Carine Chatenay, Civil Engineer at Verkis

Porleikur Johannesson, Mechnical Engineer at Verkis

Elm Hallgrimsdottir, Senior Energy specialist, World Bank

Kazakhstan ranks among the top 10 most energy-intensive economies in the world, mainly due to: (1) the high contribution of energy-intensive industries to gross domestic product (GDP), including the energy and extractives sector; (2) the low energy efficiency in key energy-consuming sectors; and (3) adverse climate conditions.

Kazakhstan is a major oil and gas producer and exporter. In Kazakhstan, nearly 30 million tons of oil equivalent (toe) of energy is consumed annually in the power and heat generation sectors alone. 74 percent of this is coal, 21 percent is natural gas, and about 1 percent is oil and oil products. While the country’s production volume could meet the total gas demand, supply within Kazakhstan is not always fully reliable and some central and northern regions experience gas shortages. The use of natural gas by households is mainly dependent on the availability of gas networks and prices. Nonetheless, according to a survey conducted by the International Energy Agency (IEA), coal and firewood were used by 30 percent of Kazakhstan’s households in 2018.

The country’s climate is characterized by harsh winters, and energy consumption for household space heating is high. The space heating sector is a major consumer of energy in

Kazakhstan and lack of investment has made the sector one of the most energy-intensive in the country. According to the study by the International Energy Agency, “Clean Household Energy Consumption in Kazakhstan: A Roadmap”, residential energy consumption for heating was about 116,500 gigawatt-hours (GWh) in 2018 and was expected to increase to 142,900 GWh by 2030 in a business-as-usual scenario, a 22 percent increase compared to 2018.

Despite the government subsidizes, which keeps energy prices low for citizens, compared to other countries worldwide, energy poverty remains an issue in Kazakhstan, with 67 percent of households in rural areas still using coal as a primary heating source. Despite relatively low energy prices and energy resource abundance, many households cannot afford adequate energy services due to a combination of income inequality, high heating demand and energy inefficiency. Further to this, combustion coal and solid fuels for heating purposes cause indoor pollution and pose serious health risks.

Few renewable energy (RE) projects have been developed to date and those developed are mainly for electricity production. It is estimated that RE represented less than 2.4 percent of Kazakhstan’s total primary energy supply in 2016, mostly divided between biomass and hydropower. This low percentage has led Kazakhstan to adopt ambitious targets and policy measures on renewable energy development focused on increased renewable energy utilization. These targets include increasing the share of renewables in electricity production, aiming not to be less than 50% by 2050.

Kazakhstan has, furthermore, adopted several policy measures to support investment in renewable energy projects.

GEOTHERMAL RESOURCE

Geothermal resources are fluids within the earth and stored in geologic formations in its crust. They may be characterized by various parameters such as temperature, pressure, and enthalpy.

Perhaps the most common categorization is by temperature: low (~20 to 80°C), medium (80 to 150°C), and high (>150°C). This practical categorization makes it easy to align the resource with its potential uses. High-temperature resources are often prioritized for electricity production. Low- to medium-temperature resources are less suitable for electricity generation but are much more widespread and lend themselves to direct use applications. Geothermal direct use refers to all applications where the commodity of value is extracted directly from the geothermal fluids from heat, minerals, and gases, see Figure 1. 

for geothermal power generation or direct use applications.

In theory, geothermal energy will last as long as the earth’s core heats the fluids in the earth’s crust. While some fluids emerge naturally through hot springs, most low to middle temperature resources are exploited by drilling and pumpingthem out of reservoirs. Where sustainable, long-term use is the objective; the key is to reach a state where the natural recharge of the reservoir, combined with reinjection, is in equilibrium with the exploitation in terms of flow and temperature.

Each geothermal system is unique in its chemistry and the type of geological formation i n which it is found. A thorough survey and study of the resource are critically important for the successful development of projects. Factors such as depth, accessibility, the resource's abundance, and the geothermal fluid's characteristics need to be considered when deciding on a utilization method;

The limited uptake of geothermal direct use in countries points toward certain barriers including: (1) limited familiarity with the resource; (2) challenges in matching resource location to the production process in which it is an input; (3) relatively small-scale production facilities that limit interest and availability of capital from investors; and (4) the adequacy of the legal and regulatory framework and government policies. However, geothermal direct use technology is relatively simple. Economic activities that rely on heat as input are ideal for geothermal direct use, and private capital markets slowly realize the monetary benefits of climate-friendly and resilient projects.

GEOTHERMAL RESOURCES IN KAZAKHSTAN

Kazakhstan is believed to hold considerable low- to middle temperature geothermal resources, mainly of the sedimentary basins, see Figure 2. This information is acquired from existing deep wells, which have mainly been drilled as petroleum and/or gas wells and have yielded hot water. Surface manifestations (hot springs) also provide evidence of such resources. Furthermore, there are parallels between the geological conditions (deep sedimentary basins) in parts of Kazakhstan and the geological conditions of sedimentary basins in other parts of the world with extensive low-temperature geothermal utilization (e.g., in Eastern Europe and China).

The geothermal resources of Kazakhstan are currently minimally utilized for spas, bathing, and greenhouses. Still, the country’s potential is suitable for direct use applications, such as district and space heating, agro-industries (e.g. greenhouses, food drying, pasteurization), and balneology for health, recreation, and tourism. In addition to being a local renewable source of energy, geothermal can contribute to reducing greenhouse gas emissions and local pollution linked to the use of fossil fuels for heat (including natural gas, oil, and coal).

Comprehensive studies of geothermal resources in Kazakhstan were conducted in the 1980’s, in the most promising regions of south Kazakhstan. These studies included prospecting and appraisal work during 1982 - 1991 regarding space heating and hot water supply in the cities of Turkestan and Arys, as well as in the Almaty oblast (Ily and Usek). The results indicated considerable geothermal reserves and was confirmed in a pre-feasibllity studies conducted in 2022.

In 2006, a feasibility study of 40 existing deep wells in the south and southeast parts of the country was carried out, identifying the most promising areas for further prospecting and exploration.

In 2008, in the Zharkent sub-basin in SE- Kazakhstan, an exploitable geothermal reserves assessment was conducted, which included the study of a deep well (2800 m), producing 90°C water that consequently has supplied a large greenhouse complex with thermal energy.

In 2015-2016, the Ministry of Energy and Mineral Resources of Kazakhstan carried out deep exploration drilling for geothermal energy at the Zharkunak site in the Zharkent basin to assess whether sufficient geothermal reserves for direct use existed in the area. This project was successful, and medium-temperature hot water from 2 - 3 wells has been used locally.

Geothermal systems in Kazakhstan have been identified in the western, south, and central parts of the country and are generally hosted in sedimentary basins, a summary report was published in 2019 on “Preliminary review of geothermal resources in Kazakhstan”. Some of the available information was collected from wells drilled specifically for the purpose of geothermal exploration, whereas oil and gas exploration wells have also been a good source of geothermal information.

The significant need for adequate heating services for the Kazakhstan population, provided in a sustainable manner, is an opportunity to assess the potential and characteristics of geothermal energy resources in Kazakhstan, and identify whether and how they can be harnessed to meet some of the household and industries energy needs.

UTILIZATION OF LOW/MEDIUM TEMPERATURE GEOTHERMAL RESOURCES IN KAZAKHSTAN The information available indicates that the geothermal resources in Kazakhstan are comparable to those observed in many places in China, France, Germany, and Eastern-Europe where direct-use projects have successfully been conducted for district heating as well as agro-industries and balenology.

District heating systems are an efficient way to harness geothermal resources for space heating, and possibly domestic hot water. In Kazakhstan, the space heating sector is a major energy consumer in the country, with additional impacts in terms of greenhouse gas emission. This could be improved where geothermal resources are available near urban areas and where the systems are technically and economically viable. Consequently, this sector is deemed to have great potential for direct use of geothermal. But other uses should also be investigated, such as food production (for green houses, food drying, fish farming, and soil heating) but also for Kazakhstan's thermal bathing and recreation industry, which has considerable potential.

Often, the resources can be shared across a set of users, a method called cascading, and these applications are sometimes combined as part of a district heating system.

They present the advantage of diversifying the types of users and revenue streams, and can ideally contribute to optimizing the utilization of the facilities and the resources over the year.

GEOTHERMAL DIRECT USES AS A DECARBONIZATION OPTION

A strong rationale for geothermal direct use lies in its potential to help decarbonize heat. About half of all end-use energy consumption globally is in the form of heat, which is more than the energy consumption for other purposes distinctively. In addition, heat supply has proven challenging to decarbonize. Renewable technologies that are becoming cost-effective in power production have yet to break through in displacing heating fuels. Currently, only around 10.4 percent of global heat demand is being met by modern renewables and only 0.3 percent by geothermal direct use (IEA 2020c).

Utilizing Kazakhstan’s geothermal energy through direct-use applications can also provide other benefits at local and national levels by strengthening energy independence, advancing the development of a varied sustainable energy sector, and supporting diverse end-use industries.

The reasons why Kazakhstan should explore geothermal direct uses potential, with a particular emphasis on the utilization of geothermal heat, and how it can be developed to bring economic and social benefits to various segments of the population and eventually contribute to various economic and policy goals that are often not adequately addressed by the private sector, such as enhancing food security, fighting energy poverty, increasing energy independence, promoting economic development, mitigating climate change, fostering resilience to volatile energy prices, and advancing decarbonization.

The use of geothermal direct use is well suited for economic operations that depend on heat as an input, and private financial markets are gradually becoming aware of the financial advantages that environmentally friendly and robust projects provide.

Technical parameters driving the design of geothermal applications include the temperature and available flow rates, which determine the energy potential of a given resource. The cost of a geothermal direct-use system is highly dependent on the resource, location (distance from end-use), capacity factor, and chemistry. Preparing a geothermal project is often a long process that may involve high capital expenditure to get a project up and running. Therefore, it is crucial to perform the project preparation in a systematic and disciplined way to make informed decisions at each stage.

As with all geothermal projects, Kazakhstan's direct use of low-to middle-temperature geothermal resources must be planned and done cautiously. Overexploitation over a long period may have an irreversible impact on the resource or affect it in such a manner that it would take a long time to recover.

AN ENABLING ENVIRONMENT FOR GEOTHERMAL DIRECT USE

Where does it make the most sense to support the development of the direct use of geothermal resources? This question cannot be easily answered unless each geothermal area's economic feasibility and social desirability are thoroughly assessed. Even in cases where a suitable resource is available for needed applications, the viability of geothermal direct-use projects depends on an adequate enabling environment. This requires support from public and private stakeholders, including local communities surrounding the geothermal areas, which can benefit from their development. A supportive enabling environment is characterized by geothermal knowledge, government policies, legal framework and social acceptance and community support.

Geothermal knowledge about a country’s resources is the key and reduces the risk of developing geothermal. Mapping Kazakhstan's geothermal potential at a regional or country level is a necessary first step. It is important to consider local conditions and the environmental and social implications that these locations have. The quality of data available on local resources, coupled with information on potential markets for various applications, is critical to determine the feasibility of geothermal direct uses projects. In many countries with geothermal energy resources including Kazakhstan, basic relevant knowledge and experience may be lacking, which can pose a barrier to innovative thinking about how to use and effectively deploy them. This can be addressed at the national level by implementing educational strategies emphasizing fields related to geothermal utilization. It is important to inform policymakers of the geothermal direct use benefits, focusing on a contributor to socioeconomic development. The incentives of gender equality and inclusiveness can also be emphasized in these efforts.

Geothermal countries have at hand or can create tools to promote investment in geothermal direct-use projects as part of their overall national goals and policies. Investment in geothermal direct use can come from both the private and public sectors or in the form of public-private partnerships. Globally, the public sector has been a major risk taker as a developer of geothermal resources due to issue debt at lower interest rates. Governments can also set up risk sharing mechanisms that protect private entities during exploration phases and ensure that the benefits are shared when geothermal resources are found and developed. The non-financial benefits of geothermal direct use, such as diversification of the country’s energy sector, reduction of the country’s long-term greenhouse gas emissions, stimulation of the national economy through job creation, and promotion of gender equality within the local community, are also relevant for scale up geothermal energy.

Kazakhstan needs a supportive legal framework to successfully develop geothermal resources aiming to ensure a transparent, cohesive, and reliable environment for the development of the geothermal sector in general and direct use in particular. This is a prerequisite for securing long-term investments in the industry and the sustainability of the resource.

Communities near geothermal areas may be benefited from various aspects related to the development and operation of a project. Therefore, it is generally good practice to include the local community and its organizations early in the project's development (during the project planning stage) and to conduct extensive public consultations. This inclusion is the best way to share the many benefits of geothermal development and its direct use with the communities, such as a better quality of life, improved job opportunities, and a healthier society.

GEOTHERMAL DIRECT USE PROJECT PREPARATION

We have discussed the geothermal resource and how the enabling environment contributes to the success of a project, but how a project is prepared is equally important. Preparation of a geothermal project is often a process that may involve up to 30 percent of the capital expenditure needed to get a project up and running (highly dependent on drilling needs and available infrastructure). Therefore, it is of great importance to perform the project preparation in a systematic and disciplined way to maximize the chances of making informed decisions.

The necessary effort to complete a geothermal project varies, corresponding to its size and complexity. However, developing a geothermal project involves stages, at the end of which the project developer decides whether to carry on with the project or not. Therefore, all stakeholders in the project are clear on the project goals, risks, and decision points at each stage.

Finally, to prepare a successful project, the developer must ensure best practices in conducting studies to evaluate the geothermal resource, environmental compliance, market analysis, and technical design, as well as provide engagement with stakeholders to demonstrate the project's benefits and minimize the risk of local opposition.

TAKEAWAYS

Geothermal resources in Kazakhstan are low-to-middle temperature geothermal resources. Large-scale electrical power production is not expected to be competitive with other energy sources in the country. Although at specific sites where the temperature is reasonable high, small-scale geothermal power plants may be considered in combination with heat production to increase the economic viability of such projects.

Kazakhstan should aim for direct use of its geothermal resources. In that sense, replacing the conventional heat sources, which are mostly either natural gas or coal, with geothermal direct use is expected to positively impact climate change, improve local air quality, and enhance the energy independence of the local communities. Additionally, exploring the possibility of developing geothermal direct use into a resource park with multiple off-takers implementing complementary direct-use applications in a cascading heat usage system will allow higher efficiency and optimal utilization of the total heat potential available at the geothermal areas.

Geothermal projects that have the possibility to develop different direct-use applications might have higher up-front costs for exploration and construction, but once a viable location has been identified, they offer greater, more diversified revenue streams. This opens up business opportunities for geothermal direct use but requires a thorough analysis of the market for demands: current and prospect.

The development of an efficient and comprehensive regulatory framework for geothermal utilization and district heating in Kazakhstan should have a priority. This regulatory framework should encompass the following aspects: definition of geothermal resources; clear ownership and access rights; licensing, permits, and fees; institutional jurisdiction; clear delineation of resource management principles and responsibilities; and environmental regulations.