Kazakhstan Chamber of Commerce in the USA

KazCham



Non-conventional energy gets higher priority 1

Posted on April 13, 2010 by KazCham

KAZAKHSTAN’S TERRAIN AND geography makes  it a highly suitable location for the generation  of many types of non-conventional energy. Its  empty windswept steppes, clear skies and under- exploited reserves of farmland can all be utilised to  generate electricity, thereby reducing the country’s  dependence on fossil fuels.

At present, some 80 per cent of the electricity  consumed in Kazakhstan is from coal-fired  power stations, with the remainder generated by  hydropower. There are not yet any provisions for  other forms of non-conventional energy to connect  to the national grid. The law on support for usage of  renewable energy, currently being considered by the  Kazakh parliament, is set to change that, and open  the way for large scale installations.

Given Kazakhstan’s abundant coal, oil and gas  reserves, the question naturally arises: “why invest in  alternative energy?” However, Kazakhstan’s oil and  gas reserves are its largest source of export revenues,  and – especially when Kashagan starts production –  are expected to continue to bring in money for many  decades to come. If some of the growing domestic  demand for energy can be derived from other  sources, this will conserve reserves of fossil fuels.

Early investment into alternative energy sources  will also protect Kazakhstan against future increases  in oil and gas prices and – in the longer term – the  time when its hydrocarbon reserves are exhausted.  “We all understand that the resources we have  underground will end one day. Oil and coal would  run short,” says Nurlan Djienbayev, director of solar  technology company ND&Co. “In order to have a  softer transition, we need to think about it now.”

In addition, Kazakhstan’s electricity generation  capacity is not evenly distributed across the country.  Power is imported from Russia in the north, and  Kyrgyzstan and Uzbekistan in the south. The main oil and gas reserves are in the west, the coal-fired power  stations in the north, near Karaganda and Ekibastuz,  and most of the hydropower plants along the Irtysh  river in north-east Kazakhstan. “Renewable energy can contribute to Kazakhstan’s  energy independence by being deployed in areas such as -south and north Kazakhstan, where power is currently  imported,” says Gennady Doroshin, head of the UNDP’s  Kazakhstan Wind Power Market Development Initiative.  “It can provide power to remote consumers, and reduce  transmission losses and the need for substantial power  transmission line construction.”

As Kazakhstan’s economy grows, demand for  electricity also increases, making the uninterrupted  supply of power to even the largest urban centres, such  as Almaty, a real challenge. Power cuts are still frequent, h

“Kazakhstan has a vast territory and its population  is scattered. After the break-up of the USSR, a  dismantling of energy networks took place,” says  Djienbayev. In the 1990s, Kazakhstan lost 90 per cent  of its hydropower capacity, when many smaller plants  were shut down.

“In some areas, villages are arranged within a large  distance from main energy networks,” Djienbayev  continues. “Today, there is a lack of electric power in  many regions of Kazakhstan, including Almaty. Solar  atteries could have significantly supplemented main  networks, and helped to solve this problem. But we  cannot do this today, because of the absence of the law.”

Moreover, Kazakhstan is Central Asia’s largest  emitter of greenhouse gases. According to 2004  data from the International Energy Agency (IEA),  emissions amounted to around 6kg of carbon dioxide h for each dollar earned. The coal-dominated energy  sector accounts for around 80 per cent of total  emissions. Poor air quality is an issue in many cities  of Kazakhstan. With the country expected to ratify  the Kyoto Protocol in the near future, renewable  energy will be a way of reducing its emissions.

Although the new law will be needed for non- conventional energy to be adopted on a large scale,  there are already several initiatives across the hydro,  wind, solar and biofuels spectrum.

The UNDP Wind Power Market Development  Initiative is a full-scale project to promote the  development of the wind energy market in  Kazakhstan. The UNDP is helping the Kazakh  government to develop a national programme on  wind energy development. This will have targets of  250-300mw of wind installation by 2015 and about  2,000mwby2030.

The European Bank for Reconstruction and  Development is also able to support non-conventional h energy projects through its $75 million framework  facility to finance investments in sustainable energy

– both in projects to increase energy efficiency in  the industrial sector and in small renewable energy  projects. Doroshin stresses the excellent potential of  Kazakhstan for wind energy generation.

“Kazakhstan is one of the best countries in the  world for large scale wind installations because of the h high wind potential and land availability,” he says.  “Many areas of the country have annual wind speeds  of more than 6m/c.” This potential, however, is little  used. This is evident, for example, at the Jungar Gates  on the Chinese border. On the Chinese side, wind  energy stations have been in place for some time; in  Kazakhstan they are still at the planning stage.

There are already two major solar stations in  Kazakhstan, one in Alakol and another in the  Kuldzhinkii region. Four additional stations are  planned under the UNDP initiative – one in Aksai  Gorge and three in Talgar Gorge. There are also  various private installations in the west Kazakhstan  oblast for the oil industry, and in the Almaty region – the largest being a 70 sq m installation to provide  electricity for the IT Park free economic zone. Some  70 per cent of the technology needed for solar  power generation, including accumulator batteries,  is manufactured in Kazakhstan. However, solar  batteries have to be imported. This situation is on the  verge of change, as there are a number of projects to  produce photovoltaic technologies in the country.  Thyssen Krupp Mannex is supplying equipment to  Silicium, Kazakhstan’s planned silicon metal plant in  Karaganda. Lancaster Industrials and Kun Renewables h are setting up a $390 million polycrystalline silicon  plant in Astana. The Investment Fund of Kazakhstan  and the Development Bank of Kazakhstan have  already agreed to finance the project.

Conditions for solar power generation are favourable -across southern Kazakhstan. The Almaty region  rarely goes without sun for more than two five-day  periods in a year. However, until the law is adopted,  systems power generation in Kazakhstan will remain  small-scale. “Solar energy usage is very small, the  figures are insignificant. The main reason for the slow  development of alternative energy resources is the  absence of legislation,” says Djienbayev.

It is a similar situation in the biofuels sector.  According to data from the Ministry of Agriculture,  Kazakhstan has the potential to produce 300,000 tonnes of biofuels a year. Production costs are estimated to be  half of those in western Europe and the US.

However, at present Kazakhstan has just one  functioning biofuel production plant, the Biochim  plant in the north-Kazakhstan oblast. A second plant,  in Taraz, is currently out of order, and a third is being  built in the city of Novoishimsk.

“The most difficult thing is production: there is  only one operating plant and it cannot meet all of the  demand,” says Beisen Donenov, director general of the  Kazakhstan Biofuels Association, which was set up  in 2007 to develop the industry. “Besides, due to the  country’s food security interests, there are limitations  on raw materials for biofuels production. And because  there was a smaller grain harvest last year, the biofuel  plant did not operate at full capacity.”

Next-generation biofuels production technologies,  such as those being installed in the Novoishimsk plant,  would use waste products as raw materials. This would  overcome objections related to food security that have  held back popular acceptance of the biofuels industry.

“At the beginning, there was misunderstanding  and aversion towards biofuels production from crops  producers. This is because many people reacted  negatively to the use of grain for biofuels production  rather than for food,” says Donenov. “However,  Kazakhstan has always had vast lands for crops. And  besides, new technologies allow the use of crop waste  and leftovers for biofuels production.”

There is already considerable private sector interest  in biofuels. The North-Kazakhstan Plant belongs to  a consortium of Kazakh companies, and the Taraz  Plant is 30 per cent state-owned, with the remainder  in private hands. There are plans to sell a 50 per cent  stake in the new plant to private investors.

Toyota has signed an agreement with the  Kazakhstan Biofuels Association, and according to  Donenov, is ready to start developing next-generation  biofuels production technologies in Kazakhstan. The  association is also working with several US scientific  institutions on the production of aviation kerosene  and other new generation biofuels.

“According to our calculations, we could build  at least 40-50 biofuels plants in Kazakhstan. The  question is in investments,” says Donenov. “However,  I must admit that the crisis decreased the number  of interested investors. In this regard, the crisis has  negatively affected our industry.”

The two key factors holding back the development  of biofuels and other types of renewable energy are the  lack of investment at present, and the need for a legal  framework. Kazakhstan’s parliament is widely expected to pass the necessary legislation this summer. The  question of investment is more open; those projects  without funding from the Kazakh government or  international development agencies, are likely to be  held back until the global economy recovers.

Invest in Kazakhstan An official publication of the Government of the Republic of Kazakhstan, 2009. Pages: 64-67.



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