Power Industry Needs Major Funding

Kazakstan’s energy ministry may be forced to import electricity and increase charges for customers to offset the huge investments needed to replace the power industry’s worn-out infrastructure and rising domestic energy consimption, energy experts say.



On November 2, the head of the Development Bank of Kazakstan, Askar Sembin, told the Power Kazakstan–2006 conference that announced that the electricity industry would need around 12 billion US dollars in investments in the period until 2015.



Kanat Bozumbaev, president of the state electricity distributor KEGOC, believes Kazakstan needs to find about 9.5 billion dollars from domestic sources almost immediately, and then develop a programme designed to avoid an energy crunch in 2008.



At a meeting of national-level power industry officials held in Almaty on October 27, Bozumbaev said the country could face a shortage amounting to one billion kilowatt hours a year in the near future, which would have a significant impact on economic growth.



Industry experts say the shortage will come about both because consumption is rising and because transmission lines left untouched for the last 20 years are falling into disrepair. Demand for electricity is growing at a rate of five or six per cent a year, and is expected to reach 74 billion KwH by 2008, while the country’s actual generating capacity is expected to be 73 billion KwH.



At the moment, 65 per cent of the national grid is considered obsolescent – but according to energy experts, no one actually has a clear picture of the extent of the deterioration.



According to NBCentral Asia analyst Yaroslav Razumov, assuming continued economic growth, Kazakstan will be forced to buy in some electricity from abroad and simultaneously seek new investment, as Sembin and Bozumbaev suggested.



“Kazakstan cannot find the required investment funds itself, but power industry officials are sure they will be able to secure them abroad,” said Razumov. “But this will entail increasing prices by at least 100 per cent.”



Currently, the wholesale price of electricity is about 1.5 US cents per kilowatt hour in winter and about one cent over the summer.



Razumov says these problems have existed for a long time, but have only been raised recently, in the wake of the presidential election in late 2005. The assumption is that at this point, public discontent at substantial rises in energy prices is not a major political risk factor.



One possible way out of the impending power crisis is to build a nuclear power station. A preliminary decision has been made about where such a facility could be located: KEGOC chief Bozumbaev told the Almaty conference that the power station would be built in the western Mangistau region.



(News Briefing Central Asia draws comment and analysis from a broad range of political observers across the region.)