The accumulated volume of investments in renewable energy in Kazakhstan will exceed $ 1.8 billion

More than half is the contribution of international financial institutions.

The accumulated volume of investments in renewable energy in Kazakhstan in 2021 will exceed $ 1.8 billion, of which more than $ 1 billion is the contribution of international financial institutions.

In less than a ten-year history of renewable energy in Kazakhstan, the accumulated volume of investments in the sector exceeded $ 1.5 billion, and about 2/3 of this amount was invested in the sector by international development institutions ready to co-finance Kazakhstan’s green projects initiated by private investors. In recent years, a turning point has been outlined: more and more companies from traditional energy are coming to RES, whether it is oil and gas production or electricity generation at coal-fired thermal power plants.

Gentlemen creditors
The Ministry of Energy has been keeping statistics on investments in renewable energy since 2014, when active financing of projects began. From this period to the end of 2020, investors invested about $ 1.5 billion in renewable energy, most of which ($ 919 million) – in the last two years, when the industry became visible on the country’s economic map (the volume of electricity generation from renewable energy sources has steadily exceeded 1 % of total production).

The total installed capacity of renewable energy sources (RES) in Kazakhstan in 2021 compared to 2019 will grow by 23.9%, to 2,025.8 MW (138 facilities), the Ministry of Energy predicts. At the moment, according to statistics that the department has been keeping since 2014, 115 green projects with 1,635 MW are operating in the country.

Investors are most active in the construction of solar and wind parks. They account for 85% of the total installed capacity of domestic renewable energy sources, another 14% for hydropower and less than 1% for biofuels. In the context of regions, the least of the installed capacity of renewable energy sources is in the North Kazakhstan region – less than 1% and in the western regions – less than 6%. Most of all in Zhambyl and Karaganda regions – at the level of 20%.

According to Yernar Bilyalov, member of the Board of Directors of the Solar Energy Association of Kazakhstan (SPAQ), about 30% of the total cost of renewable energy in the country is financed from the companies’ own funds. The remaining 70% are attracted in the form of long-term loans from international financial institutions. From 2014 to 2020, they financed renewable energy in Kazakhstan for more than $ 1 billion.

Among them, the largest lender is the European Bank for Reconstruction and Development (EBRD), which during this period financed the construction of 13 new facilities (688 MW) for about $ 440 million. The bank’s partners, the Green Climate Fund and the Clean Technologies Fund, also allocated an additional $ 120 million.

The main national source of financing is the Development Bank of Kazakhstan (DBK), which from 2014 to 2020 allocated 82.8 billion tenge for five renewable energy projects with an installed capacity of 295 MW. The Eurasian Development Bank (EDB), one of whose shareholders is the government of Kazakhstan, has invested 23.2 billion tenge and 160 million euros in nine new renewable energy projects in the country. The Asian Development Bank (ADB) started financing this sector in Kazakhstan for the first time in 2019 and allocated $ 42 million for the construction of two solar power plants.

As Bilyalov notes, development banks provide loans for the construction of renewable energy sources at “fairly high” interest rates – 11-13% per annum. According to him, market participants need more affordable and long-term financing in national currency at the level of 9-10% per annum. “Since 2009, the legislation (on the support of renewable energy sources -“ Italic ”) has been systematically improved, and the risks of renewable energy projects are decreasing every year. However, interest rates on the part of financial institutions do not change, ”complains the representative of the association. Given the growth rate of new capacity, high rates are a constraining but not limiting factor for the industry.

 

Industrialists flock
According to the expectations of the relevant ministry, in 2021 investments in the construction of new projects will amount to $ 370 million, which is 27% less than the volume of 2020 ($ 510 million). And this is due, among other things, to the fact that players of the traditional energy market are increasingly entering the sector following development institutions. It is not long before the moment when companies from the mining and metallurgical complex will come to this sector.

Among the foreign corporations that are developing the largest oil and gas fields in the country, the Italian Eni and the French Total already have renewable energy projects. Eni’s portfolio currently includes three green projects in Kazakhstan with a total capacity of 146 MW. These are the Badamsha-1 wind farm commissioned in 2020 in the Aktobe region (48 MW), as well as the Badamsha-2 wind farm (48 MW) and the Shaulder solar power plant in the Turkestan region (50 MW) under construction. In turn, Total also launched a 28 MW Nomad solar power plant in the Kyzylorda region and a 100 MW M-KAT Green solar power plant in the Zhambyl region in 2020. In 2018, the Dutch oil and gas concern Shell won the right to build a 50 MW solar power plant in the south of Kazakhstan at an auction, but has not yet started the project.

Renewable energy projects were launched by Samruk-Energo, Central Asian Fuel and Energy Company (CATEK), the main assets of which are coal-fired thermal power plants. As part of Samruk-Energo, green energy production is carried out at two wind farms and one solar station with a total installed capacity of about 52.4 MW, and the structure of CATEK includes two wind farms with a capacity of 50 MW each. The leading uranium exporter Kazatomprom produces electricity for its own needs – the corporation owns solar power plants with a total capacity of 3 MW.

The next group of enterprises that will invest in renewable energy will be metallurgical companies. For them, the growth in the share of green energy consumption allows us to talk about the transition to “green” metallurgy. This trend is already being recorded in Europe and the USA, as well as in Russia. India’s Tata Steel launches green steel production in the Netherlands by capturing and recovering CO2. The Swedish SSAB has invested 150 million euros in a project that completely eliminates the use of fossil fuels in steel production. Korea’s Posco plans to green its steel by using hydrogen. In the Russian Federation, NLMK announced the production of “green” steel, and “green” aluminum – Rusal, whose Siberian capacities are supplied with electricity from hydroelectric power plants.

The activity in the Kazakh mining and metallurgical complex is still moderate. Eurasian Resources Group (ERG) informed Kursiv about plans to build a large wind farm with a capacity of 150-200 MW and is developing a feasibility study for the project. The company clarified that ERG intends to build renewable energy sources outside the auction selection and plans to supply the generated electricity to its own enterprises in Kazakhstan. The Eurasian group also does not exclude the possibility of investing in ready-to-build projects or operating renewable energy facilities.

Green subsidiaries of oil and gas and mining companies account for about 331.4 MW, or 20.3% of the total installed renewable energy capacity in the country, and in 2021 this figure may grow to 26%.

The interest of traditional energy companies in the green sector in Kazakhstan is driven by the desire to diversify business during the global energy transition from fossil fuels to renewable energy sources, explains SPAQ Executive Director Timur Shalabayev.

“Today, not only companies, but entire countries are restructuring their energy strategies. There is no pressure (on mining and metallurgical companies and oil companies. – “Italic”) from the government of Kazakhstan. Proof of this can be seen in the fact that international financial institutions like the EBRD, ADB and others intend to refuse to finance projects related to coal, ”Shalabayev said.