Notice Period Under The PPA To Be Extended In Kazakhstan.

The renewable energy market in Kazakhstan is rising year by year and therefore requires relevant state support. Hence, the following Normative Legal Acts related to facilitation of RES development in the Republic of Kazakhstan are now being discussed and expected to be adopted:

• The Law of the Republic of Kazakhstan "On Amendments and Additions to Certain Legislative Acts of the Republic of Kazakhstan on Support of the Use of Renewable Energy Sources and Electric Power Industry" (hereinafter – the "Draft Law");

• The Order of the Minister of Energy of the Republic of Kazakhstan "On introduction of additions to the Order of the Minister of Energy of the Republic of Kazakhstan dated March 2, 2015 No 164 “On approval of the rules for the centralized purchase and sale by the settlement and financial center of electrical energy produced by facilities for the use of renewable energy sources, recalculation and redistribution of the settlement and financial center of the relevant share of electrical energy to a qualified conditional consumer by the end of the calendar year” (hereinafter – the "Order").

The main objectives of the proposed law drafts are:

• сreation of favorable conditions for RES development in Kazakhstan;

• stimulation of the maneuverable capacities construction;

• establishment of a through fare for RES support;

• extension of the terms under PPA contracts (Power Purchase Agreements).

   

The Law of the Republic of Kazakhstan "On Electric Power Industry"1 dated July 9, 2004 is proposed to expand the list of main definitions used in the Law2:

• Determination of an individual tariff for the service of maintaining the availability of electric power in the investment agreement between the authorized body and the energy producing organization.

• For newly commissioned power generating companies: determination of the tariff based on the tender results conducted by the authorized body for the construction of new generating facilities.

   

For installations with maneuverable generation mode:

• Definition of the tariff based on results of the auctions during construction of newly commissioned power plants with a maneuverable generation mode.
• Introduction of such terms as "the auctions" and "the organizer of the auctions" for definition of the investor for construction of new power stations with a maneuverable mode of generation and creation of a competition of cost of realization of the project between potential investors.

In terms of regulation of the "through fare" mechanism, such a definition has been set: the selling price of electric energy from an energy producing organization is the sum of the selling price of electric energy from an energy producing organization selling electric energy, not exceeding its marginal tariff and surcharges for support of RES use3.

Furthermore, it is planned to make some relevant adjustments:

• RES support surcharge – the price set based on the costs of RES support and the volume of supply to the electricity grid in accordance with the area of consumption of such energy. Such surcharge is expected to be determined by the Financial Settlement Center (RFC)4.

• Obligation of participants of electricity production and transmission to sell electricity at prices not exceeding the selling price of electricity and the ceiling tariff for balancing electricity, excluding sales at spot trades (not exceeding 10% of the volume of electricity produced for a calendar month)3.

• If the selling price of electricity and / or the ceiling tariff for balancing electricity is exceeded: the obligation of the participants to return the amount of excess to the wholesale and / or retail market participants, excluding sales at spot trades (not exceeding 10% of the volume of electricity produced for a calendar month)5.

• Determination of the marginal tariff for electricity and balancing electricity for newly commissioned power generating companies based on forecast costs for electricity production in the coming year and approval with the terms of validity of such tariffs6.

  In order to avoid the negative impact on energy producing companies, the authorized body is expected to approve electricity tariff limit values (for a 7-year period), considering annual inflation indexation7.

   

Moreover, the Draft Law proposes to enshrine the obligation of hydroelectric power plants to sell flood electric power to RFC for further distribution of this power among all consumers in Kazakhstan8.

Concerning consolidation of the above-mentioned amendments on flood electric power, it was proposed to supplement the Law of the Republic of Kazakhstan "On support of use of renewable energy sources" dated July 4, 2009 with corresponding editorial specifications9.

At the same time, for implementing the provisions of the Protocol of the State Commission for Ensuring the State of Emergency10, the draft Order provides for extension of the terms of submission of notification on the commencement of construction/installation works and the operational acceptance certificate to FSC by one calendar year11.