Growing development of renewable energy projects in Kazakhstan

During the last two years, we have noticed a considerable progress of the implementation of RES projects in Kazakhstan which now became a priority of the government’s energy policy, especially after November 2016, when Kazakhstan ratified the Paris Agreement.

Today, the share of RES in the total energy market of Kazakhstan is 1% but the target is to reach 3% by 2020 through the implementation of projects (total capacity 2000 MW- including 960 MW of wind farms, 750 MW of solar power and 290 MW of hydroelectric power) for which contracts for the purchase of electricity from RES have been already concluded with the investors.

Since 2009 until today, the total amount of investments in the RES sector amounts to about 58.5 billion tenge (approx. 140 M euro) based on the data of the Ministry of Energy of Kazakhstan.

According to the Minister of Energy of Kazakhstan, Mr. Kanat Bozumbaev, currently, there are 65 operating RES facilities in the country, including 12 wind farms, 19 solar, 33 hydroelectric power stations and 1 biogas plant. During the first half of 2018, they generated 629.5 million kW/h of electricity.

All RES projects in Kazakhstan are financed by investors in exchange for a guaranteed purchase of electricity from RES for 15 years at fixed tariffs or auction prices, exemption from payment for transporting RES electricity or investment preferences in accordance with the Business Code.

The bottleneck was the mechanism for the determination of fixed tariffs and marginal auction prices. Another main concern for investors was the issue of "long" money in the national currency, since the facilities are operating on the domestic market, and they will not receive foreign exchange earnings.

Now the government changed the current formula for indexation of auction prices, taking into account changes in the tenge's exchange rate to convertible currencies by 70%, and to the consumer price index by 30% from the second year of production. Such a scheme eliminates the currency risks of investors. This will allow investors to attract cheaper loan financing in foreign currency and the bidding will lead to a decrease in marginal auction prices.