Timur Shalabayev, Executive Director of SPAQ

Over the past six months, important changes have been taking place in the electric power industry of Kazakhstan, which generally lay the foundation for a deep modernization of the industry. On the one hand, it is our country's attempt to keep up with global challenges, such as the energy transition and the process of decarbonization of economies, which determines the green vector in power industry. On the other hand, it is an active search for solutions to meet the needs of the country's growing economy with electricity in the medium term. We will try to understand the key changes and initiatives.

Maneuverable generation is the key to further development of "green" energy.

As it is commonly known, profile of electricity generation by renewable energy facilities has significant irregularities, both in the context of days and months. According to the research of KEGOC JSC, with the maximum generation of about 450 MW by renewable energy facilities in the Republic of Kazakhstan in January, the maximum deviations were up to 230 MW for over generation of energy into the system and up to 113 MW for under generation. In July, with the maximum generation of renewable energy of about 600 MW, the maximum deviations were up to 102 MW for over generation of energy into the system and up to 250 MW for under generation. In the annual context, the range of deviations of renewable energy generation from the plan was about 250 MW.

Due to the lack of flexibility of generation in the UES of Kazakhstan, due to the high share of low-maneuverable coal generation, and the shortage of regulation power, the attracted regulation resources are not enough to fully compensate for unstable renewable energy generation and deviations of other market entities. The imbalances of the UES of Kazakhstan that are not covered by its own resources are compensated by the Russian energy system (in the form of unplanned balances of power exchanges at the borders of the two energy systems).

In order to solve this problem in December 2020 the President signed amendments to the legislation on electric power and renewable energy, which involve the construction of maneuverable capacities and attracting investors through an auction.

In January 2021, the President instructed the Government of the Republic of Kazakhstan to adopt a set of measures with local executive bodies in order to attract  investors to projects for construction of maneuverable generation. It is important to start projects for construction of gas generation facilities in the south of the country and accelerate the development of hydropower in the south and east of the country.

At the beginning of this July, Minister of Energy N. A. Nogayev, speaking at a meeting of the CIS Electric Power Council, said that auction for promising projects for construction of generating units with a maneuverable generation mode are planned to be held in this December with a capacity of about 1000 MW. The Minister also said that it is planned to increase the renewable energy capacity from the current 1800 MW to 2100 MW by the end of 2021.

Thus, practical steps are being taken in the country to solve the problem that hinders the development of "green" economy, which will serve as a guarantee for creation of new capacities based on generation facilities cleaner than coal (gas turbine stations, hydroelectric power plants).

Strategic initiatives in the power industry are the solution to the accumulated problems.

Over the past decades, many problems have accumulated in the country's power industry, such as imbalances in the system, a shortage of maneuverable powers, dependence on neighboring countries, equipment wear, and isolation of the Western Zone. Indeed, all these problems have a negative impact on the country's energy security.

On January 26, 2021, speaking at an expanded meeting of the Government of the Republic of Kazakhstan, the President noted that due to historical dependence on the energy systems of neighboring countries, cases of power outages in the southern regions have become more frequent recently. In particular, the accident that occurred on this January 10 in the power system of western Kazakhstan showed unreliable operation of the isolated power system of this region.

The government of the republic of Kazakhstan and Samruk-Kazyna fund were instructed to start work on strengthening the southern zone of the electric power system as soon as possible, as well as to develop a scheme for strengthening transit links between the western regions of the country, and in the future to  ensure their integration with the unified electric power system of Kazakhstan.

The Government was also instructed to develop the Energy Balance of the Republic of Kazakhstan until 2035. This document should take into account not only internal aspects - consumption, generation of maneuverable powers, an increase in share of environmentally friendly energy, but also plans for the development of our neighbors' energy systems.

In addition, the Ministry of Energy of the Republic of Kazakhstan is currently developing a National project for development of the electric power industry. This is a new regulatory document in the State Planning System, which is actually a document for development of the industry. The National project is a document that ensures comprehensive interdepartmental cooperation and priority budget financing for implementation of a set of measures aimed at solving tasks (projects), certain critical tasks for achieving National priorities, goals, objectives and strategic indicators and indicators within the established time frame. National projects are approved by the Decree of the Government of the Republic of Kazakhstan after approval by the Supreme Council for Reforms under the President of the Republic of Kazakhstan.

It seems that this document should reflect specific measures aimed at systemic changes in the electric power industry, which are due to internal (reducing the energy intensity of the economy, reducing the electricity deficit in the Southern zone, joining the Western Zone to the UES of Kazakhstan, upgrade of generating equipment, etc.) and global tasks (decarbonization of energy, "greening" of the economy, carbon neutrality, fulfilling obligations under the Paris Agreement, the UN Sustainable Development Goals, etc.) set to the industry. The national project for development of electric power industry is designed for 2021-2025 and, as it seems, will require large investments.

Solar Power Association of Qazaqstan is a member of the Working Group on development of these strategic documents for the industry.

The development of alternative energy- search for new technological solutions.

On February 25, 2021, President of the Republic of Kazakhstan Tokayev K. K, speaking at the V Meeting of the National Council of Public Trust again drew attention to the electric power sector, placing special emphasis on the fact that the paradigm of economic development based on traditional energy sources is irrevocably receding into the past. In this, the President sees measures to diversify the economy, reduce its energy intensity, and move towards "green" technologies. The President instructed to develop a separate Law on development of alternative energy, which would regulate the use of all sources of alternative energy, such as hydrogen, industrial gases, coalbed methane gas, biofuels, solid household waste. This will be a separate regulatory document that is not related to the Law of the Republic of Kazakhstan "On Support of Renewable Energy Sources", which regulates solar, wind, hydropower (small hydroelectric power plants) and biomass energy.

In continuation of this topic, foreign investors became interested in development of alternative energy in the country.

Already in this, the Swedish-German company Svevind Energy Gmbh signed an agreement on mutual understanding with NC "Kazakh Invest" JSC for construction of plant in Aktau for production of "green" hydrogen. Svevind plans to install wind 3 million tons of "green" hydrogen annually. It is expected that the stages of development, design, procurement and financing will take from three to five years, the stages of construction and commissioning -about five years, says Svevind. Speaking in this May the President stressed that there are few similar laws on alternative energy in the world, so our Law should become a model. As far as is known, this Law should be developed and adopted by the end of next year.

A new stage in the development of Kazakhstan's electric power industry.

On May 26, 2021, a meeting on development of electric power industry was held under the chairmanship of the President. Meeting discussed strategically important issues and gave specific instructions for the further development of the industry. Thus, it was decided to recognize systematic and consistent increase in clean energy sources, primarily hydropower, renewable energy sources and gas-powered maneuverable capacities, as well as phased transition to new "clean coal" technologies using modern combustion and filtration systems as the main priorities of energy development.

Strategic indicator for development of renewable energy until 2030 was increased from 10 to 15%, instructions were given for development and promotion of use of small renewable energy installations by households, development of local content for renewable energy.

Separate instructions were given to conduct a technical audit of energy sources, increase the volume of electricity sales through centralized sites, reduce the level of physical wear of power grids, tariff policy and develop human resources for the industry.

This meeting on development of the electric power industry can rightfully be called historical, because it determined strategic directions for development of the industry which determines development of the entire economy of the country. The results of the meeting are fixed in the relevant minutes, the control procedure is defined and responsible state bodies and organizations for execution of the instructions of the President of the Republic of Kazakhstan are distributed.

Instead of a conclusion: an equation with several unknown variables.

Despite the fairly consistent policy and vision of development of the industry, which the business community has seen in recent months, it seems that there is still imbalance in its implementation. The fact is that on the one hand, the task of decarbonizing the economy is not only the task of the Ministry of Energy of the Republic of Kazakhstan, but also issues of ecology, industry, trade, regulation, personnel training, investment and fiscal policy. But it is the decarbonization and "greening" of the economy that has become one of the 7 principles of the new economic policy of the country (The Message of the

President of the Republic of Kazakhstan to the people of Kazakhstan dated September 1, 2020. "Kazakhstan in a new reality: action time"). Its implementation requires effective interdepartmental correlation and development of common directions, principles, measures, and ways to achieve it. So far, we, as representatives of the business community, do not see such synchronous work. The Ministry of Energy of the Republic of Kazakhstan is developing the Energy Balance until 2035, the National Project for Development of Power Industry until 2025, the draft law on alternative energy sources, and the Ministry of Ecology, Geology and Natural Resources of the Republic of Kazakhstan is developing the Concept of Low-Carbon Development of Kazakhstan until 2050, which, according to the President of the Republic of Kazakhstan, should contain a specific vision of deep and structural decarbonization of the economy. It seems that high correlation between these documents is necessary as minimum.

Strategic indicator for development of renewable energy until 2030 was increased from 10 to 15%, instructions were given for development and promotion of use of small renewable energy installations by households, development of local content for renewable energy.

Noticing the existing dissonance, the business community of the electric power industry under the auspices of ALE Kazakhstan Electric Power Association has put forward the initiative to develop a long-term strategy for development of the electric power industry, taking into account the country's decarbonization policy. In theory, such general strategic document should serve as the basis for Energy Balance until 2035 and the National Project for the Development of the Electric Power Industry until 2025. In this regard, SPAQ believes that at the initial stage it is necessary to determine the regulatory status of the Strategy and its place in the state planning system.

Moreover, it is necessary to insert external factors into the general equation for development of the electric power industry, such as the introduction of common electricity market of the countries of the Eurasian Economic Union (2025), introduction of a carbon footprint tax in the European Union (2023), Kazakhstan's obligations under the Paris Agreement (2030). How will our electric power industry solve the old problems accumulated from the Soviet Union and the new challenges dictated by the global conjuncture? How to build a common policy for all sectors of the economy? How structurally should the electric power industry change? What energy sources will the industry use to fuel our economy in the long term: coal, gas, nuclear energy? How much should the share of renewable energy be in order to implement all the country's obligations?

So it turns out that there are still more questions than answers, and so far the state of affairs in the electric power industry looks like an equation with several unknown variables, which the Government must solve in the near future. However, the latest initiatives in the industry, which we have reflected in this article, which have occurred just in the last few months, inspire due optimism and understanding that the industry is actively searching forways to solve the tasks and modern challenges.