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DE RUEHTA #0871/01 1410719
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O 210719Z MAY 09
FM AMEMBASSY ASTANA
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UNCLAS SECTION 01 OF 02 ASTANA 000871 
 
SIPDIS 
 
STATE FOR SCA/CEN, EEB/ESC 
STATE PLEASE PASS TO USTDA 
 
E.O. 12958: N/A 
TAGS: PGOV ECON ENRG EINV KZ
SUBJECT:  KAZAKHSTAN:  RENEWABLE ENERGY PLANS AND PROGRAMS 
 
REF:  (A) 08 ASTANA 02225 (B) ASTANA 0837 
 
ASTANA 00000871  001.2 OF 002 
 
 
¶1.  SUMMARY:  Kazakhstan's Ministry of Energy and Mineral Resources 
has announced its intention to increase the share of renewable 
sources of energy in Kazakhstan's overall energy mix from 0.02 
percent at present to 5.0 percent by 2024.  Parliament endorsed the 
initiative and is now reviewing draft laws on renewable sources of 
energy, energy efficiency, and biofuels.  However, without direct 
financial, regulatory, and political support from the government, it 
is unlikely that renewable sources of energy can replace 
Kazakhstan's cheap, plentiful supplies of coal, oil, and gas in the 
near future.  END SUMMARY. 
 
THE STEPPE IS BLESSED BY SUN AND WIND 
 
¶2.  Kazakhstan's endless stretch of open steppes, buffeted by steady 
winds and enriched year round by the sun's rays, offer ample 
opportunity to exploit the earth's renewable energy.  Yet renewables 
represent just 0.02 percent of Kazakhstan's total power consumption, 
whereas coal comprises 72 percent of the total, gas 23 percent, and 
fuel oil 2 percent.  Nevertheless, on April 14, Duisenbai Turganov, 
Vice Minister of Energy and Mineral Resources (MEMR), announced the 
government's intention to increase the percentage of renewable 
energy to 0.028 percent by 2009, and 5.0 percent by 2024. 
 
¶3.  The National Program for Wind Power Development, drafted in 2007 
with support from the United Nations Development Program (UNDP), 
estimates that Kazakhstan is capable of generating 900 million 
kilowatt hours (kWh) per year by 2015, and 5 billion kWh/year by 
¶2024.  MEMR further estimates the country's potential micro 
hydropower at 8 billion kWh, and that of solar power at 2.5 billion 
kWh.  KazAgro National Holding Company estimates that 25-30 new 
biofuel plants could produce up to 2.5 million tons of biofuel a 
year. 
 
NEW LAW ON RENEWABLE ENERGY UNDER REVIEW 
 
¶4.  A draft Law on Renewable Sources of Energy is currently under 
review by the Senate and is expected to be adopted this summer 
(reftel A).  It defines renewable energy as solar, wind, biofuel, 
and geothermal energy, as well as hydrodynamic power generated at 
facilities with a capacity less than 35 megawatts (MW) that do not 
change the course of rivers (also known as micro hydropower).  The 
current draft was presented to parliament for review on December 30, 
¶2008.  The first version, drafted by the Ministry of Environmental 
Protection (MEP), was based on recommendations by the UNDP Wind 
Power Project, but it underwent significant revision after MEMR 
became the government's chief sponsor in November 2008.  For 
example, the earlier version called for certificates to be issued by 
renewable energy power generation plants.  It also would have 
established a new agency to set the price of renewable energy, 
purchase the certificates, and force traditional energy companies to 
buy them. 
 
¶5.  Unlike the MEP version, the MEMR draft does not provide many 
details on implementation.  When it was presented to the lower house 
of parliament (Mazhilis) on February 25, the Committee for 
Environment and Natural Resource Management severely criticized the 
MEMR draft for not requesting budget funding and for its apparent 
support of large energy producers.  Minister of Energy Mynbayev 
argued that power distribution companies would be obliged by the law 
to buy renewable energy, while municipal authorities would be 
responsible for allocating space for the construction of renewable 
energy plants.  Hence, he said, there was no need for any financial 
aid.   Mazhilis member Victor Kiyanskiy was visibly unimpressed and 
suggested that it was inappropriate for MEMR to draft the 
legislation.   "It is not realistic to expect oil and gas experts to 
develop an effective law on renewable energy," he said. 
 
ENERGY EFFICIENCY LAW TO MANDATE PURCHASE OF RENEWABLE ENERGY 
 
¶6.  Parliament is also reviewing a draft Law on Energy Efficiency 
that would require regional electric companies that transmit 
 
ASTANA 00000871  002.2 OF 002 
 
 
electricity generated by renewable energy to buy renewable 
electricity to offset efficiency losses in power transmission lines. 
 If the amount of electricity generated by renewable energy plants 
exceeds 50 percent of losses, the Kazakhstan Electric Grid Operating 
Company (KEGOC) would buy the remaining volume.  Costs incurred by 
regional electric companies and KEGOC for the purchase of 
electricity from renewable energy sources would then be included in 
the power transit tariffs. 
 
BIOFUEL LAW SIGNALS COMMITMENT TO ALTERNATIVE ENERGY 
 
¶7.  The Concept for the Development of a Biofuel Market informed the 
draft Law on Biofuel, which was presented to the Mazhilis by Vice 
Minister of Agriculture Arman Yevniyev on December 5, 2008.  Under 
the new law, the government would set a biannual quota for feedstock 
to produce biofuel, fund biofuel research and development, and 
define the designed capacity of biofuel plants to be constructed. 
The proposal was not well received by everyone in the energy sector, 
however.  For example, Zhanbolat Tuganov, manager of the Oil 
Processing Department of national oil company KazMunaiGas, said that 
introducing biofuels would require a $400 million investment to 
restructure existing oil refineries, and would more than double the 
cost of fuel.  Tuganov also warned that biodiesel freezes at minus 
15 Celsius and would therefore not be appropriate for Kazakhstan's 
severe winter climate. 
 
THE FUTURE OF RENEWABLE ENERGY IN KAZAKHSTAN 
 
¶8.  There are several arguments in favor of developing renewable 
sources of energy in Kazakhstan.  For example, it is extremely 
inefficient for a centralized power generating company to supply 
electricity to remote villages dispersed widely across such an 
enormous territory.  Unfortunately, however, renewable energy in 
Kazakhstan costs more to produce than it generates (reftel B).  It 
is nearly three times cheaper to use coal, for example, which will 
meet more than 75 percent of Kazakhstan's energy needs through 2015, 
according to the 2007 Plan for the Development of the Electric Power 
Industry. 
 
¶9.  The UNDP Wind Power Project to build a 5 MW wind power plant at 
the Jungar Gates near the border with China is now in its second 
stage of development.  On May 14, Technical Specialist Mikhail Rakov 
confided in Energy Officer that that MEMR was not satisfied with the 
small size of the wind power plant and delayed its approval, even 
though all of the technical documentation was ready.  The UNDP 
project managers expect to resume operations after the Law on 
Renewable Energy Sources is adopted. 
 
¶10.  COMMENT:  Kazakhstan is richly endowed with cheap, abundant, 
and accessible hydrocarbons.  Nevertheless, it is clear that the 
government is serious about renewable energy.  President Nazarbayev 
himself has promised that renewables will meet five percent of the 
country's energy needs by 2024, and parliament is likely to adopt 
legislation this year that would mandate the production and 
consumption of renewable energy sources.  Yet if Kazakhstan is to 
achieve these ambitious and laudable goals, the government will have 
to provide the necessary incentives, infrastructure, and investment 
to overcome the country's reliance on cheap coal, oil, and gas.  One 
way to engage the government on the issues of renewable energy and 
energy efficiency would be through the U.S.-Kazakhstan Energy 
Partnership, which Foreign Minister Marat Tazhin raised with 
Secretary of Energy Chu in May.  END COMMENT. 
 
MILAS