Introduction and Background:
Reactive power inefficiencies are a well-known issue in power systems, and many advanced and developing countries have addressed this through private investments in technologies like Static VAR Compensators (SVCs) and capacitor banks. The lack of sufficient action in Kazakhstan can be attributed to artificially low electricity prices resulting from fossil fuel subsidies, which distort market signals and reduce incentives for investment in grid improvements. This pricing structure undermines the economic viability of reactive power compensation projects, as the true costs of inefficiencies are not reflected in consumer prices. The sustainability of grid improvement projects in Kazakhstan is contingent on addressing the underlying issue of subsidized fossil fuel electricity prices. Without reform in this area, it remains challenging to create the necessary economic incentives for long-term investments in grid efficiency and reactive power management. Moreover, the technology is highly relevant for the country’s green energy transition, reducing grid overload and enabling the connectivity coming from RE sources, in line with the country’s plan to increase the RE share in its total energy mix.
Kazakhstan’s updated NDC (2023) outlines ambitious targets to reduce GHG emissions by 15% unconditionally and 25% conditionally by 2030. The energy sector, responsible for 77% of all GHG emissions in the country (2021, UNFCCC numbers), is the country’s largest emission contributor. Further, the NDC emphasizes modernizing energy infrastructure, promoting energy-saving technologies, and reducing transmission and distribution losses – areas directly addressed by the project’s reactive power compensation technology. Kazakhstan’s Energy Efficiency Development Concept (2023-2029) aims to reduce energy consumption in high-energy industries through economic incentives, technological advancements, and tariff reforms. By reducing transmission energy losses and enhancing grid stability, the project supports broader sectoral mitigation efforts.
Project Goals and Approach to Transformational Change:
The project promotes the large-scale utilisation of reactive power to reduce energy losses during the transmission of electricity, combatting climate change by reducing the need for the coal-based power generation in Kazakhstan.
The project is a pioneering effort in Kazakhstan, as reactive power compensation has not been tested yet in the country. Through piloting, the aim is to prove economic viability of the technology and address the regulatory barriers to investments. The innovative technology and its strong demonstration potential can notably contribute to scaling up the technology and reducing GHG emissions in long term in the Kazakhstan’s energy sector, which accounts for 80% of national emissions.
There is a high potential for a pilot to trigger transformational change by i) facilitating regulatory changes to incentivize a roll out of the technology’s implementation, ii) reducing uncertainty associated with the novel technology and as result mobilizing investments in grid modernization, iii) leveraging already developed green finance mechanism in the country (green bonds or loans) to scale up the technology and iv) having a strong potential for regional replication.
Project Components and Support Mechanisms:
FC component:
- CAPEX grants for piloting to incentivize potential companies – investors to co-invest in modernizing grids through the novel technology.
- CAPEX grants for follow-on investments to support financing via green bonds or loans and scaling up of the technology.
TC component:
TA measures focuses on addressing project barriers through training, publications, communication, introduced national technical standards and norms, regulatory framework creation, and pilot assessment. Some examples include, but not limited to:
- Developing and adopting national technical standards and norms, piloting technology to reduce the technical barrier.
- Regulatory framework – working onlaw and tariff regulation adjustments for electricity distribution companies (REKs). The regulatory barriers hindering investments must be removed to encourage REKs and consumers to adopt reactive power utilization.
- Increase awareness among the regulatory and industry target group about the economic impact of reactive power losses.
- Strengthening the capacity of the financial sector to support investments in this technology. A business model based on real-life data will de-risk future investments, enabling informed decisions.
Mitigation Potential and Long-Term Impact:
The project’s direct emissions reduction relates to a pilot only and has a limited potential. Conversely, the projected indirect mitigation potential of at least 47m tCO2e is much higher. The project assumes that 80% of the transmission lines will be equipped with the power saving devices (reactive power compensations) by 2036, with 15% annual increase from the year 3.
- Direct mitigation impact
- over the course of the project (cumulated): 47,191 tCO2e.
- over the course of the project PLUS ten years after project end (cumulated): 235,956 tCO2e.
- Indirect mitigation impact
- over the course of the project (cumulated): 340,980 tCO2e.
- over the course of the project PLUS ten years after project end (cumulated): 47,882,372 tCO2e.
- over technology lifetime: 0 tCO2e.
- Cost efficiency: EUR 24.62/tCO2e