We hope that the amendments will be adopted by the Parliament before the end of 2022.

- At the beginning of2022, the business community of renewable energy sector faced the problem of a sharp decline in the exchange rate of national currency due to various external factors. Then the issue of implementing tariff indexation mechanism became acute. UNDP-GEF provided analytical and consulting support to find optimal mechanisms for solving the problem. What decisions have been made by the Ministry of Energy of the Republic of Kazakhstan based on the results of this work?

-Yes, this is a big stratum of work. Fluctuations in national currency exchange rate introduce some uncertainty for investors in renewable energy sector, since the main equipment and technologies are exported to Kazakhstan. Several solutions to this issue were considered. Some of them were accepted by the Ministry. In particular, a tariff indexation mechanism was introduced for the construction period of renewable energy facilities. Before that, the beginning of tariff indexation was possible only from the moment the facility was put into operation, representing big time lag, from twotofouryears.

-       As you know, today the renewable energy sector can develop in two directions: through the auction mechanism and through the market of bilateral PPA agreements. How promising is development of bilateral agreements market? What are the arising problems, what does the MoE offer to solve them?

-       In general, the Ministry of Energy supports development of bilateral agreements mechanism. This is the current reality and necessity due to tightening environmental policy both in Kazakhstan and in the world. For example, the EU is introducing a cross-border adjustment mechanism (CBAM), when export goods entering EU countries will be checked for carbon footprint.

The main issues of introducing this mechanism are aspects of regulating relationships between process participants, reducing possible risks, as well as issues of technical regulation and balancing of renewable energy facilities connected to power grid.

- UNDP-GEF project "Derisking renewable energy investments" has been working for five years. What are the expectations and wishes of the Ministry of Energy of the Republic of Kazakhstan for further implementation of this project?

-       In general, as the national project director, I positively assess the work of the team. I believe that the main tasks have been completed, despite the two-year delay in its implementation. The recommendations are standard ones. It is necessary to strengthen educational work by conducting training worskshops among representatives of SMEs on the issues of implementing small-scale renewable energy projects. I would also like to intensify work with financial organizations to complete tasks of project’s financial mechanisms.

Fluctuations in national currency exchange rate introduce some uncertainty for investors in renewable energy sector, since the main equipment and technologies are exported to Kazakhstan.