Energy Auctions for Kazakhstan’s Green Economy

Two happy women in winter clothes chat in a dry amber field with wind turbines in the distance set against a gray sky
Despite being a fossil fuel-based economy with a surplus of energy, Kazakhstan has a successful renewable energy auction program that is transforming its energy sector and diversifying its energy mix.
Makpal Abduldinova / USAID
  • Webinar

    Kazakhstan: Energy Diversity through Renewables

    This webinar examines, through the lens of the Kazakhstan experience, how to design renewable energy auction programs that diversify a country’s energy mix, attract private investment, and achieve competitive prices. View the webinar

Despite being a fossil fuel–based economy with a surplus of energy for domestic consumption, Kazakhstan has a successful renewable energy auction program that is transforming its energy sector and diversifying its energy mix.

Kazakhstan has large reserves of oil, gas, coal, and uranium and produces electricity primarily from coal, gas, and water. It also has great wind and solar potential that is attractive to renewable energy developers. Despite the country’s fossil fuel–based economy with its surplus of energy for domestic consumption, the Government of Kazakhstan chose to support renewable energy and capitalize on its rich wind, solar, and water resources.

Setting National Renewable Energy Goals

In May 2013, Kazakhstan adopted a policy to transition to a “green economy” and set an ambitious goal—to generate 50 percent of its electricity from alternative and renewable energy sources by 2050. The Green Economy Concept sets the following renewable energy sector development targets:

  • 3 percent share of renewable energy sources in total electricity production by 2020;
  • 10 percent share of renewable energy sources in total electricity production by 2030; and
  • 50 percent share of low-carbon alternative and renewable energy sources by 2050.

In addition, the 2025 Republic of Kazakhstan Strategic Development Plan, approved by the Decree of the President of the Republic of Kazakhstan No. 636 on February 15, 2018, sets a target of achieving a 6 percent share of renewable energy in total electricity production by 2025.

The government aims to achieve the renewable energy targets through a gradual decommissioning of aging thermal plants, increased use of alternative fuels, installation of energy-efficient equipment, compliance with higher environmental standards, and increased renewable generation capacity.

Transitioning to a Green Economy

In 2014, Kazakhstan attracted investment in renewable energy through feed-in tariffs. While the feed-in tariffs program advanced new renewable generation projects in Kazakhstan, it did not benefit from rapidly falling costs for solar and wind technologies. In 2017, the Government of Kazakhstan replaced feed-in tariffs procurement with auctions to accelerate its progress to meeting its renewable energy targets and capitalize on falling renewable energy prices.

It took two years for renewable energy proponents to cultivate the political will in the energy ministry, parliament, and eventually the presidency and to design a program that systematically scales up renewables. Many stakeholders opposed holding auctions because there was no immediate need for the additional generation capacity, and the price would be higher than existing coal generation prices. However, others argued that decades-old coal plants would eventually need replacing, necessitating new generation capacity at some point in the near future. Proponents also made the case to tap into the country’s rich solar and wind resources to spur the green economy, meet the country’s Paris Agreement obligations, and reduce Kazakhstan’s high level of greenhouse gas emissions and other air pollutants.  As of 2015, Kazakhstan’s energy sector accounted for 82 percent of its GHG emissions.

Kazakhstan’s leadership ultimately made the strategic choice to add low-cost renewables, positioning itself favorably for the time when new capacity would be needed. Kazakhstan, already known as an energy economy, expanded this leadership to include the next generation of clean energy technologies, especially the increased use of renewable energy. Kazakhstan became the first Central Asian country to use auctions to contract renewable energy projects.

USAID Support

Through the Power the Future program, USAID is committed to helping Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan diversify their energy mix and attract private investment while achieving competitive prices through an open, competitive, and transparent procurement process. Power the Future accelerates the regional transition of cost-effective, low-emission, climate-resilient economies, primarily through increasing the deployment of renewable energy and energy efficiency technologies.

USAID’s work in auctions empowers partner governments to mobilize public revenues and harness private capital to finance their development in an accountable and transparent manner. With support from Power the Future, Kazakhstan designed an inclusive auction process that systematically addressed variable renewable energy integration challenges and balanced risks between investors and the government. USAID, in partnership with the U.S. National Renewable Energy Laboratory (NREL), also helped attract competitive bids by supporting the Financial Settlements Center of Renewable Energy (FSC), the organization that acts as the central buyer for all renewable energy produced in Kazakhstan. With guidance from USAID and NREL, FSC evaluated wind and solar potential and estimated the range of capacity factors for areas identified as potential zones for renewable energy development. The high-quality data improved transparency, increased investor confidence, and ultimately helped attract lower prices in the auctions.

In 2018 and 2019, Kazakhstan saw a total of 28 auctions, with bid prices coming in between 23 and 64 percent below previous renewable tariff ceilings. Altogether, the country added more than 1,000 MW of renewable energy generation capacity. A third set of auctions will be carried out in late 2020.

Moving Forward

Following two years of auctions, the Government of Kazakhstan is working to further improve regulations concerning renewable energy investments, including ensuring the financial stability of the FSC and making continuing improvements to its auction structure and process. USAID continues to support Kazakhstan’s energy transformation and its journey to self-reliance.

Resources

  • Webinar

    Kazakhstan: Energy Diversity through Renewables

    This webinar examines, through the lens of the Kazakhstan experience, how to design renewable energy auction programs that diversify a country’s energy mix, attract private investment, and achieve competitive prices. View the webinar

  • Guide

    Investor’s Guide to Renewable Energy Projects in Kazakhstan

    Guidance for investors on state support to renewable energy (RE) projects and auction rules, and an overview of regulations governing the preparation, coordination, approval, and implementation of RE projects. Read the guide

  • Report

    Renewable Energy Auctions in Kazakhstan: 2018–2019 Results

    The development of renewable energy (RE) in Kazakhstan, strategic goals, RE government policy and regulation, and RE statistical information and auction results from 2018 and 2019. Read the report

  • Fact Sheet

    Kazakhstan Renewable Energy Data and Decision Support

    The USAID-NREL partnership developed data sets and tools to inform power sector planning and grid integration analysis at the Kazakhstan Electricity Grid Operating Company. Read the fact sheet

  • Tool

    RE Explorer

    RE Explorer enables developers and policymakers to make decisions that support low-emission development and reduce greenhouse gas emissions with renewable energy data, analytical tools, and technical assistance. Use the tool

  • Reference

    Standard Form of the Power Purchase Agreement

    Kazakhstan’s standard power purchase agreement serves as the contract between the Financial Settlement Center and the energy-producing organization using renewable energy sources at auction prices. Read the document

  • Reference

    Kazakhstan Auction Bidding Rules

    The rules specify participation requirements, application procedures, types of application financial security, conditions for submission and return, and procedures for summarizing and determining winners. Read the rules

Last updated: October 09, 2020

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