Introduction A long-term planning system is vital for attracting investments in district heating, guaranteeing sustainable growth, and ensuring quality and reliability of heat supply at the lowest cost, while considering environmental goals. With support from the Asian Development Bank (ADB), the Government of Kazakhstan drafted legislation that supports the transition of the heating sector to clean energy. The draft law sets the principles for a comprehensive heating sector planning system and identifies energy master planning by municipalities as one of the major instruments to ensure sustainable heating. The country’s heating sector is characterized by outdated technology, poor asset condition, low efficiency and reliability, and poor environmental performance. There is a backlog in repair, maintenance, and replacement of assets due to insufficient investment, misguided economic regulation, and lack of planning over the past 20 years. The draft legislation aims to create a balanced and clear regulatory framework, set clear targets, increase the share of renewables, and improve energy efficiency standards in the heating sector. Several local authorities and heat suppliers have expressed interest in the development of heating sector master plans for their municipalities. Why is a long-term planning system important? The transition to sustainable heating is complex and multifaceted. It must ensure that heat supply will be reliable, high-quality, efficient, economical, and environmentally sustainable. The proposed comprehensive heating sector planning system will consist of nationally established sustainability targets and key performance indicators, and locally determined development plans or master plans—which serve as the centerpiece of the planning system. The master plan will define a set of actions for the development of the heating sector in a specific territory. It aims to meet future demand for heat energy and ensures reliable and cost-efficient heat supply, avoid damage to the environment, rationalize use of resources, and consider the local development context. The master plan will be developed by local executives and approved by local representative bodies based on the required methodology and procedure and target indicators approved by the Kazakhstan Ministry of Energy. Multicriteria analysis of various possible heating sector development scenarios will help determine the appropriate heat energy development path. It considers all available technologies and resources, including renewable and alternative energy sources, and the potential for reducing consumption through increased energy efficiency. What are the planning considerations? A heating sector master plan should answer the following questions: What is the optimal level of centralization for heating systems (eg., which consumers should remain on individual systems, which ones should be switched to centralized systems, local or general use)? Which rehabilitation or modernization measures for centralized systems are economically viable? Which heat energy sources can be converted/replaced with renewable or alternative energy sources? What is the priority of measures to increase energy efficiency? What organizational models and solutions should be implemented/adopted? What are the dynamics of costs, heat energy prices, and possible budget expenditures? There are multiple alternatives, both in terms of the types of heating systems used (e.g., general-use centralized heating systems, local centralized heating systems, individual heating systems) and the energy sources and technologies used for heat production. These alternatives are tied to the types of buildings where heat is consumed (multi-apartment buildings, individual dwellings); ownership of those buildings; and the historic development of settlements and their infrastructure. Due to the characteristics of heat energy as a commodity—particularly the economic inefficiency of transporting it over long distances, heating systems have a local nature, tied to the consumers of a specific territory (i.e., district, city, region) and must take into account the specific climatic, resource, and other local features. For regions with a cold climate, heating is a fundamental component of the population's livelihood and a factor of social and economic stability, which make service reliability and quality even more important. The heating sector is one of the major impacts that humans have on the environment. Without significant changes in this area, achieving climate goals becomes unattainable. Heating systems are characterized by substantial capital intensity, high energy consumption, technical complexity, and increased risks (increased danger to human life and health, including those related to the environment). When a heating system performs poorly, a range of measures in each of the three main components—consumption, distribution, and generation—could provide improvements. Consumption. Measures may involve partial or full thermal insulation of buildings, connection to or disconnection from the centralized system, or changing to different heating sources for individual dwellings. Distribution. Actions include improving maintenance, replacement, or adding of pumps and heat exchangers; or completely modernizing the system. Generation. Measures may involve improved maintenance of existing generation source or replacement with newer plants, possibly based on different combinations of sizes and fuel types, including alternative and renewable sources. Weighing different alternatives and associated risks requires a rigorous methodological approach and legally binding approval process. At the same time, making such analysis accessible to stakeholders is vital to ensure public support. The development of the heating sector development affects different stakeholders. Some improvements need to be carried out around or inside residential units. A draft regulation, Rules for Elaborating and Approving Masterplans for the Development of the Heating Sector, was also developed as part of the proposed law. It defines the procedure for the elaboration, approval, implementation, and control of the master plan’s implementation. What are the steps in developing a master plan? Figure 1: Heating Sector Master Plan Development Process The process of defining development scenarios and selecting the optimal one involves a thorough analysis of the existing situation, comprehensive inventory of available alternative and renewable options, and an iterative process of analyzing and comparing development options. Each territory will develop a 10-year heating sector master plan, with intermediate stages and updates every 5 years. The local authority may involve specialized organizations, including scientific, research, and expert organizations, heat energy suppliers, legal entities' associations, and public organizations. Local representative bodies, which will approve the master plan, are encouraged to hold discussions on the draft plan, including town hall meetings. The decision to approve the master plan must be published on the websites of local executive and representative bodies. The recommendations and conclusions of approved master plans must be considered by heat suppliers when they draw up their investment programs and plans and by local executive authorities when planning state support measures, programs, projects, budgets, and investment incentives. The implementation of a master plan is subject to annual monitoring and analysis by local executive authorities, and the results must be published within the established deadlines. What are the main components? The master plan should include: objectives and targets for the territory's heating sector during the master plan period; description of the territory, including climatic, economic, and social conditions; heat supply structure information; sources; transportation systems, and heat energy consumers; information about heat-generating, heat-transporting, and heat-supplying organizations; assessment of future heat energy and heat carrier demand for the planning period; analysis of the potential use of renewable and alternative energy sources; description of possible heating sector development scenarios, comparative analysis as and justification for selection of an optimal scenario; prospective heat energy, capacity, and fuel balances for the selected development scenario, including zones of operation for different heating systems; proposals for the construction, reconstruction, technical re-equipment, or modernization of heat energy sources and heat networks, assessment of respective investments, and proposals for state support measures, programs, plans, projects, and budget financing; price (tariff) calculations for the selected scenario implementation; and assessment of the environmental impact. Pilot master plan As part of the ADB project and with support from the local executive authority and heat suppliers, consultants from the Dornier Group developed a pilot master plan for the town of Shakhtinsk. The goals were: to familiarize interested parties with the master plan development process, to clarify specific provisions of the draft law and rules and aid the legislative adoption process, and to demonstrate the main methodological approaches and use of potential tools for developing master plans. Among the tools and models demonstrated were: THERMOS software for planning heat networks (Figure 2), production system modeling for analyzing the contribution of different generation sources to the heat supply (Figure 3), and models and concepts for calculating heat tariffs, social assistance for heating (heat benefit), gradual tariff adjustment and impact of different carbon dioxide prices (Figures 4 and 5). Figure 2: Topology of the Existing Network and Heat Consumers of Shakhtinsk Central district heating area in red, private individual heating in white. Source: THERMOS application for Shakhtinsk. Figure 3: Average Daily Heat Production by Units for the 10th Year of the Pilot Master Plan for Shakhtinsk (Scenario 2.2) MW = megawatt. Source: Pilot Masterplan Shakhtinsk. Figure 4: Tariff Adjustment—Dynamics for Different Scenarios (Single-Part Tariff Option) Single-part (single rate) tariff is a tariff that contains only one rate for consumed thermal energy. Two-part or multi-part tariffs are tariffs containing two or more rates (for consumed thermal energy, for capacity, subscription fee etc.) Gcal = gigacalorie. Source: Pilot Masterplan Shakhtinsk. Figure 5: Comparing Scenarios for Different CO2 Prices mnl.tenge = millions of tenge, USD/T.CO2 = dollars per 1 ton of CO2. Source: Pilot Masterplan Shakhtinsk. Resources Asian Development Bank. Supporting Renewable Technology-Inclusive Heat Supply Legislation in Kazakhstan. Ask the Experts Ilka Lewington Head of Markets & Regulation, Dornier Power and Heat GmbH Dr. Lewington has 25 years’ commercial, academic, and consultancy experience in energy economics, specializing in energy sector reform in economies in transition. These include developing primary legislation for energy sector reform, renewable energy, and regulation as well as secondary legislation in Azerbaijan, Belarus, Kazakhstan, Ukraine, and Tajikistan. She received a Master in Finance from Moscow Finance Institute, a PhD in Economics from the University of Sussex, and a Master of Chinese Studies from the University of Edinburgh. Oleksandr Rogozin Senior Tariff Expert, Dornier Power and Heat GmbH Mr. Rogozin has 39 years' engineering, commercial, regulatory and legislative experience in the energy sector, including key positions in state-owned and private power companies. Since 2015, he has worked as a vice-president of NGO First Energy Association of Ukraine and as a consultant in Azerbaijan, Belarus, Kazakhstan, Kyrgyz Republic, Tajikistan, and Ukraine. He has a PhD in Electric Power Plants and Systems from Kyiv Polytechnic Institute and an MA in Finance and Credit from Donetsk Academy of Management. Nana Gurgenidze Energy Specialist, Energy Sector Office, Sectors Group, Asian Development Bank Nana Gurgenidze is working on the Central and West Asia development agenda, supporting the low-carbon transformation of the energy sector in Afghanistan, Kazakhstan, and Uzbekistan. She is an experienced lawyer and an expert negotiator with a Master of Science in Energy Management. Before joining ADB, she was a government relations director/corporate secretary and a member of the management team at Clean Energy Georgia LLC, a renewable energy developer, investor, and long-term asset manager headquartered in Norway. 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