Publication: Eurasia Daily Monitor Volume: 2 Issue: 22

Last month the government of Kazakhstan approved a new strategy for developing the country’s hydroelectric energy resources. Kazakhstan plans to build 20 power stations, with a total capacity of 4.8 kilowatts per hour, by the year 2015. Most of the stations will be located in southern Kazakhstan, an area largely dependent on imported electricity from Kyrgyzstan and Tajikistan.

This is an ambitious and difficult project, given the tight national budget and a shortage of qualified workers. The first phase of the giant project, the construction of the Moinak hydroelectric power station, will cost $200 million. Kazakhstan must attract new sources of state revenue as well as private investment to finance this project, but the majority of the funding will be drawn from the national pension fund, which is reported to have accumulated more than 460 billion tenge ($3.5 billion). Construction experts predict that Moinak will not come on line any earlier than 2010. But the government is pressing for fast-tracking the project, which is to start this summer. Prime Minister Daniyal Akhmetov even said that the construction of the power station should be completed two years earlier than scheduled at the latest (Khabar TV, January 18).

Why all this hurry? At least two circumstances have forced the government to accelerate the rate of reform in the energy sector. First, Kazakhstan, particularly in the south, faces a severe electricity shortage. In recent months foreign-owned electric power companies have hiked rates in practically all regions of the country. In the city of Taraz, for example, rates rose by 17.8% in January (Zhas Alash, January 15). Local electricity companies have eluded government anti-monopoly regulations, triggering public discontent that is increasingly directed against the government. Second, the three hydroelectric power stations currently in use produce only 12% of the total volume of electricity in Kazakhstan. The country is growingly dependent on its neighbors, chiefly Kyrgyzstan. Kazakhstan has incurred a $20 million debt as a result of importing electricity. Although Kazakhstan’s ambassador to Kyrgyzstan, Umirzak Uzbekov, said his country had paid off most of its debt, the Kyrgyz side give different figures, claiming that Astana actually repaid a much lower figure than officially stated (Liter, December 25).

Even in this tense situation, the governments of Kazakhstan and Kyrgyzstan did not abandon talks on joint construction of the Kambarata-1 and Kambarata-2 hydroelectric power stations within the framework of a planned international water and energy consortium. But it is too early to tell whether these talks will produce palpable results. Many members of the Kyrgyzstan parliament have questioned Article 13 of the proposed agreement, on joint use of cross-border rivers, and suspect that their country — which has water as its sole energy source — is going to lose from a long-term agreement with Kazakhstan. “This [circumstance] will unavoidably affect bilateral relations. In Astana this situation will be accepted with dissatisfaction. Our economic relations have already turned cool, and it is hard to avoid a political cooling [of relations],” commented Kyrgyzstan’s former foreign minister, Muratbek Imanaliev (Central Asia Monitor, January 14).

Kyrgyzstan is not Kazakhstan’s only headache. The Aktobe region in west Kazakhstan relies on electricity imports from Russia, priced at world-market rates. The coal-fired Aktobe power station covers barely 10% of the electricity consumed by the region. A new power station recently built in Aktobe region has an annual capacity of 300 million kilowatts and should result in lower electricity imports from Russia.

By approving a program to construct new hydroelectric power stations, Astana aims not only at self-sufficiency in the energy sector, but also hopes to export up to 6 billion kilowatts of electricity annually to Russia. Hydroelectric power stations on the Charyn, Ili, Talas, Chu, and Syrdarya rivers in Almaty and the Zhambyl regions in south Kazakhstan, as well as Pavlodar and the Irtysh River basin in east Kazakhstan, are expected to generate 30 billion kilowatts of electricity (Kazakhstanskaya pravda, January 18).

The government’s preference for hydro energy is explained by the low generating costs. Coal deposits in the Karaganda basin are diminishing, and many experts have advised the government to not rely on oil reserves. Some years ago, Minister of Industry and Mineral Resources Vladimir Shkolnik had advocated the construction of a nuclear power plant, but this plan, which came in the wake of a highly controversial government scheme to import foreign nuclear waste for burial, sparked strong public protests. In contrast, the construction of environmentally friendly hydroelectric stations appears to be a promising step towards Kazakhstan’s energy independence.