1. Situation in the Energy Sector
2. Indigenous Energy Resources
3. Potentials for Energy Saving
4. Towards a more Energy Efficient System in Kyrgyzstan
5. Energy Efficiency Projects in Kyrgyzstan
6. Conclusions


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Situation in the Energy Sector

The deteriorating condition of the energy supply situation and the energy sector in Kyrgyzstan has already had serious negative effects on the country's economy as a whole and on the social and economic stability of the society. Kyrgyzstan has suffered from a financial and technical deterioration of the power system. The country has 4,500 km of electric power lines most of which require urgent rehabilitation. Since 1993, construction of distribution network expansion has been curtailed.

Declining revenues of the electric power industry have had a devastating effect on sustainable development of the electric power system. There is a constant increase of load on the low-voltage power grid. Power transmission capacities are used almost to the full, especially during peak time in the heating season. From 1991 to 1998, technical and commercial losses increased by more than 4 times and stood at 33.9 per cent of total electricity supply in 1998.

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Indigenous Energy Resources

Energy resource endowment in Kyrgyzstan is not sufficient to satisfy the domestic energy requirements. Domestic production of oil is 90,000-100,000 tons a year and 30-35 million cubic meters of natural gas, while demand for oil in the Republic is 2.5-3.0 million tonnes a year. Requirements for natural gas are 1.1-1.3 billion cubic meters. The recent opening of the new oil refinery partially alleviated the situation of supply shortage through domestic production of refined petroleum products. However, due to frequent work failures the operational efficiency of the refinery industry in Kyrgyzstan is only about 30 per cent.

Kyrgyzstan has sufficient resources of coal. However, during the last few years coal extraction has been falling tremendously. During 1999, coal production stood at only 895,000 tonnes. The dramatic fall in production is mostly due to the fact that the mining equipment has deteriorated and has become obsolete.


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Potentials for Energy Saving

Kyrgyzstan's economy has a substantial potential for energy savings. It is estimated that 37 per cent of electric power, up to 33 per cent of thermal power, and up to 47 per cent of boiler fuel could be saved if required measures were taken and appropriate investments made. The aggregate saving potentials add up to 33-55 per cent of current total consumption.

An audit conducted by the company "Freedman and Johnson" in Bishkek during 1995-1996 produced notable results. The audit report suggested that it was not necessary to increase energy production if energy efficiency is improved. The report underscored that by a technical overhaul of the existing equipment energy use could be reduced by 13 per cent. According to specialists of the European Commission the energy saving potentials in the industrial sector in electricity alone is equivalent to US$ 580,000 per year. The industrial sector could also save 750,000 Gcal of heat energy a year which has a monetary value of US$ 8.2 million. About 25 per cent of electric energy and 15 per cent of heat power could be saved through comparatively minor investments that would cost only US$ 1.3 million.

In the industrial sector it is estimated that 45 per cent of all energy is not used efficiently. In transport, energy losses may be as high as 83 per cent, in housing and in communal services 55 per cent, in agriculture 40-50 per cent. Heating methods used in private homes are only 25-30 per cent efficient. Public housing and social service buildings are also of old design were built according to now outdated standards.


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Towards a more Energy Efficient System in Kyrgyzstan

Even though it is evident that energy efficiency is an issue of paramount priority, little has been done so far mostly due to lack of qualified staff and lack of measuring equipment. In order to achieve a more efficient use of fuel and energy resources it is necessary to improve the system of management, strengthen the legal system, and introduce new energy efficient equipment and know-how. In order to build a suitable legal framework for implementing measures of energy efficiency and effective functioning of the enterprises, the "Law on Energy Efficiency" was adopted by the Government of Kyrgyzstan which stipulates necessary measures to support a programme to guarantee investment subsidies. The law also introduces a system of punishment in cases of continue inefficient energy use and energy waste.

In order to disseminate information and demonstrate advantages of rational use of energy it is necessary to establish a national Information and Consultation Center as well as create energy efficiency demonstration zones. At the moment there is still no energy efficiency programme in Kyrgyzstan. There is no major programme of energy and fuel conservation by consumers; no work is done as yet in informing energy users about advantages and profits of efficient use of energy, and most importantly there are also no financial incentives as yet for supporting the required investments.

The following steps are recommended for improving energy and fuel efficiency in Kyrgyzstan:

Introduction of new norms to encourage efficient use of energy; Research in assessment of energy efficiency potentials; Appropriate prices and tariffs on energy considering actual costs of energy production and supply; Modernization of energy equipment; Demand side management, including insulation in social housing and other buildings; Efficiency improvement in electric generation; Development of renewable energy sources; Extrabudgetary funds for energy efficiency activities.

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Energy Efficiency Projects in Kyrgyzstan

A recent TACIS project funded by European Commission showed the potentials for energy efficiency in Kyrgyzstan. The project "Increase of Energy Efficiency in Buildings of Kyrgyzstan" demonstrated clearly the cost-effective way of promoting energy efficiency. The project comprised of six elements: energy audit of the buildings, demonstration projects, market studies, advertisement campaigns, instructions and new building codes. As a result 29.3 per cent of heat energy was saved in the demonstration building. The conclusion was made that the most effective way of saving energy in housing is installation of measuring devices and regulating of heat energy in hot water systems.


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Conclusions

In order to achieve sustainable development of the national economy it is necessary to implement energy efficiency policies. So far it has been difficult to create a system of incentives for energy efficiency in Kyrgyzstan. Loan conditions in the local banks are unfavourable and short-term interest rates are high. Therefore, it is necessary to seek investors among the foreign banks. Another way of financing energy efficiency projects is establishment of joint ventures, or third party financing, when an investor joins a project and finances energy efficiency activities. It is possible to arrange separate accounts when an investor is paid on profit from the saved energy.

At the moment, prices in Kyrgyzstan on all major sources of energy are still very low. Energy efficiency investment therefore take a long time to get payback for the investors. It is necessary to guarantee that the investors would receive their profit. This factor stresses the necessity of consumers paying real costs of fuel and power. Therefore, it is necessary to gradually rise tariffs which implies great political and social challenges but promises positive results in the long-term.

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* Deputy Chairman, State Energy Agency under the Government of Kyrgyz Republic