01.06.2011

Legislation of the Republic of Kazakhstan on Use of Renewable Energy Sources

In line with GRATA Law Firm’s practice of keeping clients informed of important legal developments that might influence their business, we would like to draw your attention to the recently enacted Law of the Republic of Kazakhstan 'On Supporting the Use of Renewable Energy Sources' aimed at the creation of legal framework for the use of renewable energy sources in Kazakhstan.  

OVERVIEW 

Kazakhstan has repeatedly declared its intention to reduce a share of traditional energy sources in Kazakhstani energy sector, and begin a gradual transition to renewable energy sources (hereinafter - 'RES') . The obvious advantage of the RES is their continuous renewal and lack of large-scale environmental pollution from the usage thereof and energy generation. Kazakhstan has a significant potential for the development and use of the RES mainly due to the geographical situation of the country.

The Law of the Republic of Kazakhstan 'On Supporting the Use of Renewable Energy Sources' (hereinafter - the 'Law') was adopted on 4 July 2009 in order to define the main targets and directions for supporting the use of RES and, therefore, encouragement of investments into this sector of economy. The Law provides for the economical mechanisms for supporting the RES development as well as fundamental principles of the state regulation of their use. 

Basic provisions of Kazakhstani laws regarding the use of RES are described below. 

RENEWABLE ENERGY SOURCES - DESCRIPTION AND FUNDAMENTAL PRINCIPLES OF REGULATION

The main principle of the use of RES is the recovery of energy from the continuing environmental processes.  The RES mean energy sources, which are continually renewed through on-going natural processes, including:

- solar insulation, wind energy, hydrodynamic water energy for the plants of up to thirty five megawatt;

- geothermal energy: warm of earth, ground waters, river, water ponds, as well as anthropogenic sources of primary energy;

- biomass, biogas and other fuel of organic wastes used for the generation of electric and thermal energy.

The main idea of the state policy in the area of RES use is the creation of an energy system with RES as an integral part, where a share of the RES will grow from year to year.  This approach serves as a base for the principles of state policy on the regulation of RES use.

Generally, those principles include:

1) Development and implementation of the program for using RES;

2) Specifying of targets for the share of RES in the total production volume of electric and thermal energy in the energy sector development programs.

An authorised agency on the use of RES in Kazakhstan is the Committee of the State Energy Supervision of the Ministry of Industry and New Technologies of Kazakhstan.

IMPLEMENTATION OF RES PROJECTS

In Kazakhstan, performance of activities on the energy generation through RES requires a license for production, transmission and distribution of electric and thermal energy, operation of energy power plants, which is issued by the Agency of the Republic of Kazakhstan on the Regulation of Natural Monopolies.

The requirements to the construction of a facility for producing energy from renewable sources are generally the same as the requirements to the construction of any other industrial facility in Kazakhstan. To start the project implementation, you need to provide for approval a feasibility study and construction project to state authorities, including the authorities of state architectural and construction control and state energy supervision, after which the agreed documents are subject to state ecological expertise.

Kazakhstan declares the encouragement of RES development in the following main directions:

- creation of favourable conditions for the construction and operation of RES usage facilities;

- encouraging production of electric and thermal energy using RES, and creation of favourable conditions for the effective integration of facilities on the production of energy from renewable sources into a uniform energy system;

- provision of investment preferences.

The actions listed above are currently more of declarative nature. However, it cannot be denied that some steps towards the integration of facilities on production of energy from renewable sources into the uniform energy system have been already taken at the legislative level.

Thus, Article 9 of the Law provides that the regional power grid companies, electric grids of which include facilities on the RES use, are obliged to purchase electric energy in full produced by the corresponding energy-producing organisations with the use of RES. Moreover, such energy-producing organisations are released from the necessity to pay for energy transmission services.

In addition, there are a number of benefits provided for with respect to the establishment by energy-producing organisations of tariffs for the energy produced thereby, as well as for connection of new facilities to existing power grids.

CONCLUSION

Development of RES usage in Kazakhstan is still at its initial stage. However, due to the huge potential of the country, investments in the sector of energy industry become more attractive and potentially profitable from day to day.

Today, encouragement of the use of RES declared by Kazakhstan is more a declaration of intent. However, for the settlement of relations in the most important area - the sale of energy produced - there is a number of significant benefits offered that could potentially make use of RES attractive to investments.

It is obvious that further serious legislative work is required to promote the RES development. In particular, it is necessary to determine whether there will be tax and customs incentives within the implementation of such projects.

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Any questions regarding the matters herein may be addressed to:

Yerzhan Yessimkhanov
Counsel, Head of Subsoil Use Department
GRATA Law Firm

Leila Makhmetova
Senior Lawyer, Head of Environmental Law Department
GRATA Law Firm

Link to the article at Hieros Gamos

Leila Makhmetova

Counsel, Director of Environmental Law Department

Yerzhan Yessimkhanov

Partner, Head of Telecommunication & Transport, Construction & Infrastructure Department