November wind farm deal furthers Kazakhstan’s decarbonization efforts

The European Bank for Reconstruction and Development (EBRD) announced lenders have committed US$95.3 million to support the construction of one of largest wind farms in Kazakhstan in mid-November, saying that the project "marks a major milestone in the decarbonization and diversification journey away from the country's coal legacy." 

The 100-MW Zhanatas Wind Project will reduce the country's annual CO2 emissions by approximately 262,000 metric tons, and the developers have committed to gender-inclusive training at all levels of the operation, according to EBRD.

It's EBRD's 14th renewable energy project in Kazakhstan, and the bank has committed to support up to €300 million of renewable energy and grid integration projects in Kazakhstan, with more than half of that already assigned. 

"It is great to see such reputable investors and financiers joining Kazakhstan's renewables story," said Nandita Parshad, the managing director of the EBRD Sustainable Infrastructure Group, at the virtual signing ceremony on 16 November. "This signing sends a very important signal to governments and investors in the region showing that it is possible to preserve the green agenda despite the current challenges.  I am delighted to have this piece of good news in the midst of the world's fight with the coronavirus pandemic, keeping our eyes on the green recovery."

Long way to go

Growth in wind power is just one part of an energy transformation that's been underway for more than five years, but has a long way to go, according to a new report by IHS Markit. In 2015, the country embarked on a 15-year effort to make natural gas available nearly nationwide. It includes bringing gas to 1,600 cities and towns (accounting for 56% of the population) by 2030. This would both improve consumers' access to energy and also move the country towards GHG emissions reductions goals of 15%-25% below 1990 levels by 2030.

"The overall initiative has made some progress, with national gasification levels [access to piped gas] rising from 43% in 2015 to 51.5% in 2019. Still, many challenges lie ahead," IHS Markit reported. (For additional information, contact Paulina Mirenkova, Paulina.Mirenkova@IHSMarkit.com, co-author of IHS Markit paper, "A progress report on Kazakhstan's gasification program," published on 4 November 2020.)

Still, IHS Markit estimates that coal accounted for 58% of primary energy usage in 2019, with gas at just 21.5%. Coal's phaseout is likely to be slow, according to Mirenkova, as by 2040 IHS Markit forecasts that it still will account for 51% of the power market.

Renewables constitute about 7% of total installed power generating capacity in Kazakhstan, and in 2019 they contributed about 1.6% of total power generation in the nation, according to IHS Markit. That share nearly doubled in the first nine months of 2020 to 3%, or 2.4 million kWh out of a total 77.7 billion kWh. The nation's target, identified in a strategic plan in 2015, was to reach 3% of generation from wind and solar by 2020 and up to 50% by 2050.

As of October 2020, there were 110 renewable energy facilities in operation in Kazakhstan, with total capacity of 1528 MW:

• 404.4 MW was from wind power plants

• 891.6 MW was from solar

• 224.6 MW was from small hydro

• 7.82 MW was from bioenergy sources

Kazakhstan's gas consumption is expected to increase over the next 20 years at an annual average rate of 2.2%, reaching about 25 Bcm/year in 2040. Residential consumption is expected to experience the strongest growth, increasing at a rate of about 3.8% per year.

The national gas company, KTG, is leading the gasification effort, which is also heavily reliant on government investments. How much those investments will be cut back in 2021 due to the lingering financial impact of Covid-19 is unknown, but the national government did revise its budget in April 2020 that included cuts to its transfers to local governments for gas infrastructure by about 43% over the next three years (2020-22) from prior budgeted levels and this number could grow further.

Wind farm firsts

Meanwhile, the newly funded wind farm represents the multilateral approach the country is taking to expand its energy production. It represents several firsts that the EBRD said bode well for future growth: it's the first project for a large Chinese investor, China Power International Holding (CPIH); the first renewable project for the Asian Infrastructure Investment Bank (AIIB) in Central Asia; the first renewable project in the country co-financed by a commercial bank; and the first Kazakh windfarm under a project finance structure. 

The EBRD loan will provide financing of up to US$24.8 million to support CPIH, in partnership with Visor Investments Coöperatief, of the power plant and an 8.6-km, 110 kV power line to connect to the national grid. Other lenders include AIIB, the Industrial and Commercial Bank of China and the Green Climate Fund.

The involvement of Chinese investors suggests that China's announcement this fall of its 2060 Zero Carbon Agenda could have spillover effects for other Asian nations, added Aida Sitdikova, director, Energy Eurasia, in the EBRD Sustainable Infrastructure Group. 

In other news from Kazakhstan, the nation held its 2020 renewable power auctions in November, which EBRD reported produced falling bid prices that indicate greater confidence by the producers that they can expand output.

Posted 22 November 2020 by Kevin Adler, Editor, Climate & Sustainability Group, IHS Markit