KAZAKHSTAN WITHDRAWS FROM REGIONAL POWER GRID

UNCLAS SECTION 01 OF 03 ASTANA 000419

SENSITIVE
SIPDIS

STATE FOR SCA/CEN
STATE PLEASE PASS TO USTDA FOR DAN STEIN

E.O. 12958: N/A
TAGS: PGOV ECON EAID ENRG EINV ZK
SUBJECT: KAZAKHSTAN WITHDRAWS FROM REGIONAL POWER GRID

REF: ASTANA 0251

ASTANA 00000419 001.3 OF 003



1. (U) Sensitive but unclassified. Not for public Internet.


2. (SBU) SUMMARY: On February 26, for the second time in ten
years, Kazakhstan withdrew from the Central Asian Power Grid (CAPG)
by disconnecting all high-voltage lines to Kyrgyzstan and
Uzbekistan. The last time Kazakhstan took such drastic action was
in 2000, although it has threatened to do so many times in the past.
The Kazakhstan Electric Grid Operating Company (KEGOC) justified
its decision as the only way to ensure continued power supply to
domestic customers in southern Kazakhstan. KEGOC also said they
acted to protect the stability of the national power grid itself,
which they claim was threatened by over-consumption of electricity
in Tajikistan, whose high-voltage network is interconnected with the
Uzbekistan and Kyrgyzstan lines from which KEGOC disconnected. In
October 2008, Turkmenistan pledged to supply Tajikistan with 1.2
billion kilowatt hours of electricity via Uzbekistan annually until

2012. That arrangement broke down in January, with Uzbekistan's
decision to refuse to allocate transit capacities for delivery of
Turkmenistan electricity to Tajikistan. Tajikistan received no
electricity from Turkmenistan from that time until resumption of
deliveries on 28 February, when Uzbekistan agreed to resume transit.
KEGOC officials said they will continue to monitor the situation
and may rejoin the CAPG as early as April 15. END SUMMARY.

UNSANCTIONED USE OF POWER FORCES KEGOC'S HAND


3. (SBU) The high-voltage systems of Uzbekistan, Kyrgyzstan,
Tajikistan, and southern Kazakhstan (including major load-centers of
Almaty, Dzhambul, and Shimkent) were constructed in the Soviet
period as a single, integrated system, and continue to operate in
this manner. After the dissolution of the Soviet Union, generation
dispatch coordination deteriorated substantially, complicated by
protracted disagreements on the management of water resources and
their intersection with hydroelectric power generation. (NOTE: It
is widely understood that Uzbekistan's decision to deny transit of
Turkmenistan power to Tajikistan was a protest against Tajikistan's
plans to complete construction of the Rogun hydroelectric plant.
See reftel. END NOTE.)


4. (SBU) Kazakhstan, recognizing inherent risks to stable supplies
to its southern load centers caused by these water/power nexus
disputes, constructed a 500kV transmission line in 1997 to
supplement its southern regions (including Almaty) with power
generated in capacity-abundant northern Kazakhstan. The normal
operating capacity of this line is 630 MW, with intermittent peaking
up to 800 MW. Northern Kazakhstan's system is interconnected with
Russia's system, which supplies balancing electricity for the
Kazakhstan grid. With over-consumption by Tajikistan this winter,
the load on the Kazakhstan north-south 500 kV line increased to 1100
MW to compensate for the consequential load imbalance. As this line
itself became overloaded, its automatic system protection
interrupters temporarily opened the line to shed load and maintain
system integrity. Southern Kazakhstan consumers were then subjected
to intermittent blackouts as a consequence of these automatic
disconnections. We also understand from sources within KEGOC that
the significant increase in required balancing electricity elicited
complaints from Russian power network operators who said they would
not tolerate this situation indefinitely.


5. (SBU) According to KEGOC Vice President Valeriy Li, Tajikistan
had been drawing power without contract for several months prior to
KEGOC's decision to disconnect from the regional grid. He said that
KEGOC was willing to tolerate Tajikistan's unsanctioned use of
electricity until it began to threaten the stability of supply to
Kazakhstan's own citizens. By February 26, Tajikistan's national
power company Barq-i-Tojik had used 84,000 Megawatt-hours (MWh)
since the beginning of the year. According to Li, if Kazakhstan had
remained in the CAPG, Tajikistan's unsanctioned consumption of power
would have exceeded 100,000 MWh by early March. (NOTE: The current
market value of this power is from $4 million to $6 million. END

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NOTE). The additional load of Tajikistan's over-consumption would
have continued to threaten stable supply of electricity to consumers
in southern Kazakhstan. On February 26, KEGOC presented this
information to Minister of Energy and Mineral Resources Sauat
Mynbayev, who authorized KEGOC to withdraw from the regional grid.
Murat Sandybayev, Deputy Director of KEGOC's Grid Services
Department, subsequently told Energy Officer on March 5, "The Tajiks
were simply stealing our electricity. We had to do something."

REGIONAL INTERDEPENDENCE ON WATER AND ENERGY


6. (SBU) Sandybayev said KEGOC hesitated to withdraw from the
regional power grid because Kazakhstan is dependent on water
supplies from Kyrgyzstan and Uzbekistan. "There are many
intergovernmental agreements on water and power," he said, "and we
knew there would be political implications if we got tougher on
Tajikistan." Sandybayev said that KEGOC felt it had no choice but
to act. The regional power grid has limited reserve capacity and
Kazakhstan's North-South transmission line, which has a rated
capacity of 630 Megawatts, soon began to approach 1,000 Megawatts, a
potentially dangerous overload.

BLACKOUTS AND POWER CUTS


7. (SBU) The grid's automated monitoring system began to disconnect
power flow as often as 30 times a day (or a total of 403 times in
January and February),which triggered emergency power cuts in
southern Kazakhstan. Once Kazakhstan withdrew from the CAPG,
residents in Zhambyl oblast in southern Kazakhstan began to receive
additional power from the firing of additional units at the
relatively high-cost gas/mazut-fired Zhambyl power plant, which
typically supplies electrical power only during winter emergencies.
KEGOC also began operating one of its 220kV lines connecting Zhambyl
and Almaty at the 500 kV voltage level, but with lower load
capacities than the dedicated 500 kV line that crosses Kyrgyzstan's
territory to connect these two cities. Although consumers there
experienced one-hour power cuts several times a day on February 25
and 26, KEGOC's Sandybayev said power supply to the southern region
is now stabilized.

KEGOC MAY REJOIN REGIONAL GRID BY APRIL 15


8. (SBU) KEGOC's Sandybayev told Energy Officer that KEGOC would
rejoin the CAGP by April 15, or as soon as the energy dispute with
Tajikistan is settled. When asked how the dispute could be
resolved, he confided that on March 6-7, the presidents of the
national power grid companies for all five Central Asian republics
plan to meet in Almaty to discuss the situation. "We expect them to
come to an agreement," he said, "and we expect them to keep their
promises." (NOTE: KEGOC Managing Director Sergei Katyshev did not
confirm the March 6-7 meeting. We have heard from other sources
that the heads of the power companies may gather on March 26-27 in
Shchuchinsk, approximately 200 kilometers north of Astana in Akmola
oblast. END NOTE).


9. (SBU) COMMENT: Kazakhstan justified its decision to withdraw
from the Central Asian Power Grid on technical grounds, but clearly
the move carries a political message as well. In particular, the
government's decision signals the importance it attaches to its own
energy security and the integrity of its own power system. KEGOC's
decision furthermore serves notice to the other countries in the
region that it cannot tolerate uncoordinated operation of the CAPG
and unsanctioned power consumption that threatens the system's
stability. At first glance, Kazakhstan's withdrawal from the
regional power grid seems an ominous way to mark the beginning of
USAID's new Regional Electricity Market Assistance Program
(REMAP-II),just awarded this week (septel). However, KEGOC's
decision may actually provide an unexpected boost to REMAP-II, by
underscoring the importance of establishing a functioning market
with clear regulations and enforceable rules. It is no coincidence
that the resumption of Turkmen supplies to Tajikistan through
Uzbekistan resumed just as KEGOC disconnected from the grid.

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Ironically, KEGOC's temporary withdrawal from the CAPG may help to
convince Tajikistan, Kyrgyzstan, and Uzbekistan of the value of
participating in the creation of a rules-based, coordinated, common
regional power market. END COMMENT.

HOAGLAND