“SAMRUK-ENERGY” JSC | Integrated ANNUAL REPORT

The model of electricity and capacity market of Kazakhstan

Power industry plays a pivotal role in economic and social areas of the Republic of Kazakhstan. Further development of the industry, small and medium business, improvement of the population’s quality of life is greatly dependent on reliable and high-quality power supply to consumers.

Power industry is regulated by government agencies.

The authorized body represented by the Ministry of Energy of the Republic of Kazakhstan manages power industry on the basis of the Republic of Kazakhstan Law No. 588-II dated July 9, 2004 “On Power Industry”.

The authorized body represented by the Ministry of Energy of the Republic of Kazakhstan manages renewable energy sources area on the basis of the Law of the Republic of Kazakhstan No. 165 dated July 4, 2009 “On Supporting the Use of Renewable Energy Sources”.

The state body represented by the Committee for Regulation of Natural Monopolies, Protection of Competition and Consumer Rights of the Ministry of National Economy of the Republic of Kazakhstan implements the state policy in the areas of natural monopolies, including on regulated services for electricity transmission, heat production, transmission, distribution and supply in line with the Republic of Kazakhstan Law dated December 27, 2018 No. 204-VI “On Natural Monopolies”.

The Ministry of Industry and Infrastructure Development of the Republic of Kazakhstan is the state agency that manages coal industry in accordance with the Republic of Kazakhstan Code No. 125-VI dated December 27, 2017 “On subsurface and subsurface use”

Kazakhstan electricity market model

Kazakhstan has introduced the Single Buyer model from January 1, 2019, which includes the operating capacity market, that aim to create favorable conditions for attracting investments in the power industry, construction of generating facilities so as to fully meet the demand for electricity, maintain the required level of energy supply reliability and develop export potential of the industry.

It is expected that electricity market (centralized and decentralized trading of electricity) and capacity (short-term and long-term) of the balancing market will operate.

Decentralized market is a market where power plants enter into contracts for the sale and purchase of electricity directly with consumers. A centralized market involves the sale of electricity on a single platform in order to conclude contracts for the sale and purchase of electricity. The role of the balancing market is the regulation of deviations of the actual volumes of supply and consumption of electricity from the planned ones in real time mode by the system operator.

Social and political issues significantly affect tariff decisions. Economic, social and other policies of the RK Government may have a significant impact on the Group’s operations.

The model of electricity and capacity market of Kazakhstan fromJanuary 1, 2019

CAPACITY MARKET MODEL

Since the introduction of capacity market, tariffs of energy-producing organizations have been divided into 2 components: the electricity tariff and the tariff for maintaining the availability of electric capacity. Electricity tariffs include variable operating costs. The tariff for maintaining the availability of electric capacity includes investment costs.

Electricity balance of Kazakhstan

The installed capacity of Kazakhstan's power plants in 2018 amounted to 21,902 MW, which is 220 MW more in comparison with the last year.

The available capacity of the RK power plants made 18,894.9 MW, which is 103.5 MW more than last year, incl. an increase in the Northern zone – 38.7 MW, the Western zone – 21.3 MW, the southern zone – 43.5 MW.

Electricity was mainly produced at thermal power plants – 87%, the share of hydropower plants accounted for 12%, and the share of renewable energy sources was about 1.3%.

The Northern zone produced 77% of electricity of the country’s overall production. Main coal deposits and water and energy resources are located in the northern zone. Excess electricity is transferred to the southern zone experiencing power shortages and is exported to the Russian Federation.

The Southern zone is characterized by a shortage of electricity covered owing to supplies from the northern zone.

Electricity generation and consumption in the RoK, mln. kWh

The Western zone – A significant share of electricity consumption is made by oil and gas companies with their own generating sources. There are no electrical connections of the West with the North and South of Kazakhstan through the territory of the country.

According to the data from System Operator, Kazakhstan’s power plants produced 106,798 mln. kWh of electricity in 2018, which is 4.3% more than 2017 figure. Production growth was observed in the North and West zones of Kazakhstan.

Electricity production and consumption in Kazakhstan has increased over the past three years.

An increase in electricity production was driven by the growth in production of TPP and GTPP, commissioned RE facilities also influenced.

There was a 5% increase in the dynamics of electricity consumption in comparison with the figures for 2017. Thus, in the northern zone of the Republic of Kazakhstan, consumption increased by 4.6%, in the western zone by 8.1% and in the southern zone by 6.8%.

During the reporting period of 2018, compared to the same period of 2017, the maximum increase in electricity consumption was in Almaty region by 532 mln. kWh (5.1%), Zhambyl region – by 519 mln. kWh (13.6%), Pavlodar region – by 779 ln. kWh (4.2%), Karaganda region – by 621 mln. kWh (3.7%).

Electricity indicators across the Republic of Kazakhstan

mln. kWh

No.

Indicators across the RK

2016

2017

Δ 2017/ 2016, %

2018

Δ 2018/ 2017,%

1.

Electricity consumption 

92,311.6

97,856.7

6

103,228.3

5

2.

Electricity production, incl.:

94,076.5

102,383.6

9

106,797.1

4.3

 

TPP

74,702.8

82,424.8

10

86,795.1

5

 

GTPP

7,407.5

8,372.6

13

9,119.3

9

 

HPP

11,605.9

11,157.9

0.9

10,343.0

7.3

 

WPP

274.1

338.5

23

400.5

18

 

SPP

86.1

89.8

4

137.9

54

 

BP

0

0

1.3

3.

Net power flow «+» shortage, «-» excess precisely:

–1,764.9

–4,527

157

–3,568.8

0.8

 

- Russia

–1,640.1

–4,528.2

176

–3,566

0.8

 

- Central Asia

–124.7

1.2

–0.01

–2.8

–126

The volume of electricity production by facilities using renewable energy sources in Kazakhstan amounted to 1,335.2 mln. kWh in 2018 or an increase of 20.4% as compared with 2017 figures.

Indicators of Renewable electricity across the Republic of Kazakhstan

mln. kWh

No.

Description

2017

Share in the RK, %

2018

Share in the RK, %

Deviation 2018/2017

mln. kWh

%

I

Renewable electricity production in the RK, including by zones 

1,109

1.1

1,335.2

1.3

226.2

20.4

1.

Northern zone

304.8

27.5

326.8

24.5

22.0

7.2

2.

Southern zone

804.2

72.5

988.0

74.0

183.8

22.9

3.

Western zone

0

0.0

19.2

5.9

19.2

0.0

II

Renewable electricity production in the RK, including by types 

1,109

100.0

1,335.2

99.9

226.2

20.4

1.

SPP

89.8

8.1

138.6

10.4

48.8

54.3

2.

WPP

338.5

30.5

400.5

30.0

62.0

18.3

3.

Small HPP

680.7

61.4

793.6

59.4

112.9

16.6

4.

BioGasPlants

0

0.0

1.3

0.1

1.3

0.0

In comparison with 2017, electricity production by large and small hydropower plants have decreased over 2018, while the production of electricity by WPP and SPP has increased.

Export and import of electricity of Republic of Kazakhstan

Russia became the key direction of the Republic of Kazakhstan electricity export-import (exports to the Russian Federation – 4.8 bln. kWh, imports from the Russian Federation – 1.3 bln. kWh).

“Ekibastuz SDPP-1” LLP exported 3.76 bln. kWh to the Russian Federation, “KEGOC” JSC – 1.05 bln. kWh in order to balance electricity production and consumption.

Electricity exports amounted to 4,882.4 mln. kWh, which is 15% lower than in 2017. The decline in exports has occurred because the Russian party suspended the purchase of electricity from “Ekibastuz SDPP-1” LLP from August 2, 2018.

Electricity imports amounted to 1,313 or 3.5% higher than in 2017. An increase in electricity imports of the Republic of Kazakhstan in relation to 2017 was due to an increase in the volumes of balancing electricity from the Russian Federation.

mln. kWh

Description

2017

2018

Δ 2018/2017

mln. kWh

%

Export of Kazakhstan

5,795.8

4,882.4

–913.5

–15.8

to Russia

5,788.1

4,876.3

–911.9

–15.8

“ESDPP-1” LLP

4,705.5

3,758.0

–947.6

–20.1

“SevKazEnergo” JSC

62.2

68.7

6.5

10.5

“KEGOC” JSC (balancing market)

1,020.4

1,049.6

29.2

2.9

to UES of Central Asia

7,7

6.1

–1.6

–20.8

“KEGOC” JSC for “NPS of Kyrgyzstan” OJSC

7,7

6.1

–1.6

–20.8

Import of Kazakhstan

1,268.9

1,313.6

44.7

3.5

from Russia

1,259.9

1,310.2

50.3

4.0

“INTER RAO” PJSC

283.3

291.7

8.4

3.0

“INTER RAO” PJSC (purchase agreement) (balancing market)

976.6

1,018.6

42.0

4.3

from UES of Central Asia

8.9

3.3

–5.6

–62.6

“NPS of Kyrgyzstan” OJSC for “KEGOC” JSC

8.9

3.3

–5.6

–62.6