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TO BE OR NOT TO BE?
Hydrogen Project in Kazakhstan
Introduction
The spotlight on low-carbon hydrogen has intensified since the adoption of the Paris Agreement. Currently, over 70 nations worldwide have charted strategic trajectories in the realm of hydrogen-based energy. Among these trailblazers is Kazakhstan, which has embraced a game-changing initiative - the Republic of Kazakhstan's Carbon Neutrality Strategy, aimed at attaining carbon neutrality by 2060. The nation has embarked on a resolute journey toward this ambitious goal.
In a landscape where direct legal regulations are yet to crystallise, hydrogen production in Kazakhstan operates within the contours of existing overarching legislative norms. These norms span the gamut of regulations governing the energy sector, encompassing not only conventional sources but also renewables (hereafter referred to as "RE").), as well as domains pertinent to land use, ecology, water resources, and subsoil use insofar as they apply. This approach to regulating hydrogen energy within the existing legislative framework resonates with a global trend, as the formulation of new legislation is inherently resource-intensive and time-consuming.
Kazakhstan's foray into hydrogen energy has been scrutinised from both production and institutional points. However, the labyrinth of legal parameters shaping the hydrogen energy landscape remains relatively unexplored. This article delves into the important phases and requirements for the initiation of a hydrogen project based on the legal framework of the Republic of Kazakhstan. Given the scattered nature of prevailing legislation, it becomes imperative to clarify select norms and harmonise national regulatory standards. This harmonisation aims to confer lucidity and predictability to the intricate process of developing hydrogen projects.
In a landscape where direct legal regulations are yet to crystallise, hydrogen production in Kazakhstan operates within the contours of existing overarching legislative norms. These norms span the gamut of regulations governing the energy sector, encompassing not only conventional sources but also renewables (hereafter referred to as "RE").), as well as domains pertinent to land use, ecology, water resources, and subsoil use insofar as they apply. This approach to regulating hydrogen energy within the existing legislative framework resonates with a global trend, as the formulation of new legislation is inherently resource-intensive and time-consuming.
Kazakhstan's foray into hydrogen energy has been scrutinised from both production and institutional points. However, the labyrinth of legal parameters shaping the hydrogen energy landscape remains relatively unexplored. This article delves into the important phases and requirements for the initiation of a hydrogen project based on the legal framework of the Republic of Kazakhstan. Given the scattered nature of prevailing legislation, it becomes imperative to clarify select norms and harmonise national regulatory standards. This harmonisation aims to confer lucidity and predictability to the intricate process of developing hydrogen projects.
Kazakhstan Adopts Carbon Neutrality Strategy by 2060
In a significant move, Kazakhstan has embraced the Carbon Neutrality Strategy for the year 2060 (hereafter referred to as "the Strategy"). This ambitious strategy charts a course towards achieving carbon neutrality through a phased substitution of coal with alternative and renewable energy sources, electrification of energy consumption across all economic sectors, transitioning to hydrogen, biofuels, and synthetic low-carbon fuels, and the deployment of carbon capture and storage technologies.
State and quasi-state sector companies have initiated decarbonisation projects aligning with the nation's goals of attaining carbon neutrality. The national enterprise, "KazMunayGas," has adopted an internal low-carbon development policy, supplementing it with projects focused on active integration of H2 production technologies, carbon capture and storage, and an active offset strategy (climate project development). As part of the low-carbon development programme, the "KazMunayGas" company has established a Centre of Competence for hydrogen energy, dedicated to research in eco-friendly fuels and the implementation of technologies associated with low-carbon energy, including hydrogen and renewables.
The onset of strategic goals has ushered in the signing of a Framework Agreement outlining foundational principles for renewable energy projects and "green" hydrogen production in the Mangystau region (referred to as "the Agreement"). Within the scope of this Agreement, plans are underway for the construction of solar and wind parks, set to generate 40 GW of electricity. This power will be directed to a hydrogen production plant through electrolysis utilising desalinated water.
The measures undertaken and initiatives launched as part of the Strategy underscore Kazakhstan's commitment to achieving carbon neutrality. However, given the nascent nature of the industry, numerous regulatory questions remain unresolved. For instance, some experts argue that the identification of specific low-carbon technologies (hydrogen, CCUS, bioenergy) is imperative for transparency and clarity in interactions with the government. As hydrogen projects are currently government-involved endeavours, standardisation of regulatory protocols and training in this realm become essential.
In its research, the German Energy Agency (dena) concludes that Kazakhstan's legislative framework, developed between 2009 and 2014, has become outdated and requires refinement across specific thematic areas. Dena also underscores the necessity for a new comprehensive strategy for the renewable energy sector. The report from the United Nations Economic Commission for Europe similarly notes the need for a dedicated hydrogen strategy, a move primarily observed within European nations. The question of whether Kazakhstan should adopt such a strategy at this stage remains unanswered.
As far as is known, Kazakhstan had been crafting a draft law on " Development of Alternative Energy Sources" aimed at establishing a legal framework for hydrogen, industrial gases, coalbed methane, biofuels, and solid waste fuels. However, as of the article's writing, this legislative initiative is yet to be enacted. Presently, only a handful of countries possess direct legal regulations concerning hydrogen energy, and where still in developmental stages, hydrogen has been incorporated under existing laws.
State and quasi-state sector companies have initiated decarbonisation projects aligning with the nation's goals of attaining carbon neutrality. The national enterprise, "KazMunayGas," has adopted an internal low-carbon development policy, supplementing it with projects focused on active integration of H2 production technologies, carbon capture and storage, and an active offset strategy (climate project development). As part of the low-carbon development programme, the "KazMunayGas" company has established a Centre of Competence for hydrogen energy, dedicated to research in eco-friendly fuels and the implementation of technologies associated with low-carbon energy, including hydrogen and renewables.
The onset of strategic goals has ushered in the signing of a Framework Agreement outlining foundational principles for renewable energy projects and "green" hydrogen production in the Mangystau region (referred to as "the Agreement"). Within the scope of this Agreement, plans are underway for the construction of solar and wind parks, set to generate 40 GW of electricity. This power will be directed to a hydrogen production plant through electrolysis utilising desalinated water.
The measures undertaken and initiatives launched as part of the Strategy underscore Kazakhstan's commitment to achieving carbon neutrality. However, given the nascent nature of the industry, numerous regulatory questions remain unresolved. For instance, some experts argue that the identification of specific low-carbon technologies (hydrogen, CCUS, bioenergy) is imperative for transparency and clarity in interactions with the government. As hydrogen projects are currently government-involved endeavours, standardisation of regulatory protocols and training in this realm become essential.
In its research, the German Energy Agency (dena) concludes that Kazakhstan's legislative framework, developed between 2009 and 2014, has become outdated and requires refinement across specific thematic areas. Dena also underscores the necessity for a new comprehensive strategy for the renewable energy sector. The report from the United Nations Economic Commission for Europe similarly notes the need for a dedicated hydrogen strategy, a move primarily observed within European nations. The question of whether Kazakhstan should adopt such a strategy at this stage remains unanswered.
As far as is known, Kazakhstan had been crafting a draft law on " Development of Alternative Energy Sources" aimed at establishing a legal framework for hydrogen, industrial gases, coalbed methane, biofuels, and solid waste fuels. However, as of the article's writing, this legislative initiative is yet to be enacted. Presently, only a handful of countries possess direct legal regulations concerning hydrogen energy, and where still in developmental stages, hydrogen has been incorporated under existing laws.
Global Landscape of Hydrogen Energy Regulation: A Comparative Overview
A hydrogen facility located in Spain will require substantial quantities of freshwater.
Image: ANGEL GARCIA/BLOOMBERG VIA GETTY IMAGES.
Source: https://www.science.org/content/article/splitting-seawater-provide-endless-source-green-hydrogen
Image: ANGEL GARCIA/BLOOMBERG VIA GETTY IMAGES.
Source: https://www.science.org/content/article/splitting-seawater-provide-endless-source-green-hydrogen
The European Union has recently adopted a series of strategic documents geared towards achieving carbon neutrality, including initiatives like the European Green Deal, the Hydrogen Strategy, and REPowerEU. Although the Renewable Energy Directive was ratified in 2021, it was only this year that two Delegated Acts were introduced, outlining non-biological renewable fuel types and greenhouse gas emission calculation methodologies in meticulous detail. As these Acts are set to come into effect this August, it can be inferred that comprehensive legal regulation of hydrogen energy within the European Union has become viable quite recently.
In tandem with the European Union, the United States of America (USA) is at the forefront of hydrogen energy strategic endeavours. To attain carbon neutrality by 2030, the National Clean Hydrogen Strategy and Roadmap were adopted. In August 2022, the USA announced significant incentives for clean hydrogen production under the Inflation Reduction Act. However, despite setting strategic national goals, a comprehensive federal regulatory framework for hydrogen utilisation is currently absent in the USA. Consequently, numerous aspects are governed by federal agencies authorised to oversee hydrogen at various production stages, especially concerning conventional energy sources.
In tandem with the European Union, the United States of America (USA) is at the forefront of hydrogen energy strategic endeavours. To attain carbon neutrality by 2030, the National Clean Hydrogen Strategy and Roadmap were adopted. In August 2022, the USA announced significant incentives for clean hydrogen production under the Inflation Reduction Act. However, despite setting strategic national goals, a comprehensive federal regulatory framework for hydrogen utilisation is currently absent in the USA. Consequently, numerous aspects are governed by federal agencies authorised to oversee hydrogen at various production stages, especially concerning conventional energy sources.
Nouryon, in collaboration with its partners, is currently constructing an electrolyser plant to generate environmentally friendly hydrogen at the Delfzijl location in the Netherlands.
Source: https://cen.acs.org/energy/hydrogen-power/Trying-make-green-hydrogen-work/98/i23
Source: https://cen.acs.org/energy/hydrogen-power/Trying-make-green-hydrogen-work/98/i23
While the EU and the USA are leaders in strategic document adoption, China excels in electrolysing capacity expansion. Approximately 33 million tonnes of hydrogen were produced in China in 2021. A Medium- to Long-Term Hydrogen Industry Development Plan (2021-2035) was enacted to pursue carbon neutrality. Presently, China lacks a unified national regulatory foundation for hydrogen production, transportation, storage, and utilisation. These issues are governed by the regulatory framework applicable to hazardous chemicals.
The government of Singapore has set an ambitious target of achieving zero energy consumption by 2050. Currently, Singapore lacks separate legislation specifically regulating hydrogen energy. The import, storage, sale, and transportation of hydrogen are governed by broader legislation encompassing flammable materials overall, along with health and safety laws.
Experience from leading nations in hydrogen energy reveals that direct legal regulation of hydrogen energy is found only within the European Union; other countries generally lack direct legislation. As of now, Central Asian countries also lack legislation directly regulating hydrogen energy. However, considering hydrogen energy's development in Uzbekistan, it's plausible that this country could pioneer hydrogen energy legislation among Central Asian states.
The government of Singapore has set an ambitious target of achieving zero energy consumption by 2050. Currently, Singapore lacks separate legislation specifically regulating hydrogen energy. The import, storage, sale, and transportation of hydrogen are governed by broader legislation encompassing flammable materials overall, along with health and safety laws.
Experience from leading nations in hydrogen energy reveals that direct legal regulation of hydrogen energy is found only within the European Union; other countries generally lack direct legislation. As of now, Central Asian countries also lack legislation directly regulating hydrogen energy. However, considering hydrogen energy's development in Uzbekistan, it's plausible that this country could pioneer hydrogen energy legislation among Central Asian states.
In 2022, Uzbekistan adopted the Development Strategy for 2022-2026, focusing extensively on robust hydrogen energy development. Key goals of the strategy include the active integration of "green economy" technologies across sectors and the widespread adoption of renewable energy sources.
A distinctive feature of Uzbekistan's hydrogen energy development is the nation's advancement in research capabilities in this domain. Pursuant to Presidential Decree No. PP-5063, dated April 9, 2021, the Ministry of Energy established the National Research Institute for Renewable Energy Sources, which includes the Hydrogen Energy Research Centre and the Laboratory for Testing and Certification of Renewable and Hydrogen Energy Technologies.
A distinctive feature of Uzbekistan's hydrogen energy development is the nation's advancement in research capabilities in this domain. Pursuant to Presidential Decree No. PP-5063, dated April 9, 2021, the Ministry of Energy established the National Research Institute for Renewable Energy Sources, which includes the Hydrogen Energy Research Centre and the Laboratory for Testing and Certification of Renewable and Hydrogen Energy Technologies.
The development of novel technologies (hydrogen adsorbers, metal hydride carriers, nanocatalysts for hydrogen production, and solar-driven electrolysis) is being planned, alongside the establishment of scientific internships for young scholars and specialists at prominent foreign research centres and universities in the field of hydrogen energy by the year 2024.
As part of the research and development program aimed at creating technologies for hydrogen production, storage, and transportation in the field of hydrogen energy, the following will be generated:
As part of the research and development program aimed at creating technologies for hydrogen production, storage, and transportation in the field of hydrogen energy, the following will be generated:
1. An experimental prototype of a hydrogen-powered transportation vehicle utilising ammonia and hydrogen fuel cells;
2. An experimental-pilot device designed for heat and electrical energy generation from green hydrogen fuel;
3. Methodologies for formulating and applying standards, regulations, and guidelines within the domain of hydrogen energy.
In accordance with the implementation of the Strategy by the Ministry of Investments and Foreign Trade of the Republic of Uzbekistan in collaboration with "ACWA Power" company, projects are underway for the construction of the world's largest environmentally friendly hydrogen production plant. The Government of Uzbekistan is resolutely committed to advancing hydrogen energy within the country, undertaking fundamental measures for developing renewable and hydrogen energy sectors. The creation of scientific research capabilities and the augmentation of human resources stand as distinctive features of hydrogen energy development in Uzbekistan and hold potential for application by Kazakhstan in the advancement of its own hydrogen energy sector.
The Legal Regulation of Hydrogen Energy in Kazakhstan
Due to the absence of direct legal regulation in Kazakhstan, the production of hydrogen may be governed within the framework of existing general norms of legislation that regulate relations in the electric power sector, as well as renewable energy sources (RES), subsoil use, land use, ecology, and water resources, to the extent applicable.
For instance, if renewable energy, generated by wind power stations or other forms of renewable energy, is utilised in the hydrogen production process, the Law "On Support of the Use of Renewable Energy Sources" may potentially apply. Conversely, if the process involves CCS/CCUS (Carbon Capture and Storage/Utilisation), it is likely that the process will be regulated by legislation concerning subsoil and subsoil use. The storage and transportation of hydrogen could be subject to legislation encompassing flammable materials, as well as laws regarding labour protection and occupational safety.
Given that hydrogen is a flammable substance, and the CO2 storage process is linked to subsoil use, licenses and permits will likely be required at multiple stages.
For instance, if renewable energy, generated by wind power stations or other forms of renewable energy, is utilised in the hydrogen production process, the Law "On Support of the Use of Renewable Energy Sources" may potentially apply. Conversely, if the process involves CCS/CCUS (Carbon Capture and Storage/Utilisation), it is likely that the process will be regulated by legislation concerning subsoil and subsoil use. The storage and transportation of hydrogen could be subject to legislation encompassing flammable materials, as well as laws regarding labour protection and occupational safety.
Given that hydrogen is a flammable substance, and the CO2 storage process is linked to subsoil use, licenses and permits will likely be required at multiple stages.
Licensing and Permissions
- The acquisition of relevant licenses and permissions for subsurface utilisation and operation of underground reservoirs for storing captured CO2 may be requisite. These licenses shall encompass the utilisation of subterranean repositories for oil, gas, and petroleum derivatives situated at depths surpassing five meters from terrestrial surfaces in accordance with the provisions outlined in Article 249 of the Subsoil and Subsoil Use Code.
- The initiation of construction for hydrogen projects, including requisite plant or infrastructural facilities, might necessitate the procurement of construction licenses in conformity with the statutes governing architectural and construction activities.
- Due to the imperative mandate for ensuring a heightened level of environmental safeguarding in hydrogen production, the acquisition of environmental permits may be obligatory. This involves formulating an Environmental Impact Assessment (EIA) project and procuring environmental insurance.
- For the extraction of green hydrogen through water electrolysis, compliance with water legislation may warrant the acquisition of pertinent permissions.
Investment Preferences
Generally, the allocation of a land plot from state-owned land is conducted through auctions. However, in accordance with Article 48.1 of the Land Code, a land plot is allocated without conducting auctions in cases of implementing investment projects for the purposes of subsoil use based on a subsoil use license or subsoil use contract, as well as for the construction and/or placement of engineering, transportation, and other necessary infrastructure for carrying out operations related to the extraction of minerals, use of subsurface space, and as state natural grants based on an investment contract.
The List of Priority Activities for the Implementation of Investment Projects does not explicitly mention hydrogen, yet it does include industrial gases, to which hydrogen can be attributed. Given that captured CO2 can be utilised for industrial purposes, it is conceivable to explore the possibility of obtaining investment preferences by developing an investment project and subsequently entering into an investment contract or investment agreement. In the event of entering into an investment contract or agreement, investment preferences may be granted, including exemptions from customs duties and value-added tax upon import, as well as government subsidies in kind. As hydrogen energy is a promising sector in the country's economy, a direct mention of hydrogen in the List of Priority Activities for the Implementation of Investment Projects would bring clarity to prospective investors.
Developers of such projects must also adhere to the rules and instructions regarding fire safety, industrial security, and labour protection, as provided by the legislation of Kazakhstan. Non-compliance with these requirements could lead to administrative or criminal liability in cases where significant harm is caused to health and safety.
The List of Priority Activities for the Implementation of Investment Projects does not explicitly mention hydrogen, yet it does include industrial gases, to which hydrogen can be attributed. Given that captured CO2 can be utilised for industrial purposes, it is conceivable to explore the possibility of obtaining investment preferences by developing an investment project and subsequently entering into an investment contract or investment agreement. In the event of entering into an investment contract or agreement, investment preferences may be granted, including exemptions from customs duties and value-added tax upon import, as well as government subsidies in kind. As hydrogen energy is a promising sector in the country's economy, a direct mention of hydrogen in the List of Priority Activities for the Implementation of Investment Projects would bring clarity to prospective investors.
Developers of such projects must also adhere to the rules and instructions regarding fire safety, industrial security, and labour protection, as provided by the legislation of Kazakhstan. Non-compliance with these requirements could lead to administrative or criminal liability in cases where significant harm is caused to health and safety.
Regulations on Labour Protection, Health, Safety and Environmental Protection
The activities of the subject in relation to hydrogen production and storage may also fall under the purview of legislation governing occupational safety and safety engineering, including legislation on civil defence, labour regulations, chemical safety regulations, machinery and equipment safety, and fire safety. Specifically:
- Given its characteristics, hydrogen is classified as a flammable substance in accordance with Article 70 of the Civil Defense Law. Consequently, operators of such hazardous industrial facilities are obliged to meet specific requirements to safeguard personnel and the general population from their facilities' potential impact, particularly in emergencies, equipment failures, or technical malfunctions.
- The Labour Code establishes occupational safety requirements. Employers are mandated to maintain conditions that ensure the safety of workers in their workplaces. If a production facility is classified as hazardous based on assessments (possibly within the scope of carbon capture, utilisation, and storage industry), privileges such as a reduction in the workweek to 36 hours (Article 69), additional leave days (Article 89.1), and increased wages (Article 105) may be applicable.
- The Public Health and Healthcare Code and specific sanitary regulations lay down sanitary requirements for industrial facilities.
- The Chemical Product Safety Law requires the registration of chemical products (Article 12) and the conduct of risk assessments (Article 13).
- The Electrical Power Industry Law stipulates safety requirements for electrical equipment and materials that produce, transmit, and consume electrical and thermal energy (Article 9-3).
- The Machinery and Equipment Safety Law sets forth general requirements for ensuring the safety of machinery and equipment in production, obligating the provision of operation manuals, labelling, and necessary cautionary signs or danger markings as required by technical regulations.
- Fire safety regulations. As hydrogen can be classified as an explosive and flammable substance, facilities must adhere to fire safety requirements during hydrogen production and storage. While the Fire Safety Regulations do not directly regulate the production and storage of hydrogen, it is presumed that the norms for fire safety regulation applicable to petroleum supply enterprises (Section 4) may be utilised, given the absence of direct provisions for hydrogen production and storage.
Conclusion
As of the present day, direct legal regulation of hydrogen energy is absent within the territory of Kazakhstan. Given that hydrogen energy constitutes a nascent sector within Kazakhstan, the absence of hydrogen projects within the nation precludes a comprehensive evaluation of all potential legal and technical regulation gaps. Consequently, the production, storage, and transportation of hydrogen in Kazakhstan are predominantly governed by the prevailing general norms of legislation that regulate matters in the electro-energy sector, encompassing renewable energy sources, subsoil use, land use, ecology, and water resources.
On a global scale, such fragmented legal regulation aligns with prevailing practices, considering that hydrogen energy is still in its emergent developmental phase, and technologies for hydrogen production have yet to be definitively outlined in many countries. Concurrently, trends towards developing and standardising national regulatory frameworks and delineating hydrogen production, storage, and transportation technologies are evident worldwide. In light of strategic objectives, Kazakhstan may need to enact separate legislation, normative acts, and regulations to align with the global trend of "green hydrogen" advancement and cultivate a favourable legislative and institutional environment conducive to fostering an encouraging investment climate.
On a global scale, such fragmented legal regulation aligns with prevailing practices, considering that hydrogen energy is still in its emergent developmental phase, and technologies for hydrogen production have yet to be definitively outlined in many countries. Concurrently, trends towards developing and standardising national regulatory frameworks and delineating hydrogen production, storage, and transportation technologies are evident worldwide. In light of strategic objectives, Kazakhstan may need to enact separate legislation, normative acts, and regulations to align with the global trend of "green hydrogen" advancement and cultivate a favourable legislative and institutional environment conducive to fostering an encouraging investment climate.
