The proposed Karaganda District Heating Network Rehabilitation project (the Project) aims to enhance operational efficiency of district heating (DH) systems in Karaganda province.
The Project impact will be improved energy efficiency in Kazakhstan, and the outcome will be a stable, safe and energy efficient district heating distribution network in Karaganda province. The PPTA outcome will be a well-prepared Project, and enhanced institutional capacities for identifying, developing and managing energy efficiency projects.
The Project has three main outputs: (i) reconstruction and replacement of main and distribution pipelines and pumping stations, (ii) installation of individual and central heating points and substations, metering, and a supervisory, control and data acquisition (SCADA) system; and, (iii) institutional capacity building and awareness campaign including on financial management, procurement, safeguards compliance, access to finance including carbon finance and trading mechanisms, development of investment program and strategy, and project supervision and management support for the Ministry of National Economy, the Karaganda Oblast and City Akimat, LLC Teplotranzit, other utilities and other stakeholders.
|Project Rationale and Linkage to Country/Regional Strategy
Kazakhstan''s rapid economic growth was accompanied by inefficient energy use, lost revenues, accelerated resource depletion, and adverse environmental and health impacts. It was the fourth most energy-intensive and the seventh most carbon-intensive economy in the world in 2008. Current installed capacity, mostly over 30 years old and based on Soviet technology, is 19.5 gigawatt (GW). Over 7 GW of coal-fired plants supply 85% of electricity and heating demand and generating 65% of greenhouse gas (GHG) emissions. The housing sector accounted for 24% of heat demand, and consumption increases 8-10% annually. Over 80% of DH networks need urgent replacement which is critical given the country's long and harsh winters with temperatures reaching minus 50 degrees Celsius.
Karaganda City with a population of 475,200, is the industrial center of Karaganda region. The city's DH network, operated by a municipality-owned limited liability partnership company (LLP) Teplotranzit (Teplotranzit), supplies all high-rise housing, part of 1- and 2-storey houses, and 50% of administrative buildings. Heat is generated at 2 privately-owned combined heat and power (CHP) plants. The network assets are 25 to 36 years old and are operating beyond service life. All 56 pumping stations require upgrade and failure rates are increasing. Pipeline wear is 75% and insulation is missing for 29% of the network. Heat losses are at over 18%, equivalent to revenue losses of approximately $20 million per heating season. Karaganda province has the second highest number of accidents nationwide (21.7% in 2010).
Karaganda City's 109 km primary heating network is divided into 2 operational areas, each with 6 non-automated pumping stations: (i) Novogorodskoy, built in 1966, and (ii) Maykuduksky, built in 1978. The 325 km distribution network with 47 pumping stations serves the Soviet, South East, October, Kirov, and Railway operational areas. Teplotranzit's technical inspections estimated the cost of replacing all distribution pipelines in 2011 at $482 million.
The Project will focus on the oldest network established in 1965, the Soviet operational area, which serves 127 km of heat networks (94 km aboveground, 25 km underground, and 8 km transit pipes) and 7 pumping stations. Subject to availability of cofinancing, rehabilitation of October and Kirov operational areas will be included. Given the potential for replication, provision of a multitranche financing facility will also be explored during PPTA.
The Project supports Kazakhstan's energy sector, prioritized under the ADB Kazakhstan Country Partnership Strategy for 2012-2016, and is included in the ADB's Kazakhstan Country Operations Business Plan 2012-2014. The Project supports the country's Comprehensive Energy Efficiency Plan 2012-2015, and Accelerated Industrial Innovation and Development Plan 2010-2014, and will help achieve the country's energy and carbon intensity reductions targets.