Kazakhstan's power generation industry has undergone a challenging and painful post- Soviet transformation. The production and consumption of electricity in Kazakhstan fell significantly following independence in 1991. An aggressive privatization program followed this, with state involvement in a few generation companies. Robust economic growth during the early 2000’s helped boost generation but the financial and economic crisis later in the decade caused a decrease in electricity generation as well as consumption due to production stagnation in metallurgical plants and the construction industry. By 2010, power generation and consumption rose again. In 2013, Kazakhstan produced 91.9 billion kWh, which is a 1.8% increase compared to 2012. 14 electricity generation projects are included in the country’s industrial program, eight of which have been completed. The state has set a goal for the share of generation from renewable energy sources to reach 3% in 2020 (and about 10% by 2030).
According to the Ministry of Industry and New Technologies, Kazakhstan hopes to produce 150 billion kWh of electricity by 2030. It is estimated that Kazakhstan will produce approximately 103.4 billion kWh by 2015 and consume 100.5 billion kWh. Kazakhstan has 68 power plants including five hydroelectric power stations giving the country an overall installed generating capacity of 19.8 gigawatts (GW). Almost 75% of the country's power generation comes from coal-fired plants located in the northern coal producing regions. Kazakhstan's hydroelectric facilities are located primarily along the Irtysh River, which flows from China across northeast Kazakhstan.
The majority of Kazakhstan's generating capacity, however, is in the northeast of the country while the southeast is the main power consumer. While north-south connections for the transfer of power exist, they are insufficient to supply southern demand. Kazakhstan also lacks sufficient generating capacity in the west and relies on Russian imports to overcome deficits there. Furthermore, Kazakhstan’s electricity sector is unable to regulate its generating frequency — i.e. to manipulate its generating capacity to meet increases in demand during peak loads or supply disruptions. Therefore, the country needs to import electricity not only to offset supply gaps, but also to regulate frequency. Energy trade is not a one-way proposition, however, as Kazakhstan is also a significant exporter of energy to Russia, Kyrgyzstan and Uzbekistan. The bi-direction nature of electrical power trade reflects both variations in seasonal energy supply/demand as well as the legacy of a Soviet-era grid that was built without respect to modern-day national boundaries. Soviet power planners, for example, established the northern Kazakhstan city of Pavlodar as the primary energy-producing hub for a region that straddles the current Kazakhstan-Russia border.
The electric power industry remains a key factor in Kazakhstan’s industrial development and economic growth as electric power generation accounts for about one-tenth of all industrial output. The government of Kazakhstan has developed an action plan for electric power development up to 2030, which includes a list of proposed power plants for modernization or reconstruction as well as the construction of new facilities. The country's power generation sector is projected to boost total capacity to 103.4 billion kWh by 2014.
Financing for new generation facilities remains questionable; however, in July 2012 amendments to the Law on Electricity came into effect, which permitted changes to the wholesale tariff structure. These amendments to the law require generators to have an investment agreement with the Ministry of Industry and New Technologies and to reinvest 100% of profit either into new infrastructure development or upgrades.
Needs are great in the services market as Kazakhstan seeks to replace aging plants and equipment. Overall, 94% of Kazakhstan's gas turbines, 57% of its steam turbines, and
33% of its steam boilers have been in use for at least twenty years. Electricity transmission networks are inefficient, with estimated losses of 15% during transmission and distribution, although the actual figure may be higher. Construction of new power plants and expansion of power distribution networks are priorities for the government and are likely to be implemented in the medium-term. Some observers project steady growth in the market for a wide range of power generation and distribution equipment.
Major categories of goods imported by the electric power generation sector include fuel elements (non-irradiated), liquid dielectric transformers, inverters, parts for transformers and inverters, and vapor-generating boilers and parts. Considering the overall remodeling of the Kazakhstan Electric Grid Operating Company’s (KEGOC’s) systems and development of new power generation facilities, it is likely that demand for IT support, management, and communications systems will increase as well.
U.S. companies must prepare to compete with Russian, German, Korean, and Chinese companies that have acquired strong positions in the market and are sometimes entitled to tax breaks and other preferential treatment (particularly when they qualify as investors and not only as importers). Attempts to sell equipment for the power generation sector are more likely to be successful if based on a strategic approach to the market and accompanied by appropriate training, servicing, and consulting programs.
Kazakhstan's electricity sector, both its generating and transmitting infrastructure, suffers from a high degree of physical depreciation. A senior official at the Kazakhstan Electric Grid Operating Company (KEGOC) recently complained that the majority of the firm's 25,000 kilometers of power transmission lines were built in the Soviet era. He noted that KEGOC is conducting an assessment to identify "vulnerable" transmission lines that need to be modernized, and he claimed that KEGOC will implement 15 projects valued at $3 billion to modernize or construct new power transmission lines and substations by 2025. Meanwhile, the Chairman of Kazakhstan's national electricity generator Samruk- Energo has stated that Kazakhstan plans to install 14 GW of new power generating capacity by 2030, and the Minister of Industry and New Technologies Asset Issekeshev recently reported that investments in the power sector should reach $63 billion over the next 18 years, including $37 billion in power generation, $9 billion in power distribution networks, and $17 billion in regional power distribution organizations.
Kazakhstan has many renewal and development projects planned. One large successful construction is the 300 megawatt (MW) Moinak Hydroelectric Power Station that has been operating since December 2012. The restoration of the power block No.8 in Ekibastuz GRES-1 was completed on July 3, 2012. Regarding the construction of a third power block at Ekibastuz GRES-2, 6.9% of the cost of the project was financed in 2012. On December 29, 2012, the Kordai district commissioned the first industrial solar power plant in Kazakhstan. The funding came from private investments, and the plant is connected to the state electricity grid. The first part of the construction of the solar energy plant “Otar” cost nearly $1.33 million.
One of the projects includes construction of the coal-powered 1 320 MW Balkhash Thermal Power Plant. The project implementation period is 2010-2018. The plant is expected to produce 9.2 billion kWh of electricity per year. In 2011 an agreement was signed between the Government of the Republic of Kazakhstan and the Government of the Republic of Korea for the development, financing, design, construction, operation and maintenance of the Balkhash thermal power plant.
Six wind power plants are planned to be built in the North-Kazakhstan Oblast (SKO) through 2018. Wind power plants with capacity from 35 to 100 MW will be built in four districts of the region - Esil, Taiynshinsky, and Akkayynskiy and in district named after G.Musrepov. In Taiynshinsky district a wind power plant with capacity of 35 MW is planned be built in 2015.
In 2012, a credit agreement was signed with the European Bank for Reconstruction and Development (EBRD) for the sum of 9,150 billion tenge. These funds are being used to finance the "Modernization of Shardarinisk HPP" investment project.
Although Kazakhstan has significant hydrocarbon resources concentrated in the west, this region still imports electric energy from neighboring Russia. In this connection, local authorities and oil companies are seeking to create their own power supplies. The primary focus is on the construction of a gas-turbine power station (GTPS) that will utilize local gas. The most significant projects in this area will be: construction of gas- turbine installations (GTI) with 48 MW capacity at the Aktobemunaygas industrial complex; the start of the Tengizchevroil Ltd gas-turbine power station with 144 MW capacity, completely covering the needs of the Tengiz oil-and-gas complex; and the construction of a 200 MW GTI at the Kumkol (Kzylorda area) developed by Petro Kazakhstan Inc.
For more information contact Commercial Specialist Azhar Kadrzhanova.
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