VZCZCXRO5561
OO RUEHAG RUEHAST RUEHBI RUEHCI RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK
RUEHKW RUEHLA RUEHLH RUEHLN RUEHLZ RUEHNEH RUEHNP RUEHPOD RUEHPW
RUEHROV RUEHSK RUEHSL RUEHSR RUEHVK RUEHYG
DE RUEHTA #1172/01 1940921
ZNR UUUUU ZZH
O 130921Z JUL 09
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 5780
INFO RUCNCIS/CIS COLLECTIVE 1735
RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 1102
RUEHKO/AMEMBASSY TOKYO 1804
RUEHUL/AMEMBASSY SEOUL 0770
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEAIIA/CIA WASHINGTON DC
RUEKDIA/DIA WASHINGTON DC
RHEHNSC/NSC WASHDC 1286
RUEKJCS/SECDEF WASHDC 1203
RUEKJCS/JOINT STAFF WASHDC
RHMFIUU/CDR USCENTCOM MACDILL AFB FL
RUEHAST/USOFFICE ALMATY 1686

UNCLAS SECTION 01 OF 03 ASTANA 001172 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/CEN, EEB 
STATE PLEASE PASS TO USTDA 
 
E.O. 12958: N/A 
TAGS: PGOV ECON ENRG EINV SENV KZ
SUBJECT:  KAZAKHSTAN:  PRESIDENT SIGNS RENEWABLE ENERGY LAW 
 
REF:  (A) 08 ASTANA 02225 
 (B) ASTANA 0837 
 (C) ASTANA 0871 
 
ASTANA 00001172  001.2 OF 003 
 
 
¶1.  (U) Sensitive but unclassified.  Not for public Internet. 
 
¶2.  (SBU) SUMMARY:  On July 7, President Nazarbayev signed the law 
"In Support of Renewable Energy Sources" that will promote 
environmentally friendly power generation, including the use of 
renewable energy sources.  This legislation -- as well as 
information gleaned from meetings with local experts -- demonstrates 
that Kazakhstan is serious about renewable energy, energy 
efficiency, and implementation of the Kyoto Protocol, which the 
government ratified on March 26.  END SUMMARY. 
 
RENEWABLE ENERGY LAW EXPECTED TO ATTRACT INVESTMENT 
 
¶3.  (SBU) A new law, "In Support of Renewable Energy Sources," which 
came into effect on July 7, requires the Kazakhstan Electric Grid 
Operating Company (KEGOC) and regional power distribution companies 
to buy power on the open market to cover actual technical losses 
above allowed losses.  At least 50 percent of that open 
market-procured power would have to come from renewable sources, 
essentially creating a captive market for renewable generation.  The 
Ministry of Energy and Mineral Resources (MEMR) expects this new 
requirement to purchase power from renewable energy sources to 
attract investors to the sector.  Of course, investors would have to 
cover the cost of connecting power generation to distribution or 
transmission networks, and regional power distribution companies 
would be responsible for modernizing the grid, if required, to 
receive power from renewable sources. 
 
NEW RENEWABLE ENERGY AGENCY PROPOSED, BUT DISMISSED 
 
¶4.  (SBU) Gennadiy Doroshin, project manager for the United Nations 
Development Programme (UNDP) Wind Power Project (WPP), supports the 
new law, although he initially advocated a slightly different 
approach.  On June 10, Doroshin told Energy Officer that he 
originally proposed the government establish a Renewable Energy 
Agency to manage renewable power generation and distribution via 
certificates, based on the principles of supply and demand. 
However, according to Doroshin, in November 2008, the government 
dropped the idea of establishing a new agency and decided to "give 
the law five years and see how it works."  Doroshin said MEMR would 
be willing to consider the creation of a separate Renewable Energy 
Agency, if the renewable energy law succeeds in attracting 
investment. 
 
AES WILL INVEST, IF CONDITIONS ARE RIGHT 
 
¶5.  (SBU) On June 11, Doug Herron, Head of the Representative Office 
for AES Silk Road, Inc., told Energy Officer that AES would be very 
interested in pursuing opportunities in the renewable energy sector, 
provided the market conditions were acceptable.  "The question is," 
he said, "at what price could we sell renewable energy to consumers? 
 The answer to that would be critical to any investment decision." 
According to the government's electricity tariff regulations, the 
price of power generated from renewable sources will exceed that 
from traditional sources, such as coal.  UNDP's Doroshin said the 
average cost of power generated by coal-fired power plants is 
approximately 5 cents per kWh, whereas he expects the cost of wind 
power to be 7-10 cents.  According to the new law, if renewable 
power plants generate up to 25 megawatts, their tariffs will be 
approved by local authorities.  If they generate more than 25 
megawatts, the tariffs must be approved by MEMR. 
 
UNDP WIND POWER PROJECT 
 
¶6.  (SBU) On June 10, Doroshin told Energy Officer that for the past 
five years, his project has estimated Kazakhstan's wind power 
potential, identified attractive locations for wind power plants, 
provided training to government officials, and designed a pilot wind 
 
ASTANA 00001172  002.2 OF 003 
 
 
power plant at Jungar Gates in Almaty oblast, near the Chinese 
border.  Doroshin complained that the National Wind Power Program, 
drafted by UNDP in 2004, has not yet been approved by the Ministry 
of Energy and Mineral Resources (MEMR).  Doroshin also said that his 
project, together with Australia's Parsons Brinkerhoff Power 
Company, will soon publish a wind atlas of Kazakhstan. 
 
JUNGAR GATES PILOT READY FOR TAKE OFF 
 
¶7.  (SBU) Doroshin told Energy Officer that he has been waiting for 
the renewable energy law to move ahead with the Jungar Gates pilot 
project.  He said that MEMR asked UNDP to increase the plant's 
capacity from 5 megawatts, in order to make the overall project more 
commercially attractive for Chinese, Indian, Korean, and Japanese 
companies, which have already expressed interest in investing in 
wind power projects in Kazakhstan.  The Jungar Gates wind power 
plant will be connected to the Chinese power grid and supply power 
to residents of western China.  The project has been delayed, 
because until the renewable energy law was passed, MEMR had no way 
to require companies to buy power from renewable energy sources. 
 
ENERGY EFFICIENCY YIELDS SIGNIFICANT SAVINGS 
 
¶8.  (SBU) Yerbolat Buksykbayev, director of the Center for Energy 
Efficiency and Clean Production (CEECP), has been working with 
international donors, the Almaty oblast, and private companies to 
promote energy efficiency since 2002.  CEECP relies on local experts 
and customized software tools to calculate the efficiency of energy 
use at industrial sites, universities, schools, and hospitals. 
According to Buksykbayev, his energy efficiency programs can save an 
organization up to 40 percent on their electricity bill. 
 
NEW REQUIREMENT FOR ENERGY PASSPORTS 
 
¶9.  (SBU) Buksykbayev expects a new law on Energy Efficiency to be 
adopted during the third quarter, which he believes will increase 
demand for CEECP's services.  According to Buksykbayev, the Energy 
Efficiency Law would require companies to have so-called energy 
passports, which would provide summary results of an energy audit, 
describing a given facility's energy consumption profile. 
Buksykbayev said that only two specialists from the Energy 
Supervision Committee have been trained and licensed to issue such 
passports, and he doubts that the government will have the capacity 
to provide each company with a separate passport.  CEECP has been 
delivering courses at three technical universities to enable more 
specialists to issue such passports. 
 
CLIMATE CHANGE CENTER WORKS TO IMPLEMENT KYOTO PROTOCOL 
 
¶10.  (SBU) Saulet Sakenov of the Astana Climate Change Coordination 
Center (C4) informed Energy Officer on June 12 that the organization 
was established in 2002 by the USAID Greenhouse Gas (GHG) Emission 
Reduction Initiative.  C4 works to implement the United Nations 
Framework Convention on Climate Change, the Kyoto Protocol, and the 
Vienna Convention on Ozone Layer Protection.  The Center has played 
an active role in reviewing and shaping the draft laws on renewable 
energy and energy efficiency.  C4 also carries out joint projects on 
GHG emissions with Slovakia's Profing, Denmark's Rambol, Japan's 
Tohoku and Nedo, TACIS, UNDP, the Asian Development Bank and other 
international organizations.  Sakenov said that following the March 
26 ratification of the Kyoto Protocol, Kazakhstan would agree to 
binding greenhouse gas emission targets and would be eligible to 
participate in Joint Implementation and Clean Development Mechanism 
projects.  Kazakhstan has developed unified project submission 
guidelines and has approved two projects, but has not yet agreed on 
a final institutional framework for project review. 
 
KAZAKHSTAN SEEKS TO TRADE ITS CARBON SURPLUS 
 
¶11.  (U) According to an October 2008 study by the UNDP Bratislava 
Regional Climate Change Center, Kazakhstan is the eighth most 
GHG-intensive economy in the world, with a carbon intensity equal to 
 
ASTANA 00001172  003.2 OF 003 
 
 
1,872 tons of carbon dioxide equivalent per $1 million of GDP (at 
purchasing power parity.)  Despite the high carbon intensity of its 
industrial output, Kazakhstan's annual GHG emissions of 
approximately 240 million tons are still well below the cap of 340 
million tons allocated to Kazakhstan under the Kyoto Protocol, 
thereby giving Kazakhstan an opportunity to trade this carbon 
surplus on the world market.  (NOTE: Kazakhstan's cap of 340 million 
tons derives from the Kyoto protocol's target of reducing carbon 
emissions in comparison to a 1990 emissions baseline.  Kazakhstan's 
reduction target is 0% of 1990 levels.  In 1990, Kazakhstan's 
emissions were 340 million tons. END NOTE). 
 
¶12.  (U) President Nazarbayev reiterated Kazakhstan's commitment to 
the Kyoto Protocol at the June 12 meeting of the Foreign Investors' 
Council.  He also called on the Ministry of Environmental Protection 
(MEP) to play a more active role in developing energy efficiency and 
selling carbon credits.  "The Kyoto Protocol opens new opportunities 
to increase energy efficiency and attract up to $1 billion in new 
investments," he said.  President Nazarbayev urged the MEP to 
develop procedures and establish a market exchange for trading its 
carbon quota.  In February, former Minister of Environmental 
Protection Nurlan Iskakov estimated that ratification of the Kyoto 
Protocol would attract up to $300 million in investments in 2009-10, 
and $500-600 million through 2012.  Japan, a potential buyer, has 
already purchased emission rights from ten Eastern and Central 
European countries in the last two years. 
 
¶13.  (SBU) COMMENT:  Despite the abundance of relatively cheap 
fossil fuels in Kazakhstan, the government is clearly serious about 
climate change, renewable energy, and energy efficiency. 
Kazakhstan's ratification of the Kyoto Protocol, the new law on 
renewable energy, and the draft law on energy efficiency demonstrate 
that the government is willing to change the way it does business. 
However, the incremental nature and favorable terms of these changes 
also indicate that the government is not willing to pay a high price 
in the short term in order to realize longer-term economic and 
social gains.  Industry analysts estimate that it will cost several 
hundred million dollars to install the hundreds of megawatts in 
power generation required to make renewable sources of energy a 
viable alternative in Kazakhstan.  Once the government begins to 
consider these costs, it might look at ways to reduce technical 
losses and improve service quality by investing in network upgrades 
and replacing old transformers.  In other words, a concerted effort 
to improve energy efficiency would actually avoid more emissions and 
provide greater energy security than supplanting thermal generation 
with renewable sources.  END COMMENT. 
 
HOAGLAND