In 2018, Kazakhstan launched a joint project with the Ministry of Energy of the Republic of Kazakhstan and UNDP “Derisking Renewable Energy Investment”. Today Mr. Syrym Nurgaliyev, Project Manager of UNDP-GEF “Derisking Renewable Energy Investment” project replies about goals and objectives of the project for Qazaq Solar magazine.

— In order to stimulate and support the development of renewable energy projects, as well as to reduce risks associated with renewable energy investment in Kazakhstan, the UNDP developed the project “Derisking Renewable Energy Investment”. Could you tell us more about this project? What are the goals, objectives, organizations involved, and the project budget?

— The project “Derisking Renewable Energy Investment” is a joint initiative by UNDP/GEF and the Ministry of Energy of the Republic of Kazakhstan.

The Project consists of 3 components: the first is aimed at stimulating the development of large-scale RES projects (solar and wind power plants), the second and third are aimed at stimulating the development of so-called small-scale RES projects, for example, roof top solar, small biogas / wind power plants / solar water heaters to be used by households, farm enterprises, small and medium businesses.

The project budget is usd 4,610,000, of which USD 2,000,000 will be used to stimulate the use of renewable energy technologies by small and medium-sized businesses through financial mechanisms and tools that will be implemented in 2020 with the support of Damu entrepreneurship development fund JSC. The key partners of the project are the ministry of energy of the Republic of Kazakhstan, Financial Settlement Center LLP, Korem JSC, and Renewable Energy Trade Associations. The project term is 5 years: it started in 2018 and will end in 2022.

— Currently, there is a global trend towards decentralized power generation with many consumers refusing from a centralized power supply worldwide. This trend is strengthened by technological development. One of the main objectives of the Project is to promote the development of small-scale renewable energy projects. What is being done and planned to be done in this area in the framework of the Project?

— Yes, you're right, we can note such global trend in the last 3-5 years: the total installed capacity of so- called decentralized systems reached 43 GW in 2018. For example, in Germany more than 50% of all solar power stations are small-scale with a capacity of no more than 30 kW and are installed mainly on house roofs.

There has been a steady upward trend in total installed capacity of decentralized systems.

It should be noted that the use of small-scale projects brings a range of benefits to consumers. Firstly, the cost of the generated electricity does not depend on the cost of energy carriers. Secondly, it leads to a reduction in energy consumption, and as a result, resource savings in the medium and long term.

It is clear that at the current level of electric / thermal energy costs, the use of such systems without special support measures is not economically efficient, but in the medium term, the use of these systems will be more than justified.

In 2019, as part of this, the Ministry of Energy of the Republic of Kazakhstan was offered a number of recommendations on changing the current legislation to develop this promising area. In particular, it was proposed to classify users of small-scale renewable energy projects: households / farm enterprises / small medium-sized businesses (SMEs). We also proposed to consider the possibility of allocating targeted state subsidies, to exempt from taxation the income from excess electric energy sent to the grid, and the possibility of using renewable energy technologies for heating and hot water (a promising area, especially for southern regions).

Additionally, a methodology will be developed to include small-scale renewable energy projects in the emissions trading system, and technical standards / regulations for renewable energy technologies. In 2020, this work on changing the legislation and developing the legal framework will be continued, and all recommendations and changes will be discussed.

— Small-scale generation is effective when the expansion of the centralized power supply zone is impossible due to remoteness and low power loads. Could you tell us if an analysis on the needs in small-scale power projects in Kazakhstan was conducted within your project framework? Could you share this information?

— Such analysis (based on REC -Regional Electricity Distribution Company) is planned to be carried out in 2020. The results of the analysis will be available to all interested parties.

— Taking into account the landscape and climatic conditions in different parts of our country, in your opinion, what renewable energy sources will be in demand by households as part of the development of small-scale power projects?

— Earlier, the UNDP implemented a number of projects to assess the resource potential for the implementation of renewable energy projects in Kazakhstan. This potential is very significant and several times higher than the current electric energy production in the country, for example, the wind energy potential is about 920 billion kWh / year, the hydro potential technically feasible for implementation is estimated at 62 billion kWh, the number of sunshine hours per year reaches 2500 - 3000 in the southern regions while the electricity production amounted to 106 billion kWh according to the results of 2018.

As part of our project, we made recommendations on changing the current legislation to stimulate the development of small-scale renewable energy projects. In particular, it was recommended to start regulating such a promising area as solar water heaters. Now we already see a great potential for the use and application of small-scale renewable energy technologies, especially at farm enterprises, and SMEs. Every year, with rising tariffs, the use of renewable energy technologies is becoming more and more economically viable.

We see that the most popular technologies will be solar PV panels and solar water heaters. If we take into account solar atlas data (atlassolar.kz), these technologies will be used by all players of small-scale renewable energy market. In the southern regions, these technologies are more effective than in the northern regions, nevertheless, solar insolation allows the use of these technologies in the north as well.

— According to open data, more than 100 cities in the world receive 70% of their electricity from renewable sources. These are cities in Brazil, the USA, Canada, Korea, and a number of European countries. Recently, a report about non-running solar installations in the capital was shown on one of the television channels. Do you think renewable energy will develop in large cities of Kazakhstan?

— Sure, we see this trend to be real for our country. As part of the Sustainable Cities project, we are already assisting city akimats in reducing electricity consumption in the residential sector, introducing energy efficiency technologies.

CS IT is important to emphasize that within the framework of cities and urban infrastructure, the use of renewable energy technologies alone does not solve the whole problem of electricity consumption, i.e. energy efficiency measures and renewable energy technologies should be considered as an integral part of a bigger process of ensuring rational use of resources and the possibility of achieving a 20-30% share of renewable energy in the energy balance of cities by 2030.

— An important element in the development of small-scale generation is the legislative framework and state support measures. For example, in Russia, the Government allowed the population to sell electricity of “domestic microgeneration” by renewable energy installations of up to 15 kW into the common grid, and be exempted from paying personal income tax (PIT) from the sale of excess electricity generated at their own RES-based small-scale power plants. What legislative initiatives have been taken in this area in our country? What support measures exist?

— As part of our initiatives, we proposed to the Ministry of Energy a series of measures to support and stimulate small-scale renewable energy projects.

So, for example, we propose to exempt individuals from paying income taxes for the sale of excess electricity generated at their own RES-based small¬scale power plants, as well as exempt from transport tax and provide targeted state subsidies.

— Small-scale RES projects aimed primarily at households are a slightly different area than the construction of RES industrial facilities. Such projects require other business models, a customer-oriented approach, appropriate marketing, maintenance services. Here, we see rather the transition from the production and supply of equipment and goods to the provision of quality service. It is clear that, given the global dominance of Chinese manufacturers in the equipment market, the dependence on imports in the near future will continue. Do you think domestic business is ready to work in this area? What needs to be done to support our companies in this?

— This is indeed a different area, but it is gratifying to say that there are already companies that provide such services: they install and maintain solar power plants, both on-grid and off-grid, solar collectors.

For example, so-called sets of autonomous solar power plants, “out-of-the-box solution” - a complete set for a mini-station: photovoltaic modules, cables, an inverter, supporting structures for power supply or solar collectors for hot water supply and heating. At the same time, companies provide installation, maintenance, as well as equipment warranty.

We hope that with the adoption of recommendations on small-scale projects, this promising sector will develop.

For our part, in addition to institutional support, we also provide financial support to small and medium-sized businesses through subsidizing bank interest rates together with the project partner Damu Entrepreneurship Development Fund JSC. We believe that the development of this service sector, in turn, will stimulate the development of human capital and relevant capacities.

— As part of the Project, in November 2019, UNDP together with the Ministry of Energy of the Republic of Kazakhstan and the auction organizer, launched project auctions. As it is known, it is planned to build an industrial solar power plant, which differs from small-scale energy projects. What are the reasons for taking this initiative? What benefits does an investor get when participating in such auctions? Are you planning to use this practice next year?

— As already noted, one of the Project components is to stimulate the development of large- scale renewable energy projects. In the framework of this component, together with the Ministry of Energy of the Republic of Kazakhstan, it was proposed to develop pre-project documentation for a 50 MW SPP pilot project. This practice allows a future investor / developer of the project to obtain necessary basic information on a project, including information on grid connection, with all necessary approvals, pre-EIA (preliminary environmental impact assessment) with mandatory public hearings, selection and study of a land plot for the construction. This information allows future investors / developers to assess possible risks associated with choosing a land plot, developing a power distribution scheme, which, ultimately, will allow offering the lowest possible price for 1 kWh of "green" electric energy. 

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We hope that such practice of organizing res auctions will be continued by the ministry of energy of the Republic of Kazakhstan in the future, and we will see the results of the pilot auction 2019 at the end of November this year.