Kyrgyzstan (2012)

Degree of reliance on imported energy:

The share of net imports of primary energy in the total consumption in Kyrgyzstan in 2008 was 72%. Moreover, the physical volume of net imports of energy resources in 2000-2008 tended to increase. Kyrgyzstan mostly imports oil and natural gas, as well as export and import electricity to and from neighbouring countries of the region within the water-energy exchange. Natural gas –virtually all of which is imported from Uzbekistan– accounts for 30% of total energy consumption in Kyrgyzstan.

Main sources of Energy:

Total power generation capacity is 3,740 MW; the large hydropower plants account for 2,950 MW, while the combined power and thermal plants have a total capacity of 730 MW. 
 
Electricity generation in Kyrgyzstan is dominated by hydropower, which provides more than 90% of total electricity output. Hydropower plants along the Naryn cascade, with installed capacity of 2,870 MW, account for about 78% of Kyrgyzstan’s total generation capacity. The Toktogul power station, with 1,200 MW of installed capacity, is Central Asia’s largest hydropower station, and only multi-year hydropower water storage facility. Thus reliance on hydropower leaves the country vulnerable to changes in water levels along the Naryn cascade. This was particularly apparent in 2008, when drought conditions helped push water volumes at Toktogul to extremely low levels. The volume of electricity generated fell 21% in that year, and another 6% in 2009 as releases were limited by the need to restore water levels. 
 
Total Primary Energy Supply in 2009 was 3011ktoe (share of TPES excludes electricity trade). The share corresponded to*:
<ul>
<li>
Hydro: 28.1%</li>
<li>
Oil: 39.5%</li>
<li>
Natural Gas: 18.1%</li>
<li>
Comb. Renewable and waste: 0.1%</li>
<li>
Coal/peat: 14.3%</li>
</ul>

 
*Note: Shares of under 0.1% are not included and consequently the total may not add up to 100%

Country:

Kyrgyzstan

Extent of the network:

Official household survey data indicate that, while nearly all households are nominal connected to the national electricity grid of the country, a sharp increase in the frequency of planned and unplanned service interruptions during 2008-2009 effectively broke the link between grid connections and reliable electricity supplied. Gas, central heating, and hot water supplies are typically unavailable to rural and many urban households.

Capacity concerns:

More than 93% of the Kyrgyz Republic’s electricity is produced by hydropower plants. Climate change will eventually alter the average temperature and precipitation rates, and lead to an increased fluctuation in these indicators. This, in turn, may prevent reliable and consistent electricity production. In 2008, there was a decrease in the water reserves at the Naryn hydropower plants. This led to a sharp decline in electricity production and resulted in systematic scheduled power cut-offs in businesses and houses across the country for a couple of months. An eventual reduction or breakdown in electricity supply will lead to significant decline in production in other sectors. In the production of GDP in the Kyrgyz Republic, 91,900 kWh is used per KGS 1 million. From 2005-2008, this fell by 24.2%, but remains high. Concerns over the sustainability of hydropower plants have lead to increasing support for thermal energy production, which would draw on substantial coal reserves.

Power losses in Kyrgyzstan nonetheless remain quite high by international standards; losses in the 7%-10% range are considered a “standard benchmark”. Most (70% in 2010) of these losses occur at the distribution stage, due primarily to obsolete equipment, the absence or malfunctioning of meters, inaccurate metering of consumed electricity, as well as outright theft.

Potential for Renewable Energy:

The total RES potential of Kyrgyzstan is around 590 Mio TOE/year, but with the exception of small-scale hydropower, it remains largely unused. Kyrgyzstan has good potential for the application of decentralized renewable energy technologies, primarily small hydropower stations on mountain rivers, solar and wind energy, and biogas plants. In comparison to big hydro and hydro-carbons, decentralized renewable projects are relatively inexpensive (in terms of up-front capital costs), and can attract at least some of the financing needed for their construction and maintenance from donors and the communities in which they are located. Despite this, according to one source, less than 1% of this potential is being utilized. 
 
Hydro 
According to various estimates, Kyrgyzstan is not using more than 10% of its total hydropower capacity, which is assessed at 140 billion kWh by the “National Power Grid” company. The combination of abundant water resources and reliance on hydro power poses a dilemma for policy makers in Kyrgyzstan. The construction of new hydro power plants—both along the Naryn cascade and on smaller rivers—is an obvious way to increase capacity for winter power generation, as well as boost exports and promote economic development. The Ministry of Energy has conducted feasibility studies for constructing some 47 hydropower plants across the country. 
 
Wind 
The reported annual average wind speed ranges from 0.5 m/s to 3.6 m/s. The total wind potential is estimated at 1,500 MW. There has been minimal wind development activity in Kyrgyzstan. 
 
Biomass 
More than 50% of agricultural lands are occupied by pastures that determined the main branch of agriculture – livestock breeding. The livestock waste, which could be used after processing in biogas plants, constitutes approximately 2,500 thousand tons per year. It is estimated that biogas plants could produce some 5 million tons of fertilizer and some 200 million cubic meters of gas in Kyrgyzstan annually. Currently, biogas facilities produce around 2 million cubic meters of biogas annually, which is used in the residential and commercial sector. 
 
Solar 
Kyrgyzstan is rich in solar potential. The average annual output of solar energy is about 1,500 - 2,500 kWh per square meter; also, approximately 2,600 sunshine hours are recorded annually. 
 
Geothermal 
The geothermal resources of Kyrgyz Republic include many thermal springs and high heat generating granites. It is believed that low to medium heat geothermal resources could be used for district heating.

Potential for Energy Efficiency:

Currently in the Kyrgyz Republic, the per capita consumption of primary energy is more than 3 times less than the world average (0.54 TOE/person against 1.8 TOE/pers.). The assessment of potential energy savings for the whole economy is 1,800 ktoe, which would take 15 years to achieve.

Ownership:

Electricity 
Unbundling of Kyrgyzenergo, the state vertically-integrated monopoly, into separate companies by function (electricity generation, transmission and distribution) began in 2001. At present, the Kyrgyz Republic’s electricity sector structurally consists of six majority state-owned OJSCs, including one generating company (Electric Plants OJSC), one electric-grid transmission company (NEGC OJSC), and four regional electric-grid distribution companies. 
 
In addition, the Kyrgyz Republic has the following small private power producers: Ghakan HPP, Ark, Kaliniskaya HPP and Koshoy; and the following private distribution companies: Transelectro, Aksel, Energotrade and Energotehservice. However, thus far, the restructuring of the energy sector has not resulted in creation of a competitive wholesale market. Virtually the entire volume of electricity (about 98%) is produced and sold by one generating company (Electric Plants OJSC). 
 
Petroleum and Gas 
Gas import, transportation, distribution and sales are handled by the Kyrgyzgaz state-owned monopoly, whose assets include some 800 kilometres of trunk pipelines and some 2,300 kilometres of retail pipeline infrastructure. 
 
As it is the only major company involved in Kyrgyzstan, it is not surprising that Kyrgyzgaz has been included in the monopoly register, and its tariffs subjected to scrutiny by the Antimonopoly Agency. However, as with thermal, competitive forces are present on the retail gas market: households can substitute electricity or coal-fired boilers (and, in urban areas, district heating) for gas heat; gas-fired appliances can likewise be replaced by electric ones. Strengthening competition among these fuel sources can help hold costs and tariff prices down.

Structure / extent of competition:

The Electric Plants OJSC generation company produces 99% of Kyrgyzstan’s electricity. Since more than 90% of this is generated by hydropower plants on the Naryn cascade with uniform hydrological conditions, market competition in power generation is difficult to imagine for the foreseeable future. Longer term, however, the construction of large coal-fired power plants (such as Kara-Keche), expansion of decentralized renewables, increased industrial co-generation, the introduction of more flexible management of the hydropower plants on the Naryn cascade, and the possible creation of a regional electricity market, could offer prospects for competition in electricity generation. 
 
Prospects for market competition in electricity transmission are even more constrained, owing to significant associated economies of scale. The state owned NEGC OJSC company seems likely to remain a natural monopoly indefinitely. 
 
In addition, there is no market competition among electricity distribution companies, each of which operates in its own territory and their territories do not overlap. While some 27 private wholesalers/small distributors were licensed in 2009 to purchase electricity from Electric Plants OJSC and resell it, these wholesalers typically operate lower-voltage lines, and do not provide most users with an effective alternative to the regional distribution companies. It is possible to imagine competition among distribution companies —particularly in urban areas that are located close to the borders of one of the existing distribution zones, and particularly if the wholesalers are able to expand their activities. However, policy since April 2010 has emphasized strengthening state control over distribution (and other electricity) companies, in order to improve management and reduce corruption.

Existence of an energy framework and programmes to promote sustainable energy:

Kyrgyzstan’s National Energy Programme officially recognizes the importance of decentralized renewables; and a programme to develop small and medium-size power plants has been adopted. The law “On Renewable Energy” (of 31 December 2008) provides the over-arching legal framework, which regulates the development and use of decentralized renewable energy technologies. It calls for mechanisms to stimulate the development of these technologies, and to support producers and consumers of decentralized renewables. In particular, the government is to support tariff-setting so as to guarantee an eight-year payback period for decentralized renewable projects. However, while this law created the legal framework for decentralized renewables, the practical framework for its implementation has yet to be fully introduced. 
 
In May 2003, the Kyrgyz Republic ratified the Kyoto Protocol to the United Nations Framework Convention on Climate Change (Clean Development Mechanism) in May 2003. 
 
The National Energy Program of Kyrgyzstan (though 2010) and the Strategy for the Fuel and Energy Complex Development (though 2025) call for the rapid expansion of renewables by building around 100 small hydroelectric plants with a total capacity of approximately 180 MW. 
 
Legislation on RE and specifically small hydropower stations has been fairly successful in Kyrgyzstan. To promote public awareness of renewable energy, booklets describing the benefits of small hydropower stations as well as how to install a small hydropower plant were distributed to rural communities. Also, a revolving credit facility was established in Karakol by the “Issyk-Kul Activist” NGO in order to help farmers finance small hydropower plants for their operations or residences. As a result of this legislation, two pilot projects (5 kW each) have been launched by local companies. 
 
The government’s programme to develop small and medium-size power plants calls for the construction and reconstruction of 43 small and medium-sized facilities (primarily small hydropower plants, in mostly the 2-3 MW installed capacity range) with total installed capacity of 277 MW. It also calls for the construction of a wind power plant near Balykchi with a rated capacity of 22 MW.

Current energy debates or legislation:

Growing public dissatisfaction in the Kyrgyz Republic, in part due to rolling blackouts and energy price hikes during the winter of 2009-2010, culminated in the violent replacement of President Kurmanbek Bakiyev with a new interim government. The shock of these events suggests that a stable and affordable electricity supply, particularly during the winter, will acquire even greater precedence to the Kyrgyz leadership and efforts to achieve this will likely include stricter management of its various hydropower stations throughout the country.

Major energy studies:

Kyrgyzstan is partner of The Central Asia Regional Economic Cooperation (CAREC) Program. CAREC is a partnership of 10 countries and 6 multilateral institutions working to promote development through cooperation, leading to accelerated economic growth and poverty reduction. By promoting and facilitating regional cooperation in the priority areas of transport, trade facilitation, trade policy, and energy. CAREC efforts on energy have three pillars:
<ul>
<li>
energy demand–supply balance and infrastructure constraints;</li>
<li>
regional dispatch and regulatory development; and</li>
<li>
analysis of energy–water linkages.</li>
</ul>

<a href="http://www.carecinstitute.org/index.php?page=energy">http://www.carecins...

Role of government:

Ministry of Energy (ME) 
The energy sector is managed and regulated by the Ministry of Energy (prior to 2009, known as the Ministry of Industry, Energy and Fuel Resources (MIEFR)), which is responsible for strategic planning and forecasting in the energy sector, development of the energy strategy, as well as for drafting new legislation or amendments and introducing these drafts to the government for adoption. The State Department for Regulation of the Fuel and Energy Complex (hereinafter referred to as the Regulator), which has tariff setting and licensing authority, is a department within the MIEFR. 
 
Ministry of State Property 
The Ministry of State Property formally acts as the owner and manager of state-owned power companies. It designs and implements development strategies (inter alia concerning denationalization and privatization), selects and monitors company management, and the like.

Government agencies in sustainable energy:

Centre on the Problems of Using Renewable Energy Resources (CPURER), which develops a strategies for the development of renewable energy resources. 
 
Kyrgyz Association of Renewable Energy Resources, which together with CPURER has been working out a program for the development of renewable energy resources. 
 
Directorate for Small and Medium-Size Power Facilities was created by the Kyrgyz President's decree in May of 2008 with the purpose to develop small and medium size hydro power plants. The directorate is responsible for the working out and realization of suggestions concerning the power industry's improvement. Realization of these measures would allow for the relief of the energy crisis and create acceptable conditions for the regulation of the production process and energy distribution in the country, particular in the remote mountainous and rural districts

Energy planning procedures:

Kambarata-1 and -2 hydropower projects 
The Kambarata-1 and -2 hydropower projects are at present receiving the greatest attention and assistance from the government. Kambarata-2, the costs of which were estimated at some USD 100 million in 2007, is under active construction—the first unit was installed in 2010, with construction to be completed by 2015. Key parameters include: installed capacity—360 MW (three units of 120 MW each); power generation—1,148 million kWh; water reservoir capacity—70 million m3. The construction is being financed by the government budget and an earmarked credit from the Russian Federation.  Kambarata HPP-1 would be significantly larger and more expensive: installed capacity of 1,900 MW (4 units of 475 MW each); power generation of 5,088 million kWh, and a water reservoir capacity of 4,650 million m3; and construction costs of some USD 1.7 billion. 
 
Kara-Keche coal-fired power station 
The construction of the Kara-Keche coal-fired power station, with a capacity of at least 1,200 MW, is also under discussion. This plant would generate electricity from coal that would be mined from the Kavaksky lignite basin, where it would be located. In addition to helping to develop the coal industry, Kara-Keche would diversify Kyrgyzstan’s generation capacity away from its near total reliance on hydropower. However, the sources of financing for the construction of this USD 1.3 billion project have not yet been identified. 
 
Aigultash-Samat transmission line 
Some parts of the southern Kyrgyzstan —such as Leilek in the western part of the Batken region—face power shortages (especially in the winter time) because they are under-served by the existing transmission infrastructure. This problem is being addressed by the construction of the 131 kilometre Aigultash-Samat transmission line, which is to be completed in November of 2011. This project is financed by a USD 12 million credit from the Islamic Development Bank, as well as $900K from the “National Power Grid” transmission company. 
 
Datka-Kemin transmission line 
Although Kyrgyzstan imports virtually no electricity, the Toktogul-Frunzenskaya transmission line runs through Uzbekistan and Kazakhstan. Uzbekistan’s and Kazakhstan’s November 2009 decision to withdrawal from—and therefore the de facto dissolution of—the integrated Central Asian electricity transmission grid adds new potential uncertainty to power supplies in Kyrgyzstan’s northern regions. This uncertainty is to be addressed by the construction of the USD 570 million Datka- Kemin transmission line, the construction of which is expected to be co-financed by China’s Export- Import Bank, the Asian Development Bank, and others. However, this financing was put on hold following the April 2010 developments; it has not yet been secured. 
 
Metering projects 
Since 2006 a number of projects (financed by the World Bank, KFW, and the Swiss Economic Cooperation Organization), have helped the distribution companies to improve metering, reduce losses, and extend services to new households. Procurement of meters and computer hardware and software (for billing systems) has played a large role in these projects, which have helped reduce losses and boost cash collection rates. Total financing for electricity sector projects, from international organizations and from the state budget, amounts to about USD 98 million.

Energy regulator Date of creation:

This Ministry of Energy includes the State Department for Regulating the Fuel and Energy Sector (hereafter the Regulator, <a href="http://www.energetika.kg/">www.energetika.kg/</a>), whose tasks include: balancing the interests of energy producers and consumers (including dispute resolution); licensing energy sector operations; and setting energy tariffs. This structure is a relatively new one, having been formed in 2007. Prior to that time, the State Agency on Energy for Anti-Monopoly Policy and Promotion of Competition was responsible for regulation of the energy sector as well as monitoring of competition. It continues to be responsible for the latter.

Degree of independence:

Though it sits within the Ministry of Energy, the Regulator is a legal person with its own staff and structure, along with a separate settlement account in the Central Treasury of the Ministry of Finance. Its structure includes an Executive Council consisting of a Director, the Minister of Energy, and the Deputy Minister of Economic Development and Trade. The term of office of the Executive Council’s members is six years. All of them have equal rights in decision-making and equal votes in voting. The Regulator’s Director is appointed to the post for an indefinite term and released from it by the Prime Minister upon submission by the Minister of Energy.  The budget is subject to the Ministry’s of Finance approval. 
 
In practice, the Regulator is not independent of the Ministry of Energy, so that this Ministry in fact implements both managerial and regulatory functions. The Regulator is therefore often guided by conflicting political and economic interests, which can generate inconsistencies in tariff setting and other dimension of energy policy.

Regulatory framework for sustainable energy:

<ul>
<li>
The 30 October 1996 law “On Energy” (N 56), which allowed “enterprises in the fuel and energy sector to have any organizational-legal form of operation and any form of ownership (public, municipal and private)”.</li>
<li>
The market principles for energy sector operations were established in the 28 January 1997 law “On Electric Power” (N 8), which called for “creating a competitive environment and the formation of an energy market”, as well as “encouraging development of the private sector and attracting investments”.</li>
<li>
The 21 January 2002 law “On the Special Status of the Toktogul Cascade and the National High-Voltage Transmission Line” (N 7) precludes the privatization of the state-owned “Power Plants” generating and “National Power Grids” transmission companies .</li>
<li>
The 31 December 2008 law “On Renewable Energy” (No 283), which regulates the development and use of decentralized renewable energy technologies.</li>
</ul>

Regulatory roles:

Pursuant to the Law on Energy, the Regulator is responsible for:
<ul>
<li>
setting of prices and tariffs in fuel and energy organisations;</li>
<li>
issuance of licences for operations in fuel and energy organisations;</li>
<li>
approve decisions on the imposition of economic sanctions in case of breach of legislation or non-compliance with established license terms and conditions, including issuance of binding injunctions to natural and legal persons, regardless of their ownership form, as to termination of breaches on matters included in the State Department’s competence;</li>
<li>
quality control of services provided by electricity companies. For this purpose, the Department inspects the companies, both on its own initiative and on the clients’ requests, and issues, if necessary, binding injunctions.</li>
</ul>

Role of government department in energy regulation:

The Regulator reports annually on its activity to the Ministry of Energy and to the Government. The Ministry of Energy is responsible for presenting the Parliament with an annual report on its work, including that of the State Department. 
 
The Ministry of Energy develops electric power engineering development programmes and national fuel and energy balances for a medium- and long-term outlook. It also continuously monitors expected future demand for electricity, and submits, if necessary, proposals to the Government and Parliament to address any identified deficit. 
 
The State Inspectorate for Energy and Gas, subordinated to the Ministry of Energy, it is authorised to carry out control and supervising functions on ensuring reliable, safe and trouble-free work of power equipment in production, transmission, distribution and consumption of electric, thermal energy and natural gas by power enterprises and all consumers irrespective of ownership.

Regulatory barriers:

Several important legal steps have been taken: the Law on Energy Efficiency was adopted in 2007, the Law on State Policy and Regulations in the Area of Emissions of GHGs was approved in 2007 and the Law ‘On Renewable Energy’ passed parliament in 2008, followed by the introduction of ‘Rules for connecting small hydropower stations to the transmission network’. A small, NGO-run, revolving credit facility for small renewable energy projects has been established. 
 
However, according to a recent market demand study assessing the market potential for EE and RE investments in Kyrgyzstan, experience in assessing and financing RE projects is still limited. Although the existing legal framework satisfies the basic requirements of private investors, enforcement is still a challenge and some rules need to be more clearly and transparently defined. No specific investment and/or financing related to energy efficiency initiatives are currently in place in Kyrgyz commercial and residential sector.

References:

Hasanov, R. & Izmailov, K. Slay, B. editor. Commissioned by UNDP´s Regional Bureau for Europe and CIS. Kyrgyzstan´s Energy Sector. A Poverty and Social Impact Assessment. April 2011. Available at: <a href="http://km.undp.sk/uploads/public1/files/vulnerability/Senior%20Economist... [Accessed 7th September 2013] 
 
OECD/ IEA. IEA Energy Statistics. 2011. Available at: <a href="http://www.iea.org/stats/pdf_graphs/KGTPESPI.pdf">http://www.iea.org/sta... [Accessed 7th September 2013] 
 
Molodtsov, S. Centre for Energy Policy. United Nations. Economic and Social Commission for Asia and Pacific. Regional Concept of Fuel and Energy Resources Use Efficiency Improvement Policy in Central Asia for 2011-2015. 2010. Available at: <a href="http://www.unescap.org/esd/Energy-Security-and-Water-Resources/energy/ef... [Accessed 7th September 2013] 
 
UNDP Kyrgyzstan. The Kyrgyz Republic: The second progress report on the Millennium Development Goals. Second Edition revised and amended. Bishkek. 2010. ISBN 978-9967-26-182-2. Available at: <a href="http://www.undp.kg/en/resources/e-library/article/28-e-library/1405-vtor... [Accessed 7th September 2013] 
 
Electricity loss reduction strategy for Kyrgyz Power Sector. USAID. Bishkek. 25 March 2010. Revised April 2010. Pp 11,13. 
 
Inogate Energy Portal: Energy Cooperation between the EU, Eastern Europe, the Caucasus and Central Asia. Kyrgyzstan Energy Sector Review. Available at: <a href="http://www.inogate.org/index.php?option=com_inogate&view=countrysect... [Accessed 7th September 2013] 
 
European Bank for Reconstruction and Development. Strategy for the Kyrgyz Republic. September 2011. Available at: <a href="http://www.ebrd.com/downloads/country/strategy/kyrgyz.pdf">http://www.eb... [Accessed 7th September 2013] 
 
European Bank for Reconstruction and Development (EBRD). Kyrgyzstan country profile. Available at: <a href="http://ws2-23.myloadspring.com/sites/renew/countries/kyrgyzstan/profile.... [Accessed 7th September 2013] 
 
CAREC website. CAREC program. Available at: <a href="http://beta.adb.org/countries/subregional-programs/carec">http://beta.ad... [Accessed 7th September 2013] 
 
CAREC. A strategic framework for the Central Asia Regional Economic Cooperation Program 2011-2020. June 2011. <a href="http://www.carecprogram.org/uploads/events/2011/SOM-Jun/CAREC-2020-Strat... [Accessed 7th September 2013] 
 
European Bank for Reconstruction and Development (EBRD). Renewable Development Initiative. Kyrgyzstan Country Profile. Available at: <a href="http://www.ebrdrenewables.com/sites/renew/countries/Kyrgyzstan/default.a... [Accessed 7th September 2013] 
 
Levina, M. Small Power Plants will help overcome Kyrgyz energy crisis.23 October 2008. Available at: <a href="http://dlib.eastview.com/browse/doc/19093504">http://dlib.eastview.com/b... [Accessed 7th September 2013]

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