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Now on BBC News it's time for Talking Business. | :00:00. | :00:00. | |
Kazakhstan, Central Asia's largest economy, blessed with natural | :00:00. | :00:09. | |
resources like coal, oil and uranium, but when global | :00:10. | :00:21. | |
oil prices fell, this country's fortunes fell, too. | :00:22. | :00:23. | |
Now, it's looking to renewable energy for its next phase of growth, | :00:24. | :00:26. | |
Welcome to Talking Business, and welcome to the Astana | :00:27. | :00:46. | |
This Expo is all about showcasing Kazakhstan's vision for itself. | :00:47. | :00:56. | |
By 2050, the government wants half of this country's energy needs | :00:57. | :00:59. | |
to come from renewable energy, like wind, water and solar power. | :01:00. | :01:06. | |
The man behind this vision, President Nursultan Nazarbayev. | :01:07. | :01:09. | |
He has led Kazakhstan for more than two decades, the capital | :01:10. | :01:16. | |
This Expo is his initiative, the renewable energy | :01:17. | :01:25. | |
Sure, Kazakhstan has lots of wind, water and sunshine, but what it has | :01:26. | :01:31. | |
more than anything else is oil, and coal, so how is that | :01:32. | :01:34. | |
The question I put to Kazakhstan's minister of energy. | :01:35. | :01:37. | |
TRANSLATION: We've created regulations to attract investors | :01:38. | :01:39. | |
into renewable energy and it is working. | :01:40. | :01:42. | |
The sector is becoming more attractive for foreign investors. | :01:43. | :01:47. | |
We've signed an agreement with one of the biggest wind and solar | :01:48. | :01:51. | |
And Chinese companies, all of them want to work with us. | :01:52. | :01:56. | |
But foreign investors tell us that the legislation is not clear, | :01:57. | :02:03. | |
and they are worried about long-term viability of their business | :02:04. | :02:07. | |
operations because of the volatility in the currency and they are | :02:08. | :02:15. | |
concerned that there are not enough incentives being | :02:16. | :02:17. | |
provided by the government for them to invest. | :02:18. | :02:19. | |
TRANSLATION: We understand that foreign companies face certain risks | :02:20. | :02:21. | |
because they will earn their profits in our local currency. | :02:22. | :02:24. | |
We are trying to take the risks away from them by tying | :02:25. | :02:30. | |
So, if the local currency drops, then tariffs will rise. | :02:31. | :02:42. | |
When we speak to local people they said that as admirable as these | :02:43. | :02:45. | |
renewable energy targets are, how are they going to boost | :02:46. | :02:47. | |
Because many people feel it is just boosting the image of Kazakhstan. | :02:48. | :02:51. | |
TRANSLATION: The cost for renewable energy production | :02:52. | :03:04. | |
has fallen by 40-60% and by the year 2020 it | :03:05. | :03:06. | |
We're saying within a few years the cost of renewable energy will be | :03:07. | :03:13. | |
close to the cost of electricity which today we can generate | :03:14. | :03:15. | |
There will always be pessimists, and there will be optimists | :03:16. | :03:22. | |
How are you going to look after the people who are employed | :03:23. | :03:35. | |
in old fuel economies like the coal sector and the oil and gas sector, | :03:36. | :03:38. | |
TRANSLATION: The transition will happen step-by-step, | :03:39. | :03:41. | |
Within this time we can diversify our production. | :03:42. | :03:48. | |
Professions can be changed, lives can be changed. | :03:49. | :03:53. | |
We don't expect it to be easy, we need to change the culture. | :03:54. | :03:59. | |
It's important for our people to understand the benefits of using | :04:00. | :04:04. | |
I'm in the energy best practices area. | :04:05. | :04:09. | |
This is where foreign and domestic companies are showcasing their ideas | :04:10. | :04:12. | |
and solutions for innovation in this sector, there's a reason | :04:13. | :04:17. | |
they are here, the potential in Kazakhstan is huge. | :04:18. | :04:19. | |
Joining me now to talk about this is the governor | :04:20. | :04:25. | |
of Astana International Financial Centre. | :04:26. | :04:31. | |
The managing director of energy and natural resources at the EBRD. | :04:32. | :04:36. | |
And the CEO of GE Central Asia and Azerbaijan. | :04:37. | :04:38. | |
I want to start with you, why the urgency for Kazakhstan | :04:39. | :04:47. | |
to get to these renewable energy goals and targets? | :04:48. | :04:49. | |
We are known as an oil-rich country and we produce 1.6 million barrels | :04:50. | :05:03. | |
per day and we are going to double it in the next 15-20 years. | :05:04. | :05:06. | |
But the recent events and the dramatic shift | :05:07. | :05:08. | |
in our commodities prices, especially in the oil sector, even | :05:09. | :05:12. | |
with the new technology factors, like Shell oil for example, | :05:13. | :05:15. | |
It gives us ideas that probably the era of high | :05:16. | :05:23. | |
prices for oil is over, from one side. | :05:24. | :05:25. | |
And from the other side, the other disruptive technologies, | :05:26. | :05:32. | |
for example, like new automobile tendencies, like driverless cars, | :05:33. | :05:36. | |
I think that this is a paradigm shift and everyone realises | :05:37. | :05:43. | |
the technology is shifting and changing and disrupting. | :05:44. | :05:49. | |
And in Kazakhstan we understand it and we should be preparing | :05:50. | :05:51. | |
And for the other side it was a business model | :05:52. | :05:55. | |
Is that your sense, working here with the EBRD, there is a desire to | :05:56. | :06:04. | |
move into this direction? Absolutely. If I can add there is a | :06:05. | :06:12. | |
big commitment here under Paris to reduce emissions, and while this is | :06:13. | :06:18. | |
an oil producing country, 70% of the electricity system here runs on coal | :06:19. | :06:21. | |
and the power sector which is electricity and heat contributes 80% | :06:22. | :06:27. | |
of the carbon emissions to this country, so if, in tandem with the | :06:28. | :06:31. | |
paradigms shift, it is essential that Kazakhstan will have two | :06:32. | :06:35. | |
transition away from coal, and really gas and renewables is the | :06:36. | :06:38. | |
only way that they can do this in a substantial material way, and I | :06:39. | :06:43. | |
think also the sharp decline that we have seen in the cost of renewables | :06:44. | :06:49. | |
recently in particular solar. Kazakhstan adopted in 2013 the Green | :06:50. | :06:52. | |
economy transition concept, and between then and now, so the prices | :06:53. | :06:59. | |
have dropped almost 80%, so there is also an economic imperative to | :07:00. | :07:02. | |
launch into this next phase. From a corporate perspective, what kind of | :07:03. | :07:07. | |
opportunities are you seen in Kazakhstan, given there is this push | :07:08. | :07:15. | |
in this direction? The strategy is very well thought through. It is | :07:16. | :07:20. | |
very ambitious, it sounds today very ambitious but this is a very | :07:21. | :07:26. | |
long-term strategy. If we continue to work towards that actively, all | :07:27. | :07:33. | |
the participants, the government, investors, and producers, we can get | :07:34. | :07:37. | |
there, so I see this as realistic. In terms of renewables in the | :07:38. | :07:44. | |
overall development of Kazakhstan, I understand that this Expo will turn | :07:45. | :07:49. | |
into a massive financial centre at once it has been completed, but how | :07:50. | :07:54. | |
much will renewables make up as part of the overall strategy for | :07:55. | :08:00. | |
Kazakhstan in the future? First of all it is a change in mind, in the | :08:01. | :08:04. | |
country, the level of central government and local government, and | :08:05. | :08:09. | |
the people of Kazakhstan, so I think the idea of this Expo is the future | :08:10. | :08:14. | |
of energy, and from one side this is the message to the external | :08:15. | :08:18. | |
communities that Kazakhstan understands and wants to adopt any | :08:19. | :08:24. | |
renewable technologies in Kazakhstan, and the deep place for | :08:25. | :08:31. | |
this in Central Asia. -- the place. But also to say to the people of | :08:32. | :08:36. | |
Kazakhstan, a new way of thinking, about how to use the energy and how | :08:37. | :08:40. | |
to think about the future energy. And our strategy until 2050, | :08:41. | :08:48. | |
renewable energy reach should be 50%, which is a very ambitious goal, | :08:49. | :08:52. | |
but I think this is like the way which we will start from now. We | :08:53. | :08:58. | |
would like to use this opportunity in terms of this Expo to create a | :08:59. | :09:03. | |
legacy, and the legacy of Expo will not just be the physical | :09:04. | :09:10. | |
infrastructure, but kind of the new understanding and new perception of | :09:11. | :09:12. | |
Kazakhstan in terms of the development of green technologies. | :09:13. | :09:18. | |
From your experience of overseeing these projects in Kazakhstan, do you | :09:19. | :09:22. | |
get the sense that these targets are achievable? Absolutely. They are | :09:23. | :09:28. | |
achievable, but as he said very correctly, this will lead a | :09:29. | :09:31. | |
coalition of interests, public and private. We really need the | :09:32. | :09:36. | |
policymakers in Kazakhstan to set the framework that will make these | :09:37. | :09:40. | |
projects viable. Credible. We need the investors and to be honest I | :09:41. | :09:44. | |
think the Expo has been fantastic in that regard, just between breakfast | :09:45. | :09:49. | |
and hey, I ran into three different investors that I would not have | :09:50. | :09:52. | |
expected to see in Kazakhstan, and it is very clear that this is going | :09:53. | :09:56. | |
to be a message to the internal policymakers, time to get the act | :09:57. | :10:01. | |
together, to put the frame work together, and also the external | :10:02. | :10:05. | |
investing community to say that Kazakhstan is open for business, and | :10:06. | :10:08. | |
for people like ourselves, this is music to our ears. This project will | :10:09. | :10:14. | |
be doable if you have a real kind of financial institution to implement | :10:15. | :10:23. | |
it. Talking about green credits, emission trading system, these | :10:24. | :10:26. | |
ingredients will be part of the new green financial system in Kazakhstan | :10:27. | :10:29. | |
which will allow us to bring global and regional investors. Looking into | :10:30. | :10:36. | |
Kazakhstan, what is your sense of what else needs to be done? We did | :10:37. | :10:41. | |
our share in the form of legislation, as much as we can. And | :10:42. | :10:46. | |
consulted the government. It is very important, what was said, because | :10:47. | :10:49. | |
this strategy but this is more of a vision. The vision doesn't need to | :10:50. | :10:54. | |
have all the steps. What has been done in the last three years, in | :10:55. | :11:00. | |
some cases it seemed to be investors, and for us as producers, | :11:01. | :11:04. | |
slow, it a much longer term game which we are in. What I would say, | :11:05. | :11:11. | |
we have a clear vision for the 3%, that is doable and that, with all of | :11:12. | :11:17. | |
these things coming together finally, I think we will get to the | :11:18. | :11:24. | |
finishing line. That is a good point, we will get back to our | :11:25. | :11:27. | |
discussion but now I want to show you some of the challenges that we | :11:28. | :11:31. | |
have seen with trying to get to the renewable energies vision here in | :11:32. | :11:36. | |
Kazakhstan. This is a report from outside of Astana. This is what | :11:37. | :11:42. | |
Kazakhstan says it wants power generation to look like. Massive | :11:43. | :11:46. | |
wind turbines, rotating above the Central Asian steps, powering homes | :11:47. | :11:54. | |
and offices and schools. This into this, that is the sound of wind | :11:55. | :11:58. | |
going at 60 kilometres per hour and that is not even at full speed. I'm | :11:59. | :12:03. | |
not even sure I can keep standing, I'm worried about being blown away. | :12:04. | :12:07. | |
But this wind is one of the key reasons why Kazakhstan is so well | :12:08. | :12:15. | |
suited for new oval energy. This wind farm is the first of its kind | :12:16. | :12:21. | |
in the country, run by state-owned firms, and right now renewables make | :12:22. | :12:24. | |
up less than 1% of Kazakhstan's energy production, and there is room | :12:25. | :12:28. | |
for growth, but are unlikely to come from local companies. The main | :12:29. | :12:34. | |
problem for the renewable energy equipment is from foreign countries, | :12:35. | :12:41. | |
because from Germany and China, we cannot buy much of them because of | :12:42. | :12:45. | |
the financial crisis, but foreign investors can bring this equipment. | :12:46. | :12:50. | |
And that is what the Astana Expo is for, the grand show that Kazakhstan | :12:51. | :12:55. | |
has put on for foreign investments. But that doesn't mean they find it | :12:56. | :12:59. | |
any easier as I found out from California -based Primus power which | :13:00. | :13:04. | |
builds energy storage solutions. The local currency devalued in 2016 more | :13:05. | :13:14. | |
than 65% which gives very negative effect on renewable project because | :13:15. | :13:19. | |
all the equipment, even small bolts, are imported, and when in the | :13:20. | :13:26. | |
investor comes there is too much uncertainty, the government did not | :13:27. | :13:30. | |
set up proper rules. This is where you live? It is not just investors, | :13:31. | :13:38. | |
many locals also feel the strategy is not well thought out but few dare | :13:39. | :13:44. | |
to speak out. This is when they sentence you to three years of no | :13:45. | :13:48. | |
public speaking and not being able to organise a protest? This lawyer | :13:49. | :13:54. | |
and activist tells me it is all the show. TRANSLATION: They've built a | :13:55. | :14:03. | |
few power why not everywhere? And why not cheaper so that people can | :14:04. | :14:07. | |
actually use it? But none of this is changing everyday life, 80% of | :14:08. | :14:12. | |
Kazakhstan still uses coal because it is cheap, and until there is a | :14:13. | :14:17. | |
clear road map, Kazakhstan's lofty vision may remain out of reach. So, | :14:18. | :14:24. | |
as you have seen, there is still perhaps a long way to go before | :14:25. | :14:28. | |
Kazakhstan fully realises some of these ambitious goals and the vision | :14:29. | :14:31. | |
it has set for itself. To discuss the challenges we can get back to | :14:32. | :14:34. | |
our panel. I'd like to pick up with you again, | :14:35. | :14:50. | |
in some of our travels across the country, we have consistently heard | :14:51. | :14:54. | |
from foreign and domestic companies, looking to invest in the renewable | :14:55. | :14:58. | |
energy sector, that it is a very noble goal but it is still very | :14:59. | :15:04. | |
difficult on the ground. One of the things they pointed out, the | :15:05. | :15:07. | |
volatility in the currency makes it very difficult for businesses to | :15:08. | :15:12. | |
have a firm plan about how they go about doing this autumn they want to | :15:13. | :15:16. | |
do it but it is very challenging. What would you say to foreign and | :15:17. | :15:20. | |
domestic companies are keen to invest? Kazakhstan is very | :15:21. | :15:26. | |
well-prepared to absorb any external shocks and we have created a | :15:27. | :15:31. | |
national fund which consists from the oil revenues produced in | :15:32. | :15:37. | |
Kazakhstan, from one side, and we have over 62 US billion dollars. The | :15:38. | :15:46. | |
exchange rate policy, we have consistent monetary policy and we | :15:47. | :15:51. | |
moved to the restructure all forms and that means a change in mind and | :15:52. | :15:56. | |
in legislation, and we move to English, laws for example. From the | :15:57. | :16:06. | |
other side, a lot of privileges and tax exemptions for renewable energy, | :16:07. | :16:09. | |
and all of these key ingredients will help really to do the | :16:10. | :16:13. | |
investment to make commercially viable. Is the short-term pain worth | :16:14. | :16:21. | |
the long-term five Velotec? Is it viable? Absolutely, we have learned | :16:22. | :16:27. | |
lessons from the short-term pain, one of them is the challenges of | :16:28. | :16:31. | |
foreign exchange risk and the devaluation of the currency which | :16:32. | :16:33. | |
was the right way in light of the shuttle reforms which were described | :16:34. | :16:39. | |
ash structural. It caught some of our projects quite unawares and with | :16:40. | :16:45. | |
some costs. The foreign exchange risk is a very valid one, especially | :16:46. | :16:50. | |
when you have foreign investors coming in investing in a product | :16:51. | :16:54. | |
which is really a local revenue. There are a few ways to solve this | :16:55. | :16:58. | |
issue, and this is not unique to Kazakhstan, we have seen this in | :16:59. | :17:01. | |
many other countries. One of the ways is index eight, and I think the | :17:02. | :17:05. | |
government is ready, especially if they move to a competitive auction | :17:06. | :17:10. | |
process, for the next renewable projects, where they feel | :17:11. | :17:12. | |
comfortable that they are getting the best possible market price and | :17:13. | :17:16. | |
that there will be more open to indexing is, say, the dollar. There | :17:17. | :17:23. | |
is also reshaping the local capital markets, this is something we are | :17:24. | :17:28. | |
focused on. We want to do more lending and we believe that projects | :17:29. | :17:33. | |
that are generating local currency and local revenues should be | :17:34. | :17:37. | |
financed with local currency and this is another area we are focusing | :17:38. | :17:41. | |
on here. It is expensive, in terms of the tariffs in wind power | :17:42. | :17:47. | |
compared to fossil fuel power, is far cheaper to consistently get your | :17:48. | :17:51. | |
power and electricity from fossil fuels. You can see the hesitation. | :17:52. | :18:00. | |
The economy is very energy intensive, the goods produced here | :18:01. | :18:04. | |
need electricity, and it is very cheap today, so you can't compete | :18:05. | :18:14. | |
with the electricity centre and coal -based things. With wind -based | :18:15. | :18:21. | |
production. It is a very difficult equation to convince the investor in | :18:22. | :18:25. | |
that environment but this is going to be, as we said, going into macro | :18:26. | :18:31. | |
directions, from one side of gradually the tariffs will be going. | :18:32. | :18:36. | |
We have no other choice. To make sure that it fits the economy and | :18:37. | :18:42. | |
the challenges of the economy, and at the same time, the other side, as | :18:43. | :18:46. | |
producers we are doing everything to make it cheaper. It should not just | :18:47. | :18:50. | |
be like a financial comparison to say this is cheap and this is more | :18:51. | :18:54. | |
expensive. Everyone realises that it will be kind of a global | :18:55. | :18:59. | |
requirement, to any industrial production, if you produce it with a | :19:00. | :19:05. | |
not very green technology, you will be punished anyway from one side, | :19:06. | :19:08. | |
that is unavoidable. It should be done like this. On the other side, | :19:09. | :19:14. | |
let's see inside of Kazakhstan. If we are still using not very | :19:15. | :19:20. | |
environmentally friendly technology it means a cost to the social | :19:21. | :19:26. | |
inclusion and to the different diseases and the problems of health | :19:27. | :19:30. | |
scares and if you can collate everything then we will see that it | :19:31. | :19:36. | |
is really costly. 75% of the economy is based on fossil fuels and people | :19:37. | :19:39. | |
are worried about losing jobs in the coal sector and they hear this | :19:40. | :19:43. | |
vision that is coming from a top-down approach, and they are | :19:44. | :19:46. | |
wondering what does this actually mean for them and their livelihood. | :19:47. | :19:50. | |
That is what I'm trying to get from you, to understand, how do you | :19:51. | :19:56. | |
manage the expectations of the local people and make sure that the vision | :19:57. | :20:01. | |
actually benefits everyone? That is why we are talking about this | :20:02. | :20:04. | |
commitment for the long-term, we can't do it overnight. In the first | :20:05. | :20:09. | |
phase, definitely, we have to use our competitive advantage. We have a | :20:10. | :20:13. | |
high carbon energy here and we can use nuclear energy and we can use | :20:14. | :20:22. | |
the clean tech. With the coal industry, we have new destructive | :20:23. | :20:26. | |
clean technology and we are going to use it. You energy is new | :20:27. | :20:31. | |
opportunities, there will be opportunities for new jobs and | :20:32. | :20:35. | |
different kinds of jobs, but there will be opportunities for jobs and | :20:36. | :20:39. | |
what is important, the government is focused on vocational training and | :20:40. | :20:43. | |
skills development, these economic inclusion actions which need to be | :20:44. | :20:47. | |
taken and I think Kazakhstan is very progressive in that way, one of the | :20:48. | :20:50. | |
few countries that we know amongst our countries that has adopted a | :20:51. | :20:57. | |
gender action plan, which has a very large component of skills | :20:58. | :20:59. | |
development, access of jobs for women. I'm confident that Latimer -- | :21:00. | :21:09. | |
Kazakhstan will be able to make the transition. What else to you think | :21:10. | :21:14. | |
companies need to see from the government, policymakers, to help | :21:15. | :21:19. | |
make this vision a reality? We need to have the guarantees, the | :21:20. | :21:24. | |
long-term financing in place, to achieve that goal, that is obvious | :21:25. | :21:29. | |
for everyone. The most important thing is that people who understand | :21:30. | :21:35. | |
what they are doing in the government, and it was mentioned at | :21:36. | :21:38. | |
the beginning that this is a well thought strategy. The fact it goes | :21:39. | :21:45. | |
in a Evolution, not jumping through certain stages, it takes longer, but | :21:46. | :21:49. | |
we will get there. 21st-century is about efficiency. It is not about | :21:50. | :21:57. | |
selling more things into Kazakhstan, if Kazakhstan has reserves | :21:58. | :22:00. | |
technically speaking, they do not need extra capacity for a short-term | :22:01. | :22:06. | |
or mid-term future, but at the same time there are ways to improve the | :22:07. | :22:11. | |
efficiency of existing assets. Thanks for joining us. That is it | :22:12. | :22:18. | |
for me. We are leaving you with shots of the Astana Expo. Enjoy. | :22:19. | :22:56. | |
A very good afternoon. Damages have been climbing, the | :22:57. | :22:57. |