Country overview

The Kyrgyz Republic is a landlocked country in Central Asia, located in the western and central part of the Tien Shan mountain system and Pamir-Alai. In the north it borders on Kazakhstan; in the west, Uzbekistan; in the southwest, Tajikistan; and in the east and southeast, the People’s Republic of China (hereafter, “China”). The area of the country is 199 951 square kilometres (km²); the population is 6.71 million, 1.05 million of which live in the capital, Bishkek. Mountains occupy 94% of the territory of Kyrgyzstan.

The World Bank states that the Kyrgyz Republic sits at the crossroads of the large Chinese, South Asian and Russian markets, with unfettered access to the Eurasian Economic Union (EAEU) (of which it is a member) and could thus attract significant investments from the immediate region. Regional export potential is especially strong in hydro energy, and promising possibilities exist in trade transit in roads and railways. Given the right socio-political and policy conditions, the country could attract massive cross regional energy and transport investments (World Bank, 2019).

Kyrgyzstan's gross domestic product (GDP) per capita in 2020 was USD 1 176 (World Bank, 2021). The World Bank classifies Kyrgyzstan as a lower-middle-income country, in the same category as neighbouring Tajikistan. In recent years, the largest contribution to GDP has come from trade and services, followed by industry and agriculture. Garment manufacturing and mining are important components of the industry.

While the country has had consistent economic growth since gaining independence in 1991, 25.3% of its population (ADB, 2021) still lives below the poverty line. Since independence, economic growth has been uneven, characterised by declines caused by political upheavals (i.e. the revolutions of 2005, 2010 and 2020) and occasional years or short periods of high growth.

The Kyrgyz Republic’s plentiful water resources make hydropower the most important energy source; it also has significant deposits of coal, but oil and natural gas resources are marginal. The country is dependent on the import of natural gas, oil and oil products.

Domestic energy production is mainly from hydroelectric power plants and coal mining. The residential sector is the largest energy-consuming sector in the country, followed by transport and industry. Citizens enjoy universal access to electricity and one of the lowest residential electricity tariffs in the world.


Key policy directions

The Kyrgyz government adopted its long-term Sustainable Development Strategy for 2018‑2040 (SDS) and the accompanying medium-term National Development Program (NDP) until 2026.

In these policy documents the government unveiled its vision of the national development goals and laid out the following goals for the energy sector:

  • Increase the share of renewable energy sources (small hydropower plants, solar systems, wind and biogas plants) to 10% in the total energy balance of the country.
  • Reduce the country's dependence on hydrocarbon energy sources through more large-scale development of hydropower and the transition to alternative energy.
  • Continue exploiting the hydropower potential of the Naryn River basin to build several promising large hydroelectric power plants.
  • Continue a gradual increase in tariffs coupled with social protection measures to achieve the sustainability of the sector.
  • Develop autonomous boiler houses using natural gas, coal and other energy resources).
  • Apply efficiency technologies in all new construction.
  • Implement large-scale programmes on energy-efficient reconstruction of old residential and non‑residential buildings.
  • Implement gradual electrification of transport (electric cars, electric trucks, high-speed electric trains, trolleybuses and electric trains) and develop a network of high-speed electric charging stations for accumulators and batteries.

As regional integration is one of its major energy policy directions, Kyrgyzstan participates in the Central Asia-South Asia power project (CASA‑1000), the most significant project on regional integration, consisting of a 500 kilovolt (kV) Datka-Khodjent-Sangtuda alternating current (AC) transmission line connecting Kyrgyzstan and Tajikistan, and a 500 kV direct current (DC) transmission line connecting Tajikistan, Afghanistan and Pakistan. The project was approved in 2012 by all member countries and in 2019 a subcontractor was selected and construction started. The Kyrgyz component is planned to be completed in 2023.

Kyrgyzstan is a member of the EAEU and participates in the development of the EAEU common electricity market which is planned to start operations by 2025.

However, the country lacks a long-term integrated energy sector development strategy. The National Energy Program for Developing the Fuel and Energy Complex for 2008‑2010 and strategy for the energy sector development up to 2025 spells out the government’s vision for maintaining energy security, increasing domestic production and promoting sustainable development. However, 14 years after its adoption, the policy has not been implemented as designed.

There is no long-term policy for energy sector development with clearly specified strategic goals based on solid economic and technical analysis.

The government is finalising a draft Concept for the Development of the Fuel and Energy Complex of the Kyrgyz Republic until 2030. These are laudable efforts, but the country could benefit from a longer-term vision for the comprehensive and integrated policy framework based on clear strategic goals and in-depth planning for each energy subsector.

Energy sector governance and regulation

The key institutions with roles and responsibilities over the energy sector include:

  • The Ministry of Energy (MoE), which is responsible for formulating strategic energy sector policy.
  • The Department for the Regulation of the Fuel and Power Complex within the MoE, which is responsible for energy sector regulation. Until February 2021, the State Agency for Regulation of the Fuel and Energy Sector (Energy Regulator) had autonomous administrative status under the government. After the governmental institutional reform, the Energy Regulator’s administrative status was lowered and it was placed under the ministry.
  • The Technical Safety Service within the MoE, which is responsible for supervising and regulating compliance with safety requirements.
  • Two state-owned enterprises, KyrgyzKomur and Kyrgyzteploenergo, are now under the MoE. KyrgyzKomur was established in 2012 and acts as an umbrella organisation for about 30 small and medium-sized enterprises operating in the coal sector; some of these companies engage only in seasonal coal production during the autumn-winter period. Kyrgyzteploenergo manages 136 boilers in 23 field offices over the country.
  • Joint Stock Company (JSC) National Energy Holding was established in 2016 to support efforts to improve corporate governance and managerial efficiency within the main state-owned generation and network enterprises. It exercises the government’s controlling stake in key enterprises operating in the electricity sector.
  • JSC Kyrgyz Electricity Settlement Center was established in August 2015 with the objective of streamlining transactions, improving efficiency and increasing overall financial transparency in the electricity sector.
  • The National Statistical Committee (NSC) is the main provider of energy-related data and statistics.

In a recent sector restructuring, four distribution companies were merged into one company and further consolidated with the National Electric Grid of Kyrgyzstan. The national generation company Open Joint-Stock Company (OJSC) Electric Stations was merged with the Bishkek district heating distribution company (OJSC Bishkekteploset). JSC Chakan GES (cascade of small hydros) remained separate. Therefore, there are only three companies in the power sector now.

This could be viewed as a retrograde step from the perspective of establishing a more liberalised power sector characterised by greater efficiency, competition and transparency.

Lowering the status of the Energy Regulator and putting it under supervision of the MoE constrict the Energy Regulator’s ability to carry out autonomous economic regulation of the energy sector. The sector consolidation creates regulatory challenges in performance monitoring and implementing best practice forms of incentive regulation.

Regional market integration

Kyrgyzstan is part of the Central Asian Power System (CAPS) operating as a united power system connecting Uzbekistan, Kyrgyzstan, Tajikistan and Kazakhstan.

Kyrgyzstan has cross-border electricity trade with Kazakhstan (export and import), Uzbekistan (export) and Tajikistan (import in small quantities). In 2021, due to the low water level in the Toktogul reservoir and the resulting power deficit, Kyrgyzstan imported electricity from Kazakhstan, Uzbekistan and Turkmenistan.

Under the framework of CAPS, Kyrgyzstan’s hydropower system was designed not only to produce electricity, but to provide major ancillary services, frequency regulation and operating reserves for the regional power system. However, these functions are not fully operational due to the lack of agreement among the neighbouring power systems on pricing mechanisms for such services.

The government also prioritises regional electricity market development to improve energy security, intensify market competition and increase exports of Kyrgyz electricity. Kyrgyzstan participates in the CASA‑1000 project, which would connect Kyrgyzstan with Tajikistan via 500 kV Datka-Khodjent transmission line to export power to Afghanistan and Pakistan.

Kyrgyzstan is a member of the EAEU, which plans to create common EAEU gas and electricity markets by 2025. 


Security of supply

Kyrgyzstan’s energy system is subject to supply security threats as well as other challenges. The network is aged and inefficient, and losses are significant. In addition, hydro-based electricity production is susceptible to seasonal and weather-related fluctuations; electricity supply is therefore less reliable due to lower water inflows and high demand during the winter months.

The challenge is further amplified by rapidly growing electricity demand, fuelled by unsustainably low regulated electricity prices. Furthermore, while demand centres are in the north, more than 80% of hydropower capacity is in the south. Old transmission connections are a further handicap.

Electricity supply is also constrained by the regional water-energy nexus. The Kyrgyz major hydropower source, the Toktogul reservoir, was constructed in the Soviet times to provide more dependable water supply for downstream irrigated agriculture and to generate hydropower. In the last years Kyrgyzstan exports electricity to neighbouring countries under bilateral contracts; however, such contractual supplies are seasonal and subject to hydrological fluctuations. Volumes of bilateral trade even in high-water years do not generate enough funds to procure fuel for winter power generation by co‑generation1 plants.

The government’s primary focus is on diversifying energy sources and increasing domestic production, mainly for hydropower; in addition, a number of rehabilitation projects for existing thermal power plants are under implementation. Reconstruction of heating networks in Bishkek and Osh as well as reconstruction of substations and improvement of power regulation and water management at the Toktogul reservoir are being implemented.

The Cabinet of Ministers is also planning to continue elaborating on Rosatom’s proposal for construction of a low-power nuclear power plant. Kyrgyzstan expressed interest in studying the RITM-200 reactor. Such a reactor has a capacity of 55 megawatts (MW) and can be operated for about 50 years. It also could be built in blocks. If necessary, the initial capacity can be increased and expanded to 300 MW by adding up to six separate units.

The government’s initiatives to address these challenges have focused on addressing the longer-term adequacy dimensions of power system reliability. However, relatively little attention has been given to addressing the more immediate power system security challenges facing the Kyrgyz power system. Opportunities exist to implement a range of policies that could help to strengthen power system security in the shorter term, especially during periods of water shortage when power system reliability and resilience are likely to be under greatest stress.

Energy data management and use

Energy statistics in Kyrgyzstan are generally publicly available. The NSC regularly collaborates with the main (government) users of the data, building trust and knowledge of the available data. The NSC also co‑operates and regularly exchanges energy data with state and international organisations, including the International Energy Agency (IEA) and the United Nations Statistics Division (UNSD).

The NSC also disseminates its energy statistics data internationally to the IEA through the joint annual United Nations Economic Commission for Europe (UNECE)/IEA/Eurostat questionnaire. However, Kyrgyzstan does not yet report monthly data to the Joint Organisations Data Initiative (JODI).

Kyrgyzstan has achieved great progress in strengthening energy statistics data collection: the NSC has submitted joint annual questionnaires to the IEA since 2014, and for 2015 the breakdown of natural gas consumption by sector had improved.

The NSC continued strengthening energy statistics data collection and by its decrees also approved the methodological recommendations:

  • for estimated calculations of electricity production obtained from solar energy (approved on 18 January 2019)
  • for calculating the national indicator Sustainable Development Goal 7.2.1.1 "Share of renewable energy sources in total energy consumption" (approved on 21 May 2021).

Future goals include improved reporting on residential biomass use data, which are currently unavailable, and conducting a full accounting of renewable energy sources to calculate the energy balance in accordance with international standards (hydropower, solar and wind energy, biogas, etc.).

In May 2022 the Council on Statistics of the Kyrgyz Republic was established by decree of the president of the Kyrgyz Republic to provide strategic recommendations to producers of official statistics.

The Council on Statistics was established to increase participation of civil society in the process of developing strategic recommendations to producers of official statistics.


Electricity and heat

Hydro-based electricity production is susceptible to seasonal and weather-related fluctuations: electricity supply is therefore less reliable due to lower water inflows and high demand during the winter months.

Consumption has reached generation capacity and the country can barely meet the domestic demand. Kyrgyzstan went from being a net exporter to net importer.

Investments in new generating capacity and in modernisation of networks will be needed to address looming electricity supply shortages. The power sector is unable to generate sufficient cash flow to fund necessary maintenance and refurbishment, or to finance new investment in a timely and efficient manner.

Demand for electricity and heat is increasing, but the systems are aged and inefficient. Investment in rehabilitation and expansion is inadequate. The sector suffers from a substantial revenue shortfall because of tariffs that are below cost recovery and because of high (by international standards) technical and non‑technical losses.

Residential customers account for 82.1% of the total consumption. Growth in residential consumption has been driven by low tariffs, which have been set well below the cost of production.

Large industrial consumers and non‑residential consumers are paying higher tariffs and are cross-subsidising residential consumers. Residential electricity tariffs and heating tariffs are cross-subsidised. The recent merge of JSC Electric Power Plants and JSC Bishkekteploset does not solve the cross-subsidy problem.

Supply-side and demand-side management measures are not yet planned for design and implementation.

The country lacks a long-term policy for electricity sector development with clearly specified strategic goals based on solid economic and technical analysis.

Current energy policy aims to improve energy security by developing indigenous energy sources (mainly hydro and coal) and rehabilitating and expanding transmission and distribution networks. Development of autonomous boiler houses using natural gas, coal and other energy resources is a priority due to the exhausted potential of the district heating systems in large cities for further development of heating networks.

Developing solar energy recently became a priority, but there is no planning process for integration of new variable capacity additions to avoid any unintended consequences that have the potential to worsen overall reliability of supply.

Improving energy efficiency is also a priority. Energy efficiency technologies must be applied in all new construction, and the government plans to implement large-scale programmes on energy-efficient reconstruction of old residential and non‑residential buildings and introduce energy efficiency passports for all buildings. 


Coal

Coal is Kyrgyzstan's second-most-important source of domestically produced energy. Kyrgyzstan has substantial coal reserves. Coal production has more than quadrupled since 2010, driven by the government decision to boost coal production to decrease dependence on imported coal, foster decentralised heating supply and minimise use of electricity for heating purposes by households.

Production currently exceeds the demand, and export to neighbouring countries increases. Local coal is mainly used by households during the heating season, and use of coal in technological processes is very limited.

Most of the companies operating in the coal industry are small and do not have financial resources to invest in new technologies and modernisation of production equipment.

Coal prices are not regulated.

There are a number of mothballed coal deposits which the government is planning to reactivate to increase coal supply for domestic consumers to encourage use of coal for heating and thus to reduce the load on the electric system during the heating season.

Building a 1 200 MW coal plant at Kara-Keche coal mine makes sense in terms of adding baseload to the system currently overdependent on hydro generation. However, the plant should meet the world-class standards for high efficiency and pollution control.


Oil and gas

Kyrgyzstan’s oil and gas resources are marginal.

The self-sufficiency of the country in oil products and natural gas is less than 5% and is completely dependent on external supplies of oil products and natural gas. Over 80% of total imports of oil and oil products come from the Russian Federation (hereafter, “Russia”).

Most oil and gas deposits have been exploited for more than 70 years and have produced approximately 70% of their economically viable capacity. About 80% of the remaining oil reserves are difficult to extract. Their development requires additional costs and the use of special technologies.

Attracted investment into oil refineries allowed the increased production of gasoline, fuel oil and diesel fuel; however, these refineries also use imported raw materials. Quality of the domestic oil products is not high. Modernisation of local refineries’ equipment is required to reach Euro-4 and Euro-5 standards.

Due to reconstruction and development of the natural gas network and new investment in the system, the overall level of gasification of the country has increased from 22% in 2014 to 35% by the end of 2020.

Import of oil products is completely privatised and there is no government process for planning imports and domestic sales of oil products.


Renewables

The Kyrgyz Republic has a fairly large renewable energy potential, including the energy of the sun, small watercourses, biofuels, geothermal and wind energy. However, despite the huge potential, the practical use of renewable energy sources (RES) is currently insignificant, and in the country's energy balance it is no more than 1%.

The government policies in the area of renewable energy focused on development of small hydropower plants until 2018.

The National Development Strategy of the Kyrgyz Republic for 2018‑2040 sets a target of the share of renewables to be least 10% of the country's total energy balance. However, currently there is no economic and technical analysis of how to achieve the stated 10%. Neither is there a clear implementation plan supported by technical studies to identify any risks to the reliability of the national power system.

A number of solar and wind projects are being planned for implementation, but the country lacks rules for integration of new variable capacity additions to the national power system. Transparent rules and procedures for integration of new renewable energy facilities could help avoid any unintended consequences that have the potential to worsen overall reliability of supply.

Electricity tariffs do not yet reach cost recovery level, and planned tariff reform is restrained. The law provides for a preferential feed-in tariff for renewable energy that is high compared with the purchase prices in the domestic market, and end users’ tariffs are still below costs. 


Energy efficiency

Overarching energy efficiency legislation has been in place in Kyrgyzstan for more than two decades. The government is now finalising a new Energy Savings Law and the Energy Efficiency Law, which could be adopted by 1 July 2022. However, sector coverage is limited, and there are significant gaps in terms of secondary legislation, implementation and enforcement.

Minimum energy performance standards (MEPS) are in place for new construction in the buildings sector, although there are issues in terms of implementation. No significant legislation or programmes are in place to improve the energy efficiency of existing buildings.

MEPS are being developed for appliance and energy-using products as part of Kyrgyzstan’s membership in the EAEU.

Policies are currently lacking in the transport sector, with no measures such as fuel economy standards or efficiency-based import restrictions in place.

Except for industry, where electricity tariffs were increased significantly in 2016 and in 2021, tariffs for electricity remain well below costs of power generation. This limits investments in new generation capacity and creates disincentives for investments in end-use energy efficiency improvements.

Tariffs are particularly low in the buildings sector, both for electricity and for district heat, limiting available funds to upgrade and scale up district heating infrastructure as an alternative to electricity as the main fuel for heating residential and public buildings in municipalities.

In addition to the need for tariff reform, there are gaps in terms of more comprehensive efforts to increase financing and investment for energy efficiency improvements across the economy. The completion of an Energy Savings Fund (the Revolving Fund), as well as reforms to energy supplier obligations and public procurement, are needed.


Energy, the environment and climate change

Kyrgyzstan ratified the Kyoto Protocol in February 2003, and the Paris Agreement on climate change in November 2019.

Kyrgyzstan prepared the First (2004), Second (2008) and Third (2016) National Communications on Climate Change. Preparation of the Fourth National Communication on Climate Change and the First Biennial Update Report on the United Nations Framework Convention on Climate Change (UNFCCC) will be completed in 2022.

Kyrgyzstan’s greenhouse gas (GHG) emissions are small but the country demonstrated its commitment to fulfilling its obligations under the Paris Agreement by presenting the Updated Nationally Determined Contribution (NDC) in April 2021.

In April 2021, the Kyrgyz government approved an Updated NDC until 2030, setting the overall mitigation goal of the Kyrgyz Republic to unconditionally reduce GHG emissions by 16.63% by 2025 and by 15.97% by 2030, under the business-as-usual scenario. Should international support be provided, GHG emissions will be reduced by 2025 by 36.61% and by 2030 by 43.62%, under the business-as-usual scenario.

Around 60% of all GHG emissions in Kyrgyzstan are created by the energy sector. A decrease in the consumption of fossil fuels and an increase in renewable energy is planned, as well as the modernisation of energy supply systems. The promotion of activities to increase energy efficiency will also contribute to GHG emissions reduction.

The Kyrgyz Republic recognises the importance of the adoption of the Low-Carbon Development Strategy and the National Adaptation Policy.

Even though most of the mitigation measures proposed by the Updated NDC are aligned with the effective national development strategies and government policies, there is still a need to more explicitly address climate change issues in the long-term strategies for integrated energy sector development. The key climatic impacts, and changes in the gross hydropower potential of rivers, should be carefully assessed as part of sector planning to address the growing demand. In addition, the proposed non‑hydro renewable energy developments should be carefully assessed and aligned with the transmission and distribution plans.


Research, development and innovation

Researchers in the energy sector, as in other sectors, face challenges that include low levels of state funding. Kyrgyzstan spends a relatively small amount on scientific research and spreads its limited funding across a number of institutions and subjects.

Given the lack of state funding, the main institutions involved in energy-related research are primarily self-financed, with most funding coming from policy-related studies and/or feasibility studies. In majority these are donor-funded project-based contracts with international organisations and are never related to energy research and innovation.

Private-sector participation in energy research is negligible and almost absent.

There is a general lack of interface among universities, research institutes and industry, as well as a lack of government support mechanisms for innovation in industry.


Key recommendations

The government of Kyrgyzstan should:

  • Strengthen the country’s long-term energy strategy by:

>     Developing a comprehensive long-term strategy for all energy sectors development with an outlook to 2050.

>     Establishing clear targets in line with national socio‑economic development goals and energy security objectives, based on solid analysis of supply-demand trends and alternative scenario models that apply reliable data and sound assumptions.

>     Addressing all types of energy, including fossil fuels and renewable energy (solar, wind, biogas etc.), in policy coverage.

>     Incorporating an analysis of options for the diversification of generation and exploration of opportunities in solar and wind resources, including a clear understanding of associated cost and available incentives. Sector planning should include a least-cost generation plan as well transmission and distribution plans.

>     Setting energy savings targets covering all key sectors of the economy and with a particular focus on heating in public and residential buildings, which constitute the largest share of growing energy demand.

>     Assessing the pros and cons of building a low-power nuclear power plant and a coal-fired power plant, making certain they would meet the highest environmental and safety standards. If meeting such standards is not feasible, consider alternatives for providing baseload to the power system.

>     Applying solid economic analysis to gas network extensions in remote and mountainous areas, such as in Naryn and Issyk-Kul regions (where there is no gasification at all).

>     Ensuring clear links among the country’s energy strategy and sustainable development strategies as well as the country’s commitments under the UNFCCC.

>     Introducing a robust action plan and monitoring mechanisms to track progress and adjust implementation schemes if needed.

  • Develop relevant legal and regulatory framework to enable implementation of the new country’s long-term energy strategy to 2050.
  • Develop and implement mechanisms for technical and economic integration of variable RES, particularly for the introduction of solar and wind energy, in order to ensure the power system’s secure and cost-effective operation.
  • Adopt measures for strengthening power system security, especially during low water periods, (see the IEA energy policy roadmap on Strengthening power system security for Kyrgyzstan [IEA, 2022]). Opportunities exist to implement a range of policies that could help to strengthen power system security in the shorter term, especially during periods of water shortage when power system reliability and resilience are likely to be under greatest stress.
  • Continue to improve the collection of national energy statistics to inform policy decisions and develop new indicators and reporting requirements, such as energy efficiency indicators, and improved reporting requirements for renewable energy sources to calculate the energy balance in accordance with international standards (hydropower, solar and wind energy, biogas, etc.).
  • Continue tariff reform. Tariffs should reflect the actual cost of the production and delivery of the energy, while providing suitable means for protecting the most vulnerable in the society. Careful review should be given to cross-subsidies between residential electricity tariffs and heating tariffs. Cross-subsidies remain insufficient for full cost recovery in either sector. Tariff reforms should be accompanied by communication and outreach.
  • Consider restoring the autonomous status of the Energy Regulator and strengthening its functions in licensing, setting service standards, and ensuring that investments are used efficiently and optimally. Clear licensing requirements and obligations are especially important in the new consolidated structure of the power sector.
  • Develop and implement demand-side measures. Such measures will help managing daily, weekly and seasonal periods of peak consumption that create tight supply-demand conditions that could threaten power system security.
  • Develop a detailed strategy, including implementation and enforcement mechanisms, to improve energy efficiency, leveraging work already begun in this area. Improve institutional arrangements and governance to ensure energy efficiency policies and measures are fully developed and implemented.
  • Develop a programme for introduction of clean coal technologies and introduce mandatory clean coal standards.
  • Strengthen the links and co‑operation between policy makers, scientific research institutions and industry, e.g. through establishing working groups and conducting regular roundtables to address the concrete challenges in the energy sector requiring scientific research and innovation.
  • Formulate an energy research, development and innovation (RDI) strategy, including the setting of clear priorities within thematic areas and applied research, to ensure that priorities are linked with those of the new country’s long-term energy strategy to 2050.


References
  1. Co-generation refers to the combined production of heat and power.