Solar Investment Opportunities: Kazakhstan

Kazakhstan: Solar Investment Opportunities
Emerging Markets Task Force Report

Chair of the SolarPower Europe Emerging Markets Task Force: Stefano Mantellassi, Eni SpA.
Author: Roger J. Taylor, EXXERGY GmbH.
Editor: Thomas C. Sauer, EXXERGY GmbH.
Coordinator of the SolarPower Europe Emerging Markets Task Force: Máté Heisz, SolarPower Europe.
Contact: info@solarpowereurope.org.
Supported by: Association of Renewable Energy of Kazakhstan (AREK), www.kazrenergy.com.
Acknowledgements: SolarPower Europe would like to extend a special thanks to EXXERGY GmbH and all Task Force members that contributed with their knowledge
and experience to this report. A special thanks to the Association of Renewable Energy of Kazakhstan (AREK) for their support. This would never have been possible
without their continuous support.
Project information: The SolarPower Europe Emerging Markets Task Force was launched in March 2018 and, since then, has become an active working group of
more than 100 experts from more than 50 companies. The objective of the Task Force is to identify business and cooperation opportunities and thereby contribute
to the energy transition in emerging markets outside Europe.
Design: Onehemisphere, Sweden.
Published: September 2019.
Disclaimer: This report has been prepared by SolarPower Europe. It is being furnished to the recipients for general information only. Nothing in it should be
interpreted as an offer or recommendation of any products, services or financial products. This report does not constitute technical, investment, legal, tax or any
other advice. Recipients should consult with their own technical, financial, legal, tax or other advisors as needed. This report is based on sources believed to be
accurate. However, SolarPower Europe does not warrant the accuracy or completeness of any information contained in this report. SolarPower Europe assumes no
obligation to update any information contained herein. SolarPower Europe will not be held liable for any direct or indirect damage incurred by the use of the
information provided and will not provide any indemnities.

SolarPower Europe / KAZAKHSTAN: SOLAR INVESTMENT OPPORTUNITIES - EMERGING MARKETS TASK FORCE REPORT / 3
TABLE OF CONTENTS
FOREWORD 5
CONTEXT 7
SOLAR POWER POTENTIAL – MAP 6
COUNTRY OVERVIEW 7
ENERGY GEOGRAPHY 7
DEMOGRAPHICS 8
MACROECONOMIC CONTEXT 9
ECONOMIC OUTLOOK 9
BUSINESS ENVIRONMENT 9
POLITICAL AND SOCIAL CONTEXT 12
KAZAKHSTAN’S ELECTRICITY MARKET 14
REGULATION OF KAZAKHSTAN’S ELECTRIC POWER INDUSTRY 14
ELECTRICITY INFRASTRUCTURE 15
GENERATION 16
CONSUMPTION 17
NEW DEVELOPMENTS AND SOLAR POWER 18
2013 POLICY POSITION 18
DEVELOPMENT SUPPORT 19
TENDER PROGRAMME FOR SOLAR AND WIND IN 2018 19
RECOMMENDATIONS 20
FOR INVESTORS 20
FOR LOCAL PUBLIC DECISION-MAKERS 20
FOR LOCAL PRIVATE STAKEHOLDERS 21
FOR DEVELOPMENT FINANCE INSTITUTIONS 21
REFERENCES 22
“This report series, developed by our Emerging Markets Task Force,
provides quality market information to solar investors looking for
opportunities around the world. It will help solar companies to
better access new markets, and thus ultimately, accelerate the
global energy transition.”
Walburga Hemetsberger
CEO, SolarPower Europe

4 / SolarPower Europe / KAZAKHSTAN: SOLAR INVESTMENT OPPORTUNITIES - EMERGING MARKETS TASK FORCE REPORT
Clean Energy Associates
Sponsor Members:
SolarPower Europe would like to thank the members of its
Emerging Markets Task Force that contributed to this report including:

FOREWORD
BY STEFANO MANTELLASSI, Vice-President Energy Solutions ENI SpA and Chair of the
SolarPower Europe Emerging Markets Task Force, and THOMAS C. SAUER, President & CEO
of EXXERGY GmbH.
SolarPower Europe launched the Emerging Markets Task Force in 2018 to identify business and cooperation
opportunities and thereby contribute to the energy transition in emerging markets outside Europe. Since then,
the Task Force has become an active working group of more than 120 experts from over 60 companies, working
on a suite of reports presenting solar investment opportunities in new and emerging markets around the world.
The Task Force has operated through a series of physical and virtual meetings, visits in the selected markets and
conferences. We are involved in other relevant initiatives such as the Africa-EU Sustainable Energy Investment
Platform, the renewAfrica initiative and IRENA’s Coalition for Action. Moreover, we cooperate with international
stakeholders such as the European Commission, the IEC system for certification to standards relating to equipment
for use in renewable energy applications (IECRE), the International Renewable Energy Agency (IRENA), the
International Solar Alliance and GET.invest, as well as key local stakeholders such as national industry associations
from various countries to shape the global energy transition.
With this report we are proud to present our findings on solar investment opportunities in Kazakhstan. This report
researched and prepared by EXXERGY GmbH with the support of the Task Force members and the Association of
Renewable Energy of Kazakhstan (AREK) provides an overview of the country’s business environment, major
macroeconomic and demographic trends. It also analyses issues related to credit and political risks. The report
highlights Kazakhstan’s energy context, key stakeholders, and the regulatory framework relevant for solar investors
interested in the Kazakhstani market. The research finds that Kazakhstan has huge potential for the development
of solar PV, with a public tender process providing a 15-year PPA. At the same time, policymakers could further
improve the attractiveness of the country by addressing certain financial, technical and administrative challenges.
Therefore, this report provides some recommendations to investors, policymakers, development finance
institutions, and local private stakeholders to master these challenges.
This Kazakhstan report is the fifth in a series of SolarPower Europe market reports. Previous reports focus on
Mozambique, Senegal, Ivory Coast, and Myanmar. All reports can be downloaded from
http://www.solarpowereurope.org/ free of charge. Reports on India, Tunisia, Morocco and Tanzania are in
preparation and will be published later in 2019.
If you want to be part of these activities and discover new solar business opportunities, please feel free to join
SolarPower Europe’s Emerging Markets Task Force.
STEFANO MANTELLASSI
Vice-President Energy Solutions,
ENI SpA.
Chair of the SolarPower Europe
Emerging Markets Task Force.
THOMAS C. SAUER
President & CEO of
EXXERGY GmbH

SOURCE: World Bank, 2017 Solargis.
PHOTOVOLTAIC POWER POTENTIAL
KAZAKHSTAN
*The name of the capital of Kazakhstan
has changed from Astana to Nur-Sultan.
*

1. CONTEXT
COUNTRY OVERVIEW
KAZAKHSTAN
OFFICIAL LANGUAGE
CAPITAL
ADMINISTRATIVE STRUCTURE
CURRENCY
SURFACE
POPULATION (2017)
POPULATION DENSITY (2017)
EMPLOYMENT IN AGRICULTURE (2018)
GDP (2017)
EUROPE & CENTRAL ASIA GDP GROWTH AVERAGE (2017)
GDP GROWTH (2017)
ADULT LITERACY RATE (2015)
INTERNET CONNECTIONS (2017)
MOBILE PHONE CONNECTIONS (2017)
Kazakh
Nur-Sultan (previously called Astana)
Divided into 14 regional oblystar
(administrative areas) and three cities,
Almaty, Shymkent and Nur-Sultan
Kazakhstani Tenge (KZT)1
2,724,900 km2
18.0 million
6.68 people per km2
17% (1998 38%)
USD 162.886 billion
2.6%
4.1%
99.8%
76.4% of the population
147 subscriptions per 100
SOURCE: The World Bank, 2018; International Telecommunications Union, 2017; Freedom House, 2018; Frankfurt Exchange (Börse) 1 June 2019.
ENERGY GEOGRAPHY
Kazakhstan has both significant reserves of oil, gas, coal
and uranium and large potential to develop renewable
energies, both solar PV and wind. In particular,
Kazakhstan has areas of high insolation, particularly in
the south of the country suitable for solar PV.
Kazakhstan is the largest oil producer in Central Asia
with proven crude oil reserves that are ranked 12th
highest in the world. Its natural energy reserves are the
18th
highest in the world. It is estimated that total energy
extraction in 2014 was 154.2 million tonnes of oil
equivalent (Mtoe) and has been rising consistently over
the last 15 years.2
Kazakhstan also has reserves of
approximately 37 billion tonnes of mostly anthracitic
and bituminous coals (4% of world estimated reserves).3
Figure 1 demonstrates the significant contribution that
fossil fuels make to the energy mix of Kazakhstan. Of the
78 million tonnes of oil equivalent (Mtoe) supplied in
2015, all but 1% came from fossil fuels.
1 KZT 381.2300 = USD 1.00. Exchange rate on 1 June 2019, Source: Börse
Frankfurt (Exchange).
2 International Energy Agency, 2016. p13,15.
3 Karatayev and Clarke, 2014. p99.
FIGURE 1 KAZAKHSTAN ENERGY MIX
Oil; 20%
2015
Hydro; 1%
Coal; 44%
Natural Gas; 35%
SOURCE: IEA, 2017.

Kazakhstan’s solar energy potential is expected to be
significant, particularly in the south, which receives
between 2,200 and 3,000 hours of sunlight a year and
the energy from solar radiation at around 1,300–
1,800 kWh/m2
per year.4
In the north and west of
Kazakhstan, the estimate is between 1,000–
1,500 kWh/m2
with the theoretical potential overall for
3,700,000 TWh a year.5
The first utility-scale solar power
plant (57 MW) was commissioned in 2015.
The climate in Kazakhstan is starkly continental. In
summer the temperatures average more than 30°C and
in winter average −20°C. Figure 3 shows the different
climate zones across the country using the Köppen
classification.
DEMOGRAPHICS
Kazakhstan has a diverse society comprising 125
ethnicities and nationalities within a population of some
18 million as of 2017 – about 53% of which live in urban
areas. The population is relatively young – 26% are aged
below 15 years, while only 7% of the population are over
65. The ratio of dependents (people younger than 15 and
older than 64 to the working-age population) is around
49%. According to the 2009 national population census,
63.1% of the population is Kazakh, while Russians,
Uzbeks, Ukrainians and Uighurs constitute 23.7%, 2.9%,
2.1% and 1.4% of the population, respectively. This
ethnic diversity is reflected in religious beliefs with
around 70% of the population declaring themselves
Muslim (Sunni) and 26% Christian (Orthodox).
The main languages in Kazakhstan are Kazakh and
Russian. Kazakh is the official state language as per the
constitution, while Russian can be used as the language
of interethnic communication. Transactions between
individuals or legal entities in Kazakhstan that are
executed in writing are in Kazakh and Russian.
Agreements involving foreign individuals and other legal
entities are in Kazakh and another language acceptable
to the parties. According to PwC,6
non-compliance with
this “rule” does not lead to the invalidation of the
underlying agreement.
1 CONTEXT / CONTINUED
FIGURE 2 KAZAKHSTAN’S CLIMATE ZONES
Cold desert climate (BWk)
Temperate continental climate/Humid continental climate (Dfb)
Warm continental climate/Humid continental climate (Dfa)
Warm continental climate/Mediterranean continental climate (Dsa)
Cold semi-arid climate (BSk)
SOURCE: Zifan.
4 Ibid, p101.
5 International Energy Agency, 2016. p17.
6 PwC, 2017, p7.

MACROECONOMIC CONTEXT
The World Bank’s assessment7
of Kazakhstan’s economy
is that in the first half of 2018, the economy expanded
at an annual rate of 4.1%, supported by robust oil
production. This is down slightly from a growth rate of
4.3% in the same period of 2017. Oil output rose by 6.2%
year-on-year in January to June, supported by stronger-
than-expected production from the Kashagan oil field,
but expansion was below that posted in the same
period of 2017 (9.7%). The services sector also
contributed to growth, benefiting from spill overs from
favourable terms of trade. Although output from the
agriculture sector rose by 4%, the construction sector
activity remained flat. On the demand side, economic
growth continued to be driven by net exports fuelled by
rising oil exports and higher oil prices. The European
Bank for Reconstruction and Development (EBRD)
identifies that oil accounts for around 65% of
Kazakhstan’s exports in dollar terms,8
in total 68.3 billion
USD in goods and services, a 24.2% increase from 2017.9
During this period, the external position improved
markedly based on favourable terms of trade. As a
result, the current account deficit narrowed to 1.9% of
GDP in the first half of 2018, down from 4.3% of GDP in
the same period one year earlier. On the financing side,
strong inflows of foreign direct investment (FDI) were
offset by short-term capital outflows. As a result,
international reserves had declined by around 2% by
mid-2018 compared to end-2017. The Tenge remained
broadly stable against the U.S. Dollar in the first half of
2018 owing mainly to the improved external position.
Rising revenue from the oil sector and continuing fiscal
consolidation drove an improvement in the fiscal
position in the first half of 2018. The fiscal deficit
narrowed markedly, falling to 3.9% of GDP in the first
half of 2018 (from 6.7% of GDP in the same period of
2017, largely on account of substantial capital injections
to the banking sector). The non-oil fiscal balance
improved, as the government continued to curtail
transfers from the National Fund to the state budget.
In the absence of external shocks, inflation continued
to moderate. Annual consumer price inflation fell to
6.4% in the first half of 2018 (from 7.6% in the same
period of 2017), within the Central Bank’s inflation target
range of 5–7%. Subsequently, the central bank cut its
policy rate from 10.25% at the beginning of 2018 to 9%
in June.
ECONOMIC OUTLOOK
It is predicted that the economy is set to lose traction
during 2019, as slowing growth in the country’s trading
partners weighs on export performance and as a fall in
oil output likely limits oil revenues. Domestic demand
dynamics should remain robust, however, amid
strengthening credit growth. Meanwhile, uncertainty
over the transition in power and lower commodity
prices present the key downside risks. Expectations are
for GDP to increase 3.4% in 2019, unchanged from last
month’s estimate, and 3.3% in 2020.10
In the period leading up to the resignation of President
Nazarbayev, the Kazakhstani authorities initiated a series
of reforms — including civil service reforms, fiscal
decentralization,judicialmodernization,andmeasuresto
improve the business environment — in an attempt to
address key structural weaknesses. The full
implementation of these reforms is likely to accelerate
Kazakhstan’stransitiontoanewgrowthmodelandboost
market confidence. As a consequence of these changes,
The World Bank11
forecasts an improving fiscal balance
and increasing labour income, but also predicts
unfavourableimpactsonKazakhstan’sinternalconditions
including low productivity growth, the dominance of
state-owned enterprises in the economy, unequal
regulatory treatment and low competition levels.
BUSINESS ENVIRONMENT
Generallytheenvironmentforestablishingandundertaking
business in Kazakhstan is well developed. The Doing
Business Index published annually by The World Bank12
provides a general picture of the comparative efficiency of
the business institutions in a country. It measures the
impact of regulatory and fiscal discipline on business
activity and the ease/difficulty of doing business in the
country through the analysis of selected criteria such as
fiscal discipline, access to credit, international trade, tax,
registeringpropertyandinvestorprotection.
As shown in Figure 3, Kazakhstan ranks 28th
in the world
on overall rankings, ahead of the other countries in the
central Asia region and within the second to top decile
of countries.
7 The World Bank 2019b.
8 Quoted in The Astana Times 2019a.
9 Minister of Finance Dalenov quoted in The Astana Times 2019b.
10 Focus Economics, 2019.
11 The World Bank 2019b.
12 The World Bank, 2019a.

Across the range of specific topics measured, shown in
Figure 4, Kazakhstan performs at a world leading level
in protecting minority interests (rank 1) and in enforcing
contracts (rank 4). On the other hand, it performs
relatively poorly on two dimensions: trading across
borders and getting electricity. The trading across
borders measure is comprised of an assessment of
documentary and border compliance for exports and
imports. The cause of Kazakhstan’s relatively poor
performance on this measure is solely related to
exports. Both documentary and border compliance for
imports rank very highly. For electricity supply,
Kazakhstan scores relatively poorly on the number of
procedures to be completed to obtain an electricity
supply and the time taken and cost of getting electricity
supplied. It ranks well (surprisingly, given the
description of the electricity system below) on quality
of supply.
FIGURE 4 RANKINGS ON DOING BUSINESS (2019), BY TOPIC
190
180
170
160
150
140
130
120
110
100
90
80
70
60
50
40
30
20
10
1
Rank
Starting a
business
Dealing with
construction
permits
Getting
electricty
Registering
property
Getting
credit
Protecting
minority
investors
Paying
taxes
Trading
across
borders
Enforcing
contracts
Resolving
insolvency
36 35
76
18
60
1
56
102
4
37
SOURCE: Doing Business, the World Bank Group.
FIGURE 3 EASE OF DOING BUSINESS IN KAZAKHSTAN, 2019
57.11: Tajikistan (Rank 126)
Tajikistan (Rank 126)
0
190
100
1
DB 2019 Ease of Doing Business Score
DB 2019 Rank
73.54: Moldova (Rank 47)
Moldova (Rank 47)
72.34: Regional Average (Europe & Central Asia)
Kyrgyz Republic (Rank 70)
77.37: Russian Federation (Rank 31)
Russian Federation (Rank 31)
77.89: Kazakhstan (Rank 28)
Kazakhstan (Rank 28)
68.33: Kyrgyz Republic (Rank 70)
SOURCE: World Bank.
NOTE: The distance to frontier (DTF) measure shows the distance of each economy to the ‘frontier’, which represents the best performance observed on each of the indicators across all economies in the Doing Business sample
since 2005. An economy’s distance to frontier is reflected on a scale from 0 to 100, where 0 represents the lowest performance and 100 represents the frontier. The ease of doing business ranking ranges from 1 to 190.

Foreign ownership restrictions exist for farm and forestry
land and land in a Kazakhstani frontier zone. Foreign
owners can lease agricultural land for a period not
exceeding 25 years, although the lease of land to foreign
entities is currently on hold due to some social unrest
regarding this issue.14
Kazakhstan has extensive regulation. Permits are
categorisedonthebasisofthelevelofdangeroftheactivity
to be carried out: Licenses for high danger activities,
permits for moderate danger and notifications for low
danger activities. Since 1 January 2017, lists exist for the
activities required for a license (79) permit (201) and
notification(53).Therequiredlicense,permitornotification
must be obtained prior to the commencement of the
activity. If all the documents required to be filed are
contained in the application, processing takes 15 days. In
reality, the process of obtaining the license or permit can
take between one and six months.
Figure 5 shows a range of political and credit risk
measures. Overall, the measures indicate Kazakhstan
has an average risk rating.
Kazakhstan has a comprehensive tax system (see PwC’s
Doing Business guide for details) including corporate,
individual and value added taxes. Corporate income tax
applies to the taxable income of Kazakhstan entities and
branches of foreign entities. Kazakhstani branches of
foreign legal entities are taxed on their Kazakhstan
sourcedincome.Therearepossibleinvestmentincentives
under the tax system for Kazakhstani legal entities and
special economic zones exist in eleven areas, which may
include areas of interest for solar energy production.
Rights related to land and other immovable property are
regulated by the Land Code, the Civil Code and the Law
ofStateRegistrationoftheRightstoImmovableProperty.
A cadastral register of property rights is maintained, but
accesstotheregisterislimitedtotheownerorauthorised
state authorities. Each plot of land has a designated
purpose, which is identified in an act for a designated
purpose. This purpose depends on the category of land,
for example land in population centres and agricultural
land.UndertheLandCode,alandplotshouldbeusedin
accordance with its designated purpose.13
FIGURE 5 KAZAKHSTAN’S OECD RISK CATEGORY AND S&P’S, MOODY’S, FITCH RATINGS
Average political risk Expropriation and breach
of contract risk
War and civil
disturbance risk
Transfer and
convertibility risk
52/100 56/100 49/100 51/100
Average credit risk
OECD country
risk category
5
S&P’s
rating
BBB-/A-3
Moody’s
rating
Baa3
Fitch
rating
BBB
Sovereign credit risk Bank credit risk Corporate credit risk
67/100 41/100 78/100 81/100
SOURCE: SACE 2019. OECD Country Risk Classification, S&P rating, Moodys rating, Fitch rating.
13 PwC 2019.
14 Pers comm. Arman Kashkinbekov. AREK.

POLITICAL AND SOCIAL CONTEXT
Since gaining independence from the Soviet Union in
1991, the Republic of Kazakhstan’s political landscape
wasledbyPresidentNursultanNazarbayevandhisruling
NurOtanParty.SectionIIIoftheKazakhstaniConstitution
concentrates power in the presidency; changes or
amendments to the constitution require Presidential
consent. The President controls the legislature and the
judiciary, as well as regional and local governments. The
Organisation for Security and Cooperation in Europe
(OSCE),hasquestionedwhetherparliamentaryelections
fortheMazhilis(orMajilis,thelowerhouseofparliament)
and presidential elections meet the fundamental
standards for a democratic election.
At federal level, in addition to the president, there is a
bicameral parliament. The upper house of parliament,
the senate, contains 47 members, 40 of whom are
elected from the 19 oblasts and the capital (two from
each) and the remaining seven senators are nominated
by the president. Senators have a four year term. The
lower house, the Majilis, consists of 107 members. 98 of
the members are elected on a proportional basis with
parties submitting list of candidates to fill all these seats.
The remaining nine members are elected by the
Assembly of Peoples of Kazakhstan.
On the 19th
of March 2019, President Nazarbayev
announced his decision to step down as President,
which occurred the following day. He appointed the
former leader of the Senate, Kassym-Jomart Tokayev,
as his replacement as president and his daughter as
replacement Senate leader. President Tokayev was
subsequently elected as President in the elections held
during June 2019. The transition from Presidents
Nazarbayez to Tokayez suggests a continuation of the
current model of presidential governance, and that the
possibility of an institutional transition may take some
time to emerge.
While some analysis15
comments on restrictions on free
speech and freedom of assembly, strong social
institutions are being developed with the support and
encouragement of the international community.16
This
institutional development and subsequent societal
change may take time.
There has been an overall improvement in the quality
of life in Kazakh society in the period since its
independence. As shown in Figure 6 there has been a
continued increase in the Human Development Index
(HDI), a composite measure of health and life
expectancy, education and income, since the mid-
1990s. This demonstrates an overall improvement in the
quality of life within Kazakhstan since its independence.
15 For examples, see European Parliament Research Service 2015a and b and
Freedom House 2018a.
16 Forexamples,seeDeutscheGesellschaftfürInternationaleZusammenarbeit
(GIZ), 2019, European Union, 2019 and German Federal Foreign Affairs, 2019.
FIGURE 6 KAZAKHSTAN’S HUMAN DEVELOPMENT INDEX FROM 1990 – 2016
0.6
0.65
0.7
0.75
0.8
0.85
Value
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
SOURCE: United Nations Development Programme.

As reported by the European Parliament Research
Service, Kazakhstan’s economic growth has had positive
impacts on employment and poverty indicators. As
shown in Figure 7, the unemployment rate has reduced
from 10.5% of the total labour force in 2001 to under 5%
in 2016, showing a decrease of more than 50% since
2001. As the employment situation improved, the
proportion of the population living in poverty fell, from
46.7% in 2001 to 2.5% in 2016.
Byinternationalstandards,thepercentageofpeopleliving
on less than USD5 a day fell from 76.6% in 2001 to 34.7%
in2009,reflectingabroadtrickle-downofsomeeconomic
benefits. However, as shown in Figure 8, there continues
to be an unequal share of prosperity among the richest
and poorest sections of Kazakhstani society. The income
shareheldbythelowest20%ofincomeearnerswas8.2%
in 2004 while the highest 20% earned 40.2% — a gap of
32%. In 2017 this gap had narrowed to 27.6%.
FIGURE 7 UNEMPLOYMENT RATE AND PROPORTION OF POPULATION LIVING IN POVERTY FROM 2001 TO 2016
0
10
20
30
40
50
%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Unemployment, total (% of total labout force)
% of population living in poverty
SOURCE: The World Bank. Data extracted from searchable databases.
FIGURE 8 DECREASING INCOME INEQUALITY FROM 2004 TO 2017
0
10
20
30
40
50
%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Income share held
by highest 20%
Income share held
by lowest 20%
SOURCE: The World Bank. Data extracted from searchable databases.

During the period when Kazakhstan was a part of the
Soviet Union, its electricity system was developed as an
integrated part of the Soviet electricity system, with
interconnected grids and coal fired plants located to
feed the Soviet electricity system. Since gaining
independence, Kazakhstan has been undergoing a
transition towards self-control and market-based
institutions, upgrading and replacement of power
plants and transmission and distribution networks and,
since 2013, a policy of integrating renewable electricity
generation into the system.
The Unified Power System of the Republic of Kazakhstan
(UPS RK) is centrally operated by the Kazakhstan
Electrical Grid Operating Company (KEGOC). KEGOC is
a company established under Kazakhstan law, which is
largely owned by the Kazakhstani sovereign wealth fund
Samruk-Kazyna. KEGOC owns and operates the
transmission grid and operates and settles the
electricity market.
REGULATION OF KAZAKHSTAN’S ELECTRIC
POWER INDUSTRY
The UPS RK is a combination of power plants,
transmission lines and substations providing reliable
and quality power supply to consumers in the country.
The government is directly responsible for regulation in
theelectricpowerindustrywhichitcarriesoutinorderto:
• Meet the maximum consumer demand for energy
and protect the rights of electricity market
participants by creating competitive conditions in the
market ensuring the right for consumers to choose
suppliers of electrical energy;
• Ensure reliable and stable operation of the electric
power sector of the Republic of Kazakhstan;
• Unify the control over the electric power sector of the
Republic of Kazakhstan as a critically important life-
support system of economic and social complexes of
the country.
The Ministry of Energy of the Republic of Kazakhstan is
the state authority responsible for performing control
and management of the electric power industry.
Amongst a range or other responsibilities,17
are the
following responsibilities:
• Implement the state policy in the electric power
industry;
• Draw up development programmes for the electric
power industry and monitor their fulfilment;
• Approve terms of reference for the development of
an investment programme;
• Enter into agreements and investment contracts with
energy producing organisations;
• Monitor the fulfilment of investment obligations
stipulated in agreements and investment
programmes specified in investment contracts by
energy producing organisations;
• Form a group of energy producing organisations;
• Approve the procedure for determining the
guarantee supplier and its areas of responsibility.
The power industry is supervised and controlled by the
public authority for state energy supervision and control
- the Department of Electricity and Coal Industry under
the Ministry of Energy of the Republic of Kazakhstan.
The department is responsible for the oversight of a
range of functions including:
• The fulfilment of technical requirements in the
electric power industry under regulatory legal acts of
the Republic of Kazakhstan;
• The operation and technical condition of power
equipment of power stations, electric and heat
networks, and electrical and heat-reclaiming facilities
of consumers;
• Compliance with technical requirements for
electricity and heat quality;
• Rational and economical use, optimisation of
electricity and heat production, transmission and
consumption modes;
• Readiness of power stations, electric and heat
networks for operation in the autumn and winter
conditions.
The Committee for Electricity and Atomic Control and
Inspection of the Ministry of Energy is responsible for
performing the following selected18
functions and tasks:
2 KAZAKHSTAN’S ELECTRICITY MARKET
17 The KEGOC website sets out the range of matters under the jurisdiction
of the Ministry, see reference below.
18 Ibid.

ELECTRICITY INFRASTRUCTURE
As summarized above, the Kazakhstani electricity
system commenced as part of an integrated network
within the Soviet Union. The majority of Kazakhstan’s
fossil fuel generating capacity is in the northeast of the
country while the southeast is the main power
consumer.19
While north-south connections for the
transfer of power exist, they are insufficient to supply
southern demand. Kazakhstan also lacks sufficient
generating capacity in the west and relies on Russian
imports to overcome deficits there. Furthermore,
Kazakhstan’s electricity sector is unable to regulate its
generating frequency — i.e. to manipulate its generating
capacity to meet increasing demand during peak loads
or supply disruptions. Therefore, the country needs to
import electricity not only to offset supply gaps, but also
to regulate frequency. Energy trade is not a one-way
proposition, however, as Kazakhstan is also a significant
exporter of energy to Russia, Kyrgyzstan and Uzbekistan.
The bi-directional nature of electrical power trade
reflects both variations in seasonal energy
supply/demand as well as the legacy of the Soviet-era
grid that was built without regard to modern-day
national boundaries.
Figure 9 shows the energy flows in 2017 across the
interconnection with Russia, Kyrgyzstan and Uzbekistan.
19 United States of America, Department of Commerce, 2018, p2.
• Participate in the work of commissions inspecting
power utilities to assess the readiness of facilities and
equipment for operation in winter conditions;
• Have access to electric and power units;
• Carry out periodic inspection of the technical
condition of power equipment of power stations,
electricity and heat networks, as well as consumers’
power equipment;
• Organize qualification tests and assessments of
knowledge of technical operation and safety rules;
• Organize the elaboration of energy saving
programmes, regulatory and procedural acts, legal
and economic mechanisms.
The Agency on Regulation of Natural Monopolies of the
Republic of Kazakhstan under the Ministry of National
Economy is the state body responsible for the
management of natural monopolies and regulated
markets (including those in the electric power industry)
pursuant to the procedure established by the legislation
of the Republic of Kazakhstan.
The Agency for Protection of Competition of the
Republic of Kazakhstan, also under the Ministry of
National Economy, performs the regulatory and
supervisory functions to control and regulate the market
entities, protect and promote competition, and protect
consumer rights in the activity area of market entities
holding a dominant position at a specific product
market (including the electric energy market).
FIGURE 9 KAZAKHSTAN’S INTERCONNECTED ELECTRICITY FLOWS IN 2017 (GWh)
IMPORTS FROM (GWh) EXPORTS TO (GWh) NET FLOW (GWh)
Russia 1,259.9 5,788.1 4,528.2
Kyrgyzstan 8.9 7.7 1.2
Uzbekistan Data not available
SOURCE: KEOGC.

2 KAZAKHSTAN’S ELECTRICITY MARKET / CONTINUED
Third-party access to the transmission and distribution
networks is allowed based on licensing and safety
requirements. Generation, transmission and
distribution activities require licences from the relevant
ministry or the CRNMPC. However, there are major
technical limitations to large-scale deployment of
renewable energy: Frequency and capacity balancing,
voltage fluctuations, vibration frequency disruptions
and volatility of supply, among others.20
The electricity
grid is not equipped to incorporate a large-scale
integration of renewables at present, and significant
investments in the network infrastructure are required
in order not to reduce reliability when integrating
variable renewable energy sources.
The electricity transmission and distribution networks
across the country are inefficient, with losses estimated
at anywhere between 15% and 33%.21
Efficiency of
incorporating new renewable energy sources will also
depend on geographical distances from the point of
generation to the point of consumption, potentially
leading to high transmission and distribution losses if
the energy source is not physically close to its
consumers, which can often be the case in countries
with dispersed population centres like in Kazakhstan.22
GENERATION
The installed capacity of Kazakhstan’s electricity
generation (in 2017) was 22,055 MW with an available
capacity of 18,789 MW.23
Electricity generation has increased from a low of
approximately 51,000 GWh in 2000 to more than double
that at 107,000 GWh in 2016, a CAGR of 4.7%. In 2017
generation dropped a little to 102,400 GWh. The
dominant fuel source continues to be coal, accounting
for between 66% and 80% of the total electricity
generation. No data could be located or identified to
quantify differences between gross consumption and
generation, and thus cannot provide an estimate of grid
efficiency. As noted above, losses are likely to be in the
range of 15%-33%.
20 Karatayev and Clarke, 2014.
21 Solar DAO, p3. Karatayez and Clarke, 2014, p98.
22 Karatayev and Clarke (2015) in International Energy Agency 2016, p34.
23 US Department of Commerce, p1. The report gives these figures as MWh,
but this seems to be an error and the figures are the capacity in MW.
FIGURE 10 ELECTRICITY GENERATION BY FUEL SOURCE
0
25 000
50 000
75 000
100 000
125 000
GWh
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
Oil
Coal
Wind
Solar PV
Hydro
Gas
SOURCE: International Energy Agency, 2018b.

Over the period 1990 to 2017, the electricity generated
from renewable sources (excluding hydro) is
insignificant, accounting for 0.4% of total generation in
2017. Electricity generated from hydro over this period
ranges from 7,400 GWh to 11,200 GWh 8.4%-14.7% of
total generation.
In 2018, five renewable energy plants were
commissioned in the Mangystau, Zhambyl, Almaty and
Karaganda regions. The largest plants were the 50 MW
“Burnoye Solar – 2″ and 100 MW Solar station in Saran.
In 2019, it is planned to introduce a further 16 renewable
energy plants with a total capacity of 629 MW. In 2020,
the number of renewable energy plants is planned to
more than double, with a total capacity of 2,353 MW.24
This will enable Kazakhstan to achieve its short term
goal under its Green Economy strategy (see below).
There is no evidence of any complimentary
development of electricity storage to support any of the
new renewable energy plants being developed, limiting
the capability of renewables to replace existing fossil
fuelled generation plants.
CONSUMPTION
Consumption generally follows the same overall pattern
as generation, but with marginal differences as a result
of imports and exports to adjoining countries as
discussed above. Since 1990, the lowest annual
consumption occurred in 1999 at approximately 40
TWh. The highest annual consumption was in 2015 at
101.29 TWh (representing approximately 0.5% of
worldwide electricity consumption resulting in a similar
per-capita electricity consumption as the EU). There is
some conflict amongst the various data sources
regarding the location of consumption within
Kazakhstan. As noted above, the US Department of
Commerce overview of Kazakhstan power generation
states that the main power consumption is in the south-
east. This contrasts with data from KEGOC for 2017,
which identifies the North Zone as having the greatest
consumption at 66.3%, the South Zone 21% and the
West Zone 12.7%.
Consumption growth is forecast to reach between 120-
180 TWh by 2030.25
There is, however, recognition of the
highenergyintensityoftheKazakhstanieconomy.Targets
are in place toreduce the energyintensityofGDP by25%
comparedto2008by2025andanumberofprogrammes
have been initiated to achieve this. By 2017, a reduction
of 18% compared to 2008 had been achieved.26
FIGURE 11 KAZAKHSTAN’S ELECTRICITY CONSUMPTION
0
25 000
50 000
75 000
100 000
125 000
GWh
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
SOURCE: International Energy Agency, 2018b.
24 Green Bridge Partnership Programme, 2018.
25 Karatayev and Clarke, 2014. p98.
26 Kabykenov, 2019.

2 KAZAKHSTAN’S ELECTRICITY MARKET / CONTINUED
Regulatory Indicators for Sustainable Energy (RISE) is a
World Bank initiative that provides a score to reflect a
snapshot of a country’s energy policies and regulations,
organised around the three pillars of access, efficiency
and renewable energy. As shown in Figure 13, according
to this index, Kazakhstan scores an overall 70, making it
comparable to Ukraine and Armenia, and places it at the
top of the Central Asian states.
NEW DEVELOPMENTS AND SOLAR POWER
2013 policy position
As a consequence of rapid economic expansion and the
associated increase in electrical demand, the UPS RK
requires modernisation of existing power plants,
improvement to the transmission and distribution
networks, additional generation sources and
improvement to electricity efficiency.
To achieve this, the Kazakhstani government launched
the Kazakhstan 2050 Strategy in 2012, which defines the
course for long-term economic development. In May
2013, the Green Economy Concept was adopted, setting
an ambitious target of 50% of the electricity generation
mix to be comprised of energy sources “alternative” to
coal and oil, including gas, nuclear and renewable
energy by 2050. The government plans to achieve this
by phasing out ageing infrastructure, increasing the use
of these “alternative” fuels, installing efficient energy
technologies and complying with high ecological
standards. Shorter term goals include: 3% of electricity
to by generated by renewable sources by 2020, 10% by
2030 and 50% by 2050.28
The industrial sector consumes the vast majority of
electricity at approximately 70%. All other sectors are
insignificant in comparison to the dominance of the
industrial sector’s consumption. The IEA27
energy
factsheet shows a consistently high electricity
consumption by the industrial sector in 2015, but has
domestic consumption somewhat higher than what is
shown in Figure 12, at approximately 20%. The IEA data
has correspondingly lower electricity consumption from
the agriculture, other services and transport sectors.
This concentration of electricity consumption in the
industrial sector may have significance to the location
of new generation as well as for tapping the potential
for significant energy efficiency in industrial processes.
27 International Energy Agency, 2017.
28 US Department of Commerce, 2017. p2.
FIGURE 12 ELECTRICITY CONSUMPTION BY SECTOR
2014
Industrial; 70%Commercial &
service; 9%
Residential; 10%
Transport; 6%
Agriculture; 2%
Other; 3%
SOURCE: Karatayev and Clarke.
FIGURE 13 KAZAKHSTAN’S SCORE IN THE REGULATORY INDICATORS FOR SUSTAINABLE ENERGY
Energy access Energy efficiency Renewable energy
100 49 60
Overall score
70
SOURCE: RISE, 2018.

• The Asian Development Bank (ADB) provides equity,
loans and guarantees for private sector companies
with clear development impacts, provided they
expect a good rate of return.
• The Eurasian Development Bank is also active in the
renewable energy support, granting loans of USD 30
to USD 100 million for renewable energy projects and
for projects to upgrade the transmission network.
In addition to support from development banks, the
European Commission (EC) is an active supporter of the
development of renewable energy in Kazakhstan. For
example in April 2019, the EC hosted a Sustainable
Energy in Central Asia conference, creating a forum for
energy leaders to gather to share ideas for the
development of renewable energy solutions in
Kazakhstan and the broader Central Asia region. In 2017,
the EC facilitated two conferences within the framework
of the Future Energy Forum in Nur-Sultan. More broadly,
the European Union has an Enhanced Partnership and
Cooperation Agreement (EPCA) with Kazakhstan, which
includes cooperation in the energy sector.
Tender programme for solar and wind in 2018
During 2018 the Kazakhstani government undertook a
number of international tenders for the supply of
renewable energy. Capacity building for the programme
was supported by the EBRD and included enhancing
planning and renewable energy integration, and
capacity for administering renewable energy tenders,
amongst other matters34
As a result, 36 renewable energy projects (both solar and
wind) were selected over a number of tenders with a
total capacity of 858 MW. 113 companies from 9
countries participated in the tenders. The tender
programme to build renewable energy capacity is
expected to continue.35
74 renewable energy installations with a total capacity
of 678.6 MW have been built and are operating as of July
2019. Another 20 renewable energy installations with
total generation capacity of 1,021 MW are expected to
come online in 2020.29
The goals set out in the policy are significant for a
country and an economy with strong ties to fossil fuels
and may be questionable on those grounds. However,
when such a policy is located within a geo-political
development context and with the “growing
prominence of renewable energy in international
networks of finance, prestige and politics . . . rhetoric is
unlikely to remain rhetoric alone.”30
Development support
In order to assist in this transition, a number of
development banks are active in Kazakhstan:31
• The European Bank for Reconstruction and
Development (EBRD) has been a substantial
contributor to the development of renewable energy
in Kazakhstan. In conjunction with the Kazakhstani
government, it developed the first legal framework
for sustainable energy in 2009 and subsequently,
supported the development of the tariff system in
2013 which guarantees a 15 year competitive market
for renewable energy producers.32
The EBRD along
with the International Finance Corporation (IFC) also
provide renewable energy producers with equity,
loans and loan guarantees, provided projects have
good commercial potential to be realised within the
next 15 years. The EBRD support for the
implementation of the Green Economy transition
strategy has enabled investments of approximately
EUR 3.4 billion in green economy projects.33
29 Pers comm. Constantinos Peonides, Director, Alectris.
30 Koch & Tynkknen, 2019. p11.
31 Solar DAO, 2017. p9.
32 Koch & Tynkknen, 2019.
33 EBRD, 2019.
34 EBRD, 2018.
35 Green Bridge Partnership Programme, 2018.

3 RECOMMENDATIONS
FOR INVESTORS
Kazakhstan has huge potential for development of solar
PV. The areas of highest irradiation are located in
regions where there is demand for more electricity for
domestic consumption and for possible export to China,
Russia, Uzbekistan and Kyrgyzstan.
Given the low population density outside of the main
urban areas, solar PV also represents an opportunity to
develop distributed supply solutions.
As a consequence of the auction system, the investment
focus has been on utility-scale projects. There is also a
need for in-country capacity building for residential and
commercial and industrial scale investments.
Market entry is most likely through the government’s
tender process, which provides a 15 year (inflation
indexed) PPA at the cleared price in the tender. A
possible joint venture with an existing generator is likely
to be the only other viable market entry method,
however the very low retail price of electricity in the
market will likely exclude this possibility.
Investors should pay special attention to the PPA
document issued by the Financial Settlement Center of
Renewable Energy LLP, since all contract obligations are
secured only by LLP’s assets as per existing Kazakhstani
legislation.
Investors need to manage currency risk against the
Kazakhstani tenge. There is a risk of possible currency
devaluation despite the indexation formula recently
introduced by the Ministry of Energy.
Investors should manage the quality and performance
risks around the PV plants they invest in by ensuring
good quality practices are adopted throughout the
development, design, procurement, construction,
commissioning and operation & maintenance (O&M)
life-cycle. This can be achieved by investors requiring
certification of plants through their development life-
cycle to international standards developed by the
International Electrotechnical Commission (IEC). The
IECRE conformity assessment system provides PV plant
and component assessments against the IEC standards.
Some testing organisations also offer non-standardised
assessments of PV plants and plant components based
on methods developed in-house.
FOR LOCAL PUBLIC DECISION-MAKERS TO
IMPROVE THE FRAMEWORK CONDITIONS
FOR SOLAR
Despite considerable renewable energy potential, the
enabling environment for renewables development
continues to be inhibited by the following barriers in
Kazakhstan: low electricity tariffs; transmission losses
and inefficient technologies; weak regulatory and legal
frameworks; persistent governmental body reforms;
inadequate levels and quality of scientific support;
awareness and information barriers; and a high-risk
business environment.
Frequent changes in legislation and policy for and
impacting the electricity sector creates an uncertain
environment for the sector. Potential investors have to
factor this risk into their investment decisions. A stable,
transparent legislative and policy environment is most
likely to encourage foreign direct investment (FDI).
Creation of capacity building in the residential and
commercial sectors through: Increasing public
awareness of the benefits of renewable energy; and
further improving transparency of the renewables
market factors for private and foreign investors.
Kazakhstan has a vision for developing a Green
Economy established under the 2013 policy with clear
targets to reach 3% of electricity generated from
renewable energy by 2020, 10% by 2030, and 50% by
2050. However, there is lack of information on inter-
temporal targets, as well as on further state support
measures and mechanisms. The Kazakhstani
government could assist by setting out more detailed
targets and committing to measures to achieve those
targets to assure large investors of their ongoing
sustainability policy.
To support the development of renewable energy and
the transition away from a fossil fuel based electricity
generation mix requires both a commitment to
achieving aspirational targets and a coordinated
programme for the phase out of existing thermal plants.
When industry stakeholders (government agencies,
investors, developers, international financial institutions
and regional authorities) have a reliable concrete
programme for change including the supporting
policies and incentives, they can better make
investment commitments. A review of the current
renewable energy targets should be undertaken
towards a significantly higher percentage compared to

FOR DEVELOPMENT FINANCE INSTITUTIONS
A range of development finance institutions have been
instrumental in the changes made to the structure and
institutions within Kazakhstan that have created the
emerging opportunities within this market. Over the
medium term, the development finance institutions are
key players for further assisting building capacity in
regulatory institutions to create the conditions for an
efficient market for renewable energy.
Investment from commercial banks is required by
Kazakhstani SMEs and households for residential and
commercial-scale developments.
Furtherworkneedstobedoneontheinfrastructurewithin
the country by strengthening the physical grid and
legislation on grid integration rules and working on
frequencymanagementonacollaborative,regionalbasis.
Ongoing support, encouragement and assistance from
theEuropeanCommissionisanimportantcomponentof
the development of the solar sector in Kazakhstan. The
continuation of fora for the presentation and discussion
of ideas to enhance solar PV development in Kazakhstan
is recommended.
current targets. Furthermore, these targets should be
supported by detailed plans for their achievement,
including supporting transmission and distribution
networks and institutional arrangements to manage the
system, enabling, for example, community based micro-
networks and peer-to-peer electricity trading and
encouraging existing thermal operators to invest in and
operate solar power plants.
The potential for local content development and
rooftop solar for Kazakhstani households should also
be an integral part of such programmes and plans.
As electricity generation from renewable sources moves
past 30% of total generation (on the basis that
significant imports of electricity is not feasible), energy
storage will be required to support the electricity grid
and to ensure 24/7 supply. Government is encouraged
to develop policy settings now that encourage the
development of energy storage. As there are a range of
storage options available in the market, and it is likely
that new options will be developed, these policies
should not focus solely on one particular technology.
Policy-makers are encouraged to consider as a part of
the review of their institutional arrangements,
introducing minimum quality and performance
standards for new renewable energy electricity plants
as outlined at the end of the first section for investors.
FOR LOCAL PRIVATE STAKEHOLDERS
Localprivatestakeholdersalsohaveakeyroleincapacity
building. Training and skill development can create
opportunities in operation and maintenance, in
increasedworkopportunitiesandintechnologytransfer.
Interested local organisations should seek partnership
opportunities with successful bidders in the auctions
processandwithinternationalactorsandbecomeactive
in local institutions, such as AREK, the Association of
Renewable Energy of Kazakhstan, which currently unites
virtually all existing investors, developers, scientists and
“start-uppers” in the renewable energy field.

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info@solarpowereurope.org / www.solarpowereurope.org
“There is huge potential for the development of solar in emerging
markets, where different paths to the sustainable energy transition
are possible: the Task Force will allow members to analyse and
benchmark the accessibility of selected markets, untangle barriers
to investment and engage with local stakeholders”.
Stefano Mantellassi - Eni
Emerging Markets Task Force Chair

Solar Investment Opportunities: Kazakhstan

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