Kazakhstan may peg green subsidies to US dollar

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Kazakhstan, the oil-exporting former Soviet republic in land-locked Eurasia, has told Bloomberg that it is considering pegging the green subsidies it pays to the U.S. dollar as it attempts to attract more foreign investment into its fledgling renewables market.

Its Energy Ministry, based in the capital, Astana, is seeking to diversify the nation’s energy landscape and economy in the wake of ongoing low oil prices, and has targeted incremental increases in renewable energy penetration – 3% by 2020, and 10% by 2030.

Government approval of the plan is still to be confirmed, but analysts believe that by pegging subsidies against the U.S. dollar rather than the Kazakh tenge – which has plunged in value over the past six months as crude prices have tumbled – foreign investors are likely to find the Kazakh market more attractive.

Currently, solar power producers in Kazakhstan receive 34.61 tenge per kilowatt-hour of electricity produced, which at current exchange rates is $0.09/kWh. When that tariff was first set in June 2014, the rate would have been worth a far-more-attractive $0.19/kWh, so by pegging investments against the more stable dollar, investors are protected against the shocks of dramatic currency movement.

Many leading banks and investment institutions – includinfg Germany’s KfW development bank – prefer to only provide finance in dollars or euros in markets where currency instability is likely.

At the COP21 talks in Paris last December, Kazakhstan joined more than 190 other nations in agreeing to curb carbon emissions and adopt a greater share of renewable energy.

Last June, the country received backing of around $93.5 million from the European Bank for Reconstruction and Development (EBRD) and the Clean Technology Fund (CTF) for its first large-scale solar PV project – a 50 MW plant near Burnoye.