(based on the results of Qazaq Green Fest, III International Business Festival on Renewable Energy, May 30-31, 2024 in Burabay district of Akmola region)

The business community of the energy industry and renewable energy sources (hereinafter referred to as RES) supports the initiatives of the President of the Republic of Kazakhstan K.K.Tokayev regarding the transition to a green economy and sustainable development in the country.

As is well known, the Republic of Kazakhstan has declared its commitment to the goal of achieving carbon neutrality by 2060. In February 2023 The Head of State signed the Strategy for achieving Carbon Neutrality of the Republic of Kazakhstan by 2060. Under the Paris Agreement, Kazakhstan has committed to an unconditional 15% reduction in greenhouse gas emissions, as well as a 25% reduction (conditional on international support) by 2030, compared to the 1990 levels.

Today, more than ever, Kazakh society understands the great responsibility we have for the ecological future of our country and the health of our nation. One of the ways to achieve all set goals is through the introduction of renewable energy technologies.

At the same time, there are currently constraints to the development of renewable energy in the Kazakhstan's market, which were discussed at length at the III International Business Festival Qazaq Green Fest. The Festival brought together over 400 representatives from the business sector in the fields of both traditional and green energy. Based on the outcomes of the event, the business community has submitted the following proposals to relevant state authorities and the Government of the Republic of Kazakhstan:

1. Consideration and adoption of the Strategy for the Development of the electric power industry of the Republic of Kazakhstan until 2035.

The further development of renewable energy directly depends on the state of the energy industry, which has accumulated many problems today: a shortage of maneuverable capacities, obsolescence of generating equipment and an increase in accidents at stations, a shortage of power reserves in the system, isolation of the Western energy zone, dependence on flows from neighboring countries, social orientation of tariff policy in the absence of targeted assistance mechanisms, and shortage of personnel.

In general, all these problems pose a real threat to Kazakhstan's energy security. It is understood that the future development of all sectors of the economy will depend on the development of the energy sector, given the increasing consumption dynamics and the growing energy deficit.

Apart from that, it is important to consider such external factors as the introduction of the common electric power market of the Eurasian Economic Union (2027), the implementation of a carbon footprint tax in the European Union (2026), and Kazakhstan's commitments under the Paris Agreement (2030).

Considering all the challenges and obstacles, the Kazakhstan Electric Power Association and the "Qazaq Green" Renewable Energy Association have taken the initiative to elaborate a Strategy for the development of the electric power industry in the medium term (hereinafter referred to as the Strategy). The main objective of this document is to provide clear signals, understanding and a vision to all stakeholders: the state, business and the public on further ways to develop the electric power industry considering economic and financial indicators.

As part of the Strategy development, the following topical issues in the industry have been considered:     a further vision for the development of coal generation, with regard to Kazakhstan's realities and environmental challenges, the development of the gas industry, considering the need for gas consumption in the domestic market, the development of renewable energy sources (issues of construction of maneuverable capacities, integration of solar and wind power plants into the energy system, development of hydropower), the development of the national electric grid and transnational flows, issues of heat supply development, tariff policy. We would like to emphasize that the developed Strategy meets, first of all, the interests of the country, the population and domestic business.

We request the Government of the Republic of Kazakhstan to consider the draft Strategy and determine its place as an official document in the state planning system.

2. Solving challenges related to the personnel in the energy sector.

In course of the meeting of the Supreme Council for Reforms on June 23, 2023, the Head of State K.J. Tokayev outlined the problems that require attention, that is, a shortage of qualified personnel, staff turnover at heat and power facilities and the energy system.

The main reasons for this situation include the low level of wages for power engineers as approved in tariff estimates, a lack of employee benefits, insufficient funding for professional development and retraining of personnel, as well as difficult working conditions.

Retaining qualified personnel and attracting young experts in companies is an urgent and priority area in the work of personnel management services of energy companies. The volume of accumulated issues has reached a point where their resolution requires immediate action from the government. 

In this regard, we would like to request the Ministry of National Economy of the Republic of Kazakhstan to review the rules for tariff formation with a view to increasing the cost of personnel, both in terms of determining an objectively fair number of employees based on standards and in terms of ensuring salaries that are not lower than the republican average. Salaries that are not lower than the national average should be considered fair. In those regions where the average salary is higher than the national average, it is recommended to use the regional average instead.

We note that the current binding to the regional average does not allow most regions to raise the wage level above the indicator of the forecast of socio-economic development. The Ministry of Labor and Social Protection of the Population of the Republic of Kazakhstan is asked to develop a program of state social support for employees of the electric power industry: for the purchase and construction of housing for resettlement to labor-deficient regions, medical and sanatorium services for workers engaged in work with harmful and dangerous conditions. The Ministry of Science and Higher Education of the Republic of Kazakhstan to increase the formation of a state educational order for personnel training in the educational programs "Electrical Engineering and Energy", "Thermal Power Engineering", "Electrical Engineering and Automation".

The above measures will serve as the foundation for maintaining optimal conditions for the operation and growth of the industry. This will ensure its viability, reduce the exodus of skilled personnel, and, consequently, enhance the reliability and quality of electricity supplies to consumers and the economy of our nation.

3.The operation of renewable energy facilities within the framework of a Single buyer and balancing electricity market in real time.

On July 1, 2023, a new market mechanism was implemented: the single buyer and real-time balancing of the electricity market. Conceptually, the introduction of new rules of the game for renewable energy facilities (hereinafter referred to as RES) implies: the sale of generated electricity to a "Single Buyer" and the application of financial liability measures for the imbalances in the energy system.

It should be noted that the renewable energy facilities that concluded long-term contracts for the purchase and sale of electricity before July 1, 2023, remained within the framework of the previous operating modes and conditions. For RES projects that enter into contracts with Accounting and Finance Center for RES LLP after July 1, 2023, financial liability is provided for positive and negative imbalances in the energy system, which are related to increasing and decreasing factors.

Specifically, in accordance with the Rules of Functioning of the balancing market of electric energy, for energy-producing organizations using renewable energy sources that have concluded a long-term contract for the purchase and sale of electric energy with a single buyer of electric energy after July 1, 2023, the values of the increasing and decreasing coefficients, as well as the values of permissible deviations specified in this paragraph, are to be determined in accordance with the procedure approved by the authorized body in accordance with paragraph 16 of Article 15-10 of the Law of the Republic of Kazakhstan "On Electric Power Industry".

It should be noted that the values of the increasing and decreasing coefficients, as well as the range of permissible deviations, are not determined at the moment. In this regard, based on the work of the balancing electricity market and the Single Buyer mechanism over the past year, we request the Ministry of Energy of the Republic of Kazakhstan to conduct analytical work and submit the above issues for discussion with the RES business community.

In addition, we would like to point out that in order to better predict and adjust planned generation volumes from renewable energy sources, the rule for adjusting planned applications two hours before the relevant hour has a conditional nature and is only applied if the balance between production and consumption of electricity is maintained. That is, before the beginning of the operating hour for which the adjustment was scheduled, an application for a reverse adjustment from another entity should appear in the designated area. If this does not happen, the controllers of the National Dispatch Center of the System Operator will reject such adjustments. In turn, this condition makes the adjustment norm practically non-functioning. We ask you to consider the possibility of further improving the adjustment mechanism. We believe that this will provide an opportunity to more quickly adjust the schedule of generation by RES facilities, which will reflect the real conditions under which these facilities operate (weather conditions, technical conditions of the lines, etc.).

These measures will contribute to the successful implementation of renewable energy projects and significantly reduce risks for investors.

4. Development of the market for bilateral RES contracts.

It is essential to adopt a flexible approach towards the development of renewable energy in our country, taking into account the interests of both consumers and investors in order to meet our strategic goals of achieving carbon neutrality. The opportunity to implement these projects for their own needs and take advantage of the existing package of support measures for renewable energy should be available to all businesses, regardless of their ownership structure. Thus, the development of RES as a direct tool for decarbonizing the economy should become a national task.

One of the tools for the development of the RES market is the segment of bilateral renewable energy contracts, when an industrial enterprise enters into a direct contract with a renewable energy generator to purchase green electricity in order to reduce its carbon footprint. According to experts, this segment has great prospects due to the fact that most companies in the real sector of the economy have adopted strategies at the corporate level aimed at decarbonizing production processes. In general, the market of bilateral contracts can be much larger than the RES auction market and become a driver of further development of the sector, while not affecting the growth of tariffs for households and businesses in the country.

Despite the fact that the legislation regulating the development of renewable energy sources does not exclude the development of the market of bilateral contracts, the key barriers to the development of this segment include the following:

- uncertainty of the rules of operation of bilateral renewable energy contracts in the light of the introduction of the "Single Buyer" model;

-  the lack of "rules of the game" for market participants in general;

- strict requirements of the system operator for connecting such facilities, despite the fact that renewable energy facilities are not directly connected to the network;

-  The issues of balancing, free transportation and priority dispatching for such projects remain debatable;

-  the possibility of selling surplus electricity under bilateral contracts to a single buyer;

- there is no understanding of how financial organizations can lend to such projects, given the absence of any risk reduction mechanisms, in the event of termination of the purchase of electricity from a renewable energy facility by an industrial enterprise;

- for the state and quasi-public sectors that would like to implement RES projects, the access to a package of state support measures (investment, customs, tax preferences) is limited. The Business Code limits the share and duration of participation by such organizations in investment priority projects, making the implementation of renewable energy projects problematic for them.

-  allocation of land plots for bilateral renewable energy projects.

In this regard, we request the Ministry of Energy of the Republic of Kazakhstan to develop and implement rules for the implementation of bilateral projects in this area in cooperation with the renewable energy business community, and if necessary, to initiate legislative changes.

5.    Further stimulation of small-scale RES.

In the spring of 2024, the Majilis of the Parliament of the Republic of Kazakhstan adopted the draft Law of the Republic of Kazakhstan "On Amendments and Additions to Several Legislative Acts of Kazakhstan Regarding Support for the Use of Renewable Energy Sources, the Electric Power Industry, and Natural Monopolies." The draft Law of the Republic of Kazakhstan was recently adopted by the Senate of the Parliament of the Republic of Kazakhstan (hereinafter – the draft Law of the Republic of Kazakhstan).

In accordance with the draft Law of the Republic of Kazakhstan,  there are plans to introduce the concept of small-scale RES projects, to increase the capacity of renewable energy projects to 200 kW, to create the attractive conditions for connecting net consumers to the networks of energy transmission organizations and selling electric energy to energy supply organizations, as well as incentive measures to purchase surplus electricity generation of small-scale renewable energy from net consumers.

These measures will contribute to the development of the use of renewable energy technologies by households and small and medium-sized enterprises in the country. According to the UNDP assessment, the potential for the development of small-scale RES can reach 2-3 GW. In this regard, the issue of monitoring the development of small-scale RES becomes relevant. It should be noted that official statistics from a sample household survey do not provide a comprehensive picture of the development of small-scale RES in the country. Furthermore, the collection of data on small-scale RES through local executive bodies does not accurately reflect the actual situation. In addition, the population and business of the country, having no experience in implementing RES projects, are practically deprived of the opportunity to receive qualified information about the development opportunities of small-scale RES projects. To address this information gap, it would be beneficial to establish an Information and Analytical Center to support small-scale RES projects. This center could be based on the Qazaq Green Renewable Energy Association, following the principles of a market council, in accordance with the laws of the Republic of Kazakhstan.

Therefore, such a Center could have the status of a non-profit organization engaged in monitoring the development of small-scale RES in the country and at the same time would perform the following functions:

‒  monitor the development and operation of small-scale RES facilities connected to electric grids;

‒ receive and process information from regional power grid companies on issued technical connection conditions, connected small-scale renewable energy facilities, refused connections to small-scale RES facilities;

‒ to receive and process information on the purchase of excess electricity generated by net consumers (volumes, tariffs) from energy supply organizations divided up by months;

‒ submit analytical information on the development of small-scale RES by region to the authorized body;

‒ to make proposals to the authorized body on improving the legislation of the Republic of Kazakhstan on the development of small-scale renewable energy sources;

‒ to carry out information and explanatory work with the public and business on the development of small-scale renewable energy sources, as well as maintenance of renewable energy plants

‒  perform other functions determined by the authorized body.

We request the Ministry of Energy of the Republic of Kazakhstan to consider this proposal and, if approved, initiate necessary amendments to the legislation of the Republic of Kazakhstan and the development of Rules for the operation of the Information and Analytical Center for the development of small-scale RES.

 6. Improving the indexing mechanism for renewable energy projects.

To reduce currency risks in the implementation of renewable energy projects, a mechanism for currency indexing of fixed and auction tariffs has been implemented since 2017. It was approved by the Decree of the Government of the Republic of Kazakhstan No. 271 dated March 27, 2014 "On Approval of the Rules for Determining Fixed Tariffs and Auction Prices". In addition, in 2022, a new system of indexing was introduced for the construction period of renewable energy facilities. According to fixed standards, this process can take from 2 to 5 years, depending on the specific technology used. The indexing formula has also been significantly improved.

However, in all existing currency indexing mechanisms, the US dollar is fixed in the current Rules. It should be noted that today the geography of investors working in the renewable energy sector covers countries such as China, Germany, France, Russia, etc., which allows them to attract affordable financing in other currencies, for example, yuan, euro, Russian rubles. Thus, the current mechanism does not allow full use of the opportunities of foreign investors for the development of "green" energy in Kazakhstan. In this regard, it would be beneficial to provide investors with the option to choose the currency when implementing the indexing mechanism, rather than being restricted to the US dollar alone.

Apart from that, in order to ensure the flexibility of the indexing mechanism, it is important to provide investors with the opportunity to convert the US dollar to another foreign currency once, both during the indexing for the construction period and during the operational phase during the life cycle of the project.

It should also be noted that, at the moment, the indexing formula in the rules is selected only once when a purchase agreement is concluded for the entire duration of its validity. However, as a rule, the attraction of investments or loan funds from financial institutions (including international ones, such as the EBRD, EDB, etc.) is carried out after signing the purchase agreement. Therefore, all the conditions for financing the project are to be discussed after signing the purchase agreement. At the same time, the chosen indexing method plays an important role in the financial structuring of the project. It is necessary to provide investors with the right to change the indexation formula once, both during the construction period and during the operational phase of the agreement.

We request the Government of the Republic of Kazakhstan to consider the proposals of the business community to improve the indexing mechanism.

7. Exclusion of RES facilities from the list of vulnerable to terrorism.

In accordance with the Regulations and Criteria for classifying facilities as vulnerable to terrorism, approved by Decree of the Government of the Republic of Kazakhstan No. 234 dated April 12, 2021, facilities vulnerable to terrorism include: TPP, SRPP (State Regional Power Plant), HPP, GTPP (Gas Turbine Power Plant), CHP and boiler houses. At the same time, local executive bodies have included renewable energy producing organizations in the list of facilities vulnerable to terrorism (solar and wind power plants).

According to the Law of the Republic of Kazakhstan "On Support for the Use of Renewable Energy Sources", an energy production organization using renewable energy is a legal entity that produces electric and/or thermal energy using renewable sources, excluding net consumers. Renewable energy sources include solar radiation, wind, hydrodynamic energy from water, and geothermal energy from heat within the soil, groundwater, and rivers. These are not energy-producing organizations as defined in Decree No. 234 of the Republic of Kazakhstan.

Renewable energy producing organizations do not meet any of the criteria for listing objects as vulnerable to terrorism:

1.     They are not a part of the critical state facilities (central state bodies, judicial bodies, local executive bodies, etc.);

2.     They do not belong to strategic objects, objects of economic sectors of strategic importance, vulnerable to terrorism (military units, state reserve facilities, etc.);

3.     They are not a part of dangerous production facilities;

4.     They are not places where people gather in large numbers.

Pursuant to the Law of the Republic of Kazakhstan "On Civil Protection" (paragraph 75 of Article 1), life support facilities include an energy supply facility, upon termination (suspension) of operation of buildings, structures, technological installations and aggregates of which the activities of social and engineering infrastructures of settlements and territories are disrupted. It should be noted that RES facilities are not energy supply organizations, the electricity generated by them enters the Unified Energy System of the Republic of Kazakhstan and cannot disrupt the activities of social and engineering infrastructures of settlements and territories.

If energy-producing organizations that use renewable energy sources are considered vulnerable to terrorist attacks, investors may face unforeseen expenses that could directly affect their capital and operating expenses, leading to a decrease in profitability and a loss of interest in investing in renewable energy projects in Kazakhstan. This could result in a decrease in foreign and domestic direct investment in this sector.

We request the Government of the Republic of Kazakhstan to exclude energy-producing organizations using renewable energy sources from being vulnerable to terrorism and to make appropriate amendments to the regulatory framework.

 8.    Information support for the development of renewable energy sources.

Today, one of the few industry news online publications is the QazaqGreen.com information portal. Every year, the portal publishes about 1,500 materials in state, Russian and English languages and thye news on the development of the green economy. The users of the portal come from various countries, including Kazakhstan, Russia, the United States, Kyrgyzstan, Uzbekistan, Ukraine, Belarus, the United Kingdom, Germany, and Japan.

Therefore, today the Qazaq Green.com portal has become practically the only platform in Kazakhstan that systematically and purposefully provides information and analytical support for the development of renewable energy sources. This work is extremely important due to the fact that the awareness of the population about the issues of energy transition, the principles of lean consumption of energy resources, and the use of clean energy sources is currently extremely low. In addition, unfortunately, at the state level, there is either no work done to inform the public and businesses, or it is done in a fragmented manner.

In this regard, we request the Government of the Republic of Kazakhstan to consider the possibility of allocating a state order for the implementation of state information policy at the republican level for the placement of materials on the development of a green economy, the development of clean energy sources, decarbonization, achieving the goals of carbon neutrality and ecology for the Internet portal "Qazaq Green.com".

 9.    "Renewable Energy Worker Day" Professional holiday

An additional measure to stimulate the development of renewable energy sources could be the initiation of a professional holiday - the Day of the Renewable Energy Worker. This would not only encourage employees in the sector from an economic perspective, but also promote renewable energy as a whole.

It is commonly known that "people make all the difference" and the renewable energy sector is no exception to these rules. Thousands of specialists work in the sector today: power engineers, engineers, builders, economists, civil servants, investors, scientists, and analysts. Thanks to their work, a completely new sector of the economy has appeared in the country in a short period of time, and 148 renewable energy facilities with a total installed capacity of about 2.9 GW generate renewable energy.

In the period from 2018 to 2023 over 297 companies from 13 countries took part in the auction for the selection of renewable energy projects. A large amount of investment has been attracted to this sector.

International organizations such as UNDP, USAID, as well as international financial institutions (EBRD, ADB, EDB, Clean Technologies Fund, Green Climate Fund, etc.) operate in the Republic of Kazakhstan on renewable energy, and all of them have completed or ongoing projects in their portfolios. A separate division of the Astana International Financial Center is dedicated to the topic of "green finance". Global oil and gas companies ENI, Shell, Total are engaged in the implementation of renewable energy projects in different parts of our country.

Students studying energy at universities in the country are taught courses in renewable energy and a successful renewable energy landfill operates at Nazarbayev University. In addition, a full-fledged master's program in "Strategic Management of Renewable Energy and Energy Efficiency" was launched at the Kazakh-German University. Specialists are defending doctoral dissertations on renewable energy.

We request the Government of Kazakhstan to consider establishing a professional holiday for renewable energy workers as a means to encourage young professionals to enter the industry.