Reforms and developments in Kazakhstan’s power sector
Oraz Jandosov, President of Kazakhstan Electricity Grid Operating Company
Today, the country’s power sector is entering a new period of market reforms and dynamic growth. In the first quarter of the year 2000, overall power consumption in Kazakhstan increased by 757.3 million kWh, or by 5.0% as compared with the corresponding period last year. Reforms were initiated in 1996-1997, when the Government of the Republic of Kazakhstan developed and began to implement an intensive programme for reforms in the power sector. Its priorities include the formation of a private sector in power engineering, and the creation of a competitive power market.
Today, we can present an interim summary of the work done. Almost all large sources of power have been privatised, some being in the ownership of foreign companies. At the same time, the transmission and distribution systems, which are the only monopolists in the sector, have been reorganised. A high-voltage transport network was created, and has been operated and owned by KEGOC. We have established regional electric grid companies which are responsible for power supply in the regions. Some of the companies have been privatised.
These measures have allowed the development of competition between power generators and distributors to be intensified at all levels, an increase in power tariffs to be stopped, the payment discipline to be strengthened, and a reliable power supply to consumers ensured.
In general, the World Bank experts believe that Kazakhstan is taking a leading position among the ex-Soviet countries in terms of reforming its power sector.
The next stage of reform calls for expanding the existing model of the power market, which is based on the direct-contract system of power trading, through a system of spot (a day before) and balancing power trading, and the market of auxiliary services. A market operator is being established for this purpose.
Based on our experience so far, we are revising the programme for further development of the power market, and also developing normative documents which regulate the formation of the power market and provide its efficient functioning. These include rules for the organisation and functioning of the wholesale power market, plus regulations on the access of subjects of the wholesale market to the trade in power and its transmission through international grids (electric grid code) and others.
KEGOC owns 23,500 km of power transmission lines, 70 transformer substations, the central control centre of the integrated electric grid of Kazakhstan, plus regional control centres and other facilities.
Most of our equipment has been in operation for more than 20 years, without any upgrade. This is unacceptable for relay protection devices, devices for accounting power transmitted through grids, measuring devices and data transmission channels to control centres. The operation of obsolete equipment has a negative impact on its safety. Such equipment does not endure a standard turnaround time. Several substations are still manually controlled, which limits the volume of information received. Despite all these problems, the number of technological failures was considerably reduced in 1999 thanks to the high professionalism of the specialists at KEGOC electric grid companies.
Meanwhile, advanced technical achievements require a totally new level of control of the equipment and modes of its operation. This and other problems require prompt reconstruction. In short, the national electric grid is in need of radical upgrading.
KEGOC has developed and is implementing a project for the upgrade of the national electric grid. The project consists of several components, including the upgrade of substations and control centres. This also requires the provision of state-of-the-art equipment and technology to substations. Some of them will be equipped with shunting reactors to achieve a standard quality of voltage. We will also install a computer-aided commercial power accounting system. This will allow computerised collection and processing of verified information on the generation, transmission and consumption of electricity and power by subjects of the wholesale power market to be carried out. The introduction of the SCADA/EMS system will extend functions and increase the quality of on-line control.
In general, this project will improve the reliability and the quality of power supply through the re-equipment of transport substations and upgrade of the control system, and will foster the development of competition through the creation of an effective and transparent power market and the improvement of access to the transport network.
The project has been devised for 2000-2005, and will be financed by investment attracted from the IBRD, EBRD and KEGOC’s own funds, with a total value of $250 million.
As for developing international co-operation, KEGOC is actively participating in joint energy projects with other states. Kazakhstan has ratified an agreement to the Energy Charter, which was signed by more than 50 countries. This agreement will create the conditions for mutually beneficial business relations between energy companies and investors, consumers and producers. The suppliers of transit services will obtain great profits on a long-term basis.
At present, a protocol on transit to the agreement to the Energy Charter is being prepared within the conference on the Energy Charter. Based on the provisions of the agreement, the protocol will create a reliable and transparent legal framework for making commercial decisions on investment related to transit. Our experts are also participating in the process.
Moreover, KEGOC is taking part in partnership programmes with the US Energy Association (USEA). We have established close business relations with the Independent System Operator (ISO), California. The company has been studying experience in the functioning and development of electric grids of the EU with the assistance of the co-ordination and advisory group for the power sector in Central Asia (a project of the European Commission).
I would like to mention our co-operation with the power companies of adjacent countries. In the north and the west, Kazakhstan partners with the Integrated Electric Grid of Russia, and in the south with the power departments and companies of Turkmenistan, Kyrgyzstan, Uzbekistan and Tajikistan.
A new project, which we are developing together with Russian and Central Asian partners, will become an example of mutually beneficial co-operation. In particular, the project will permit the use of existing extra high voltage networks to alleviate peak loads during the time of the highest power consumption, and will enable the hydroelectric resources of the Central Asian region to be used efficiently.
In short, both domestic funds and attracted investment, as well as the great experience of foreign power companies working in the country, are being aimed at resolving the most pressing problems and priorities of the development within the company and in the sector in general.
It is common knowledge that the power sector is one of the most fundamental industries, and thus plays an important role in the economic and social sphere of every state. Which is why the power sector is defined as a priority sector of the economy of Kazakhstan. According to the analysis of the current situation in the power sector, and trends of prospective development, the reforms being carried out in the sector will create a reliable basis for the country’s sustainable development.
The place and role of Eurasia in the Third Millennium Nursultan A. Nazarbayev
The attraction of investment into the country is a well thought-through choice of economic development of Kazakhstan Kasymzhomart Tokaev
Chairman of the Agency of the Republic of Kazakhstan on Investment, answers questions of our magazine Dulat Kuanyshev
Domestic policies and institutional reforms are key to sustained recovery in the Eurasia Region Johannes F. Linn
Economic Outlook for the Central Asian and Caucasus Region John Odliing-Smee
Preventing and rooting out corruption: factor determining a proper framework of private sector development Johannes F. Linn
Reforms and developments in Kazakhstan’s power sector Oraz Jandosov
NOVA ZINC DRIVES TO SUCCESS Mukhit Zhanasov
Kazakhstan’s Securities Market in 2000: Opportunities and Expectations Aidan Karibzhanov
It is necessary to study potential investment markets and make practical steps toward investors Banu Babaeva
New Labour Law Abylkhair Nakipov, Akhmetzhan Abdullayev