Renewable Energy Action Plan for Kazakhstan: Overcoming Obstacles and Achieving Targets

1. 6th International Scientific Conference on Energy and Climate Change Obstacles for the promotion of RES in Kazakhstan: Guide to the Development of a Renewable Energy Action Plan Prof. Sergey INYUTIN, Dr. Y. Kalashnikov, Dr. L. Inyutina SRC KAZHIMINVEST, Kazakhstan Athens 9-11 October 2013

2. Content • Kazakhstan energy sector and current RES status • Obstacles for small hydro and ways to overcome RES development in Kazakhstan • Approach • RES potential • Key findings - 2 -

3. RK Energy sector Sources:National Statistics (Kazakhstan Today,2005,2008, www.stat.kz, ) MINT program projection 2010-2014, State Program development up to 2020 Source: KEGOC

4. Current Status of RES Development Electricity Produced from RES Current Status • Because Kazakhstan has not performed as expected despite having national plan and policy, more RES development with action plan is required to meet national RES target • Power Industry • Power Plants – Coal-burning: 75%– Natural gas: 23%– Oil: 3% • Electricity Consumption– Higher than OECD average National Plan &Policy • Infrastructure Condition • Power Stations & Facilities – Low energy efficiency • Distribution system – 21.5% loss for every 2,500 km More RES Development National RES Target Successful RES Deployment Source: Ministry of Industry and New Technologies of Kazakhstan; KPMG Analysis

5. Obstacles for small hydro should be considered in complex of RES, in composition of RE needed to meet Kazakhstan’s renewable energy targets development Obstacles to promote small hydro and ways to overcome Barriers for RES development in Kazakhstan • Provide guidance on developing scenarios for different compositions of renewableenergy needed to meet Kazakhstan’s renewable energy targets for 2020- • Develop regional priorities for oblasts in Renewable Energy Sources (RES) • development based on economic feasibility resulting from a unit-cost of • generation analysis • Provide guidance on rural off-grid electrification through utilization of • renewable energy • Provide guidance to promote development of the renewable energy industry

6. Approach National Development Plan Policy / Legal Framework • National plan and policy have been developed for promoting RES in Kazakhstan, but further development and realistic improvement are necessary Strategy of Industrial-Innovative Development 3 Laws 4 Rules RES Law* Rules for Purchaseof Electricity National RES Target 3% of Energy Consumption (≅ 2.5 TWh)with Renewable Energy Sources by 2020 3% of Energy Consumption (≅ 2.5 TWh)with Renewable Energy Sources by 2020 Rules for Connectionto Grid Law on Investments Rules Monitoring RES Strategy of Transport Sector Development Law on Power Industry Rules for ConsideringFeasibility Studies Territorial Development Practical Amendmentto Laws & Rules National RES Target Successful RES Deployment * RES Law: Law of the Republic of Kazakhstan about Support of Use of Renewable Sources of Energy Source: Ministry of Industry and New Technologies of Kazakhstan; KPMG Analysis

7. RES Potential Implication Potential • There is enough room for further RES development and improvement as Kazakhstan has tremendous RES potential, especially for wind, solar and small-scale hydro energy Wind Energy • Total Potential Wind Power: 353,500 MWt • Total Potential Electricity: 929,000 GWt • Has developed with support from UNDP • Number of projects currently underway with institutional reforms Expected continuous development Solar Energy • Total Solar Radiation Incident on Horizontal Surface (Annual) – Shevchenko: 5,368 MJ/m3 – Aral Sea: 6,085 MJ/m3 – Alma-Ata: 5,218 MJ/m3 • Underdeveloped in spite of its abundant solar energy potential • Great promise considering abundant Silicon reserves Hydro Energy (Small-Scale) • Total Economic Potential: 2,414.5 MW • – Existing SHPP: 102.6 MW • – Additional SHPP Potential: 2,311.9 MW • Expected continued development • Potential is concentrated mainly in the east, south, southeastern parts Bioenergy • Total Primary Crop Production (avg. 2006-2007) : 25,125,958 tonne • Annual Roundwood Production (avg. 2006-2007) : 852,000 m2 • Have not yet met development potential Source: Ministry of Industry and New Technologies of Kazakhstan; Ministry of Agriculture of Kazakhstan; EBRD; UNDP; AF-Mercados EMI; KPMG Analysis

8. Overview Current Target Questions to be asked To meet 3%(equivalent to 2.5TWh) of total energy consumption with renewable energy sources by 2020 • How to mix in order to meet targetsachievement • The amount of government funds required to execute plans • Developing a national plan is required to meet Kazakhstan’s 2020 RES target Policy directions for development Provide Guidance through Case Studies Development of Strategic Direction RES Mix Composition Estimation of Gov. Funds • Estimation of required gross investment costs to meet targets • Estimation of required government funds for development per time-period • Selection of promising RES • RES mix composition to meet targets for 2020 • RES mix composition per time-period • Analysis of key factors in renewable energy development from benchmark countries • Set strategic direction for development tailored for Kazakhstan

9. Key Findings :Regional RES Development Overall Priority Ranking Priority Rankings by RES • Although marginal costs of renewable energy vary among sites within oblasts, Almaty and South Kazakhstan showed the highest potential for RES development among others Wind SHP Solar PV Source: “Modeling Regional Renewable Energy Feed-in Tariffs within Kazakhstan,” published by AF-Mercados EMI in 2011, MKE 2008

10. Key findings: Estimation of Required Gov. Funds Government Funds(Million KZT) Gross Investment (Million KZT) • Example: Estimation of gross investment costs and required government funds based on a preliminary analysis Price-weighted Price-weighted Related industrial development potential-weighted Related industrial development potential-weighted Source: KPMG Analysis

11. Key findings: RES Mix Composition RES mix per Time-period (TWh) 2020RES mix • Example: Kazakhstan’s RES mix composition based on a preliminary analysis Price-weighted Price-weighted (Unit: TWh) Related industrial development potential-weighted Related industrial development potential-weighted (Unit: TWh) Source: KPMG Analysis 11

12. Key findings: Rural off-grid Development • Kazakhstan’s abundant RES potential can be used for rural off-grid electrification and heating uses more easily than grid extension or conventional energy sources Key Considerations for off-grid RES utilization • Policy and Institutions - must be in line with overall goals set forth in Sustainable Energy Action Plan • Financing and Markets – Private sector participation, long-term financing plans necessary for effective deployment • Technology and Data – Full utilization and development of local technology and deployment based on accurate data

13. Key findings: RES Industry Development Central Factor for Domestic RES Industry Development Benefits of Domestic RES Industry Key Implications • Developing a domestic RES industry can be a new source of economic growth but requires a strong home market based on supportive policies ▶ Cost savings ▶ Ease of maintenance ▶ Conducive to technology transfer ▶ Export potential • Policy support and financial support strategies must be designed to support home market development • Continued R&D investment and cooperation with international firms for technology transfer • Alignment with national energy strategies such as off-grid RES utilization to serve as test-bed for domestic producers • ▶ Home Market Development : • Strong local market for RES attracts foreign investment • Local markets can act as a technology test-bed for local manufacturers

14. THANK YOU FOR ATTENTION!lyubov.inyutina@mail.ruKAZHIMINVEST - 14 -