A “hot Season” For Kazakhstan Heating Sector

Kazakhstan President Kassym-Jomart Tokayev repeatedly drew attention to systemic problems in the heat power sector ¹. These include:

• significant wear and emergency condition of a number of thermal power plants;
• shortcomings in the existing tariff-setting system, which no longer fully meets the sector's current economic challenges;
• a shortage of long-term private investment needed for its modernisation and development.

To address those issues, Kazakhstan has made significant progress in the area of sustainable development, both in fulfilment of its international commitments and through the adoption and implementation of domestic policies and strategies, including the Strategy for Achieving Carbon Neutrality of the Republic of Kazakhstan by 2060.

Just on some of the positive developments specifically in the heating sector we have to mention the adopted sector-specific Law of the Republic of Kazakhstan "On Heat Power Engineering" No. 120-VIII dated 8 July 2024. Previously, relations in the field of electric and thermal energy were governed mainly by the unified Law "On Electric Power Industry" No. 588-II dated 9 July 2004. The Law established an independent legal framework for the sector, setting out mechanisms for long-term planning, monitoring, state support, and investment attraction.

The Decree of the President of the Republic of Kazakhstan No. 1008 dated 13 September 2022 "On Measures to Implement the Head of State's Address" introduced the state policy of "Tariff in Exchange for Investment," and amendments were made to the legislation on natural monopolies affecting the mechanisms for setting tariffs and investment programme, aimed at attracting financing to the sector.

Furthermore, Resolution of the Government of the Republic of Kazakhstan No. 1102 dated 25 December 2024 approved the National Project "Modernisation of the Energy and Utilities Sectors," which provides for infrastructure modernisation and investment attraction in the sector.

In 2026 Kazakhstan expanded its national standardisation framework by introducing standards addressing climate change management and the transition to carbon neutrality. The Kazakhstan Institute of Standardisation and Metrology (KazStandard), under the Ministry of Trade and Integration of the Republic of Kazakhstan, developed two new national standards: ST RK ISO 14068-1 “Climate Change Management. Transition to Net Zero. Part 1. Carbon Neutrality” and ST RK IWA 42 “Guidance on Carbon Neutrality.” Both standards are identical to the corresponding international standards, ISO 14068-1:2023 and IWA 42:2022, respectively.
In parallel with the improvement of the regulatory framework, the state is implementing practical measures to modernise heat power infrastructure. Major overhauls and reconstruction of thermal power plants and heating networks have been carried out in various regions of the country, including in Almaty city, Ekibastuz, Ridder, and the Karaganda region ².

As a result of these and other positive measures, the scope of repair and investment programmes has increased, while the number of thermal power plants classified as high-risk has decreased. Modernisation is funded from the state budget as well as through tariff-based and loan financing mechanisms.

Despite these positive developments, time, existing implementation practice indicates that these and other sectoral strategies, both past and current, have been subject to criticism and raised concerns regarding the risk of failing to meet stated targets, the quality and timeliness of their implementation, and the extent to which the applicable legal and contractual frameworks are aligned with international best practices.

Non-binding Nature of Climate Targets

Kazakhstan’s climate targets generally do not have the status of legally binding obligations, making sectoral targets difficult to enforce. As a result, strategies and roadmaps may be affected by changes in political priorities and policy direction. Integrating climate objectives into the binding strategies, plans and programmes of central and local government bodies and national companies could provide greater stability and predictability at the sectoral and regional levels. For example, the Concept for the Development of the Fuel and Energy Complex until 2030 sets out capacity expansion targets, but these remain indicative rather than legally binding.

Limited Critical Evaluation of Previous Strategies

A key weakness of Kazakhstan’s strategic planning framework is the limited systematic assessment of the implementation and shortcomings of previous strategies and plans. Strategic documents often provide limited analysis of whether earlier targets were achieved, why they were missed, and what corrective measures should follow. Greater transparency in reporting on the implementation and effectiveness of previous strategies could strengthen accountability and improve the quality of future planning.

For example, the Ministry of Energy estimated in 2022 that the transition away from coal and other decarbonisation measures could result in the loss of approximately 27,000 jobs in coal mining and energy production, rising to around 35,000 when related sectors are included. This highlights the need for a structured just-transition framework, including social protection, retraining and reskilling programmes, and the creation of alternative employment opportunities in low-emission and “green” industries.

Structural Dependence on Coal and Hydrocarbons

Kazakhstan remains an energy-intensive economy heavily dependent on coal and hydrocarbon extraction. Reducing the share of coal-fired generation and ultimately phasing out coal by 2060 would therefore require a fundamental transformation of the energy sector and represents a significant policy and investment challenge.

Policy Conflicts Across Sectors

Certain decarbonisation measures may conflict with other government priorities, particularly policies aimed at maintaining or increasing hydrocarbon production. For example, in September 2025, President Kassym-Jomart Tokayev emphasised that hydrocarbons would continue to play a key role in both global and Kazakhstan’s energy sectors. He also noted that coal accounts for approximately 70% of Kazakhstan’s energy balance and emphasised the need to use the country’s coal resources efficiently. Such policy positions may create tension between long-term decarbonisation objectives and continued reliance on fossil fuels.

Gaps in Renewable Heat and CHP Policy

The heating sector lacks clear targets for the deployment of renewable heat, limiting the development of renewable solutions in the sector. Under the renewable energy support legislation, renewable energy targets focus primarily on electricity generation, including the share of electricity generated by renewable energy facilities and total installed RE capacity by technology.

There is also no comprehensive state policy specifically aimed at expanding high-efficiency CHP capacity, replacing and modernising district heating networks, or upgrading existing centralised heating infrastructure. Existing support measures remain fragmented and are not consistently linked to energy efficiency, emissions reduction or the development of sustainable CHP.

Significant Investment Needs and Unclear Implementation Mechanisms

Achieving Kazakhstan’s climate and decarbonisation objectives will require substantial investment in low-carbon infrastructure, renewable energy, grid modernisation and other clean technologies. This will increase the need to mobilise international financing, private capital and technology. At the same time, concerns remain regarding the clarity of mechanisms for implementing Kazakhstan’s nationally determined contributions (NDCs), the absence of sufficiently clear legal instruments for the phased reduction of fossil-fuel use, and the limited formalisation of stakeholder consultation processes.

Limited Bankability of the Current Energy and Heat Regulatory Framework

Existing sectoral agreements, including power purchase agreements (PPAs), investment agreements, capacity purchase agreements and heat supply agreements, contain provisions that may limit investor protection and project bankability. Key gaps include the absence or limited scope of change-in-law protection, insufficient termination compensation, and uncertainty regarding the allocation of force majeure, curtailment and other regulatory risks.
The state is consistently implementing measures to modernise the heat power sector and improve its efficiency. Legislation is gradually creating more favourable conditions for attracting private investment, and the government programmes being implemented provide for various forms of cooperation with the private sector. However, though the certain improvements have been introduced, the existing limitations continue to constrain investor confidence and may increase reliance on intergovernmental agreements or bespoke contractual arrangements to address project-specific risks.

Footnotes

1 Speech by Head of State Kassym-Jomart Tokayev at an expanded meeting on the socio-economic development of the country, 19 April 2023.
Interview of the President of the Republic of Kazakhstan Kassym-Jomart Tokayev with the newspaper "Turkistan," "Kazakhstan Has Entered a New Stage of Modernization," 5 January 2026.

2 "Government to Allocate 3.4 Billion Tenge from Reserve for Further Modernization of the Ekibastuz TPP," 5 June 2024, Sungat Yessimkhanov Reviewed the Progress of the Heating Season at the Ridder TPP, 14 Heat Supply Projects Being Implemented in the Karaganda Region