Headwinds Against Renewables Future
BMI View: The Eurasian Development Bank's announcement that it will provide a US94mn loan to help support the construction of a wind farm in Kazakhstan is a positive sign for the country's renewable energy industry, and the wider prospects for energy security in Kazakhstan. However, we believe that renewable energy projects will be one-off developments, as the regulatory framework is not in place to incentivise widespread investment into the renewables industry . Furthermore, the country's vast hydrocarbon reserves and nuclear aspirations are likely to d raw interest away from the sector.
It was announced at the end of April 2013 that the Eurasian Development Bank (EDB) agreed to provide a 10-year loan of US$94mn to help fund the construction of a wind power project in the Akmola region of Kazakhstan. The 45MW project, if successfully completed, would be the first large-scale non-hydro renewable energy project in the country .
Kazakhstan's electri city mix is heavily reliant on coal-fired generation , which contributes roughly 78% to the total. This is hardly surprising considering that Kazakhstan's coal reserves are the 10 th largest in the world, totalling 116mnt (million tonnes) in 2011. However, the country's supply/dem and gap is relatively tight and electricity imports are typically required to meet domestic power demand. We expect this trend to continue as power consumption increases over the course of the decade, spurred on by positive demographics and promising economic prospects ; boosted by its n atural resource wealth (primarily oil, gas, coal, iron ore and other base metals). Additionally, the energy-intensive mining industry will no doubt have a knock-on effect on electricity demand.
|Insecure Energy Picture|
|Total Net Generation, By Type (TWh), 2013 and Net Generation, Consumption and Net Imports (TWh), 2013-2022|
...But Renewable Prospects Limited
Pursuing renewable energy could therefore be beneficial to Kazakhstan's energy dynamics and potentially free-up hydrocarbons for export. As such, we view the E DB 's loan as a positive development -which could help stimulate interest in the, as of yet, underdeveloped non-hydro renewables industry.
That said, we believe that renewable energy projects are likely to be one-off, sporadic developments (a s opposed to a widespread investment trend ), with loans from international financial institutions and development banks providing crucial project finance. The government is yet to introduce a comprehensive and attractive regulatory framework for renewable energy that encourages private investment into the sector . Furthermore, Kazakhstan's hydrocarbon and uranium reserves , and plans to develop nuclear capacity within the country , have the potential to draw interest away from the sector.