J._3_IEE_Supplement_1_Asia_17-033.pdf

SUPPLEMENT #1 TO THE INITIAL ENVIRONMENTAL

EXAMINATION (IEE)

Title of Activity: 1. Scaling Up Renewable Energy Central Asia Interagency Agreement with the Department of Energy’s National Renewable Energy Lab

2. Power the Future Indefinite Delivery Indefinite Quantity Contract

Program Area: EG.7 Modern Energy Services EG.10 Environment EG.12 Climate Change-Clean Energy

Program Elements: EG 7.1 Expanded access to Modern Energy Services EG 10.1 Clean Productive Environment EG.12.2 Clean Energy Investment, Implementation, and Use

Country/Region: Kazakhstan, Kyrgyz Republic, Tajikistan, Turkmenistan, and Uzbekistan

Funding Period: FY2017 – FY2022 Resource Levels/Amount(s): USD 25 million

Statement Prepared by: Sergey Yelkin, Energy Projects Specialist, Economic Development Office

Date: February 3, 2017

Supplemental IEE? Yes X DCN of Original IEE:

- Asia 14-69 - Regional Energy and Water Cooperation in

Central Asia), FY 2014-2020 (Programmatic)

Environmental Media and/or Human Health Potentially Impacted (check all that apply):

None Air Water Land Biodiversity Human health Other

Climate Change Vulnerability Risk Low Medium High

ENVIRONMENTAL ACTION RECOMMENDED: (Place X where applicable)

Categorical Exclusion: [ X ] Negative Determination with Conditions: [ X ] Positive Determination: [ ] Deferral: [ ]

Asia 17-033

SUMMARY OF FINDINGS

The purpose of this Supplement to the Initial Environmental Examination (IEE), in accordance with Title 22, Code of Federal Regulations, Part 216 (22 CFR 216), is to provide a preliminary review of the reasonably foreseeable effects on the environment, as well as recommended threshold decisions, for the activities detailed below. The document provides a brief statement of the factual basis for the threshold decisions.

Recommended Action: The activities under review are recommended for the Threshold Decisions indicated above in the Environmental Action Recommended Section and Section 5 of the IEE (Categorical Exclusion and Negative Determination with Conditions).

1. PURPOSE, BACKGOUND AND ACTIVITY DESCRIPTION

1.1 Purpose

This Supplement # 1 to the Programmatic Regional Energy and Water Cooperation IEE (DCN:

Asia 14-69), further referred to as “P-IEE”, is for two new activities that will take place under Program Areas EG.7: Modern Energy Services, EG.10: Environment and EG.12: Climate Change-Clean Energy and Development Objective 2 of the Mission’s Regional Development Coordination Strategy (RDCS): Enhanced Cooperation on Shared Energy and Water Resources.

The Amendment covers Clean Energy, including renewable energy and energy efficiency activities. The Amendment is a critical element of a mandatory environmental review and compliance process meant to achieve sound activity design and implementation. The purpose of this IEE Supplement # 1 is to:

• Timely and duly account for: 1) Interagency Agreement (IAA) with US Department of

Energy’s National Renewable Energy Laboratory (NREL): Scaling Up Renewable Energy-Central Asia (FY 2017-FY 2018); and 2) Power the Future (PTF): Scaling Up Clean Energy (FY 2018-FY 2022) with an estimated combined value of $25 million to be implemented in five countries of Central Asia. This Supplement does not change the budget ceiling of the P-IEE.

• Confirm that the scope, nature and type of proposed activities are consistent with those regional and country-specific activities described in the original IEE.

• Stipulate that all previously approved Threshold Decisions and related conditions, limitations and stipulation for revision shall fully apply to proposed activities.

• Establish additional types of activities Qualifying for a Negative Determination with Conditions (ND), and

• Stipulate for screening, mitigating, monitoring and reporting measures as presented in Section 4.

1.2 Background

The goal of these activities is to accelerate the regional transition to high performing and market-based approaches to low emission economic growth. This will be achieved by mitigating climate change by increasing the deployment of cost-competitive renewable energy in all five Central Asian countries and improving their ability to meet national emissions commitments. While other donors are operating in this overall space, USAID/Central Asia

(USAID/CA) has been and will continue to be diligent in coordinating to ensure no duplication of efforts.

USAID/CA seeks to enter into a one-year interagency agreement with the NREL to assist the five Central Asian countries with the initial assessments and technical assistance needed to reduce greenhouse gases and scale up renewable energy. This activity will provide an analytical base for any additional work the Mission or another donor plans to do on the adoption and scaling up of renewable energy in Central Asia. Determination was made that the requirements of Foreign Assistance Act, section 621(b) have been met and that the Department of Energy’s National Renewable Energy Laboratory is particularly suitable to perform the required technical assistance. Action memorandum of determination was prepared for USAID/CA Mission Director approval.

An IAA between USAID and NREL will enable USAID to utilize the expertise residing at the NREL. Under the IAA, NREL is particularly suitable to provide the technical assistance towards supporting the Central Asian countries to begin implementing their efforts to reduce greenhouse gases, enhance transparency of progress toward those reductions, and scale up renewable energy.

1.2.1 GHG Emissions and NDCs in Central Asia

The NREL Agreement and PTF activity aim to strengthen the global response to the threat of climate change by keeping the global temperature rise this century to well below two degrees Celsius above pre-industrial levels. Achieving this goal will require significant reductions in emissions of GHGs over the coming decades. In advance of Paris December 2015 Climate Change conference, many countries, including four of the five Central Asian nations, outlined the post-2020 climate actions they intend to take to reduce their own GHG emissions, known as their Intended Nationally Determined Contributions (INDCs).

Central Asia is a significant source of GHG emissions. In 2012, emissions from the five countries in the region totaled 660 million tons CO2-equivalent. GHG emissions from Kazakhstan accounted for some 45% of the regional total, with Uzbekistan and Turkmenistan accounting for more than one-third and one-sixth, respectively. Emissions from energy production and consumption accounted for more than 85% of the region’s emissions1.

Kazakhstan: As a result of energy-intensive mining and industry, Kazakhstan is one of the world’s biggest emitters per unit of Gross Domestic Product (GDP). In the past few years, the government of Kazakhstan has shown leadership in addressing global climate change.

The government of Kazakhstan, through its INDC, has committed to an unconditional target of 15% reduction of GHG emissions by 2030 compared to a 1990 baseline, and 20% conditional target if external assistance is available. To achieve these targets, the government committed to 3% renewable generation by 2020, 30% renewable generation by 2030, and 50% alternative (renewables and nuclear) by 2050. The government seeks to reduce energy intensity of the economy by 10% by 2015, and 20% by 2025.

Kyrgyz Republic: Although it has one of the lowest GHG emissions per capita in the world, the Kyrgyz Republic is one of the most climate vulnerable countries in Central Asia. Freshwater reserves in the Kyrgyz Republic are estimated to decrease 40% by the end of the century if the

1 World Resources Institute, CAIT Climate data explorer; values exclude land-use change and forestry) effects of climate change continue unabated. In its INDC, Kyrgyz Republic committed to reducing GHG emissions 11.49 - 13.75% below a BAU scenario by 2030. With international support, Kyrgyz Republic could reduce emissions 29.00-30.89% below BAU in 2030.

Tajikistan: This is a small developing country without significant reserves of oil, gas, or coal, and a low per capita GDP, as such it is a low emitter of GHG, but is extremely vulnerable to climate change, including frequent natural disasters. Tajikistan’s NDC has a target of 65- 75% of the 1990 level of GHG emissions by 2030. About 98% of Tajikistan’s electric power is from hydropower facilities. Tajikistan plans to achieve its contributions through systematic reforestation and through new international funding and technology transfer for energy efficiency improvements in power, transport, and agricultural sectors.

Turkmenistan: notes that intends to reduce the emissions intensity of its economy, reducing the amount of GHG emissions per unit of GDP, although it anticipates that the overall level of emissions will double by 2030 over 2012 levels.

Uzbekistan: Although it did not submit an INDC, Uzbekistan is taking steps towards transitioning to a lower emissions economic development model. Uzbekistan reported that for the last 15 years (2000-2015) its energy intensity per GDP was reduced by 55%. By 2030, Uzbekistan further plans to reduce its energy intensity per GDP two fold.

1.2.2 Regional Challenges and Opportunities in Developing Renewable Energy

In Central Asia, countries have taken some steps to add renewable energy (RE) to their national energy mix. There is enormous potential for power generation from cost competitive solar, wind, small hydro, and biomass resources in the Central Asian countries. Through development of their domestic RE resources, these countries can access many development benefits, including increased energy security using market-based approaches, renewable energy exports, economic development and job creation, and reduced GHG emissions.

Developing a RE industry in Central Asia also provides an economic opportunity for rural and agricultural areas. As of 2016, Kazakhstan has 48 operational RE facilities with a combined capacity of approximately 252 MW (including hydro and biomass); these facilities currently account for about one percent of all electricity produced in Kazakhstan. In order to reach its three percent target, Kazakhstan seeks to bring approximately 1800MW of new solar and wind generation capacity online over the next four years.

In addition to developing Kazakhstan’s RE supply, parallel efforts to improve energy efficiency (EE) in existing energy systems can both contribute to INDC emission reduction targets, and enable grid flexibility that is essential for balancing the natural variation of solar and wind power generation. One of the larger energy sub-sectors where improvements in efficiency can have a significant impact is combined heat and power (CHP) facilities. In addition to generating power, CHP units also supply heat for buildings and industrial processes. CHP units are primarily powered by coal, and currently generate about half of the nation’s electricity. CHP offers a unique opportunity to access flexibility in the power system, and will play an important part in grid integration of VRE in Kazakhstan.

Kazakhstan is viewed as a regional leader, and through C5+1 countries 2in the region will benefit from lessons learned in Kazakhstan through the implementation of replicable pilot projects, improved knowledge management practices, and broad information sharing among regional stakeholders.

Central Asia’s power sector offers important opportunities for development of renewable energy and energy efficiency. Realizing this potential will however require determined national and regional action to:

● Create an effective enabling environment for RE that accounts for the low wholesale and retail electricity prices that are common throughout the region; Establish the policy and regulatory preconditions for investment in RE; and

● Addressing institutional and technical barriers to high penetration grid-connected RE

Developing large scale RE poses challenges related to high costs and electrical system operational stability throughout Central Asia. While the regional challenges to scaling up RE in Central Asia are considerable, opportunities for encouraging RE development through regional cooperation exist that can complement national actions.

1.2.3 Other Donors’ and IFI’s Activities

United Nations Development Program (UNDP). Initiated in the early 2000s by the UNDP and the government of Kazakhstan, and financed by the Global Environment Facility (GEF), the Wind Power Market Development Initiative was one of the first projects in Kazakhstan that aimed to reduce the country’s greenhouse gas emissions by facilitating the sustainable development of the wind market. It made the first attempt to address the development of regulations and policy instruments to reduce the risk of renewable investments and support the adoption of a national target for wind power in Kazakhstan. The Wind Atlas of Kazakhstan, which served as a basis of later investments, was a direct outcome of this initiative, as was an initial assessment of the development potential by region. The combination of a broad range of market barriers prevented the investment fell into three categories: 1) awareness, information and capacity; 2) financial and low electricity prices; 3) policy and institutional. In 2016-2017, UNDP plans to develop proposals for improvement of RE regulatory basis under the project “upport to the Government of Kazakhstan in implementation of ’Green Economy’” concept and institutionalizing of the Partnership Program “Green Bridge”.

European Bank for Reconstruction and Development (EBRD). The EBRD’s involvement in Kazakhstan’s renewable energy market began in 2008 by signing a Sustainable Energy Action Plan (SEAP). This document outlined a range of joint actions, comprising both investments and technical assistance. Among the proposed investments, renewable energy projects were identified as priority investments. The proposed technical assistance activities focused on regulatory support in the area of renewable energy. The government of Kazakhstan passed the renewable energy law in 2009. In June 2009 the EBRD helped the government develop its Clean Technology Fund (CTF) Investment Plan. The CTF provided support and approved the government’s request to nominate renewable energy as a priority investment area in Kazakhstan. The CTF allocated USD

2 2 At the August 2016 C5+1 Ministerial in Washington DC, all parties agreed to develop regional projects to improve security, promote economic connectivity and increase resilience against the impacts of climate change. One of these “C5+1 Joint Projects” is designed to help energy sector policymakers and mid-level staff in their efforts to scale up renewable energy throughout Central Asia; it is also titled “Power the Future.”

https://www.state.gov/r/pa/prs/ps/2016/08/260805.htm

116 million to support the creation of a renewable energy market, by funding investments and technical assistance on the introduction of a cost allocation system; draft provisions for feed-in tariff; procedures on the award of concessions; and developing standards for power-purchase agreements and national standards regarding the technical conditions of connecting renewable energy projects to the grid. The majority of the recommendations were incorporated into the new primary law.

Between 2010 and 2015, the CTF provided a total of Euro 1 million to support the EBRD’s and the Kazakh government’s work on creating a favorable environment for renewable energy by analyzing existing barriers, identifying incentive mechanisms and drafting primary and secondary legislation. A new renewable energy law with significant improvements was passed in 2013. It introduced a feed-in tariff mechanism, designed the Power Purchasing Agreement (PPA) and helped create of the Cost Clearing and Settlement Centre in 2013 to serve as the single buyer for renewable power. The Centre’s main function is to purchase renewable generation from eligible generators, calculate the average cost per MWh of generation purchased and sell the energy to suppliers and other load-serving entities.

During the period of 2010 - 2015 EBRD signed several investments in renewable energy in Kazakhstan3. In April 2016, a number of further improvements in the regulations related to the creation of a reserve fund for payments of the feed-in tariffs, the development of a standard agreement for the connection to the grid and the possible indexation of the feed-in tariffs to hard currency were proposed. The EBRD plans to continue to work closely with the government on improving the existing renewable energy framework.

1.2.4 On-going USAID Energy Activities

The following energy and climate change activities have been implemented in 2014-2017:

Central Asia Energy-Water Development Program (CAEWDP, 2014-2018). The purpose is to enhance regional cooperation in Central Asia around shared energy and water resources. The program combines various interventions in power sector reforms, energy trade, efficiency improvements, emissions reductions, and climate change adaptation with regional and local water dialogue, water governance improvements, sustainable management, and water resiliency. By joining WB's multi-donor trust fund with USD 1 million. in 2014, USAID is able to coordinate with other donors, expanding its impact to improve water resources management from local to international levels across the region maximizing USG limited resources in Central Asia region.

Currently, USAID and WB have one year no cost extension agreement through December 2017 allowing the mission to be a part of the donor coordination in energy and water sector.

Energy Links Project (2014-2019). The objective of Energy Links is to increase national energy security for countries in Central Asia via four supporting outcomes: Outcome 1: Increased transparent intra- and inter-regional energy trade; Outcome 2: Improved legal and regulatory framework and investment climate for the countries’ energy sectors; Outcome 3: Improved

3 This includes 1) a loan agreement of US$ 60.6 million to SamrukEnergo Company, the owner of the 100 MW Shardara hydropower plant for replacing old equipment and improving the efficiency of the hydropower plant (2012);.

2)the first large-scale Wind Power Yereymentau loan €59.2 million guaranteed by JSC Samruk-Energo – Kazakhstan’s national energy company and ultimate owner for the construction of a 50 MW wind power plant, the connection to the power transmission grid, and commissioning (2014); 3) the EBRD’s second €80 million solar power 50 MW plant project in South Kazakhstan (Burnoye) co-financed with CTF funds of US$ 15 million by Kazakh-UK joint venture (2015); and 4) construction of Kazakhstan’s largest solar power plant with a total capacity of 75 MW in southern Kazakhstan. Six renewable energy projects with total capacity of 290 MW planned for installation in 2015 and 2016 in the southern Kazakhstan region will cover the region’s current electricity deficit of 280 MW by 2017 corporate governance, operations, and commercialization of the energy companies; Outcome 4:

Improved energy efficiency (EE) and demand-side management (DSM). Energy Links project conducted assessments for Tajikistan and Kyrgyzstan Republic power sectors, providing policy context, system characteristics, and high-level energy supply and consumption data to help frame DSM and energy efficiency analysis. Energy sector in both countries is in a continuous crisis state, especially in winter, driven primarily by the mismatch between high winter electric loads from building heating systems, and the low winter availability of the hydropower resource that comprises almost all of the country’s generation capacity. The problem is typically described as a capacity-constrained electric grid, specifically during the winter months due to excessive and inefficient use of electricity to heat homes with electric resistance heaters. While capacity expansion is a major priority, demand side management and energy efficiency can also make major contributions to resolving the energy crisis and supporting clean development. Energy Links also works on USAID supported Central Asia – South Asia 1000 (CASA-1000) by funding the CASA-1000 Secretariat’s executive director and support staff, and helping the participating countries work through the project’s various contracts and agreements.

Climate Change Mitigation Program (KCCMP, 2013-2017).

The purpose of USAID’s KCCMP is to help Kazakhstan achieve long term and sustained reduction in greenhouse gas (GHG) emissions intensity by supporting the government and business community of Kazakhstan in implementation of climate change mitigation policies and measures at the project, corporate, and national levels. The program approach includes assistance in developing, implementing, and enforcing policies, regulations and/or procedures that provide real and measurable reductions in GHG emissions while strengthening the technical and institutional capacities of Government of Kazakhstan agencies; building the capacity of the business community to measure and manage their emissions and energy consumption and take mitigation actions; and improving graduate-level education and training for the next generation. KCCMP supported the Government of Kazakhstan for an initial draft of the INDC, and signing and ratification of Paris Agreement in November 2016. Additionally, KCCMP is working with UNDP and local investors on improvement efficiency of heat supply to autonomously heated municipal buildings. Preliminary results show this improvement can reduce air pollution and GHG emissions from the heating systems by more than 50 per cent. Kazakhstan being committed to its climate change goals, faces substantial pressures to improve its economy, which is deeply reliant on heavy industries that are energy-intensive and produce significant GHGs. Given quite high government staff turnover and the significance of the financial and economic constraints on businesses, it will be difficult to achieve goals of GHG reduction.

Success in the energy sector is predicated on many things outside of USAID’s manageable interest. Without long term political will for reforms from the governments, and infrastructure investments from other donors, USAID’s work in the energy sector will not be sustainable. In addition, despite favorable cost/benefit and feasible financing, regional cooperation on everything from water-sharing agreements to CASA-1000 may not take place because of the political calculations of the actors involved. Governance and management improvements alone cannot make up for the billions of dollars needed to maintain and improve the region’s electrical grid over the next 10-20 years –donors will need to provide this in the short to medium term and private sector investors in the long term.

1.3 Activity Description

Illustrative components under 1) Interagency Agreement with DOE/NREL and 2) Power the Future : include the following:

• Strategic Energy Planning: Short, Medium, and Long Term Plans and related analyses, assessments, and modeling;

• Mapping and related assessments, consultations, and analyses;

• Competitive Procurement of Renewable Energy: Building awareness and capacity for competitive procurement/reverse auctions;

• Enabling environment and support for establishing laws and policies;

• Legal and technical reviews;

• Grid Integration: Support for broad suite of Grid Integration services related to Ancillary services, Balancing area cooperation, Demand response and storage, Integration of Distributed Generation, Flexible Generation, Renewable Energy Forecasting, Grid Integration Studies and Pilots, and System Operations Improvements;

• Smart Incentives: Legislative, regulatory, and implementation support for tax incentive programs and related trainings, analyses, evaluations, and interventions;

• Renewable Energy Zones: Identification of renewable energy zones in priority countries through resource mapping and transmission planning; and

• Under second activity, work on INDC is also included.

Summary of Activity I: IAA with NREL: Scaling Up Renewable Energy - Central Asia (one-year activity)

These tasks will provide targeted support to countries in the region, and an analytical basis for any potential follow on work. During implementation, the USAID/CA may work with NREL to prioritize the tasks based on country demand and alignment with ongoing USG priorities in the region. NREL will provide technical assistance called for under the C5+1 Renewable Energy project to the five countries of Central Asia. The following activities and deliverables will be generated and maintained by NREL to facilitate the project management associated with this Statement of Work.

Task Description Outcomes and Deliverables Task 1 Scaling RE Bilateral and Regional

Learning This task will support a series of consultations and workshops in the Central Asian region, with the intention of increasing awareness, capacity and coordination among bilateral and regional players on scaling up RE. Potential topics include:

RE zones, optimized transmission and generation planning, RE’s role contributing to operational and planning reliability, electricity market design and operation, RE forecasting, flexible combined heat and power (CHP), flexible coal, rooftop PV, RE grid integration, and regional power grid integration. The in-country consultations will be delivered during an extended regional trip with 2-3 NREL experts participating.

Outcome 1: Increase regional understanding of challenges and opportunities to scaling up renewable energy deployment, and identify technical assistance needs

Deliverables:

• Regional RE kick-off workshop

• Five (5) country-specific deep-dive workshops/trainings

• Regional and country-by-country analytical assessments that highlight the challenges and opportunities in each country including political analysis, technical feasibility, and opportunities for continued technical assistance for scaling up

RE.

• Regional RE capstone workshop at completion of all Tasks

• One regional workshop per quarter Task 2 Strategic Planning for High RE Scenarios

Strategic energy planning will require incorporation of RE, EE, and GHG mitigation goals into power sector planning to achieve goals of reducing energy sector carbon intensity while improving access and reliability. This activity may involve the use of several modeling tools and data, depending on the outcomes and scenarios that are investigated.

This activity will support robust, inclusive, and best-practices based planning to enable each country to achieve long term RE targets.

Potential topics for technical collaboration may include:

Development of “Renewable Energy 2030 Roadmap”, support development of each country's low carbon development roadmap, optimized generation and transmission planning, RE zone and technical potential analysis using enterprise geospatial toolkit (eGsT), integrated resource planning.

Outcome 2: Enable Central Asian countries to achieve RE and GHG mitigation targets at least cost through robust, stakeholder inclusive power sector planning and analysis.

• Establishment of relevant bilateral or regional technical working groups

• Development of strategic energy planning key guidance documents, handbook, and training materials, including lessons learned and best practices based on NREL and international experience

• Detailed work plan for two to three technical assistance activities that meet the needs of the host government and align with Agreement objectives

• Delivery of the identified technical assistance through virtual and in-person support

Task 3 RE Resource Data, Analysis, &

Visualization for RE Deployment Providing access to data through user-friendly and intuitive platforms stakeholders will have access to the key data underlying these decisions as well as the resource and infrastructure data needed

Outcome 3: Provide reliable, robust, and validated data for informed planning, policy development, and investment in the clean energy sector.

Deliverables:

• Data gaps and needs assessment

– including key stakeholder and recipient mapping

• Identification of partner organization for ownership, and utilization of the Enterprise Geospatial Toolkit (eGsT).4

• Central Asia regional eGsT

• Metadata repository

• Procurement or development of new data.

Task 4 Activity Management, Coordination, and

Transition NREL will conduct program management and coordination activities for the IAA, as well as reporting and communications related

Outcome 4: Provide coordinated, high-quality support and deliverables that adhere to USAID reporting requirements

● Quarterly progress updates, 4 The eGsT will be renamed to Renewable Energy Data Explorer (RED-E) activities under this SOW. financial statements, and indicator reporting

● USG and donor coordination

● Development of one case study or lessons learned document

● Development of a Project Management Plan (PMP)

Summary of Activity II: PTF: Scaling Up Clean Energy in Central Asia

Task Description Required Results and illustrative activities Objective 1: Support Kazakhstan to meet NDC and Clean Energy goals Outcome 1.1: Improved Power sector planning and operation for high RE scenarios This component will support the achievement of the country’s NDC by achieving measurable reductions in GHG emissions, through both NDC implementation and enhancing transparency of its GHG emissions reductions.

Technical assistance will be provided to support Kazakhstan to meet its targets for renewable energy generation, as part of implementing and achieving its NDC commitments.

Outcome 1.1: Improved Power Sector Planning and Operation for High Clean Energy Scenarios This outcome seeks to mobilize flexibility in the Kazakhstan power grid, through strategic planning and improved system operations, practices, and technologies required to integrate large amounts of variable renewable energy into the grid. It is not envisioned that large-scale equipment purchases will be made as part of this outcome.

Task 1.1.1

Improved Power Sector planning for high RE and EE scenarios This task will support Ministry of Energy (MOE), Kazakhstan Electricity Grid Operating Company (KEGOC), and other key stakeholders in strategic power sector planning for high RE and EE scenarios. Support will include utility and/or national level Integrated Resource Planning (IRP), long term capacity expansion or transmission planning under high RE scenarios, and development of renewable energy zones5.

Stakeholders: MOE, KEGOC, Samruk-Energy, Utilities, RE developers, CHP owners

● Required Results:

● Stakeholder-driven, inclusive process established or enhanced for power sector planning and/or renewable energy zone development

● Improved institutional capacity for power sector planning at high RE and EE scenarios

● Pathway to RE targets identified meet its generation targets and measurable reductions in GHG emissions

● Assist the GOK, KEGOC, and other key stakeholders to identify the areas of high RE resources for development

● MOE, KEGOC, and other key stakeholders have the capacity and expertise to implement grid integration considerations included in power sector planning

● GOK power sector planning includes transmission scenarios based on RE

5 Renewable Energy Zone is a geographic area characterized by several features that support cost-effective renewable energy (RE) development, including high-quality RE resources, suitable topography, and strong developer interest.

Developing an REZ allows power system planners to overcome the difference in timescales associated with developing transmission and RE generation.

development and/or renewable energy zones

Illustrative interventions:

● Utilizing outputs from grid integration studies, support KEGOC and MOE in development of a “grid integration roadmap”,

● Support RE integration into existing transmission and capacity expansion planning

● Support the GOK to jointly develop a stakeholder-driven renewable energy zone process,

● Support the GOK to develop a high-level transmission plan that includes RE targets, Task 1.1.2

Renewable Energy Forecasting for Improving RE Grid Integration

Description: This task will assist key stakeholders build a modern system for accurate forecasting of renewable energy on the grid, and integrate this forecasting into system operations.

Stakeholders: MOE, KEGOC, utilities, developers, generators, Kazhydromet, universities

Required Results:

• KEGOC utilizes wind and solar forecasts in system operations

• Provide support to KEGOC to develop improved sub-hourly system scheduling, dispatch, and market clearing

• Support KEGOC towards improved purchase power agreements (PPAs)

Illustrative Interventions:

• Proposed design for a national RE forecasting system developed

• Support for forecasting vendor trials and tracking and evaluation Training, study tours, and exchanges

• Development of PPA language Outcome 1.2 Increased Deployment of Grid-Connected Renewable Energy Stakeholders: Private sector developers, utilities, Kazakhstan Electricity Grid Operating Company (KEGOC), Ministry of Energy (MOE), Association of Renewable Energy of Kazakhstan, Kazakhstan Market Operator of Electricity and Capacity (KOREM)

Task 1.2

Renewable Energy Auction Support This task will help GOK to use the best emerging practices globally to obtain the lowest possible renewable electricity prices.

Illustrative Interventions:

• Support for auction design, Development of auction platform

• Bidder pre-qualification and auction bid evaluation support

• RE Auctions system is designed

Outcome 1.3: NDC Implementation and Transparency The contractor will provide policy guidance and technical support to assist GOK with implementation of the NDC. Stakeholders: Council on Transition to Green Economy (KZ), Ministry of Energy, Sectoral Ministries, Zhasyl Damu, NGOs Task 1.3.1

Accelerate NDC Implementation

NDC targets will require strategies that link energy development with achievement of emission reduction targets and broader data and policy coordination.

• Establish a sustainable NDC

Implementation Working Group

• NDC targets integrated into energy and minerals sectors integrated planning

• GOK NDC Implementation Strategy/ies in place and being utilized

• Improved regional learning and dissemination of best practices on NDC Implementation

Illustrative Interventions:

• Training on NDC implementation strategies and tools

• Support the GOK to develop interim

NDC implementation and emission reduction milestones for the energy sector

• Support the GOK to develop processes to identify and address potential policy and emissions reduction gaps in specific sectors and overall

• Evaluation of approaches and recommendations for incorporating NDC implementation language, policy development and timing into national and regional power sector and energy resource planning

• Support for NDC implementation through design of a national strategy

• Design and facilitation of regional workshops with government partners from the five countries of Central Asia and donors

Task 1.3.2

Improve NDC Tracking and Transparency

The contractor will track and keep informed of emerging issues and decisions related to transparency within the UNFCCC, provide assistance to GOK

• Support Kazakhstan to adhere to emerging NDC transparency and tracking requirements

• Kazakhstan has improved technical and human capacity to track NDC progress

• Improved regional learning and dissemination of best practices in NDC transparency and tracking

• Training of GOK on above methodologies

Illustrative Interventions:

• Develop and refine software and/or other tools

• Biannual review of emerging

UNFCCC transparency developments and policy directives

• Review of potential methodologies for estimation of emission reductions

• Training of GOK on above methodologies

• Utilizing the C5+1 platform, holding regional NDC implementation workshops sessions to share information on UNFCCC requirements

Objective 2: Increased Regional Deployment of Clean Energy Outcome 2.1: Enhanced Coordination and Communications Related to Renewable Energy and Climate Change in Central Asia This component will contribute to Power the Future objectives by supporting the C5+1 Environment/Climate Change Working Groups. Stakeholders: Ministries of Energy, U.S. State Department, Energy Utilities, Regulators, RE Associations, RE Developers, Technology Providers, Environmental NGOs, and other groups. External partners identified include EBRD, the Islamic Development Bank, the World Bank Group, ADB, and the German government.

Task 2.1

Provide Renewable Energy consultation and assistance to the C5+1 country governments and working groups The contractor will provide technical assistance and consultation on renewable energy with all C5+1 Government representatives regarding the technical work planned and completed under Power the Future.

Required Results:

A regional community of practice for scaling RE, EE, and GCC topics established Illustrative Interventions:

• Provide expert-level support to the C5+1 Ministerial-Level and Working Group Meetings

• Support preparations for Ministerial- Level, Working Group, and Expert- Level Meetings, etc.

Outcome 2.2: Improved Power Sector Planning and Policy Framework for High Renewable Energy and Energy Efficiency Scenarios in Central Asia The adoption and scale up of sustainable clean energy systems requires supportive enabling environments. Enabling environments include institutions that provide the legal, regulatory, sector and corporate governance arrangements, and electricity market incentives. In addition, key financing mechanisms and incentives, such as subsidies, revolving funds, public budgeting and financial management arrangements, feed-in tariffs, and specialized banks and lending windows are necessary for a robust private sector investment climate. Stakeholders: Ministries of Energy, U.S. State Department, Energy Utilities, Regulators, RE Associations, RE Developers, Technology Providers, Environmental NGOs, and other groups. External partners identified include EBRD, the Islamic Development Bank, the World Bank Group, ADB, and the German government.

Task 2.2

Improve Enabling Environment Needed to Bring Renewable Energy and Energy Efficiency Scenarios Online

This key area includes innovative policy, legislative, regulatory or implementation financial support that leads to large scale development and deployment of renewable and energy efficient technologies more effectively, cheaply, and sustainably.

Strategic planning supports the development of other scaling renewable energy building blocks, such as providing long-range, least cost capacity expansion inputs into a multi-year competitive procurement program and testing efficacy and impact of smart incentives.

Improved data, information, and tools for power sector planning in Central Asia to help bring better Renewable Energy and Energy Efficiency scenarios online in Central Asia Illustrative Interventions:

• Support in developing laws, policies, incentives, and/or regulations for better integration of RE and EE in the region

• Provide enhanced data layers to a regional Renewable Energy Data Explorer for Central Asia

• Implementation of technical assistance as part of the agreed work plan under the C5+1 Energy and GCC working group

• Analysis of power trade opportunities for renewable energy trade and flexibility

• Regional assessment of renewable energy and energy efficiency policies and regulatory frameworks

• Regulatory exchanges within and outside of Central Asia

Outcome 2.3: Improved Collaborative Access to Relevant Research and Information through a Robust Knowledge Management Portal This component will contribute to Power the Future objectives by developing and maintaining sound Knowledge Management (KM) practices to connect stakeholders, share lessons learned, and access needed information that will help them to work effectively together and make decisions more collaboratively.

Task 2.3

Develop and Execute a Renewable Energy KM Strategic Framework for the region In effort to support Outcomes 2.1 and 2.2, the Contractor will design, build, operate, and eventually hand over a web-based Knowledge Management

Required Results:

• Knowledge Management Portal for ongoing collaboration and dialogue

• Increased capture, sharing, and dissemination of knowledge in the Central Asia region

Portal that will contain relevant content including biographies, research, key documents, meeting agendas, and meeting minutes.

Illustrative Interventions:

• Allow permitted users to submit content and provide relevant metadata, such as document descriptions and intended audiences

• Provide a content taxonomy for finding relevant files as well as an intelligent search engine with appropriate filters

• Enable users to be able to receive notifications for new content related to topics to which they have subscribed

• Be available on the Web as well as via mobile devices using an HTML5-compliant platform

• Allow real time portal usage report

2. COUNTRY AND ENVIRONMENTAL INFORMATION (BASELINE

INFORMATION)

2.1 Locations Affected and Environmental Problems

Activities under this project may take place in any of the five Central Asian countries.

Environmental information for each country and project location varies in physical and topographic conditions, climate, soils, and ecosystems. There are three main groups of issues relevant to environmental and security issues in Central Asia: 1) Access to and quality of natural resources (primarily water and land, but also forest and more generally biodiversity resources); 2) Existing or potential pollution from industrial facilities, hazardous and radioactive waste sites;

and 3) cross-cutting issues such as natural disasters, climate change, public health, environmental governance, public participation and access to information. The tragic human consequences of above-ground nuclear testing in the vicinity of Semipalatinsk in Kazakhstan; one of the world’s greatest human-induced ecological disasters - Aral Sea desiccation; multiple uranium tailings in mountains and plains of Tajikistan and Kyrgyzstan; burials of obsolete pesticides; a number of very serious localized pollution problems associated with soviet-era heavy industry, especially mining and metallurgy, throughout the region that continue to have potential human and environmental health effects, are well-known. Perhaps the most widespread negative environmental impacts result from mismanagement and inefficient use of energy and water resources. Heavy subsidies in the energy sector have contributed to artificially low prices of electricity and heat and resulted gross waste, excessive emissions, while the sustained overuse of water for agricultural irrigation has resulted in the salinization of vast areas and reduced crop yields. All of these severe environmental conditions continue to affect the possibilities for sustainable economic growth.

Greenhouse gas emissions are dominated by the energy sector where 85% of total emissions are driven mostly by a highly carbon intensive power sector and energy intensive industrial sectors, including fossil fuel extraction. Kyrgyz Republic and Tajikistan countries have very low per capita GDP and low level of gross and specific GHG emissions.

Baseline information on water resources, Ecosystems Biodiversity and Services and Protected Areas can be found in P-IEE. Also a set of useful reference materials for guidance concerning sustainable use of natural resources in project countries may be found in WB, ADB, EBRD and other donors reports, as well as USAID/Central Asia and USAID/Kyrgyz Republic Biodiversity Analyses6. These analyses identify strategic national priorities and threats related to the conservation and sustainable use of biodiversity in an effort to inform sustainable design and implementation of USAID programming in a particular country.

2.2 Climate and Climate Change

2.2.1 Climate. The main features of the region's climate are its sharp continentally and aridity.

The difference between summer and winter temperatures in some places is more than 80° C.

Maximum of air temperature exceeds 48-50° C (South Turkmenistan); while minimum might be colder than - 52° C (north of Kazakhstan). Except for mountain areas, which often receive over 1000 mm per year of precipitation, most of Central Asia suffers from a moisture deficit. The annual amount of precipitation in the plains does not exceed 300 mm. Insolation varies from 2100 to 3200 hours and is sufficient for the development of solar energy throughout the entire region.

Average wind speed in Kazakhstan and Central Asian countries is about 2-7 m/s, with high wind power potential near Caspian Sea, various mountain valleys, and selected areas such as Djungar gates and Shelek corridor, where wind speed exceeds 7-9 m.s.

2.2.2 Actual climate changes, climate change projections and impacts.

Actual changes: Central Asia has experienced climate change on a large scale for many decades.

Higher temperatures and shifts in rainfall patterns are already being experienced throughout Central Asia. The IPCC 4th Assessment Report 7state that climate change poses serious threats to Central Asia’s environment, ecological and socio-economic systems, particularly because of the arid nature of the region. The evidence shows that there has been a general warming trend in Central Asia on the order of 1-2 C° since the beginning of the 20th century that might have a strong potential impact on the regional temperature and precipitation regimes and also on natural ecosystems, agricultural crops, hydropower and human health. Communities and regions will need to cope with changes expected due to climate change. Some areas have already warmed at rates twice as fast as global averages.

Climate change projections: Some of the projected impacts of climate change include a continued increase from the 1980-1999 base period in mean annual temperatures between 2.6 and 5.2°C, with a median projection of 3.7°C, by 2080-2099. Median precipitation is projected to increase during the winter but decline during the summer. Overall, a median decrease in average annual rainfall of three percent from the 1980-1999 base period by 2080-2099 is projected8.

Impacts on water resources, agriculture and hydropower: Central Asia has recently observed greater frequency and intensity of extreme weather events, including droughts and longer heat waves and raise in rain intensity weather events such as floods and droughts. Water stresses already are a problem of this predominantly arid region, and may be aggravated by climate change since they do not have sufficient development in water infrastructure yet. In particular, glacial melt in the mountainous areas due to temperature increase is projected to increase, leading to increased flows in the river and lake systems. Ice reserves have decreased in last 40 years by 25 %. Glacier melt has already started increasing river flow to be continued during next two

6 2013 USAID Central Asia Biodiversity Assessment; 2013 USAID Kyrgyz Republic Analysis for Biodiversity

7 The IPCC 4th Assessment Report: http://www.ipcc.ch/publications_and_data/ar4/syr/en/main.html

8 USAID Climate Change Vulnerability profile for Central Asia, November 2013RSIA decades. It is expected that during next 50 years the reduction of the Amudarya and partly some tributaries of the Syrdarya and Zarafshan rivers flow will fall by 25- 30 %. As such, under the no adaptation option, climate change is likely to cause yield reductions of 20–50 percent by 2050 for nearly all crops, thus threatening the food security of the country. This will also definitely impact the hydropower generation. Building water storages and integrated water management are key element for developing sub-regional adaptation strategies. These might include a more efficient organization of water supply, treatment, and delivery and increased use of groundwater.

2.3 Policy, Laws and Regulations

Due the nature of the assistance offered within the framework of the proposed activities to scale up clean energy, the assistance may be subject to Environmental Code and environmental laws following in each of Central Asian countries, which stipulates that all economic and industrial activities are required to obtain clearance from the authorized environmental agency through the satisfactory performance of an Environmental Impact Assessment (EIA) if they meet the following requirements: i) they are in the mandatory list stated in the law; ii) the amount of their production exceeds threshold values specified in regulations; iii) they are located in a protected area. Similar requirements exist in all region countries and should be respected. The project implementers are recommended to work in the context of applicable international conventions, country-specific and regional laws, regulations, and treaties. They should coordinate closely with local governing bodies, to comply with policies and regulations. Unique among Central Asian countries, Kazakhstan has set ambitious goals to transform to a green economy by 2050. To help meet these targets, the country adopted national energy efficiency requirements in 2012, launched a GHG emissions trading system in 2013, adopted a Law “On Transition to Green Economy” in May 2013 and adopted a law in September 2016 requiring to make amendments to the Land, Water, Ecological, Entrepreneurial, Tax, On Administrative Delinquency codes and several laws, including “Renewable Energy Law” that would support the transition to Green Economy. The list of major applicable participating countries policies and regulatory documents is provided in Annex 1.

3. EVALUATION OF ENVIRONMENTAL IMPACT POTENTIAL

3.1 Implementation of the P-IEE conditions

The originators of energy activities described in P-IEE expected that up to 40% of funding under P-IEE would be spent for activities qualifying for a ND such as procurement of computers and other electric and electronic equipment, commodities and materials; small-scale construction and reconstruction of…