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As Kazakhstan advances its energy transition and decarbonisation agenda, the decommissioning of conventional power plants is becoming an increasingly important issue for project developers, lenders and public authorities. Although Kazakhstan has not yet adopted a standalone legal and regulatory framework specifically dedicated to conventional power plants phase-out, the existing energy and environmental legislation establishes a fragmented regulatory landscape governing the withdrawal of fossil fuel based heat and power generation assets from operation, including significant environmental compliance obligations.
The Concept for the Development of the Electric Power Industry of the Republic of Kazakhstan for 2023–2029 identifies the absence of agreed decommissioning plans for power plants as a barrier to achieving national environmental and climate commitments. In parallel, the Strategy for Achieving Carbon Neutrality by 2060 provides that, in the medium and long term, carbon capture and storage (CCS) technologies are expected to play a role in reducing greenhouse gas emissions. The Strategy envisages the development of a roadmap for the gradual decommissioning of coal-fired power plants with an operational life exceeding 30 years, while introducing CCS technology for units that are expected to continue operating beyond 2035. Decommissioned coal-fired power plants are also expected to be granted priority rights to implement “green” energy projects.
This note provides a brief overview of the current legal regime applicable to the decommissioning of conventional power plants in Kazakhstan and highlights potential areas for future legislative development. Unicase law firm has extensive experience advising on conventional energy and renewable energy projects in Kazakhstan and Central Asia. We are currently advising on a first-of-its-kind energy transition project in the country, in which the decommissioning of fossil fuel generation assets and their potential replacement with clean energy solutions forms a central component of the legal and structuring analysis.
Decommissioning under Heat Supply Legislation
Under the Law On Heat and Power Industry 1, heat supply entities are subject to the following key obligations:
Notification obligations
Heat supply entities must provide written notice to local executive authorities regarding repairs or the decommissioning of heat sources, heat networks, or heat-consuming installations in accordance with procedures established by the authorised state body.
Advance notice for permanent shutdown
In the event of a permanent cessation of operation of a heat source, the operator is required to notify the relevant local executive authority at least five years in advance.
Risk assessment by authorities
Upon receipt of such notice, local authorities must assess the risk of heat supply shortages, based on approved heat supply development schemes, and evaluate options for replacing the withdrawn capacity.
Mandatory mitigation measures
Where replacement of heat capacity is not feasible and a risk of heat deficit exists, local executive authorities may require the heat supply entity to:
- sell the heat source subject to continued operation; or
- sell the heat source to the relevant local executive authority at a price not exceeding market value as defined by the legislation of the Republic of Kazakhstan and agreed upon by the parties.
In practice, this framework reflects Kazakhstan's policy priority of maintaining uninterrupted heat supply, particularly in urban areas and during the heating season, and may significantly affect the timing and structure of traditional power plant decommissioning.
Environmental Law Implications
Conventional power plants are generally classified as Category I facilities under the Environmental Code of the Republic of Kazakhstan, due to their significant environmental impact.
While the Environmental Code does not establish a separate, formal “decommissioning procedure” for conventional power plants, termination of operations triggers a comprehensive set of environmental obligations in the field of remediation, which typically follow after the decommissioning process.
The legal framework is based on two fundamental principles:
- Principle of remediation: environmental damage must be eliminated in full. Where full remediation is not technically feasible, the adverse effects must be minimised or compensated through alternative remediation measures.
- “Polluter pays” principle: the operator bears full financial responsibility for preventing, controlling, and remedying environmental damage caused by its activities.
Importantly, cessation of operations does not release the operator from environmental liability.
Mandatory remediation obligations
The Environmental Code stipulates that, as part of the elimination of the consequences of the operation of facilities that have a negative impact on the environment, work must be carried out to restore land plots to a condition that ensures the safety of human life and/or health, protects the environment, and allows for their further use for their intended purpose. Depending on the nature of the facility, such work may include the dismantling of construction facilities, the dismantling and removal of equipment, land reclamation, waste management, and other measures provided for by the legislation of the Republic of Kazakhstan.
These obligations remain in force until the site reaches an environmentally acceptable and safe condition suitable for future use.
Financial Security for Remediation Obligations
A key feature of Kazakhstan's environmental regime is the requirement to provide financial security for remediation obligations. Operators of Category I facilities must provide financial security in favour of the Republic of Kazakhstan to cover current and future remediation obligations.
Acceptable forms include guarantees, bank deposit pledges, property pledges or insurance.
Financial security must be:
- provided three years after commissioning, for existing facilities countdown begins from 1 July 2026;
- maintained continuously until full completion of remediation;
- recalculated every seven years based on updated cost estimates.
Operation of a Category I facility without financial security is prohibited. Transfer of ownership does not release the previous operator from liability until the new operator provides adequate financial security 2.
Сonservation of power plants
Although Kazakhstani legislation does not currently provide for a comprehensive legal regime specifically governing the decommissioning of power plants, it recognizes the concept of conservation of energy facilities' equipment. In accordance with the Rules for the Technical Operation of Electric Stations and Networks 3, the equipment of energy facilities commissioned into operation may be in one of four operational states: in operation, in reserve, under repair, or in conservation.
Further, the Methodological Guidelines on the Conservation of Equipment of Stationary Power Plants Placed into Reserve, set out the technical and organizational methods for сonserving power plant equipment placed in reserve. In practice, сonservation is being applied in Kazakhstan, for example, at the CHP plant in Kyzylorda 4. It appears that the conservation functions as an interim technical status, distinct from formal decommissioning, which remains largely unregulated as a standalone legal process.
Future Outlook
Looking ahead, Kazakhstan may consider further improvement of its legal and regulatory framework for conventional power plant decommissioning, including:
- dedicated legal and regulatory framework governing decommissioning of conventional power plants, harmonized with environmental, occupational health & safety, and land-use laws, comprehensive technical standards for dismantling, site remediation, post-closure land use and etc. aligned with international best practices;
- incentives, including co-financing mechanisms, concessional funding through development banks, tax incentives and compensation mechanisms for early closure and repurposing of sites;
- just transition measures, addressing workforce retraining and further job transition;
- integration with climate and energy transition policies, including pathways for repurposing coal sites for renewable energy, energy storage and etc.
As conventional power plants will approach the end of their operational life in the upcoming years, legal clarity and regulatory predictability will play a decisive role in securing financing, ensuring responsible site remediation, and sustaining energy security.
Footonotes
1. Law On Heat and Power Industry dated July 8, 2024, No. 120-VIII ZRK, art. 47
2. Environmental Code of the Republic of Kazakhstan dated January 2, 2021 No. 400-VI ZRK, art. 145 and 147
3. Rules for the Technical Operation of Electric Stations and Networks approved by the (Order of the Minister of Energy dated 30 March 2015 No. 247)
4. https://inbusiness.kz/ru/last/vse-tec-rabotayushie-ot-uglya-v-kazahstane-zakonserviruyut
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