Toktogul, Kyrgyzstan

Small Hydropower Plants for Independent Power Production (IPP)

Photo by UNDP Kyrgyzstan

Small Hydropower Plants for Independent Power Production (IPP)

Country
Sector
Most major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Renewable Resources and Alternative Energy
Sub Sector
Most major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Alternative Energy
Indicative Return
Describes the rate of growth an investment is expected to generate within the IOA. The indicative return is identified for the IOA by establishing its Internal Rate of Return (IRR), Return of Investment (ROI) or Gross Profit Margin (GPM).
15% - 20% (in IRR)
Investment Timeframe
Describes the time period in which the IOA will pay-back the invested resources. The estimate is based on asset expected lifetime as the IOA will start generating accumulated positive cash-flows.
Medium Term (5–10 years)
Market Size
Describes the value of potential addressable market of the IOA. The market size is identified for the IOA by establishing the value in USD, identifying the Compound Annual Growth Rate (CAGR) or providing a numeric unit critical to the IOA.
181,431 MWh annual generation and 63.38 MW installed capacity
Average Ticket Size (USD)
Describes the USD amount for a typical investment required in the IOA.
USD 1 million - USD 10 million
Direct Impact
Describes the primary SDG(s) the IOA addresses.
Affordable and Clean Energy (SDG 7) Industry, Innovation and Infrastructure (SDG 9) Responsible Consumption and Production (SDG 12)
Indirect Impact
Describes the secondary SDG(s) the IOA addresses.
Life Below Water (SDG 14) Partnerships For the Goals (SDG 17)

Business Model Description

Design, build and commission a small hydropower plant for independent power production, including individual needs such as production facilities, selling the excess energy to the National Electric Network of Kyrgyzstan to tap into a greater hydropower potential of the country and reduce the load of electricity consumption in the system. Utilize the Power Purchase Agreement (PPA) or Purchase-Sale Agreement (PSA) according to the tariff outlined in Law No. 49 on renewable energy sources to sell the excess energy to the grid.

Expected Impact

Improve energy supply, decrease electricity costs, promote independent energy generation, expand the national grid capacity, mitigating power outages.

How is this information gathered?

Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.

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Country & Regions

Explore the country and target locations of the investment opportunity.
Country
Region
  • Kyrgyzstan: Osh Oblast
  • Kyrgyzstan: Issyk-Kul Oblast
  • Kyrgyzstan: Jalal-Abad Oblast
  • Kyrgyzstan: Naryn Oblast
  • Kyrgyzstan: Talas blast
Learn more

Sector Classification

Situate the investment opportunity within sustainability focused sector, subsector and industry classifications.
Sector

Renewable Resources and Alternative Energy

Development need
Growing energy demand, high dependency on hydropower, and low level of gasification of 38% prompt Kyrgyzstan to rely on imported coal and oil for heating and electricity during winter peak. The power sector faces up to 20% of transmission and distribution losses, while power outages affect 60% of the population (1, 2, 3, 4).

Policy priority
The National Development Strategy for 2018-2040 aims to decentralize heating systems and increase gasification in the country, reducing carbon dioxide (CO2) emissions conditionally by 43.62% by 2030 compared to the business-as-usual (BAU) scenario, adopting energy-saving technologies, and transitioning to a sustainable energy system (5, 6).

Gender inequalities and marginalization issues
Disproportionate access to uninterrupted electricity is observed between the regions, with only 62% of the rural population having a stable electricity supply. Women in rural areas are affected the most by power outages as the primary carers for household and older family members (3).

Investment opportunities introduction
The government of Kyrgyzstan seeks to develop cascade hydro schemes, improve the transmission system, projects to improve the strength of the network and the security of supply, and cross-border electrical connection projects such as CAREC. In 2023, the power generation sector attracted USD 313,500 in foreign direct investments (7, 8, 9, 14).

Key bottlenecks introduction
Kyrgyzstan's high vulnerability to climate change renders hydropower, the country's primary source of domestically produced electricity, increasingly unreliable during the winter season.

Sub Sector

Alternative Energy

Development need
As of 2021, the development of renewable energy accounts for less than 2% of Kyrgyzstan's overall potential. The country has roughly 30% of Central Asia's hydropower resources on its territory, with hydropower accounting for 90% of its domestic electricity consumption, but utilizes only one-tenth of it (10, 11, 12).

Policy priority
The National Development Strategy for 2018-2040 aims to increase the share of small hydro, solar, wind, and biogas power to 50% in the energy mix by 2040. In Nationally Determined Contributions, Kyrgyzstan pledges to develop wind energy to 3.6K tons of carbon dioxide (CO2) equivalent, solar energy to 13K tons of CO2 equivalent, and biogas power to 1312K tons (5, 6).

Gender inequalities and marginalization issues
The air quality in the rural areas remains affected by the pollution from unclean cooking stoves as in 43% of the rural population utilized solid fuel stoves in 2018, requiring wood or coal for heat. The proportion of the rural population using primarily clean fuels and technologies fell to 2.37% in 2023 (1, 15).

Investment opportunities introduction
The government of the Kyrgyz Republic prioritizes projects in small hydropower, solar, and wind to expand the renewable energy mix. Preferences for investors in electric energy using renewable energy sources are provided by the Tax Code of the Kyrgyz Republic and the customs tariffs of the Eurasian Economic Union (9, 16).

Key bottlenecks introduction
A weak regulatory environment, particularly pertaining to operational Power Purchase Agreements (PPA), can hinder the development of alternative energy sources in Kyrgyzstan (13).

Pipeline Opportunity

Discover the investment opportunity and its corresponding business model.
Investment Opportunity Area

Small Hydropower Plants for Independent Power Production (IPP)

Business Model

Design, build and commission a small hydropower plant for independent power production, including individual needs such as production facilities, selling the excess energy to the National Electric Network of Kyrgyzstan to tap into a greater hydropower potential of the country and reduce the load of electricity consumption in the system. Utilize the Power Purchase Agreement (PPA) or Purchase-Sale Agreement (PSA) according to the tariff outlined in Law No. 49 on renewable energy sources to sell the excess energy to the grid.

Business Case

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Market Size and Environment

Critical IOA Unit
Describes a complementary market sizing measure exemplifying the opportunities with the IOA.

181,431 MWh annual generation and 63.38 MW installed capacity

The technological hydropower potential is estimated at 142 billion kilowatt-hours (kWh) annually, with an economic or production potential of 60 billion kWh per year (39).

In 2022, 22 small hydropower plants collectively generated 181,431 megawatt-hours (MWh) of electricity in Kyrgyzstan, contributing to a total installed capacity of 63.38 megawatt as part of the country's overall electricity production for the year (40).

In 2023, Kyrgyzstan's rural population was estimated at 4,665,000. In 2022, the per capita electricity consumption reached 2.021 megawatt-hours (MWh). Based on these figures, electricity consumption in rural areas can be approximated at 9,427,965 MWh (41, 42).

Indicative Return

IRR
Describes an expected annual rate of growth of the IOA investment.

15% - 20%

The National Investments Agency (NIA) under the President of the Kyrgyz Republic identified a small hydropower investment project with a capacity of 7.1 megawatt and an internal rate of return (IRR) of 19.15% over 10 years (19).

Investment Timeframe

Timeframe
Describes the time period in which the IOA will pay-back the invested resources. The estimate is based on asset expected lifetime as the IOA will start generating accumulated positive cash-flows.

Medium Term (5–10 years)

A small hydropower plant in the Chui region with a capacity of 500 kilowatts, which produces energy to power its butter and cheese factory and sells the excess energy to the grid, reports a payback period of 5-10 years (17).

The National Investments Agency (NIA) under the President of the Kyrgyz Republic identified a small hydropower investment project with a payback period of 4.31 years (19).

Ticket Size

Average Ticket Size (USD)
Describes the USD amount for a typical investment required in the IOA.

USD 1 million - USD 10 million

Market Risks & Scale Obstacles

Capital - Limited Investor Interest

While there are private companies that are interested in building and investing in small hydropower plants, regulatory hurdles such as those related to land acquisition and energy sale to the grid, prevent private investors from actively participating in the development of the sector (17, 20).

Market - Highly Regulated

Few private companies were able to utilise Power-Purchase Agreements (PPA) or connect hydropower plants to the grid. Standard contracts such as Sale Purchase Agreements (SPA), used instead, have a shorter period of two years compared to the grace period of 15 years outlined in the law (16, 17).

Market - Volatile

Due to the volatile nature of the water flows, particularly in winter seasons, the price of the one kilowatt hours generated by the small hydropower may fluctuate around the year (17).

Impact Case

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Sustainable Development Need

Kyrgyzstan’s hydropower potential is estimated at 18.5 kilowatts of capacity and over 142 billion kilowatt-hours of electricity generation, yet only 10% of this potential is used. Less than 3% of Kyrgyzstan’s hydropower potential is of small plants (19, 21).

The population growth pushes electricity demand up, where in 2023, 17.2 billion kilowatt-hours (kWh) were consumed. According to the high electricity demand scenario, the generation needs will reach 17.4 billion kWh by 2025 and 20.1 billion kWh by 2030 (11, 22).

In 2023, Kyrgyzstan imported 3.5 billion kilowatt-hours of electricity, representing 20% of the country's total consumption for the year, with an estimated cost of approximately USD 962.5 million, based on 2021 energy import figures (22, 48).

Kyrgyzstan generates 51 billion m3 of water annually, consuming 12 billion internally and sharing 39 billion with neighbours. High irrigation needs in summer deplete water for winter power generation, while climate change and inefficiencies worsen shortages for large hydropower plants (49, 50).

Gender & Marginalisation

Almost 31% of the rural population experienced electricity outages once a month compared to only 8% of the urban population in 2021 (3).

A significant gender gap persists in energy sector training. In secondary and higher vocational institutions offering "Electric and Thermal Power Engineering," women comprise just 3.3% of students, while men account for 96.7% (16).

Expected Development Outcome

Small hydropower enables diversification of the country's energy mix towards more sustainable options while maximizing the utilization of its hydroelectric potential.

Small hydropower plants reduce the strain of increasing electricity demand and associated costs on the population by providing autonomous energy solutions for businesses and decreases the pressure on depleting water resources.

Small hydropower plants reduce reliance on imported electricity by enhancing the country's domestic energy capacity.

Gender & Marginalisation

Small hydropower plants designed for individual use mitigate the frequency of power outages in rural areas by enabling reliance on autonomous off-grid energy generation.

Primary SDGs addressed

Affordable and Clean Energy (SDG 7)
7 - Affordable and Clean Energy

7.1.1 Proportion of population with access to electricity

7.2.1 Renewable energy share in the total final energy consumption

Current Value

73.21% in 2023 (23).

The share of renewable energy sources in total energy consumption amounted to 30% in 2022 but the share of electricity generation by power plants using renewable energy sources from total generation was only 1.28% (16, 24).

Target Value

89.03% by 2028 (16).

The share of electricity generation by power plants using renewable energy sources from total generation is targeted to reach 18.81% by 2028 (16).

Industry, Innovation and Infrastructure (SDG 9)
9 - Industry, Innovation and Infrastructure

9.4.1 CO2 emission per unit of value added

Current Value

9,449,100 tons in 2017 (25).

Responsible Consumption and Production (SDG 12)
12 - Responsible Consumption and Production

12.a.1 Installed renewable energy-generating capacity in developing countries (in watts per capita)

Secondary SDGs addressed

Life Below Water (SDG 14)
14 - Life Below Water
Partnerships For the Goals (SDG 17)
17 - Partnerships For the Goals

Directly impacted stakeholders

People

Employees of the small hydropower plants, particularly women, who are underrepresented in the industry, benefit from improved employment prospects.

Gender inequality and/or marginalization

The rural population benefits from small hydropower plants installed in rural and distant areas.

Planet

The environment benefits from cleaner electricity generation in Kyrgyzstan.

Corporates

Businesses in agriculture and industry benefit from lower costs of electricity as a result of autonomous energy generation and add-on income opportunities from selling excess energy.

Public sector

The public authorities benefit from improved electricity supply and lower demand from businesses, which have independent power generation.

Indirectly impacted stakeholders

People

The general population indirectly benefits from the outcomes of improved energy supply to the national grid, such as reduced the number of power outages.

Gender inequality and/or marginalization

Women, who are underrepresented in the hydropower sector, benefit from enhanced employment opportunities.

Outcome Risks

Hydropower projects are known to affect the migration patterns of water animals; particularly hydropower dams obstruct the flow of rivers (43).

If the irrigation needs of the agricultural producers are not considered, the construction of new hydropower plants can negatively impact the access to water resources in the region (51).

Impact Risks

If small hydropower plants are built in seismically active areas, landslides and mudflows can occur, lowering the impact of the small hydropower development.

Building small hydropower plants in the mountains with weaker water flow and higher ground level differences may affect the power generation capacity and lower impact of small hydropower.

Impact Classification

C—Contribute to Solutions

What

Small hydropower plants reduce electricity costs, enhance income generation from energy sales to the grid, expand the national grid capacity, and reduce power outages.

Who

Employees of the small hydropower plants, businesses in agriculture and industry, the general population, the environment, and the public sector benefit from improved clean energy supply.

Risk

Seismic activity and natural hazards alongside weaker water flow and restrictive topography may hinder the impact of small hydropower plants.

Contribution

Small hydropower improves energy supply in the North, addressing higher needs where large hydropower is absent and diversifies water intake compared to large hydropower reservoirs (40).

How Much

Small hydropower plants will save up to 49.8 MT of carbon dioxide by 2030. Between 2023-2040, the cost of hydropower electricity may drop from USD71.1 to USD45.9 per megawatt-hour (6, 26).

Impact Thesis

Improve energy supply, decrease electricity costs, promote independent energy generation, expand the national grid capacity, mitigating power outages.

Enabling Environment

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Policy Environment

Nationally Determined Contributions, 2021: sets a goal for power generation at existing private small hydropower plants, reducing 2737 tons of carbon dioxide (CO2) eq. until 2030 and construction and launch of new small hydropower plants, reducing 49,796,000 tons of CO2 eq. until 2030 (6).

Master Plan for Complex Development of the Energy Sector of the Kyrgyz Republic, 2022: recommends a set of measures to improve the power system, particularly, small hydropower plants are recommended to be included in the Generation Expansion Plan due to their low levelized cost of electricity (11).

The Project of the Program for the Development of a Green Economy in the Kyrgyz Republic for 2024-2028: sets out to assist in reducing investment risks related to green energy through public-private partnerships agreements (PPP) and improved standard power purchase agreements (PPA) (16).

National Development Programme until 2026, 2021: highlights the necessity to launch small hydropower plants with government purchase of electricity from small- and medium-sized producers at attractive tariffs, enabling commission facilities with a total capacity of 300-400 megawatt (27).

National Development Strategy for 2018-2040, 2018: sets an objective for Kyrgyzstan to become a major electricity producer in the region with a 50% share of environmentally friendly energy sources, including small hydropower (5).

Financial Environment

Financial incentives: Hungarian-, Russian-, and Uzbek-Kyrgyz development funds offer preferential loans up to USD 25 million at 1.5-7.25% for energy sector companies. The Green Energy Fund provides KGS 5 million (USD 57,175) guarantees for small hydropower companies (31, 32, 33, 34).

According to Article 239 of the tax code of the Kyrgyz Republic, new producers of electric energy using renewable energy sources within 5 years from the date of commissioning of power plant facilities receive income tax incentives (35).

Regulatory Environment

Law No. 49 On renewable energy sources, 2022: establishes the implementation of a guaranteed buyout of electrical energy from hydropower, applying a coefficient of 1.3 to all tariffs. A grace period for projects using water energy is 15 years (28).

Law No. 8 On electricity, 1997: stipulates that legal entities or individuals producing electric energy using renewable energy sources do not need licensing to produce, transmit, distribute, sell, export or import electricity (29).

Law No. 66 On investments, 2003: establishes the basic principles of the state investment policy, providing fair, equal legal treatment to investors and guaranteeing the protection of their investments in the economy of the Kyrgyz Republic (30).

Marketplace Participants

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Private Sector

JSC Incraft, LCC Tegirmentinskaya HPP, 40 Capital, JSC Kalininskaya HPP, ARK Construction Company LLC.

Government

Ministry of Energy, Ministry of Economy and Commerce, National Investments Agency under the President of the Kyrgyz Republic, PPP Center, National Electricity Network of the Kyrgyzstan (NESK), Green Energy Fund.

Multilaterals

Asian Development Bank (ADB), European Bank for Reconstruction and Development (EBRD), United Nations Development Programme (UNDP), World Bank, Delegation of the European Union to the Kyrgyz Republic, Asian Infrastructure Investment Bank (AIIB).

Non-Profit

Renewable Energy Association (Association "VIE KR").

Public-Private Partnership

In 2024, OJSC Chakan HPP, a state-owned energy company, and LLC "Joint Kyrgyz-Chinese Society for the Construction of Hydropower" signed the first public-private partnership to construct a 25-megawatt small hydropower plant valued at USD27 million (36).

Target Locations

See what country regions are most suitable for the investment opportunity. All references to Kosovo shall be understood to be in the context of the Security Council Resolution 1244 (1999)
country static map
rural

Kyrgyzstan: Osh Oblast

Osh oblast has the highest technical river potential for the construction of small hydropower plants, amounting to 2,300 million kilowatt-hours. Still, in 2023, only 0.8% of the region's population used clean fuels and technology (37, 44).
rural

Kyrgyzstan: Issyk-Kul Oblast

The Issyk-Kul Lake attracts increasing numbers of tourists annually, yet 53.14% of the population had electricity access in 2023. The region’s technical river potential for small hydropower, estimated at 1,700 million kilowatt-hours, offers an opportunity to improve access to electricity (37, 38).
rural

Kyrgyzstan: Jalal-Abad Oblast

Jalal-Abad oblast has a high technical river potential for the construction of small hydropower plants (1600 million kilowatt-hours) and produces 19.5% of the gross agricultural output of the republic, necessitating a heightened energy supply (37, 45).
rural

Kyrgyzstan: Naryn Oblast

Naryn region produces the most lignite in Kyrgyzstan, with 1.7 million tons mined in 2023. It also has a high technical river potential of 160 million kWh, offering opportunities for small hydropower development, essential for advancing the region’s transition to clean energy sources (37, 47).
rural

Kyrgyzstan: Talas blast

Compared to other low-population regions in Kyrgyzstan, Talas oblast has a disproportionally high share of average energy costs per capita (4.8%). Only 51.07% of the population has access to electricity, suggesting the need to provide cheaper, cleaner, and more efficient energy sources (38, 46).

References

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