Electricity 2.0: Problems and Solutions
At the end of October Almaty city hosted XII Kazakhstani Forum of Power Engineers. The topics under discussion were the prospects of creating the green economy and the situation in the electricity sector of the EEA countries. The Forum delegates also tried to find solutions for the problem of how Kazakhstan should accelerate the development of renewable energy sources.
The forum was held as usual within the frameworks of the international exhibition Power Kazakhstan-2013 International Energy, Electrical Equipment and Machine Building Exhibition. 160 companies from 17 countries of the world who presented at their stands the latest equipment, technology and services for the domestic energy industry, took part in the exhibition. It is significant that the Kazakhstani exhibitors, under leadership of KEGOC and JSC Samruk-Energo, occupied almost half of the exhibition. The second place was occupied by the Russian companies, and the third-by the representatives of Czech Republic. The scale of the event has proven the fact that the role of energy as a pivotal sector of Kazakhstan's economy is not weakening, but has been growing steadily. So, compared to the last year, the exhibition area increased by 20%. More interest is focused on this event: only on the first day, there were about two thousand registered visitors.
Where the wind blows?
As for the Forum, the delegates included 150 industry professionals. Among the topics discussed, in addition to the prospects of the electricity of the EEA, there were the issues relating to the energy-efficient technologies, innovative developments for the sector, the economic incentives for energy saving and the development of renewable energy.
While opening the event, Rustem Makulbekov, the Manager of Hydropower and Renewable Energy Division at the Samruk-Energo, highlighted that the important components of the sustainable development of any economy, following the way of ‘green growth’ is a systematic approach to the energy conservation and renewable energy.
According to him, in accordance with the strategic plan of Kazakhstan’s development, by 2015 the renewable energy share in the total energy consumption of the Republic should make up 1.5% and by 2020, it shall exceed 3%. “The priorities set by the State program of Forced Industrial and Innovative Development for the period of 2010–2014, provide an increase in renewable energy production up to 1 billion kWh per year, which exceeds 1% of the energy mix. And this is not the limit. According to preliminary estimates, the total potential of solar energy is 2.5 billion kWh per year, wind power-1820 billion kWh, and the small rivers energy-7.56 billion kWh.
As Mr. Makulbekov mentioned, JSC Samruk-Energo has already launched a number of major projects in this area. Among them, the construction in the Kapshagai town of solar power plants with capacity of 2 MW, using the single-crystal photovoltaic panels and sun tracking system, as well as the construction of a wind farm with capacity of 45 MW near Ereymentau town, with the prospect of expanding up to 300 MW.
Moreover, in the Shelek corridor the wind farm with capacity of 60 MW (expansion potential up to 300 MW) is under construction, as well as the electricity cogeneration station based on biomass with capacity of 5 MW. The construction of several small hydroelectric power stations and a number of other renewable energy sources is planned.
According to Samruk-Energo, their implementation will ensure the power production of more than 172 million kWh per year without use of hydrocarbon fuel, and this in turn, will not only save more than 60 thousand tons of coal, but it will also improve the reliability of power supply in the region.
However, the speaker recalled that for the project development in the area of renewable energy sources in Kazakhstan, the law ‘On supporting the use of renewable energy sources’ was adopted in 2009. This year in July there have been significant amendments made thereto. The document stipulates: firstly, introduction of fixed tariffs, secondly, long-term contracts for renewable generated electricity and heat, and thirdly, creation of a specialized clearing center, which will purchase all the energy, developed by the RES.
Alexander Trofimov, General Director of Kazselenergoproject Institute LLP focused the attention of participants to the growing interest of foreign investors in the development of the renewable energy projects in the country, which he believes is related to the gradual elimination of the organizational and financial barriers. As an example, Mr. Trofimov shown the German company – Vestas Wind Systems A/S, producing the wind turbines. The company is considering the possibility of investing about 200 million euro into the Kazakhstan’s wind power. It was also assumed that a part of equipment for future wind farms will be produced by the domestic plants.
At the same time, Mr. Trofimov did not hide the fact that a number of legal issues remains unresolved. It turns out that according to the law ‘On support of Renewable Energy Sources’, the construction of infrastructure for the renewable energy facilities is the responsibility of the owner. Although these costs are budgeted in the cost of the project, however, a clear definition of the concept of "infrastructural part” is not provided by the law. As the speaker highlights, it creates the possibility of a free interpretation of the "infrastructure volumes" as by the owner of the object, as by the expert and supervisory authorities.
In addition, he informed the Forum participants that amendments to the law are already prepared to establish the “maximum acceptable price per unit of generated energy” in order to make them equal for all the wind power plants, regardless of their geographical location.
While concluding his report, Mr. Trofimov said that the sustainable management and development of wind energy in Kazakhstan requires the General Plan of Locating the Wind Power Station, which would take into account the interests of consumers, businesses and investors, and above all, the interests of energy security.
This topic was continued by Peter Kvasov from the JSC Kazakhtsan Energy Research Institute. In his view, the development rate of wind power today is not compatible with the capabilities of modern engineering and far from meeting the demands of consumers. According to the expert, this is due, primarily, to the overall lack of wind stations. Secondly, the price of 1 kWh produced by a wind power station is significantly higher than the costs of energy derived from the combustion of liquid fuels and energy from the nuclear power plants. Another negative factor for use of wind energy, as speaker says, is the non-regular power generation due to the wind changes.
Meanwhile, the experts are concerned about the status of existing electric power facilities. So, Shaimerden Urazalinov, Chairman of the "Kazakhstan Electricity Association”, said that the depreciation of fixed assets in industry exceeded 60%, resulting in high costs and losses in the networks.
He reminded that although electricity sphere develops according to the sectoral program for 2010–2014, but presently it is difficult to find at least one achievement in implementing this document, since such issues are not monitored. "Kazakhstan has many industrial programs, but not all of them are effective and efficient”.
In order to change the situation in a positive way, Mr. Urazalinov proposes a "step-by-step measures" within the framework of the implementation of the long-term programme for the development of the electric power industry until the year 2030. "You cannot develop the electricity sector blindly, to the touch. Otherwise, already by January 1, 2016 the heat and electricity station might find themselves in trouble. What kind of market is possible if we have no competition? When power reserves will be available, then the competition will appear too. You need to build the new stations, despite the fact that the projects are expensive.
The expert also raised the issue of Kazakhstan's commitments within the frameworks of the Kyoto Protocol. He said that the "Kazakhstan Electricity Association” has prepared a letter to the Government to prevent the adoption of the national plan for allocation of greenhouse emission quotas in the proposed form. The problem is that the Government, on the one hand, urges the business and the energy sector to increase the production of electricity, and at the other hand, they ask to reduce the emissions. In his view, it is almost impossible do so at this stage, because the domestic energy industry depends entirely on coal and in the short term, this dependency will continue.
"We have 83% energy from the coal generation, and 86% of greenhouse gases comes from the coal-fired power plants. How to increase the production and burning of coal and to reduce emissions at the same time? Why we are trying to develop the "green economy" in this case? The transfer of stations to the natural gas is not expected in the short term, and what is the alternative to the coal? "
In addition, Mr. Urazalinov doubted the ability of Kazakhstan to launch the operations of the balancing electricity market in real time by January 1, 2014. In his view, this can only happen by 2016, when the country will have the capacity market.
In his turn, Michael Gamburger, the General Director of Almatyenergosbyt LLP, recalled that the work of the balancing market is ensured in simulation mode. The main purpose of its establishment is to support an optimal level of electricity and power in Kazakhstan, since a stable and trouble-free operation of the energy system and the quality of the electricity, supplied to consumers, depends on the balance in the power grid.
Based on the monitoring results of the settlement center at the JSC Energoinform (system operator of the balancing market), the share of purchased balancing electricity in 2010–2012 years ranged from 11% to 16%. According to Mr. Gamburger, transfer to real time mode will require more discipline in planning by the consumers of their daily timetables for the electricity supply and consumption, because the “payment to the suppliers will be made in accordance with the stated amounts”. In case of exceeding the actual level of consumption over the amount approved by the system operator in the daily chart, the missing part of the energy will be purchased at the balancing market. And the rate will excess the purchase price under the direct contracts. The excess stated amounts will be sold at the same market at a lower price.
However, the launch of the balancing market may face the clear difficulties. So, according to JSC Energoinform, the technical ability to participate in the regulation the power generation (to decrease it) is available only at the HES of Irtysh cascade. The main source of balancing electric power is the JSC Zhambyl GRES (State district power station), since this plant is technically able to increase generation in the hours of peak loads. However, as mentioned Mr. Gamburger, the practice of the autumn-winter period (AWP) 2012–2013 shows, during the peak periods the station experienced a shortage of fuel and supplies, and therefore, the same situation concerned the increase in the power supplied during the peak hours. This means that consumers in the southern zone are lacking the reserves to cover the positive imbalances of power during autumn and winder periods. The speaker agreed with Mr. Urazalinov that entering the balancing market in real time is possible only after the launch of the capacity market.
At the same time, Mr. Gamburger assured that his company is ready for this now. In particular, the balance provider JSC Alatau Zharyk company signed a contract to buy and sell electricity in the balancing market with the financial center of JSC Energoinform. The methods for calculating actual hourly imbalances are revised and updated.
Speaking of the challenges, Mr. Gamburger noted that at the initial stage, the introduction of balancing market in real time will lead to an increase in the cost of wholesale power purchase and payments for the services provider. As a result, it will be followed by an increase in the sale tariff for the retail consumers.
So, according to the results of the monitoring of the impact caused by electricity imbalances on the purchase tariff for Almatyenergosbyt LLP, the increased cost of purchasing electricity in 2010 made 1.51%, in 2011 – 2.65% and in 2012 – 2.44%.
According to the expert forecast, if we take the data as of last year, the launch of the balancing market from January 1, 2014 will further increase the costs for Almatyenergosbyt LLP for 2.44% and the purchase tariff to consumers will grow for 1.4%.
Another most discussed topic was the problem of the development of the energy sector in the Eurasian Economic Community. As mentioned by Georgy Kutovoy, Adviser to CJSC OMK on energy, Representative of the Executive Committee of the Electric Power Council of the CIS, Academician of the Russian Academy of Natural Sciences, the cooperation in the energy sector should be based on the economic benefits for all participants in the EEC without exception.
In his view, the mechanism of competitive relations in this sphere should work in a way that does not restrict or hinder the real sector of the economy, and it shall favour its further development. The expert noted with regret that the Russian experience in this matter proved to be unsuccessful: despite Russia's extensive renovation and modernization of the legal and organisational structure of the electric power industry, no adequate solutions are found for trade relations, allowing to benefit the consumer, rather than energy business”.
Therefore, he believed that the coming stage must be aimed at improving the trade and economic relations, particularly in the border areas, where the producers and consumers could structure the collaboration directly, in view of the development of the competitive market environment”.
According to Mr. Kutovoy, now in Russia there is an order to develop the proposals for creation of energy bridges in the region of Urals, Siberia and Kazakhstan. Within the framework of the implementation of the priority activities, the transit line with capacity of 1150 KW is already established along the route: Siberia – Kazakhstan – Ural. However, according to the expert, 1150 KW is too high, and that is why it is necessary to bring it down to 1000 KW, since this is the most acceptable value to all the Member countries. At the same time, he opposed the proposals to pass to 750 KW, believing it to be a non-optimal solution. In any case, the reconstruction of substation equipment will be required, for which a feasibility study shall be prepared in advance.
In conclusion, Mr. Kutovoy expressed confidence that a single supranational authority is required for the effective coordination of the work of system operators in Kazakhstan and Russia. He thinks that it can be located in Astana because due to the geographical position, our country is an important energy hub and it "should play a historical and vital role in the Eurasian Economic Community".