“Central Asia has a high potential for solar and wind energy and also for hydropower. Low population density, large territory, and a big number of sunny days per year make Central Asia unique for renewable energy development,” says Roman Vakulchuk, Senior Researcher and Head of Сenter for Energy Research at the Norwegian Institute of International Relations (NUPI).
CABAR.asia: In January 2022, three Central Asian countries experienced a power outage that affected millions of people in the region. In the aftermath, many wondered about the relevance of a unified energy system. How appropriate is it for the Central Asian countries to be in one energy grid? Could these accidents happen again in the future?
There are several key factors that need to be discussed. The first and most important one is the fact that the electricity grid in Central Asia had been built during the Soviet time. For many decades this infrastructure has been used to the full extent. Since 2000 experts have often mentioned that a continued used of the ageing and deteriorating infrastructure would only increase the risks associated with its use. The recent accident in Central Asia is an example of such a risk. If we measure the accident in economic terms, we talk about millions of dollars in losses. It halted production, business processes, people had no Internet, this a big hit to the economy.
Unfortunately, the cost of modernizing the existing electricity generation infrastructure in Central Asia is very high, requiring multi-billion-dollar investments. International organizations such as the World Bank, the Asian Development Bank and others have been already providing assistance to modernize certain power generation units or transmission lines. However, they cannot cover the entire costs as required investments are considerable. Another reason for the blackout is the activity of cryptominers. There was an uncontrolled use of electricity in Kazakhstan, which led to a heavy load on the power grid.
Unfortunately, a similar situation could happen again. Today, we are witnessing the digitalization of economies all over the world. For example, in Western countries, electricity consumption is projected to increase by 10-15% annually because of digitalization, which is a large number. Electricity consumption will increase in the Central Asian countries as well. As a result, the risk of accidents will also grow and it is important to think about solutions already now. It is not enough to carry out modernization in some parts of the grid infrastructure. It is necessary to think about diversifying solutions to this problem.
Blackouts and bans on the use of electricity by certain business sectors have become regular. What prevents the states in the region from improving the necessary infrastructure to ensure an uninterrupted supply of electricity? What, in your view, are the key issues that need to be addressed immediately?
Some solutions are being discussed today in terms of repairing and modernizing some of the power plants. But it can sometimes go wrong. A few years ago, there was an accident in Kyrgyzstan after a low-quality repair work of a power unit where Chinese investment was used.
I think, first of all, control over electricity consumption should be tightened and made more transparent in order to limit illegal consumption, in particular by cryptominers. Until recently Kazakhstan was one of the top five most attractive markets for cryptocurrency mining, but this is changing as the government has proposed to increase taxes for miners by three times.
Second, the region could develop local mini-grids that use renewable energy. What is a mini-grid? It is when a town switches to solar or wind power using its own autonomous mini-grid that is not connected to the main grid. The most prominent example is Denmark, which has been one of the most successful players in wind power generation using local mini-grids since the 1980s. They developed these through a model of energy cooperatives. The government and energy companies offered households to co-finance the establishment and installation of wind farms. What are the benefits for the population? After the wind farms were up and running, many households started making profit through the sale of electricity in addition to their main income. As a result, the population participating in energy cooperatives started to actively support the development of wind energy. All this makes the Danish experience unique and interesting.
I do not see any barriers to try this model in Kazakhstan or Kyrgyzstan. The population density in the region is quite low and the countries have many small settlements in mountainous areas, in places remote from large urban centres. It is possible to test this model in pilot projects. Required initial investments are not that large. Given that Central Asia is not densely populated, mini-grids would be cheaper than connecting small villages to the main electricity grid. For this purpose, assistance could be sought from major international banks. For example, the European Bank for Reconstruction and Development (EBRD) is actively involved in developing green energy in Central Asia.
In Kazakhstan, Uzbekistan and, more recently, Kyrgyzstan, there is an interest in building nuclear power plants. To what extent does nuclear energy meet the needs of these countries, as well as safety requirements?
It is difficult to give a clear answer to this question. In many countries nuclear power is still an important source of energy. But to install new nuclear power plants, all pros and cons have to be assessed. Safety issues are of major concern. We know that the Fukushima plant is in Japan that is one of the world’s leading countries in terms of high safety standards. However, in the case of the Fukushima plant, the original construction plan was poorly designed failing to address the risk of possible tsunamis.
Central Asia is an earthquake-prone region and that is the biggest risk. If you imagine a nuclear power plant built in a place that is close to earthquake zones, such as close to Almaty for example, this would carry many risks. In the northern part of Kazakhstan, the seismic risks are not that great. Therefore, before constructing such a plant a thorough evaluation needs to be conducted – in terms of safety, economic profitability, etc.
What types of alternative energy sources have the greatest potential for development in Central Asia? What are their advantages and disadvantages?
First, Central Asia has a high potential for solar and wind energy and also for hydropower, which has been already used for decades. There are places in the region that have the highest potential, in particular the Dzungarian Gate mountain pass, near Kazakhstan’s border with China, that could be used for wind power generation.
Second, if you look at the number of sunny days per year, Central Asia is well ahead of many European countries, such as Germany or Denmark for example. Especially if we talk about places like the area around the Aral Sea on the territory of Uzbekistan. The steppes in Kazakhstan also receive a lot of solar irradiation. This factor as well as low population density and large territory make Central Asia unique for the development of green energy. Europe is densely populated; often installing a wind farm takes time. Because it can affect the interests of local communities or commercial enterprises. There are many examples in Germany or Norway, where consultations with communities regarding the installation of wind farms take much time. And even after long discussions it is often difficult to obtain approval. In Central Asia this is less of a problem, given that more than 80% of Kazakhstan is unpopulated, for example.
Third, land rights belong to the state in Central Asia. One could look at the experience of countries in the Middle East, such as the UAE, where unpopulated land is used for large-scale installation of solar panels. The same could be done in Central Asia; it is the region’s advantage. That said, if we talk about installing solar panels, it is important to keep up with latest innovations. New models occupy less space, and they generate more electricity than older models. It is incorrect to think that after installing several kilometers of solar panels one can use them during the next 30 years. This mode of thinking is relevant for the coal industry, where mines are developed over many decades. In the case of solar power technologies, one should monitor how the installed solar panels will work during the first five years, then it may be necessary to replace them with new models. The same logic applies to wind farms. A more flexible approach is necessary.
Another area where Central Asia could play a major role relates to the production of critical materials, elements that are used in the production of solar panels, wind turbines and batteries. These include lithium, cobalt, copper, nickel, silver and others. For example, today the demand for lithium is increasing worldwide and in the last year alone the price for it rose by more than 400%. We recently conducted a study in which we showed that Central Asia has large deposits of many critical materials. This makes the region attractive to potential investors. China is already active in Central Asia, having increased production and obtained rights to new deposits of many critical materials throughout the region in recent years. In particular, molybdenum exports from Kazakhstan to China have increased, with exports rising by 400% in just a few years. Thus far China is the only country that has realized the importance and potential of Central Asia in this area.
Coal and gas power generation is known to be much cheaper than green energy. How can tariffs be revised so that electricity generation from alternative sources becomes more affordable, including in terms of price for consumers?
This is not quite the case anymore. The price of producing electricity from green energy is falling all over the world. For example, in 2020, 62% of all new clean energy projects were cheaper than new coal-based power plants. But in the case of Central Asia, yes, you are right. On average, electricity generation from coal in the region is still cheaper than generating a kilowatt of electricity by, for example, solar panels.
What could be done? I believe that states in the region have experience with subsidizing coal-fired electricity generation. Under such a subsidy scheme the government covers some part of the cost of electricity production for the population. For example, if it takes 17 Tenge to produce one kilowatt of energy, the government covers 10 Tenge and the household pays the rest. This makes electricity bills more affordable for the population. It should be possible to transfer this subsidy scheme to the development of alternative energy, where the state could partially cover the cost of production. The question is where to find financial resources to cover this? International organizations could help. Today hardly someone would provide funds to support coal because it is the dirtiest source of energy in terms of carbon dioxide emissions. But international organizations are willing to provide loans and grants to subsidize green energy. And here one could start with pilot projects, for example, first trying to test this model in one area, see how it works, what can be improved, and then spread it to other areas.
What are the best practices from other countries in addressing energy security issues that Central Asian states could learn from?
I have already said that the digitalization of the economy will inevitably lead to an increase in energy consumption. Thus, there is an urgent need to diversify the sources of electricity production. In Kazakhstan, 70% of the produced electricity is still based on coal. However, if we look at the structure and diversity of energy supply sources in Europe, or even in some Southeast Asian countries, such as Vietnam for instance, we can observe increasing diversification and localization of electricity production and consumption. There is a need to reduce dependence on a single electricity grid. If not, this would make the existing system highly vulnerable to various risks and accidents, which is what happened in January 2022. More autonomous mini-grids should result in fewer risks associated with weather conditions, cryptocurrency miners, etc.
It is also important to promote energy conservation and energy efficiency, starting with kids at elementary schools. Given that electricity consumption will grow, it is vital to educate households about energy conservation. In the long run, this should save the budget of both the population and the state.