KAZAKHSTAN: RENEWABLE ENERGY PLANS AND PROGRAMS

UNCLAS SECTION 01 OF 02 ASTANA 000871 SIPDIS STATE FOR SCA/CEN, EEB/ESC STATE PLEASE PASS TO USTDA E.O. 12958: N/A TAGS: PGOV ECON ENRG EINV KZ SUBJECT: KAZAKHSTAN: RENEWABLE ENERGY PLANS AND PROGRAMS REF: (A) 08 ASTANA 02225 (B) ASTANA 0837 ASTANA 00000871 001.2 OF 002 ¶1. SUMMARY: Kazakhstan's Ministry of Energy and Mineral Resources has announced its intention to increase the share of renewable sources of energy in Kazakhstan's overall energy mix from 0.02 percent at present to 5.0 percent by 2024. Parliament endorsed the initiative and is now reviewing draft laws on renewable sources of energy, energy efficiency, and biofuels. However, without direct financial, regulatory, and political support from the government, it is unlikely that renewable sources of energy can replace Kazakhstan's cheap, plentiful supplies of coal, oil, and gas in the near future. END SUMMARY. THE STEPPE IS BLESSED BY SUN AND WIND ¶2. Kazakhstan's endless stretch of open steppes, buffeted by steady winds and enriched year round by the sun's rays, offer ample opportunity to exploit the earth's renewable energy. Yet renewables represent just 0.02 percent of Kazakhstan's total power consumption, whereas coal comprises 72 percent of the total, gas 23 percent, and fuel oil 2 percent. Nevertheless, on April 14, Duisenbai Turganov, Vice Minister of Energy and Mineral Resources (MEMR),announced the government's intention to increase the percentage of renewable energy to 0.028 percent by 2009, and 5.0 percent by 2024. ¶3. The National Program for Wind Power Development, drafted in 2007 with support from the United Nations Development Program (UNDP), estimates that Kazakhstan is capable of generating 900 million kilowatt hours (kWh) per year by 2015, and 5 billion kWh/year by ¶2024. MEMR further estimates the country's potential micro hydropower at 8 billion kWh, and that of solar power at 2.5 billion kWh. KazAgro National Holding Company estimates that 25-30 new biofuel plants could produce up to 2.5 million tons of biofuel a year. NEW LAW ON RENEWABLE ENERGY UNDER REVIEW ¶4. A draft Law on Renewable Sources of Energy is currently under review by the Senate and is expected to be adopted this summer (reftel A). It defines renewable energy as solar, wind, biofuel, and geothermal energy, as well as hydrodynamic power generated at facilities with a capacity less than 35 megawatts (MW) that do not change the course of rivers (also known as micro hydropower). The current draft was presented to parliament for review on December 30, ¶2008. The first version, drafted by the Ministry of Environmental Protection (MEP),was based on recommendations by the UNDP Wind Power Project, but it underwent significant revision after MEMR became the government's chief sponsor in November 2008. For example, the earlier version called for certificates to be issued by renewable energy power generation plants. It also would have established a new agency to set the price of renewable energy, purchase the certificates, and force traditional energy companies to buy them. ¶5. Unlike the MEP version, the MEMR draft does not provide many details on implementation. When it was presented to the lower house of parliament (Mazhilis) on February 25, the Committee for Environment and Natural Resource Management severely criticized the MEMR draft for not requesting budget funding and for its apparent support of large energy producers. Minister of Energy Mynbayev argued that power distribution companies would be obliged by the law to buy renewable energy, while municipal authorities would be responsible for allocating space for the construction of renewable energy plants. Hence, he said, there was no need for any financial aid. Mazhilis member Victor Kiyanskiy was visibly unimpressed and suggested that it was inappropriate for MEMR to draft the legislation. "It is not realistic to expect oil and gas experts to develop an effective law on renewable energy," he said. ENERGY EFFICIENCY LAW TO MANDATE PURCHASE OF RENEWABLE ENERGY ¶6. Parliament is also reviewing a draft Law on Energy Efficiency that would require regional electric companies that transmit ASTANA 00000871 002.2 OF 002 electricity generated by renewable energy to buy renewable electricity to offset efficiency losses in power transmission lines. If the amount of electricity generated by renewable energy plants exceeds 50 percent of losses, the Kazakhstan Electric Grid Operating Company (KEGOC) would buy the remaining volume. Costs incurred by regional electric companies and KEGOC for the purchase of electricity from renewable energy sources would then be included in the power transit tariffs. BIOFUEL LAW SIGNALS COMMITMENT TO ALTERNATIVE ENERGY ¶7. The Concept for the Development of a Biofuel Market informed the draft Law on Biofuel, which was presented to the Mazhilis by Vice Minister of Agriculture Arman Yevniyev on December 5, 2008. Under the new law, the government would set a biannual quota for feedstock to produce biofuel, fund biofuel research and development, and define the designed capacity of biofuel plants to be constructed. The proposal was not well received by everyone in the energy sector, however. For example, Zhanbolat Tuganov, manager of the Oil Processing Department of national oil company KazMunaiGas, said that introducing biofuels would require a $400 million investment to restructure existing oil refineries, and would more than double the cost of fuel. Tuganov also warned that biodiesel freezes at minus 15 Celsius and would therefore not be appropriate for Kazakhstan's severe winter climate. THE FUTURE OF RENEWABLE ENERGY IN KAZAKHSTAN ¶8. There are several arguments in favor of developing renewable sources of energy in Kazakhstan. For example, it is extremely inefficient for a centralized power generating company to supply electricity to remote villages dispersed widely across such an enormous territory. Unfortunately, however, renewable energy in Kazakhstan costs more to produce than it generates (reftel B). It is nearly three times cheaper to use coal, for example, which will meet more than 75 percent of Kazakhstan's energy needs through 2015, according to the 2007 Plan for the Development of the Electric Power Industry. ¶9. The UNDP Wind Power Project to build a 5 MW wind power plant at the Jungar Gates near the border with China is now in its second stage of development. On May 14, Technical Specialist Mikhail Rakov confided in Energy Officer that that MEMR was not satisfied with the small size of the wind power plant and delayed its approval, even though all of the technical documentation was ready. The UNDP project managers expect to resume operations after the Law on Renewable Energy Sources is adopted. ¶10. COMMENT: Kazakhstan is richly endowed with cheap, abundant, and accessible hydrocarbons. Nevertheless, it is clear that the government is serious about renewable energy. President Nazarbayev himself has promised that renewables will meet five percent of the country's energy needs by 2024, and parliament is likely to adopt legislation this year that would mandate the production and consumption of renewable energy sources. Yet if Kazakhstan is to achieve these ambitious and laudable goals, the government will have to provide the necessary incentives, infrastructure, and investment to overcome the country's reliance on cheap coal, oil, and gas. One way to engage the government on the issues of renewable energy and energy efficiency would be through the U.S.-Kazakhstan Energy Partnership, which Foreign Minister Marat Tazhin raised with Secretary of Energy Chu in May. END COMMENT. MILAS