News Kazakhstan

News Kazakhstan23.04.2024

Ainur Sospanova: Clear rules are needed for functioning of bilateral contracts market

QAZAQ GREEN. The system of bilateral PPA contracts in Kazakhstan could become an alternative to auctions for the selection of renewable energy projects. Clear legislative rules need to be developed for the full functioning of the new mechanism.

Corporate bilateral PPA contracts are one of the tools of the renewable energy market that is widely used around the world. Despite the lack of legislative specifics for market participants, businesses are showing high interest in concluding corporate contracts.

"The potential for developing bilateral contracts in Kazakhstan is even higher than the potential for implementing projects through the Single Purchaser. The current climate agenda is encouraging large consumers to buy clean energy. Plus, companies are thinking that without complying with ESG policies, their competitiveness will fall. Today, the scheme of bilateral contracts is not denied, but not supported either. We need clear rules for the functioning of the bilateral contracts market, which would regulate the issues of interaction between a large consumer and a renewable energy facility that implements the project for the needs of the buyer," - noted the Chairperson of the Board of the Renewable Energy Association "Qazaq Green" Ainur Sospanova during a round table organized within the framework of the GIZ project "Developing climate policy potential in South-Eastern and Eastern Europe, the South Caucasus and Central Asia (CDCP)".

The practice of concluding bilateral contracts is widely used around the world. As the Head of the Energy Department of Global Factor Consulting, Craig Menzies, said, thanks to the new mechanism, over the past eight years, the volume of renewable energy capacity introduced in Europe has grown from 5 to 46 gigawatts. There is a clear trend of increasing bilateral contracts in the EU.

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"The system of bilateral contracts is very popular in the EU, for example, in Finland, about 85% of all energy supplies are PPA contracts. Since 2022-2023, there has been a high demand for the new mechanism in Europe from large companies. With the change in the geopolitical situation, many of them began to think about taking the conclusion of contracts into their own hands. Technology companies, data centers Amazon, Meta, Google sign large contracts for the purchase of energy directly from the supplier. Among oil and gas and chemical companies, clean electricity is also in high demand," Craig Menzies shared the latest data.

The EU Green Course is also relevant for Kazakhstan. Between our countries there is an Enhanced Partnership and Cooperation Agreement, which covers a wide range of areas and joint initiatives. In this regard, the implementation of bilateral contracts can become an effective tool for fulfilling decarbonization obligations of our economy.

According to the Director of the Department for the Development of the National Electric Network of JSC KEGOC Zhenis Dyussenov, Kazakhstan is observing a fairly high rate of introduction of alternative energy sources. In 2023, the share of renewable energy sources in the total energy balance increased by 30%. He also announced the completion of a major study of the Kazakhstani electricity market, which took into account initiatives to develop the generation of traditional and renewable energy sources.

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"We see that the structure of the energy balance is changing. A new type of energy - renewable energy - is entering the market. Plans for the development of the national electricity network and generation in general are aimed at ensuring the balance stability of the power system. We are in favor of the power system remaining balanced when integrating any technology of the renewable energy type. This requires measures to increase maneuverable generation, equip renewable energy facilities with control systems," the representative of the system operator believes.

At the same time, he drew attention to the need for high-quality forecasting of energy production. He also said that his department is ready to participate in the joint development of by-laws with the Qazaq Green RES Association.

During the round table, representatives of industrial enterprises raised the issue of the functioning of renewable energy sources after 2029, when the period of validity of contracts with the Single Energy Purchaser - the Financial Settlement Center for Renewable Energy Sources - will end. It was assumed that enterprises would be able to enter the free market. Another question that interested the business is the possibility of concluding bilateral contracts if the previous PPA contract was terminated at the initiative of the consumer.

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"When the first PPA contracts began to be concluded in 2014, it was assumed that they would work on the free market after 2029. Today there is no free market, no free single buyer either. Will enterprises be able to work on bilateral contracts, like renewable energy sources? In theory, yes, the law does not prohibit it. In general, we need to start discussing this issue with the Ministry of Energy now. 5-6 years will pass and it will become acute," Ainur Sospanova summed up.

According to Nurlan Kapenov, Chairman of the Board of Directors of the Qazaq Green RES Association, the future of Kazakhstan's energy sector lies in corporate bilateral contracts.

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"Now tariffs are reaching a fair level, understanding this, businesses are beginning to correctly structure the process of generating energy from the technical side on their own. When a fair tariff appears, companies themselves enter the balancing market, they will be ready to pay a fair price. If necessary, the business itself will buy balancing capacities, install an energy storage device or apply some other tools. In any case, together with the system operator, it will find a win-win solution that will be beneficial for both KEGOC, and the buyer of electricity, and the Settlement and Financial Center for Renewable Energy Support, KOREM and other stakeholders," Nurlan Kapenov believes.

In addition, bilateral contracts will stimulate the development of related businesses, when energy storage technologies become more affordable and have a longer life cycle.

PPA is a long-term contract for the supply of electricity between a producer and a consumer of electricity. The contract is usually concluded for 10-15 years with a fixed contract price for a certain volume of production.

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