WORKSHOP IN DEVELOPMENT PRACTICE FOSTERING ENERGY EFFICIENCY IN THE INDUSTRIAL SECTOR OF KAZAKHSTAN

Prepared for National Agency for Technological Development by a group of graduate students at Columbia University’s School of International and Public Affairs

Tara Badri Carlos Javier Barcelon

Yoganand Chillarige Sunho Hwang Marina Leytes

Ruohan Ma Cristian Salas

Table of Contents

1.  Country Background 2.  Big Push for Energy Efficiency: Recent Developments 3.  Client and Context 4.  Why Energy Efficiency 5.  Research Question 6.  Methodology of Research 7.  Problem Analysis 8.  Current Legislation 9.  Roadblocks to Legislation 10.  Recommendations 11.  Comprehensive Table of Recommendations

Country Background

Ninth largest landmass in the world Population 16.5 million

Former Soviet Union Republic, independence on December 16th 1991

President Nursultan Nazarbayev, head of

state since 1989

3% of the worlds raw materials Oil accounts for over 50% of

exports National agenda focusing on

economic diversification

Big Push for Energy Efficiency: Recent Developments

q  January 2012 Law "On energy saving and energy efficiency“ q November 2012 Astana selected to hold EXPO-2017 q  January 2013 Strategy 2050: President Nazarbayev tasked the government to reduce energy intensity by 10% annually in the next three years

Clients and Context

President of Kazakhstan Nursultan Nazarbayev

Ministry of Industry and New Technologies (Minister Asset Issekeshev)

Kazakh Energy Expertise

(President Yessimkhanov Sungat) National Agency for Technological

Development (CEO Aidyn Kulseitov)

Why Energy Efficiency: Main Drivers

• Reduced company costs; energy efficiency measures are cost and time-effective

• Increased productivity • Improved trade balance – ability to export more resources and import less • Increased domestic innovation and production of technologies; reduced

dependence on technology imports and/or open new export opportunities • Increase revenue by selling CO2 emissions reduction units

Increased Competitiveness

• Kazakhstan’s greenhouse gas emissions per capita are among the highest in the world and the country is the largest emitter of greenhouse gasses in Central Asia.

• March 2009 – Ratified Kyoto Protocol

Improved Environmental Record

Why Energy Efficiency: Local Context

0.00 0.05 0.10 0.15 0.20 0.25 0.30

GermanyJapan

European  UnionNorwayAustralia

United  StatesIndiaWorld

Saudi  ArabiaRussia

CISKazakhstan

Ukraine

q  Industry represents more than 60% of electricity consumption vs. roughly a quarter in EU countries. 

q  Transition economy; growing private sector

q  Policy of forced industrial development => manufacturing is projected to grow

faster than GDP

q  A lot of room for energy saving…

Energy saving potential: 10-30% in industrial sector if Soviet-Era production technologies and utility equipment replaced

Source: ENERDATA 2011

Energy Intensity 2011

Research Question

What policies should the Kazakhstan government implement to increase energy efficiency in the industrial

sector?

Methodology of Research 1) Preliminary Research (November – February)

•  20-25 case studies of energy efficiency policies •  Client communication and discussion •  Benchmark analysis for energy efficiency

2) Kazakhstan Field Research (March):

Met with over 20 stakeholders to discuss: • Existing measures to tackle energy efficiency in the country • Building knowledge on future plans • Current/foreseeable problems with implementing energy efficient

technologies • Identifying existing and potential methods of recording information on issues

regarding energy use in Kazakhstan

3) Formulating a plan for Kazakhstan (March – May):

• Selected 7 International case comparisons on energy efficiency policies • Energy audit infrastructure: incentives, pilots, regulations • Current/foreseeable problems with implementing energy efficient technologies • Adapting findings to Kazakhstan • Follow up calls and interviews with stakeholders

Problem Analysis

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Current Legislation

Public Energy Register • Register by March 2014 • Energy consumption

database

Mandatory Energy Audits • Conduct and report by July 2015 • Companies consuming over 1,500

TCE

Other Requirements • No established timeline • Standards on energy efficiency

Implementation of energy efficiency improvements

• Undertake improvements from energy audits • Review occurs in 5 years' time • Voluntary agreements mentioned as a measure

Monitoring and Evaluation • Report consumption annually, conduct audit once every 5 years • Continued post-audit monitoring of implementation

2013 2014 2015 2016 2017-20 2020 -

2013 2014 2015 2016 2017-20 2020 -

Roadblocks to Legislation

Second  Round  of  mandatory  audits  

Recommendation #1

•  Coordinate all resources and responsibilities among stakeholders

•  Create a unit in charge of data management •  Create a unit in charge of awareness and training

Creation/designation of a specific agency in charge of energy efficiency policy in Kazakhstan

•  Australia (SCCC), Norway (ENOVA) and India (Bureau of Energy Efficiency)

Country cases:

Recommendation #2

•  Provide information for benchmarking against industry levels

•  Penalize entities for failing to submit data on a regular basis

Introduce incentives for submitting information to Public Energy Registry

Recommendation #3

•  Improve human capital and physical resources to raise awareness, collect data and build energy efficiency audit capacity

•  Ensure a permanent funding stream

Increase funding to government organizations responsible for energy efficiency policies

•  Australia, Saudi Arabia, Russia and India

Country cases:

Recommendation #4

•  Finance 50% of the costs at the time of the audit, specifically to SMEs for whom the audit is mandatory •  Requires the budget allocation for the fund which will finance these

audits •  The funding provided to SMEs should be contingent on the

implementation of audit recommendations. •  Stipulate that 50% funding be a one-time option for SMEs

Provide financial support to SMEs for energy audits

•  Norway, India, Saudi Arabia

Country cases:

Recommendation #5

•  Encourage voluntary energy investments through more targeted incentives

•  Offer a range of benefits that correspond to a range of energy savings

•  Expand recommendation to any company that conducts an audit

Introduce a more flexible framework for voluntary agreements

Country Cases:

•  Denmark

Recommendation #6

•  Create a specific fund to provide guarantees for the banks to encourage financing of energy efficient projects •  ‘Energy efficiency loans’ will only be guaranteed for projects

that have passed an energy audit •  Incentivize companies by not asking for collateral since the

funding will be provided to mitigate risk

Provide financial support for energy efficient investments

•  Russia, Norway (fund)

Country cases

Recommendation #7

•  Improve the current shortage of industry-specific information on energy consumption in Kazakhstan

•  Create and collect information at both company and industry levels

•  Assess state of industry annually to match global benchmarks and set appropriate targets

Creation and collection of more industry-specific indicators

•  Australia, Norway and Russia

Country cases:

Recommendation #8

•  Remove barriers to entry into the ESCO sector •  Provide initial tax breaks for ESCOs to spur their growth in the

market •  Provide advisory services to nurture new companies

Creation of a domestic Energy Services Company (ESCO) Market

•  Poland, Russia and India

Country cases

Timeline Timeline Recommendation Priority Feasibility

Short Term

Creation/designation of a specific agency on charge of energy efficiency in Kazakhstan High High

Introduce incentives for submitting information to PER High Medium to High

Increase allocation of funding to responsible agencies High Medium to High

Provide financial support to SMEs for Energy Audits Medium Difficult to identify

Provide incentives for non-audit-based improvements in energy efficiency Low High

Medium-Term

Promote Energy Efficiency investments as a separate asset class High High

Provide financial support for energy efficiency investments High Medium to High

Introduce a more flexible framework for voluntary agreements Low to Medium Medium

Share information of PER and awareness about incentives and available technologies

Medium to High Medium to High

Review of fine amount for non-compliance according to the cost of energy audits

Medium to High Medium to High

Creation and collection of more industry-specific indicators Medium Medium to High

Invest in new technology for energy efficiency Medium Medium to High

Long-term Support the development of an ESCO market in Kazakhstan Medium Medium

Develop a market for trading Energy Efficiency Certificates Low Low

Thank you! Cпасибо!

Рахмет!

Team Bios [1] Tara Badri •  Master of International Affairs,

Water and Energy Security •  Bachelor of Science in Business

Administration and Environmental Science

•  5 years as a Deloitte Consultant at the U.S. Department of State in Washington, D.C. and U.S. Embassy Riyadh, Saudi Arabia

•  Internship at the U.S. Department of Treasury in the Office of Emergency Programs

•  Citizenship: U.S.

Carlos Javier Barcelon •  Master of Public

Administration, Economics and Finance

•  5-year joint Bachelor of Arts and Master of Public Administration program at Columbia University

•  Internship at a private equity firm in Hong Kong, investing in socially responsible businesses

•  Citizenship: Philippines

Sunho Hwang •  Master of International Affairs •  Bachelor of Arts (Honors) in

Government •  3 years experience as a financial

analyst and 2.5 years as an IT programmer in South Korea

•  Internship with UN Secretariat in New York in Summer 2012 developing reform plans and future strategies of the UN

•  Citizenship: South Korea

Yoganand Chillarige •  Master of Public

Administration •  Bachelor of Science (Honors)

Economics and Statistics •  4 years as an Economics

Research Associate with Daiwa Capital Markets, Singapore

•  Internship with UNICEF Uzbekistan in Summer 2012

•  Citizenship: India

Team Bios [2]

Ruohan Ma •  Master of International Affairs,

Economics and Journalism •  4 years working experience as an

journalist in the China Central Television (CCTV) and Xinjiang Daily

•  Published over 300 articles including news articles, features, newsletters and commentary

•  Citizenship: China

Cristian Salas •  Master of International Affairs,

Economics •  5 years of Working Experience

as an Economist in the private, non-profit, and public sector.

•  At the Chilean Embassy in Beijing, he made connections to bring Chinese solar and wind energy investments to Chile

•  Citizenship: Chilie

Marina Leytes •  Master of International Affairs,

Economic Development •  Bachelor of Science in Computer

Science (Honors) •  7 years of portfolio analysis and fund

management experience at a private equity real estate fund-of -funds manager, NY, NY

•  Internship at Agora Partnerships, Washington DC, impact investing firm

•  Citizenship: U.S./Russia

Group Email Contact: kazakhstan-capstone@googlegroups.com