Renewable energy for sustainable development of kazakhstan swot and competitiveness analysis


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Renewable energy for sustainable development of kazakhstan swot and competitiveness analysis

  1. 1. Renewable energy for sustainable development of Kazakhstan Competitiveness factors and SWOT analysis Astana capital of Kazakhstan chosen as the venue for International Exhibition EXPO2017 is presented with an excellent opportunity to demonstrate how the wide scale use of renewable energy sources can foster harmonious and sustainable economic growth of our society. Sayan Kombarov, Ecowatt LLP Winner of Red Herring 100 Global and Asia 2010 Principles of sustainable development As it is known, sustainable development of society is based on production of consumer goods and the means of their manufacture for wide scale use at stable and affordable prices. The more such goods are available the higher general welfare of the whole community. The better quality of such goods, the more they are demanded by the markets, the more profitable is their production yielding more economic benefits through their provision for all investors and stakeholders, the more jobs and valuable products can entrepreneurs and capitalists create. Therefore only that production is sustainable that creates value for consumers resulting in the stable increase of social and material capital of society leading towards full satisfaction of its current needs without compromising the wellbeing and requirements of its future generations. Sustainability of renewable energy sources One the ways on the path to sustainability is the use of alternative or renewable energy sources, such as wind, solar and hydro power, with which our country is greatly endowed. Kazakhstan can promote its stable economic growth by engaging in efficient production of environmentally friendly "green" and inexhaustible energy creating high added value for the benefit of mass consumers. More so, construction, maintenance and operation of renewable energy generation capacities would allow creating permanent and highly skilled professional jobs in civil engineering, electric components, composite materials and machine building industries. Significant renewable energy potential of Kazakhstan would not only provide for supply of clean and inexhaustible energy to resource poor and electricity deficient regions of the country, such as south-eastern parts of it, but would also be sufficient for diversification of export with non fossil energy for mass consumption abroad. Mass production of renewable energy at affordable low prices would lead to the following beneficial consequences:  1) Stable and even ever growing market demand at affordable and stable prices,  2) Benefit for long term social and economic development of the country,  3) Generation of sustainable profit levels for the foreseeable future,  4) Creation of new jobs and industries,  5) Preservation of environment and natural wildlife habitats, 1
  2. 2.  6) Preservation and rational use of non-renewable energy sources of the needs of future generations. With that said, one must bear in mind that the most effective and profitable mass production and resource concentration is possible only thanks to the international labor specialization. It makes sense for Kazakhstan to specialize in those production industries, where it has competitive advantages rendered due to the natural, geographical and traditional industry related conditions. Specialization, as the basis of international and industrial division of labor, would allow attaining competitive advantage by means of resource concentration for production of the most beneficial goods as deemed by its added value per labor unit. According to classical Say's law, after XIX century French economist Jean-Baptist Say, mass production resulting in low product unit prices due to economies of scale would thereby itself create a very elastic consumer demand making possible other innovative ways of energy use and consumption. In Kazakhstan that would lead to such instances as mass spread of electric means of transport, hydrogen production and underground water extraction in Central part of the country. Renewable energy potential, especially availability of wind corridors, where the wind flow is having only one direction, such as Yerementau in Akmola and Zhuzymdyk in South-Kazakhstan region, or two periodically alternating in opposite directions, such as Dzhungar Gates and Shelek in Almaty and Korday in Dzhambyl region, would allow Kazakhstan to attain even lower costs having significantly boosted the volume of power generation sufficient for both domestic and foreign markets. Kazakhstan renewable energy potential One of such conditions, enabling Kazakhstan to achieve international competitive edge, is its abundance of not only fossil, but also unlimited renewable energy resources. Renewable energy is particularly attractive due to their inexhaustible supply making possible ecologically pure power generation. According to Harvard University professor and Nobel Prize winner for economics Michael Porter's competiveness factors analysis, the following factors lay foundation for specialization for a country to create competitive industry of world class:  Conditions  Market  Related and supporting industries  Strategy and structure to sustain long-term competitive advantage. The following Porter's factor analysis indicates the conditions necessary for creation in Kazakhstan of world class "green energy" industry, integrating all production stages from research and tentative studies to manufacturing, construction and operation of renewable power generating capacities: 2
  3. 3. Success Factors for Renewable Energy development in Kazakhstan Conditions  Wind power potential tens of thousands MWs (from 10 MW/sq. km for compact innovative turbines) or over 1 trillion kWh p.a. - one of the best in the world per UNDP and Kazakhstan Ministry for protection of Environment estimates;  Hydro energy potential thousands of MW;  Favorable solar climate;  Proximity to main markets with high demand;  Long distance of large energy consumption centers in the south of Kazakhstan from traditional fossil energy sources;  Availability of specially favorable conditions in wind tunnels, where the winds are blowing in either one, (Yereimentau, Zhuzymdyk) or periodically alternating opposite directions (Dzhungar gates, Shelek corridor, Korday valley). Related and supporting industries  Development of renewable energy leads to the diversification of national economy;  Availability of production capacities and materials for manufacturing, installation and construction;  Creation of new forms of energy, transportation and energy storage;  Stimulation of research and innovations aimed at creation of low cost and highly productive technologies. Market  High energy demand on domestic and foreign markets of neighbor countries;  Potential electricity market up to 50 billion kWh p.a plus;  Diversification of export potential from non fossil fuel energy sources;  Carbon oxide emission quotas market;  Substitution of traditional energy sources with renewable. Strategy, structure and competition  Strategy: sustainable and scalable power generation based on high capacity, highly productive and low cost renewable energy generation technology to alleviate reliance on consumption of non-renewable fossil and carbon energy resources;  Structure: efficient power generation, accumulation and transportation of electric and heat energy, seasonal synergy and mutual complementarily of different types of renewable energy. High capacity divisibility and scalability allowing to introduce stage-by-stage investments and capacities;  Competition: nuclear, fossil fuels energy are characterized by relatively higher costs, long lead periods, negative environmental impacts, technological complexity and remoteness from main consumption centers, e.g. in the southeast of Kazakhstan. South-eastern part of Kazakhstan is particularly rich with renewable energy. Due to the remoteness from traditional energy sources, such as coal deposits, oil and gas fields, energy supply from these sources is draught with considerable costs and losses. It is expected that the renewable energy 3
  4. 4. market for the region is quite large. Potentially, ecologically clean energy sources in the south-east of Kazakhstan can not only supply the domestic market several times over, but also neighboring countries, for example China, which is constantly experiencing growing demand for electric power. According to some estimates, current and future demand for electricity from Kazakhstan to China totals about half of its annual power production. China, under the auspices of Shanghai organization for cooperation, expressed interest in importing some 40 billion kWh of electricity p. a. It is expected that power prices both in Kazakhstan and China would gradually grow. In some regions of China electricity prices are 30-50% higher, than in Kazakhstan. Secure power supply is a matter of vital importance for sustainable development not only for Kazakhstan, but for our closest neighbors as well. Having said that, huge renewable energy sources of the region, fist of all its wind power potential, is practically untapped. One of the main reasons for this backlog lack of national electro technical and machine manufacturing in Kazakhstan, which cannot support neither construction, nor facilitate raising investments into erection of wind and solar power capacities, small and medium hydro power stations on the rivers of Trans-Ili and Dzungarian Alatau. Domestic mass manufacturing of electric equipment and turbines would allow rendering construction and production of renewable energy cheaper and more affordable for the end consumer. These favorable conditions constitute comparative advantage for generation and utilization of renewable energy in Kazakhstan. Thereby successful utilization of renewable energy sources in Kazakhstan would only be sustainable thanks to the development of locally based related and supporting manufacturing and technological industries. Choice of optimal strategy and technology for sustaining competitive advantage of renewable energy Exploitation of these resources would be most beneficial economically when coupled with creation of domestic manufacturing and technological base closely adapted to local particularly favorable conditions. This approach involves implementation of new design solutions aimed at achieving a number of cost and production performance advantages. Large scale renewable energy production in Kazakhstan, including wind power, would require its price and productivity competitiveness versus traditional sources of energy. Wind power in Kazakhstan is particularly interesting as it can generate industrial volumes of electric energy which can be transmitted via electricity grids to remote consumers, as well as to use in order to generate heat energy, for example in the form of hot water. Costs of renewable energy can be reduced with the help of special design and technical solutions which must fully take into account and as much as possible fully utilize characteristics and huge potential of the best wind sites of Kazakhstan, such as Dzungar Gates and Shelek corridor, as well as a number of other similar wind sites. Shortcomings of conventional tower mounted wind turbines Production of industrial volumes of wind electricity by universal tower mounted wind turbines under the conditions of the richest by their potential sites, such as Dzhungar Gates, can prove very difficult because of the extremely powerful winds and significant temperature seasonal changes. Among shortcomings of such turbines are their big mass mounted at high altitude of their masts, which make them very vulnerable to possible earthquakes and frequent hurricanes and gusty winds with velocity 4
  5. 5. above 20 m/sec (absolute maximum 50-60 m/sec). Under such extreme winds conventional wind turbines usually are put into idle condition in order to prevent their damage and therefore will produce some 30% less in such sites as Dzhungar Gates than it is possible if the turbines operated without such forced idleness. Conventional turbines equipped with guidance and turning systems towards the wind that are unnecessary in one directional winds, long and heavy blades which can be damaged by strong winds, high cost and installation and maintenance, low density of placement with intervals of up to 10 radius of the blades between the adjacent musts. Apart from that, construction of wind power stations in Kazakhstan based on imported tower mounted wind turbines would require high costs, and correspondingly high and subsidized by government budget for their payback tariffs. Their high cost, vulnerability to breakdowns under conditions of high speed and gusty winds in sharply continental climate and seismicity of south-east Kazakhstan, as well as low electricity tariffs may appear unattractive to investors, whereas their erection would come very expensive and cumbersome, especially under the extreme weather and climatic conditions. Not only imported technologies are necessary to use for the most efficient development of the best wind sites of Kazakhstan. It is also possible to develop and apply such technical solutions which would fully take into account their features and be free from the above shortcomings. Such turbines must be characterized by low cost, high capacity and productivity performance, be simple and easy to build, mount and service, аs well as available for serial manufacture in Kazakhstan. Development of such technological solutions would allow implementing mass production of wind turbines with large capacity for large scale development of wind power potential of the most perspective wind sites in Kazakhstan for wide circles of industrial and private consumers. Of course, tower mounted imported wind turbines can and will be operated in Kazakhstan. However, high cost of import would require high tariffs and subsidies rendering such green development economically unprofitable and unsustainable. Strategy, cost and production structure competitive advantage In order to create successful green industry in Kazakhstan it is necessary to introduce such development strategy which would be aimed at reaching structural and price competitive advantages attaining long-term benefits and added value for all stakeholders and society at large. Renewable energy strategy must be derived from position analysis of green energy of Kazakhstan and be directed at conversion of weaknesses and mitigation of risks to reach matching of opportunities and strengths. It is important to develop and apply such technological innovations which would aimed at achieving best competitive advantages versus existing technology due synergy of natural, production, geographical factors, which would determine technological structure of renewable energy, its cost and marketing advantages. Kazakhstan would rather benefit more from not merely importing ready produce, which would only strengthen its role of importer of not the best adequate and expensive technologies. That would discourage use of renewable energy due to their high price barrier. Therefore, in order to assure affordable and profitable mass consumption of renewable energy in Kazakhstan, it is necessary to apply maximum efforts for creation of domestic industry founded on existing in the country technological base. Of course, it is absolute pre-requisite to take into full account all state-of -the-art technological solutions found in the technologically advanced economies in this area. Special design and technical solutions developed by Ecowatt LLP are aimed to implement this approach n Kazakhstan. These solutions take into consideration peculiarities of the most powerful 5
  6. 6. energy potential of best wind sites, such as Dzhungar Gates and Shelek corridor, as well as Yereymentau, Zhuzymdyk, and Korday with the view to make its most efficient use. Total area of these perspective sites is thousands of square km. Green energy, according to Kazakhstan President Nursultan Nazarbayev, must be innovative. Kazakhstan being represented by Ecowatt LLP can offer such innovations, which would make such a better use of local outstanding wind and geographic conditions, thereby allowing to start mass manufacturing of not only productive and capital intensive technologies with large added value, such as wind turbines, generators, fibro glass materials, but also generation by their means of such mass consumption goods as electric power. Such production should correspond to all requirements of sustainable development and green growth that is highly demanded by international community. Large scale generation and reduction of price for renewable energy due to economies of scale could bring maximum economic effect thanks to implementation of design and technological disruptive innovations, aimed at attaining sustainable and log-term competitive advantage in the following areas:  Specific cost per MW of generation capacity ($/МВт)  Productivity increases in the form of operating efficiency with full capacity load (hrs. p.a.), including during hurricanes and gusts up to 50 m/sec  Improvement of generation capacity land placement (MW/sq. km.)  Quick and inexpensive construction, transportation, installation turnaround of generating capacities. Innovative technologies in renewable energy must be aimed at creation of powerful high performance output wind turbines with capacity in the range from a hundred kW to 1-5 MW, so that they can produce electricity with low cost, more dense placement and stable under possible seismic activity. This would have beneficial effect on the price of the final product - electric power and would invoke a huge demand for it. It can be reasonably expected, that chances for such successful harnessing of some of the best wind sites in Kazakhstan will be more promising. Wind power potential of Dzhungar Gates and other perspective sites Land area, which would be utilized for construction of wind power stations, could be in the range from 100 to 500 sq. kms. With target placement density from 10 to 100 special wind turbines per 1 sq. km. with forecast cost of $1 million/MW, 1 sq. km. area can accommodate some 10 to 100 MW of wind power generation capacities, comprising of compact innovative wind turbines 1 MW each, located with the distance of 100 m from each other. Conventional wind turbines, due to their large size, usually take more land area, since they must be located up to 10 blades radius away from each other, whereas their generation would be some 30% less, than forecasted for innovation turbines made in Kazakhstan. 6
  7. 7. SWОT green energy of Kazakhstan Strengths Weaknesses  Wind potential tens of thousands MW (10 MW/sq. km. for compact innovative turbines) or over 1 trillion kWh p.a. - one of the world best according to estimates of the Kazakhstan Ministry for Environmental protection and UNDP;  3 - 5,5 thousand effective hrs. p. a. with full capacity load vs. less than 3 thousand hrs. in Europe;  Hydro power potential thousands MW;  Favorable solar climate;  Proximity to main markets with high demand capacity;  Tax investment preferences;  Guaranteed purchase of "green energy" by the state under approved by regulator businessplan tariff;  Free of charge electricity transportation towards final user;  Priority dispatching of renewable "green energy".  Strong and gusty winds, especially in Dzhungar Gates, with velocity up to 50-60 m/sec, restricting utilization and increasing the cost of construction of wind energy generation capacities;  Seismic activity in south and south-eastern Kazakhstan pose a risk of severe damage to wind renewable energy facilities, restricting utilization and increasing the cost of construction of wind energy generation capacities;  Lack of own manufacturing capacity for producing of electric equipment;  High cost of construction of renewable energy facilities from imported technologies and equipment;  Insufficient infrastructure and Power Transmission Lines (PTLs), long distances between generation and consumer centers causing high transmission losses. Opportunities Threats and risks  Creation of domestic manufacturing and producing base in the field of "green energy", construction and synthetic materials;  Increase of potential and productivity by means of creation and application of disruptive innovations;  Creation of additional export and transit energy routes;  Improvement of ecological situation on large urban cities by conversion of their energy supply and transport to ecologically clean renewable energy sources;  Accumulation of energy for subsequent heat and power supply of cities;  Power generation for subsequent production of cheap hydrogen and extraction of water from underground aquifers for agriculture and other uses;  Adaptation to local natural, climatic, seismic conditions to improve cost and production performance.  Guaranty for observation of capital and intellectual property rights;  Insufficient technological and design experience for development of innovations and introduction of new technologies;  Relations with suppliers equipment and technology;  Risks of errors in coordination, planning which may lead to delays in construction and mounting;  Operation and maintenance under the conditions of sharply continental climate;  Weather and climate risks;  Entry into new markets;  Under-developed infrastructure and PTLs;  Regulative and legal risks. 7
  8. 8. Estimated parameters for 1 GW wind power station in Dzhungar Gates Area, sq. km. Installed capacity, on the basis of 10 MW/ Cost of construction, $ billon Estimated volume of power generation, billion kWh p.a. Power sales revenue, $ million 100 1000 1 5.5 275 100 sq. km х 10 wind power turbines each with capacity 1 MW, which would total 1 thousand MW or 1 GW of installed capacity, with estimated cost of ориентировочной стоимостью $ 1 billion. Operating and maintenance costs of such wind power stations would be small, not more than 5% of sales revenue, which can be achieved due to more rigid and strengthened blades, reducing the odds for breakdowns and idleness due to repairs. According to estimates of the project developers, payback period, without taking into account taxation, can be reached in some 4 years, with power selling price ¢5/kWh. Application of compact and not obstructing each other innovative wind turbines, the density of placement for power generating capacities can be increased up to 100 MW/ It is estimated, that a 1,000 MW wind power station in Dzhungar Gates with average full capacity efficiency of 5.5 thousand hrs. per year can annually yield some 5.5 billion kWh for $275 million at selling price of ¢5/kWh. But, useful area available for construction of wind power station situated in Dzhungar Gates gorge 80 km long and 10-15 km wide is actually totaling some 1,200 sq. km. That area can house some 48,000 MW of power generating capacities (based on the assumption that 1 can accommodate 40 MW) which can produce c. 264 billion kWh p.a. or more than 3 times of total Kazakhstan current power generation. According some to expert estimates, number of effective wind generation full load operating hrs. in other prospective wind sites in Kazakhstan on average can reach 3-3.5 thousand hrs. p.a. The following table indicates characteristics of the most perspective sites of Kazakhstan with unidirectional or alternating in opposite direction wind flows: Site Area, Dzhungar Gates Shelek Ereymentau Korday Zhuzymdyk 1,200 2,000 10,000 200 400 Total Installed capacity, MW based on 10 MW/* 12,000 20,000 100,000 2,000 4,000 Cost, $ billion based on $1 million/MW* Full capacity operation, hrs p.a.* 12 20 100 2 4 5,500 3,500 3,300 2,500 3,000 138 GW 138 Potential power generation, billion kWh p.a.* 66 70 330 5 12 483 *Data on specific capacity and efficiency of operation is based on estimates by Ecowatt LLP. The capacity per sq. km. indicator of 10 MW/ can be increased 4-10 times due to more dense turbines placement corresponding to 40-100 generating units per sq. km. which can be located at 100 158 m intervals between each other. Alternatively, more dense capacity placement can be reached by 8
  9. 9. increasing capacity of individual turbines. Above total wind power capacity estimate can reach 500-700 GW. Growth limits for green energy of Kazakhstan Current total installed capacity of all power generating electric plants in Kazakhstan amounts to c. 19 GW, capacity at disposal is 14.6 GW. Installed power generating capacities of Russian Federation total 218 GW, of Chinese - 900 GW, Central and Eastern Europe - 900 GW. Installed wind power generating capacities of EU total 1,000 GW. In accordance to above estimates, total wind power potential of Kazakhstan can reach 500-700 GW, which is 26-35 times more than currently installed capacity. Per the previous table, power generation of only some of the best known wind sites of Kazakhstan can total c. 483 billion kWh p.a., which is over 5 times, than cumulative power production in Kazakhstan that reached 86.2 billion kWh in 2011. Wind power potential of Dzhungar Gates alone is estimated at some 1,000 billion kWh p.a. It is becoming clear, upon examination of above estimated data, that wind energy potential at disposal in Kazakhstan has huge investment attraction and capacity, forming the foundation for sustainability for the development of the country for many years ahead. According to the theory of power grids, such eletric closed systems can remain in stable equilibrium if their renewable energy sources total 10% of all installed capacities connected to them. Should the power grids of Europe, Central Asia, China and South-east Asia be connected, the share of renewable energy of such Pan-European Energy system connected with Pan-Asian within the framework of Green Euro-Asian energy bridge can be quite substantial. Strategic location of perspective wind sites, such as Yereumentau in Akmola region, Shelek and Dzhungar Gates in Almaty region near the largest capital cities of Kazakhstan and western provinces of China, will allow for organization of power transmission to supply mass consumer with cheap and ecologically pure energy. Generation of sufficiently large volumes of electricity in the future would make possible not only use of renewable energy for electric and heat supply for population, but production of hydrogen fuel, extraction of large volumes of underground water in Central Kazakhstan for agricultural needs, provision of cheap electricity for electric means of transportation and so on. Conclusion Prospects for creation of world class renewable energy industry in our country are from onset are much more promising exactly due to the exceptionally favorable natural factors, primarily because of open large land areas and best wind conditions. It is estimated that in comparison with Europe and the rest of Asia, wind power turbines in Kazakhstan can produce some 30% more electricity with the help of special innovation performance improvements. As it was noted above, even more opportunities can be reaped through implementation of special innovative technological solutions aimed at increasing productivity and generation capacity allocation per land area unit. Due to simplicity of manufacturing, construction and installation, economies of scale through mass power generation экономии and local content, it is expected that specific generation capacity cost can be reduced to $1 million/MW, which is almost twice lower than the similar indicator for Hydro and Coal Fired Power plants. For comparison, cost of construction of Balkhash 1,320 MW Coal Fired Thermal Power Plant is forecast at around $2.3 billion, or c. $1.7 million/MW. Cost of imported wind power turbines is estimated at some $1.5-2 million/MW plus. 9
  10. 10. With that said, development of renewable energy would be most beneficial thanks to creation and manufacturing of own innovative wind turbines in the Republic of Kazakhstan, which would address the issue of achieving cost and production leadership through the better use of local geographical, topographical and natural comparative advantages. That would lead to further development of connected and related industries, such as construction, production of synthetic materials, electric technical equipment, which are already founded in Kazakhstan. It is important, that special design and construction solutions in wind energy would not pose present noise discomfort for population, threat to migrating birds and wild life in Kazakhstan, as well as not make disturbances for radio navigation and communication. Thereby, development and introduction of renewable energy sources at national enterprises would be in the best interest for generation and electric and heat energy from ecologically pure sources of free energy, enhance non-raw materials export of Kazakhstan, and therefore correspond to the import initiatives of the Program of Forced Industrial Innovation Development (FIID) of Kazakhstan and development of its "green" industry and creation on its basis of export "green" energy bridge, interconnecting Europe, Central and South-east Asia and China. The Program FIIR of Kazakhstan, initiated by the President Nursultan Nazarbayev and the Government of Kazakhstan must be directed towards industrialization of the country with the aim of introducing innovative technologies enabling sustainable and economically profitable development of its comparative natural and geographical advantages, such as rich sources of renewable energy. It is not surprise that it is precisely in the field of renewable energy Kazakhstan private techno startup demonstrated possibilities for creation of large market value from scratch that won prestigious Red Herring 100 Global award for 2010. Thanks to technological innovations such as those proposed by Ecowatt LLP, Kazakhstan has opportunity for not only putting renewable energy at the disposal of its national economy and people, but also to do so in the most beneficial and profitable way having created a huge demand for its produce in domestic and foreign markets, so that the lion's share of the development costs and subsequent revenues would remain in the republic. References 1. Eric Lundtang Peterson et all. Djungar Gate and Chilik corridor - Kazakhstan. Wind energy potential. Risø National Laboratory, Denmark. 2. Комбаров М. Н. О возможности экспорта электроэнергии в Китай. Журнал "Kazenergy". 2006 г. 3. Материалы ПРООН в РК. 4. Комбаров М. Н. Ветротурбина для однонаправленных ветров. Энергетика и топливные ресурсы Казахстана. №2. Апрель 2010 г. 5. Комбаров С. М. Значение инноваций для развития ВИЭ Казахстана. Журнал "Kazenergy". Октябрь, 2012 г. 6. Камбаров М. Н. К вопросу водообеспечения центрального Казахстана. Журнал "Kazenergy". Октябрь, 2012 г. 7. Камбаров М. Н. О Создании единой энергосистемы евразийского континента. 8. Hal Foster. EcoWatt designs new type of windmill for breezy gorge 10 areas