Industry news

On October 21, 2022, the Minister of Energy of the Republic of Kazakhstan Bolat Akchulakov, in his speech at the Central Communications Service, spoke about how the transition to an updated tariff policy in the generation sector «Tariff in exchange for investment» will take place as part of the implementation of the Message of the Head of State Kassym-Jomart Tokayev.

The ongoing shortage of electric energy since 2021 is a consequence of the frequent cases of emergency disposal of obsolete equipment of domestic energy sources.

Compared to the same period in 2021, the number of emergency shutdowns of power equipment increased by 22%, and their duration – by 16%. The depreciation of generating capacities today is about 60%.

During the briefing, the head of the department, Bolat Akchulakov, noted that the current situation and factors constraining the development of the industry, against the background of the recorded record growth in consumption, could become a serious threat to the country's energy sustainability in the future.

Recall that from 2009 to 2015, the country had a program «Tariff in exchange for investment» with the introduction of marginal tariffs for electric energy. Over the above period of time, a medium-term capacity reserve was created by commissioning 1.2 GW of new capacity and restoring 1.7 GW of capacity, which eventually made it possible to cover the previously existing deficit.

Now the task of the transition to an updated tariff policy in the generation sector «Tariff in exchange for investment» is to achieve a reduction in the depreciation of generating capacities by 15% by 2035 by transforming approaches in tariff formation with an increase in annual investments by 3 times. An important part of the updated model is the strengthening of existing support mechanisms and reverse obligations on the part of the market.

The current policy of restraining tariffs for electric energy does not take into account the growth of inflation in full, which also affects the investment attractiveness of the industry, since to ensure the stability of the operation of energy enterprises, a predictable tariff policy providing for indexation to the inflation rate is necessary.

Within the framework of the current Electric Power Market, the limit on the amount of funds allocated for the return of investments invested in the industry is set at 32 billion tenge. The Ministry of Energy of the Republic of Kazakhstan is working on increasing this limit by 100 billion tenge, it is expected that this will allow for additional modernization and expansion of existing power plants.

In addition, in order to ensure the inflow of investments, it is necessary to increase the current tariff on the electric power Market from the current 590 thousand tenge per 1 MW per month to 885 thousand, which will attract an additional 35 billion tenge per year to the industry.

The head of the department also noted that in order to protect certain categories of consumers from the impact of tariff increases, conditions for targeted subsidies will be created taking into account today's experience.

The heat power sector, taking into account the social aspect, requires the introduction of a hybrid model that will stimulate investment attraction and provide guarantees of return on investment with the inclusion of existing mechanisms for budget financing of heat power and the corresponding obligations of owners to invest.

For energy companies, counter obligations will be introduced to invest part of their own funds, in addition to those received from tariffs, for the development of their own assets. For the full implementation of the proposed measures, it is necessary to return the control functions of the authorized body for the targeted use of funds received under the «Тariff in exchange for investment» policy, as well as to establish indicators that need to be achieved within the framework of the investments», Bolat Akchulakov, head of the country's energy department, summed up his speech.