Kyrgyzstan energy profile

The Kyrgyz Republic (Kyrgyzstan) is located in Central Asia and is bordered by Kazakhstan to the north, Uzbekistan to the west, Tajikistan to the south and China to the east. The country is approximately 200 000 square kilometres (km²) in area, with a population of 6.3 million people. Its 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.

Kyrgyzstan gained independence in 1991 with the dissolution of the Former Soviet Union, but the country subsequently struggled economically. Later in the 1990s, significant structural market reforms contributed to economic growth, and real gross domestic product (GDP) (adjusted to purchasing power parity [PPP]) increased to around USD 24.54 billion in 2018. Poverty, however, remains around 22.4% (2018).

Agriculture is the largest sector of the economy, its main products being cotton, tobacco, wool and meat. Industrial exports include gold, mercury, agricultural products and electricity (www.indexmundi.com/kyrgyzstan/economy_profile.html). Kyrgyzstan has been a member of the World Trade Organization since 1998, and it joined the Russian Federation (“Russia”), Belarus, Armenia and Kazakhstan in the Eurasian Customs Union in 2015.

The energy sector represents 4% of GDP and 16% of industrial production, and hydropower accounts for two-thirds of energy production. Kyrgyzstan exploits coal and some oil and gas, but most hydrocarbons are imported. In fact, it relies on oil and gas imports for more than half of its energy needs, particularly during the winter months when hydropower production is low. For this reason, regional integration with neighbouring countries is important.

Kyrgyzstan is part of the Central Asian Power System connecting Uzbekistan, Kyrgyzstan, Tajikistan and Kazakhstan. New integration plans include the Central Asia-South Asia power project (CASA‑1000), which will connect the electricity-exporting countries of Kyrgyzstan and Tajikistan with Afghanistan and Pakistan to supply them with electricity. The project is in the advanced stages of planning and could be operational after 2023.

Suffering from lack of investment, Kyrgyzstan’s energy sector is characterised by aged infrastructure and significant losses. System wear and tear is gauged at over 50%: significant deterioration of energy assets and poor sector development are the result of heavy subsidies, particularly for electricity consumption, which drain resources for system maintenance and investment. Unable to finance the necessary rehabilitation of its natural gas network, Kyrgyzstan sold it to Gazprom for USD 1 in 2013. Gazprom is to invest USD 600 million in the system over a 25-year period.

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. Developing sustainable energy and improving energy efficiency are also priorities.

Energy sector ties with China have been strengthened in recent years, and China financed several key Kyrgyz development projects. Kyrgyzstan also became a member of the Eurasian Economic Union (EAEU) in 2015.

• Kyrgyzstan’s total primary energy supply (TPES) was 3.9 million tonnes of oil equivalent (Mtoe) in 2015 and reached 4.6 Mtoe in 2018.
• Total final consumption (TFC) totalled 4.2 Mtoe in 2018, and is growing rapidly (+72% since 2008). 

• In 2018, domestic energy production was 2.3 Mtoe, consisting mostly of hydropower (53%) and coal production (37%). Kyrgyzstan also produces some crude oil and natural gas.
• Domestic production covers roughly half of annual consumption, with imports necessary to meet the remaining demand.
• Coal production has more than quadrupled since 2010, driven by the government’s decision to boost coal production in order to decrease dependence on imports, foster decentralised heating supply and minimise the use of electricity for heating purposes by households.

• Over 90% of oil products (mainly diesel and motor gasoline) and natural gas are imported. The most important trading partners for oil and gas are the Russian Federation and Kazakhstan.
• Domestic electricity production relies heavily on hydropower (>90%). As a result, seasonal effects (winter peak) and lower water years directly affect the quantities of electricity that must be imported from Tajikistan and Kazakhstan.

• In 2018, total final consumption equalled 4.2 Mtoe. Oil is the main energy source (48%) followed by electricity (24%) and coal (17%).
• Residential sector is the largest energy consuming sector in the country, followed by transport and industry.
• Electricity consumption per capita, although sometimes limited by power outages, increased by more than 45% from 2010 to 2018.

• Renewables contribute to 27% (2018) of Kyrgyzstan’s energy mix. The calculated share mostly consists of hydroelectricity, but is likely underestimated as data on the consumption of fuelwood and other solid biofuels by households are currently not available.
• Around 90% of total electricity generation is hydro-based. Kyrgyzstan has one of the highest shares of renewable electricity in the world.

From July 2016 the State Committee on Industry, Energy and Subsoil Use (the State Committee) has been in charge of developing and implementing a uniform state policy in the energy sector, including water-energy and fuel resources, renewable energy sources and the industrial potential of the country. In January 2016 the Kyrgyz Government established Open Joint Stock Company “National Energy Holding Company” to manage state-owned shares in the power sector companies.

Executive power in Kyrgyzstan lies with the government, its subordinate ministries, state committees, administrative agencies and local administrations. In the energy sector, the government:

• Grants and transfers property rights, and rights for use of water, minerals and other energy resources.
• Provides incentives and promotes a stable and favourable investment climate for the fuel-energy complex.
• Approves the functions and authority of authorised government bodies for the energy sector and licensing.
• Allocates plots of water fund land for temporary use.
• Determines the procedure for holding bids for construction of energy facilities and the criteria for selecting bids and winners.

As the authoritative government body in the energy sector, the State Committee on Industry, Energy and Subsoil Use is responsible for:

• Developing and implementing a uniform state policy for the study and rational use of subsurface resources, water energy and fuel resources, and renewable energy sources, and for assessing the industrial potential of the country.
• Assisting in devising a strategy for effective development of the industry sector, the fuel-energy complex and subsurface resources.
• Participating in developing and implementing interstate programmes and agreements to bolster the country’s industrial potential, effective utilisation of water energy and fuel resources, subsurface resources research, and development of mineral resources.
• Developing incentives for energy efficiency, energy saving and use of renewable energy sources.
• Creating conditions for introducing and using renewable energy sources and reliably supplying consumers with energy resources, industrial products and services.

Legislative power is exercised by the parliament (the Jogorku Kenesh). Laws may be initiated by: a) a body of 10 000 voters (popular initiative); b) a member of the parliament; or c) the government of the Kyrgyz Republic.

Draft laws submitted to the parliament are deemed accepted if they pass three readings with a majority of deputies’ votes. After a law has been accepted by the Parliament, it is sent within 14 days to the president for signing. The president must sign the law no later than one month after receiving it, or return it with objections to the parliament for re-examination. Laws signed by the president are published and come into force ten days from their promulgation if not otherwise stipulated in the law itself or in the law on the procedure for its entry into force.

The judicial system, consisting of a supreme court and local courts, is established and governed by the constitution and laws of Kyrgyzstan. Judicial power is exercised through constitutional, civil, criminal, administrative and other forms of proceedings. Specialised courts may be established by law, but the creation of extraordinary courts is prohibited.

The 2010 constitution replaced the Constitutional Court of the Kyrgyz Republic with the Constitutional Chamber in the Supreme Court of the Kyrgyz Republic.

Kyrgyzstan has signed two conventions on international commercial arbitration:

1. The Convention on Settlement of Investment Disputes between States and Nationals of Other States (the ICSID Convention), ratified by the Kyrgyz Republic in July 1997;
2. The Convention on Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention), ratified in May 1995.

The State Agency for Regulation of the Fuel-Energy Sector (the Energy Regulator) is vested with the authority to:

• Issue licenses for energy sector activities.
• Develop tariff-setting methodologies and set tariffs for electricity, heat and natural gas.
• Develop and supervise the reporting and monitoring framework for the performance of energy sector companies.
• Conduct awareness-raising activities.
• Develop procedures for consumers and energy sector companies to lodge claims and complaints.

The National Energy Program for 2008-2010, with its integrated plan for fuel-energy complex development to 2025, remains the main long-term policy document for the energy sector. It aims to:

• Ensure reliable electricity and heat supply.
• Liberalise the electricity market and adopt the legislation necessary to define market rules.
• Improve the energy efficiency of production, transmission and distribution of electricity and heat through modernisation and new technologies.
• Increase hydro and coal-fired generation capacity to augment the national electricity supply and increase exports.
• Actively participate in regional electricity market development within the sphere of the EAEU.

The government prioritises energy security, efficiency and sustainable development in its policies. Improving energy security and efficiency is important due to fluctuations in hydropower production, reliance on hydrocarbon imports, and aged, inefficient infrastructure that incurs high losses.

In March 2020, the government approved a Medium-Term Tariff Policy (MTTP) for 2020-2022 to make electricity, heating and hot water tariffs more cost-reflective while providing affordable energy for the most vulnerable customers.

Kyrgyzstan’s energy saving potential is significant: it is estimated that rehabilitation and modernisation can save up to 25% of electricity and 15% of heat. Under the National Strategy for Sustainable Development for 2018-2040, energy efficiency technologies must be applied in all new construction, and the government plans to implement large-scale programmes for the energy‑efficient reconstruction of old residential and non-residential buildings, and to introduce energy efficiency passports for all buildings. 

The government also prioritises regional electricity market development to improve energy security, intensify market competition and increase exports of Kyrgyz electricity.

The most significant project on regional integration is CASA‑1000, 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 completion of the Kyrgyz component is planned for 2023. 

The government also plans to reform the coal sector by privatising it and increasing competition; it will therefore phase out financial support to the sector to attract private investment. As coal is currently the most cost-effective and readily available fuel, the government plans to increase production in existing fields from 450 kilotonnes (kt) in 2010 to 3 Mt by 2025 (in 2018, coal production was 2.395 Mt). The main objectives of coal sector reform are to:

• Privatise the coal sector and create a competitive coal market.
• Improve working and safety conditions.
• Improve socio-economic and ecological conditions in coal mining regions.

In the oil and gas sector, policies are directed at improving the fiscal regime of minerals management and attracting investment to develop new oil and gas fields. Further, they aim to foster competition in domestic oil supply with fair conditions for all market participants. Gazprom Kyrgyzstan, in co-operation with Gazprom, is developing a gas distribution policy to 2030.

Kyrgyzstan ratified the Kyoto Protocol in February 2003, and a number of Clean Development Mechanism (CDM) projects have been identified but not yet registered. In October 2013, the government adopted the Priorities for Adaptation to Climate Change up to 2017 programme, aimed at developing adaptation measures in water, agriculture, health, environmental emergencies, forestry and biodiversity; the respective ministries have submitted sectoral adaptation programmes for government approval. Furthermore, Kyrgyzstan’s Third National Communication under the United Nations Framework Convention on Climate Change (UNFCCC), prepared by the State Agency for Environment Protection and Forestry, was approved by the Kyrgyz government in October 2016. In November 2019 Kyrgyzstan ratified the Paris Agreement. The State Agency on Environmental Protection and Forestry has developed a first draft of “green economy” document – Concept for Long-term Development of the Kyrgyz Republic with Low Greenhouse Gas Emission until 2050.

The National Statistical Committee is responsible for collecting official energy statistics. Energy data are collected through five different surveys sent to enterprises, and annual energy data are published online in Excel format, following the layout of the fuel energy balance used in the Former Soviet Union. Monthly data on electricity and fossil fuel energy production and trade are also collected. Graphic representations of fossil fuel production are available in the industry statistics section of the National Statistical Committee application.

The National Statistical Committee also disseminates its energy statistics data internationally to the International Energy Agency (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).

The main user of energy data is the State Committee on Industry, Energy and Subsoil Use, which complements the statistics datasets with various other sources to produce an energy balance. There is no official energy statistics working group in Kyrgyzstan, but in 2017 various ministry and energy company representatives as well as grid operators had the opportunity to meet at the Statistical Committee headquarters in the capacity of a working group on indicators of water, food and energy security and on UN Sustainable Development Goals.

Kyrgyzstan has achieved great progress in strengthening energy statistics data collection through the INOGATE programme: the National Statistical Committee has submitted joint annual questionnaires to the IEA since 2014, and for 2015 the breakdown of natural gas consumption by sector had improved. Future goals include improved reporting on residential biomass use data, which are currently unavailable, and on small-scale electricity generation.