English (UK)
On March 28, 2025, the Ministry of Energy of the Republic of Kazakhstan approved new imbalance penalty coefficients (1.3 for excess and 0.7 for shortage) to be applied when generation deviates beyond ±5% from the scheduled output for renewable energy (RES) facilities.
Although these regulations formally came into force after the 2023 and 2024 auctions, the regulator proposes applying them retroactively to projects selected before these norms existed—raising serious concerns among investors and project operators and violating the principles of legal certainty and investment stability.
Core Issues:
- RES projects selected in 2023–2024 entered into offtake contracts and financing agreements based on the previously valid coefficients (set at 1.0).
- The new 2025 coefficients significantly increase the financial burden, particularly given the lack of an effective forecasting system.
- The Ministry of Energy proposes to apply the new norms retroactively starting from July 2023 and to enforce strict deviation thresholds.
Legal and Institutional Risks
| Aspect | Risk |
|---|---|
| Principle of Legal Certainty | Violates the principle of non-retroactivity — new norms should not apply to past contracts |
| Trust in Auction System | Undermines investor confidence in the stability of auction mechanisms |
| Financial Planning | Projects cannot comply with financial models approved by lenders |
| Risk of Default | Increased penalties threaten PPA compliance and debt servicing |
Examples from International Practice
- In the EU, any changes to balancing market rules are not applied to contracts signed before the new regulations were adopted.
- In India, the court prohibited the regulator from revising dispatch and penalty rules for projects selected before the publication of new norms.
Proposed Measures
- Apply new imbalance coefficients only to RES projects selected from 2025 onward.
- Set a deviation tolerance band of ±20% from the declared schedule.
Conclusion:
Retroactive application of new imbalance penalties and unreasonably narrow deviation thresholds presents both legal and institutional risks, undermining the credibility of the RES auction system. To preserve investment predictability and project sustainability, a differentiated and phased approach is necessary.