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The global trend led to a decrease in tariffs for solar power plants in Kazakhstan from 2014 to 2020 by 58 percent at once.

The International Renewable Energy Agency (IRENA) analyzed the results of auctions for the construction of renewable energy sources over the past 10 years and calculated how much alternative energy has fallen in price. From 2010 to 2020, the world average cost of electricity generated by solar power plants (SPP) decreased by 74 percent - to $ 0.04 per kWh (about 18 tenge). According to the agency's calculations, this is 27 percent lower than the cheapest tariff for coal-fired generation.

Onshore wind farm (WPP) tariffs have dropped 47 percent over the past decade to $ 0.04. The data on tariffs for offshore wind farms in the IRENA report is incomplete, but it is expected that in Europe in 2023 they will be in the corridor of USD 0.05-0.10.

The lowest tariffs in the last 18 months were offered by new SPPs in Qatar ($ 0.0157), the UAE ($ 0.0135) and Saudi Arabia ($ 0.0104). The agency notes that a few years ago it was impossible to imagine that tariffs could fall below $ 0.02.

The cost of renewables has dropped so dramatically due to improved technology and value chain, as well as economies of scale, explains IRENA. As a result, last year the “green” share in the global increase in generating capacity was 62 percent. In the global energy system, renewable energy sources account for 36.6 percent; in 2020, their installed capacity reached 2,799 GW.

In trend

Last year, renewable energy tariffs in Kazakhstan followed the global trend. Solar energy has fallen in price the most, and wind farm tariffs have also dropped significantly.

In Kazakhstan, 2014 is considered to be the starting point for renewable energy as an industry, when the Government approved fixed tariffs for renewable energy projects. In 2018, an auction selection of projects was launched in the republic - the investors who offered the lowest tariff per kilowatt-hour became the winners. The auction model made it possible to achieve a rapid reduction in tariffs in the "green" energy sector of the Republic of Kazakhstan.

In 2020, the cost of solar energy in Kazakhstan decreased by 55 percent from the level of 2014 - the average tariff was 15.54 tenge per kWh. Winners of auctions for the construction of wind turbines offered an average of 19.51 tenge per kWh (-14 percent), small hydroelectric power plants - 14.69 tenge per kWh (-0.9 percent).

The decrease in the tariff proceeded in parallel with the increase in the number of new projects: from 2014 to 2020, the number of green stations in the country increased from 26 to 115, the installed capacity of renewable energy sources increased from 178 to 1,635 MW. In 2020, Kazakhstan has reached the target indicator for the development of renewable energy sources - three percent of the total generation in the country.

The stable growth in the volume of "green" generation is due to state support for the renewable energy sector. The Settlement and Financial Center of KEGOC, the national operator of the electric power system of the Republic of Kazakhstan, is guaranteed to buy all electricity from renewable sources for 15 years (from 2021 for the winners of new auctions - 20 years). In the future, renewable energy is purchased by coal and gas turbine power plants (conventional consumers).

The emergence of competition

In 2020, 16 auction winners offered tariffs for hydroelectric power plants from 13.48 tenge, SES - from 14.58 tenge and wind farms - from 15.90 tenge. Such results bring renewable energy in the country closer to the tariffs of new gas-fired power plants. The gas-piston power plant of OralMunayProm LLP, commissioned in 2020, sells electricity at 16.92 tenge per kWh (the tariff is valid from July 1, 2021). It also offers the highest tariff among all 47 groups of energy producing organizations in Kazakhstan, which include all coal, gas and large hydroelectric power plants. Another gas generation, SagatEnergy LLP (launched in 2012 and expanded in 2016), received a tariff of 15.04 tenge. For comparison, these are the new power plants, the payback period of which has not yet been completed.

According to the chairman of the board of the Kazakhstan Association of Solar Energy (SPAQ) Ainur Sospanova, the construction of a new coal generation in the country today can be as expensive a project as renewable energy. First, projects in the coal power industry are limited in funding sources: international development institutions refuse to lend to them. In the modernization of coal-fired power plants, their owners mainly invest their own funds. Another option for financing such projects is loans from Chinese banks, which can allocate money for the purchase of Chinese coal technologies. Secondly, the cost of modern coal technologies is comparable in some cases to “green” energy.

- If you build a coal station in Kazakhstan today, it will not be cheap. It is necessary to comply with the requirements of the Environmental Code for the best available technologies, pay for CO2 emissions - the cost of coal becomes more expensive, and modern coal technologies are also expensive. I can assume that the cost of a kilowatt-hour of new coal-fired generation will be at the same level or more expensive than a solar or wind station, ”explains Ainur Sospanova.

He who does not take risks does not build

The cost of money attracted for the construction of renewable energy sources takes a significant share in the structure of the "green" tariff. The final cost of electricity and the success of the project at the auction depend on this. For example, the Italian Eni, which, in addition to oil production in Kazakhstan, also builds renewable energy projects, has access to cheaper money through Eni Finance (a special company established in 1995 that finances Eni projects outside Italy). This, as noted by A. Sospanova, allowed the company to offer the cheapest tariffs for SPP at an auction in Kazakhstan. Eni's portfolio currently includes three green projects in Kazakhstan with a total capacity of 146 MW.

The main limiting factor for the development of renewable energy sources in Kazakhstan remains the low readiness of the national electric power system to increase the share of renewable energy sources in the installed capacity. The rapid growth of RES capacity, whose generation is unstable and depends on weather conditions, requires balancing - the construction of flexible capacities. They replace the deficit that occurs when renewable energy sources do not generate electricity.

Given the planned growth of RES in the country: 15 percent in 2030 and 50 percent (along with other alternative sources) in 2050, Kazakhstan will need more and more flexible installations. These include hydroelectric power plants (HPPs) and gas turbine power plants (GTES). Unlike coal-fired ones, they do not need a lot of time to supply electricity to a single system - 15-20 minutes for a gas turbine power plant and about two minutes for a hydroelectric power plant.

According to the head of the Kazakhstan Electricity Association Askerbek Kuanyshbaev, Kazakhstan needs the construction of flexible capacities of at least 1000-1500 MW. Recall that the installed capacity of renewable energy sources in 2020 increased to 1,635 MW.

To solve the problem, in December 2021, Kazakhstan will host auctions for the selection of projects for the construction of flexible generation by analogy with the mechanism for the development of renewable energy sources (the state guarantees the purchase of electricity for 15 years).

“If investors believe that the auction will take place, projects with which they will sign a 15-year contract will be selected, then in two or three years maneuverable sources will appear in the country, and the technological risk will decrease,” believes Ainur Sospanova.

Interest is fueled by commitment

For RES investors in Kazakhstan, thanks to state support, it remains an interesting energy asset that will generate cash flow in the future.

Another incentive for the development of renewable energy sources is the growing need for "green" energy among enterprises in the most energy-intensive industries of the Republic of Kazakhstan - metallurgy, the oil sector, and the production of fertilizers. These exporting companies will soon face stricter CO2 emissions requirements in their value chain. The EU plans to apply a carbon tax for importers exceeding intra-European emissions from 2023. By leveraging more green energy, Kazakh exporters to the EU will be able to at least optimize payments.