English (UK)
Currently, large-scale RE projects with 1000 MW capacity in Kazakhstan are implemented through two parallel mechanisms — Intergovernmental Agreements (IGAs) and Auctions by KOREM JSC.
A combined model is proposed: the Government of Kazakhstan permits the implementation of wind projects with capacities up to 1000 MW under investment agreements, linked to the construction of major industrial facilities (e.g. petrochemical, metallurgy, etc.). In this case:
- Up to 70% of generated electricity is used for the investor’s own needs.
- Up to 30% is sold to the Financial Settlement Center (FSC) under a 20-year PPA at the auction tariff for RE > 499 MW (e.g. 18.72 KZT/kWh), taking into account the presence of energy storage systems.
Advantages of This Model
| Parameter | Combined Model | KOREM Auctions | IGA Mechanism |
|---|---|---|---|
| Investment Efficiency | High: New factories + generation | High (if low tariff) | Limited (overpayment up to $437M) |
| Budget Burden | Low: Only 30% is tariffed | None | High: 100% tariffed at inflated rates |
| Tariff for 30% | 18.72 KZT/kWh | 18.72 KZT/kWh | 4.25 US cents/kWh (~22 KZT/kWh) |
| Infrastructure Effect | High: New plants and logistics | Moderate | Limited |
| Selection Format | Investment agreement + benchmark tariff | Transparent auction | Closed intergovernmental deals |
| National Law | Applicable (via FSC offtake) | Fully applicable | Limited application |
| Local Industry Support | Guaranteed (localization of investment) | Mandatory >51% | Often less than 50% |
| RE Sector “Overheating” | Minimal: no quota pressure | Moderate | High |
Potential Risks and Mitigation Measures
| Risk | Mitigation Mechanism |
|---|---|
| Unjustified tariff benefits | Limit grid sales to 30% of total generation |
| Bypassing the auction system | Link grid sales to actual commissioning of the industrial facility |
| Lack of competitive tariff | Apply only the auction tariff for RE > 499 MW |
| Low economic impact | Require localization of investment and job creation in Kazakhstan |
Strategic Effect
- Accelerates industrial projects with captive generation
- Maintains price discipline: government avoids paying for full generation
- Strengthens national energy and industrial sovereignty
- FSC secures stable volume at transparent tariff without budget loss
Recommendations for Government
- Develop a standard agreement model that includes both RE and industrial facility construction
- Limit model application to high-tech industries with a multiplier effect
- Introduce expert review for cost and energy balance (self-consumption vs grid sales)
- Ensure legal protection for the auction mechanism as a foundation of tariff policy