An in-depth review of the energy efficiency policy of Kyrgyzstan was conducted in 2017 and published in 2018. This review report has been prepared by the Energy Charter Secretariat in cooperation with the country’s State Committee on Industry, Energy and Subsoil. The peer review team was composed of officials from countries that are parties to the Protocol on Energy Efficiency and Related Environmental Effects (PEEREA): Mr Sergey Katyshev, Advisor to the President, Director of the Project Management Department of the Kazakhstan Electricity Grid Operation Company (KEGOC), Chair of the Kyrgyz Republic Review; Ms Kristel Nõges, Executive Officer, Energy Efficiency, Energy Department, Ministry of Economic Affairs and Communications of Estonia; and Mr Artan Leskoviku, Director of Energy Efficiency and Renewable Energy Sources, National Agency of Natural Resources of Albania. The team also included Ms Sarah Keay-Bright, Energy Efficiency Expert, and Mr Oleksandr Antonenko, Energy Efficiency Coordinator of the Energy Charter Secretariat.
The energy supply of the Kyrgyz Republic is based on approximately equal shares of coal, oil and hydro and electricity accounts for around 30% of total final energy consumption. The shares of coal and oil in the energy supply mix have increased considerably since 2005 while the share of hydro has decreased from 42.7% to 30.1% despite the fact that the Kyrgyz Republic has significant hydropower potential. Though the country has been keen to exploit this potential to meet rising electricity demand, to benefit from electricity exports and to reduce other energy imports, it has been unable to do so because of the country’s inability to attract private sector investment. Key reasons are that Kyrgyzstan recently backtracked on reforms to encourage competition in the power sector by returning to a fully regulated vertically-integrated market model and because the country’s energy consumer tariffs are among the lowest in Europe and Central Asia and do not recover costs. Utilities have consequently suffered severe revenue shortfalls over a prolonged period of time. They have been unable to invest in maintaining their existing assets adequately. This, combined with the relatively unchecked growth of the electricity demand, not helped by subsidised consumer tariffs, has exerted a negative impact on system reliability and the utilities’ ability to connect new consumers and attract private sector investment.
The country’s Mid-Term Energy Tariff Policy aimed to achieve cost recovery but has not been implemented yet for political reasons. Its implementation should be a priority action in the near-term but the public’s acceptance of tariff increases is needed. Energy efficiency should therefore be at the heart of the country’s energy strategy to gain consumer acceptance of the higher tariffs needed to achieve full cost recovery. Furthermore, tariff design reforms could help better align the motivations of the natural monopolists and regulated companies with public policy objectives and customers’ requirements, using key performance indicators (KPIs) as a means of measuring, rewarding and penalising performance.
An important environmental challenge for the country relates to the existence of a strong water–energy nexus dependent on the use of the water resources by the Kyrgz Republic and its neighbours of the Syr Darya Basin. There has been a shift away from regional cooperation towards energy independence, which has resulted in considerable inefficiencies. The current trends in energy and water consumption, population growth and climate change impacts suggest that the situation is set to deteriorate. Improving the efficiency of Kyrgyzstan’s energy system can play a major role in improving the management of the basin’s water resources.
While bilateral and multilateral donors have committed around $60 million per year to climate actions in Kyrgyzstan, this amount is five times lower than the average for the countries of Eastern Europe, the Caucasus and Central Asia (EECCA). Kyrgyzstan is therefore not fully exploiting its potential to attract international support that can be helpful in leveraging private sector investment. The likely explanatory factors include a lack of administrative capacity and capability as well as Kyrgyzstan’s inability to introduce reforms that have repeatedly been recommended by international institutions, such as tariff reforms.
The Fuel and Energy Complex Development Strategy of the Kyrgyz Republic to 2025 provides a fairly sound basis on which to build. A longer-term vision and well-defined target outcomes, to perhaps 2040 or 2050, would help to direct shorter-term strategies and action plans. The improvement of the Law on Energy Conservation adopted in 1998 should be prioritised and developed, along with appropriate secondary legislation, in line with international best practice. As yet, only the legislation pertaining to the improvement of energy efficiency in buildings is satisfactory. More comprehensive energy efficiency legislation is urgently needed to introduce mechanisms such as minimum energy performance standards (MEPS) and energy labelling schemes for energy-using products (including vehicles), energy service companies (ESCOs), energy performance certificates, public procurement and energy audits. The effective implementation of energy efficiency policies and programmes will require the strengthening of the existing institutional arrangements and the securing of a reliable and consistent source of funding.