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. Central Asia's electricity sector

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by John C.K. Daly
Washington (UPI) Sep 7, 2007
"Communism is Soviet power plus the electrification of the entire country." -- Vladimir Lenin (1920), "Collected Works," Vol. 31, page 516.

Despite the Soviet Union's baleful 74-year experience under communism, one of the few positive aspects of Soviet rule was Moscow's insistence from the very beginning on industrialization and its corollary, electrification. The collapse of communism in 1991 left the Soviet Union's 15 successor states fully capable of generating electrical power for their citizens 24/7, a situation particularly in Central Asia in stark contrast to their neighbors.

In the 15 years since the demise of communism, national and regional concerns are beginning to affect the new nations' energy policies. While there are significant differences, there are certain commonalities, not least of which that the gargantuan Soviet power plants were both inefficient and environmental nightmares. While electrical exports remain a lucrative possibility, as high power lines are far cheaper to construct than pipelines, the goal for post-Soviet Central Asian nations remains to upgrade ramshackle Soviet power stations, reduce environmental degradation while attracting as much foreign investment as possible, goals that have been met with varying degrees of success. Of particular interest is the binary relationship between rising petrostate Kazakhstan and its hydrocarbon-poor neighbor to the east, Kyrgyzstan.

Last year Kazakhstan's electrical output reached an estimated 66.5 billion kilowatts. As domestic consumption was 59.2 billion kilowatts, exports exceeded 4.9 billion kilowatts. Kazakhstan's electricity is generated by 71 power plants, with the largest being the coal-fired AES Ekibastuz GRES-1. As with its hydrocarbon resources, the Kazakh government has opened up its electrical generating grid to domestic and foreign investment, with the result that 86.5 percent of the nation's electric power generation network has been privatized, with market forces determining electrical prices.

Following the collapse of communism, Kazakhstan moved swiftly to implement energy reform. In 1992 the Kazakh government split its post-Soviet state-controlled energy company into electricity administration and business management companies, which as a step toward privatization opened up substantial opportunities. Rejecting the Soviet experience, Kazakhstan studied Western modes, (notably Britain and Norway) as models for designing a successful system and quickly permitted its largest regional electricity producers to form joint-stock companies. In 2003 Kazakhstan's energy reforms prompted Anatoly Chubais, chief executive officer of Russia's largest electrical company, Unified Energy Systems, to encourage Moscow to study Kazakhstan's policies as a model for successful electricity reform. Kazakhstan also expanded its grid links with neighboring Central Asian countries with a view toward eventual electrical exports. Significant electrical exports remain a future goal, not a current reality.

While Kazakhstan's electricity generation is increasing by about 5 percent per annum, domestic consumption is growing at a slightly higher rate, and a lack of investment for upgrades means that many power stations are operating at only 65 percent capacity, forcing the country to occasionally import electricity from both Russia and Kyrgyzstan.

Currently 87 percent of Kazakh electrical generation is produced by coal-powered plants, with the remaining 13 percent being generated by hydroelectric stations.

Astana has succeeded in attracting a certain amount of foreign investment for upgrading its power generation facilities, most notably from the World Bank and the European Bank for Reconstruction and Development. The hydrocarbon sector remains, however, the largest magnet for foreign investment, with the domestic energy market being far less attractive to international capital.

In contrast, Kyrgyzstan, flush with hydroelectric power, last year exported 6.4 billion kilowatts from a total output of about 14.06 billion kilowatts generated by 21 power stations. Kyrgyzstan's power generation ratio is almost the exact opposite of Kazakhstan's with about 80 percent of its power being generated by hydroelectric plants. Unlike Kazakhstan, Kyrgyzstan's national power engineering remains under the state monopoly Kyrgyzenergoholding with electricity distribution companies including Severoelektro, Vostokoelektro, Jalalabatelektro and Oshelektro.

For mountainous Kyrgyzstan, however, hydroelectric power presents its own difficulties, most notably the erratic nature of water storage. Statisticians predict this year that the country's largest artificial water reservoir will be nearly 3 billion cubic meters below its 2006 inflow of 16.7 billion cubic meters, leaving the reservoir next year with only 7.5 billion cubic meters of water, curtailing electric power exports to Kazakhstan and Uzbekistan and forcing Bishkek to import natural gas instead.

The government is carefully studying the country's inefficient electrical power generation in the wake of a Ministry of Industry, Energy and Fuel Resources study that estimated during the period January-June more than 2 billion kilowatt-hours were lost through technical problems, representing 39 percent of total output. With an eye toward increasing foreign investment, Kyrgyz legislators voted to privatize the unfinished Kambarata-1 and Kambarata-2 hydropower stations on the Naryn River near the border with Tajikistan. The move was less the result of opening markets than of sheer economic reality, as the plants' projected $2.8 billion cost equals nearly seven times Kyrgyzstan's annual budget. Bishkek is optimistic that the plants' projected capacity of 6,240 megawatts will attract overseas investors eager to export surplus energy to Afghanistan, China and India.

Taking a leaf from Russia's hardball energy tactics, Kyrgyzstan has not hesitated to use its "power weapon" against foreign scofflaws; last month the Severelektro state electricity-distribution cut off electricity to Russia's airbase at Kant over unpaid bills, which Russia quickly settled. Showing no favoritism Severelektro also cut off power to a depot belonging to the Kyrgyz Defense Ministry at the same airfield over unpaid bills.

Kyrgyzstan clearly sees its future as a major regional exporter of electrical power and has begun to reach out to potential client states beyond its borders. Last month the Pakistan-Kyrgyz Joint Working Group of their ministries of Water and Power and Energy convened to study the possibility of Pakistani imports of Kyrgyz electricity in exchange for Kyrgyz access to Pakistan's Gwadar port, under construction on the Arabian Sea. The arrangement would be facilitated through Tajikistan, with Pakistan receiving energy imports while Kyrgyzstan would receive access to the world's oceans without being beholden to neighboring giants Russia or China.

Until such grandiose projects are realized, however, Kazakhstan and Kyrgyzstan will remain close as Siamese twins, bound by the dual links of water and power.

(e-mail: energy@upi.com)

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