General Director of Kazakhstan’s Renewable Energy Association Arman KASHKINBEKOV:
WE LOOK FORWARD TO SEEING THE GLOBAL GIANTS AT THE 2ND AUTUMN RENEWABLE ENERGY AUCTION IN KAZAKHSTAN, INCLUDING ROSATOM'S WIND POWER SUBSIDIARY
In Kazakhstan last year the renewable energy share amounted to 1% in the total electricity production. However the situation can change very much with the arrival of large players in Kazakhstan’s market. The major companies intend to participate in the 2nd renewable energy projects auction to be held this autumn. General Director of Kazakhstan’s Renewable Energy Association Arman KASHKINBEKOV talked about that in the interview with Interfax-Kazakhstan.
- How do you characterize the 1st renewable energy projects auction trading in terms of the investors' interest in Kazakhstan’s renewable energy market?
- Kazakhstan’s Energy Ministry held auction trading for the first time in the country's history to select new green energy facilities where mainly small capacity assets up to 10 MW were put up, that is, conditions were created to attract local Kazakhstani investors, developers and businessmen. The association started setting a local content issue before the Energy Ministry three years ago that it is necessary to break down auctions, not to forget about our local business, not to put up only large projects with the capacity of 50-100 MW, which the global giants would grab. I participated in person as an independent observer in a couple of auctions, and my colleagues and I saw real competition – in case an auction was held, the battle for projects was felt as if at auctions on the New York Stock Exchange. For example, one company - there were only eight [companies] at the auction [series] - made 23 bets in three hours! That is, every cent is important for an investor; their profitability, the project model, etc. depend on that.
Following the auction, and the Energy Ministry stated this clearly, a fairly rapid tariff decrease from fixed levels took place - the price fell by 17-20%. Nevertheless now we are worrying in a good sense about the successful implementation of projects. Why is this so important? That is why the next autumn auctions on the same capacity will proceed from these prices - the spring auction winning price will be the "ceiling". That is, if the company gave a tariff of 17 tenge (335.99 tenge/$1) on power energy from wind farms, then trading would start from 17 tenge. In this regard, it is important that there be no wrong chain for a steady reduction in prices, and as a result, companies fail to implement projects. Now we will think of this issue together with the Energy Ministry, but without jumping to conclusions, in fact the first trading series was successful - eight out of ten auctions took place.
- As a renewal energy summit, recently held in Astana, showed, the global power companies take interest in the development of renewable energy projects in Kazakhstan, what investors are you looking forward to seeing at the auctions this autumn?
- At the autumn auctions, where large capacities will be put up - from 50 MW upwards, we look forward to seeing many global giants. For example, the representatives of NovaWind, a subsidiary of the state corporation Rosatom, arrived at our summit in Astana - they are studying and analyzing. Also the representatives of Eni, Shell, Jinko Solar are studying our market. All these companies should carry out an analysis, find suppliers, develop a project model throughout the summer.
- To the best of our knowledge Rosatom specializes in nuclear energy, and it started developing wind energy not long ago , is such cooperation of interest to Kazakhstan?
- I met them [the company NovaWind] in person at a conference in Europe and invited to the summit in Astana. This enterprise as part of Rosatom is to develop a new filed for the corporation - wind power. The company has a large portfolio of projects - 1 gigawatt in Russia from wind power, so in the next 3-4 years it will be engaged in these projects. Now the company has expressed its desire to join our association to be aware of all discussions and decisions. What does this give to the investor? Representatives of the company do not need to travel to Astana every time; they will receive all necessary documents regarding the industry and submit their proposals online. This is very important for investors.
In general, the proposals of all investors are of interest to us since then we will have a choice, the main thing is that they should give the lowest price and fulfill contractual obligations.
So far renewable energy projects in Kazakhstan have been developing modestly - the renewable energy share in total electricity production was 1% in 2017, 3% is planned by 2020. In the next 3-5 years the renewable energy share in Kazakhstan will still be negligible, but the power giants, which will come over in the autumn could sharply raise this bar for us. I am absolutely sure that this autumn the big "monsters" will show themselves off in the battle not for oil and gas blocks, but for renewable energy projects in Kazakhstan. And there is such a trend in the whole world.
- It appears that the main hopes are pinned on the global giants’ investment?
- In Kazakhstan, firstly, the state support is needed for any industry to be formed up, and secondly, a powerful investor [is needed]. Thus, with participation of major players we put the oil and gas sector, agriculture, construction sector on track.
I am personally against the state presence in business but at the initial stage, as global practice shows, the renewable energy sector has not developed anywhere without state support. Of course, one has yet to determine to what extent the state would continue to play in the market through national companies. For example, the solar station Burnoye (in Zhambyl region), the wind farm Ereimentau (in Akmola region) and a number of other projects were created with financial support from Kazakhstan's national companies. The objective of the state was achieved but at what point it should stop and say that business should move further on all by itself? Naturally, for that the state needs to create even more attractive conditions, since private business has worse conditions a priori than national companies.
- When is it planned to adopt the first program for the development of renewable energy in Kazakhstan?
- After summing up the summit results we will submit the final declaration to the government, the main narrative of which will be an appeal to the government to start jointly developing the first state program for the development of the renewable energy industry in Kazakhstan. At the same time, we know that Chairman of the National Chamber of Commerce Atameken Timur Kulibayev instructed the Chamber to proceed to devise such a program.
So in the summer we will be starting, but the main work on the document will get underway in the autumn. We hope that in September the association together with the government and other interested state bodies and financial institutions will set up a working group to develop the state program. If everything goes as planned it may be submitted by the end of the year. There will be nothing complex in this program because all problems are already known, just the state departments, companies and financial institutions should be defined which would really do this work. The state has three goals: to reach the 3% renewable energy share by 2020, 10% by 2030, 50% by 2050 but there are no interim data, how much power the state needs in 2025, 2035 whereas the investors are wondering about that. The straight [line] is planned sharply upright, but in reality, in practice it fluctuates depending on oil prices, forex rates.
Long-term investors consider Kazakhstan not as a separate country, but as part of Central Asia, part of the Eurasian Economic Union; this is a huge market, and massive investment is planned for a long period. Therefore the investors need clarity, and the longer term the better.
- Thank you for the interview!
June, 2018
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