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Eurasianet

Eurasianet

EurasiaNet.org provides information and analysis about political, economic, environmental and social developments in the countries of Central Asia and the Caucasus, as well as in…

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Kyrgyzstan: Subsidised Energy Deters Investment in Renewables

Kyrgyzstan: Subsidised Energy Deters Investment in Renewables

Almost five years ago, as his village in northern Kyrgyzstan endured daily power outages, rays of light always emitted from Sabyr Kurmanov’s garage. They came from his egg incubator, a 12-volt contraption powered by something he and his neighbors have in abundance – wind.

Kurmanov is no environmentalist. But he knew that he could not rely on the ailing national energy grid for a steady supply of power. “Hatching eggs requires stable light and temperature,” he says. Kurmanov fashioned the turbine himself; parts for the 60-egg incubator setup cost less than $300. “Mine was the only business in Kochkor working around the clock,” he jokes.

These days, Kurmanov, a small-time businessman and former engineer, has inspired his neighbors. Each summer, he helps them use solar-powered pumps to get clean water out of the ground. Not far from Kochkor lies an alpine lake, Song-Kul, where shepherds live with their families for a few months a year. Now visitors can enjoy the disorienting experience of waking up in an isolated yurt hearing a shepherd’s favorite brand of techno – the beat powered by the sun.

But while public interest in alternative energy has increased – mainly spurred by an ongoing energy crisis – heavily subsidized domestic electricity, when it works, provides a disincentive for local businesses to invest in off-the-grid options. Rates in Kyrgyzstan are the cheapest in Central Asia. And mindful of the fate of ex-President Kurmanbek Bakiyev, who was chased from power shortly after imposing a steep utility rate hike in 2010, today’s leaders in Bishkek are wary of raising tariffs, despite the World Bank’s prediction of a protracted supply deficit beginning this winter.

Igor Kuon worked for 14 years in the state hydroelectric sector and now leads Inkraft, a company supplying small-capacity hydropower-units and solar panels. He has been well placed to observe the “deterioration of national energy.” When his company started working on renewables in 2003, there wasn’t much demand for their services, he told EurasiaNet.org.

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“Energy was plentiful and it was cheap. The [national] grid wasn’t well managed but it had retained some of its former capacity. The equipment was in better condition. Some specialists had left [Kyrgyzstan], but not all,” Kuon explained.

Since then, however, rapid degradation of physical infrastructure and mismanagement has taken a toll. “By the time Bakiyev came to power [2005] much of the infrastructure was ruined. … A few people began to realize cheap energy is only useful if it exists,” said Kuon.

Industry experts argue that Kyrgyzstan would be ripe for a renewables drive, if only investment was forthcoming. The country enjoys an average of 270 days of sun per year and only Tajikistan and Russia have more significant hydropower potential among former Soviet countries, says Edil Bogombayev, who coordinates a UN project that helps build small hydropower stations (between 5- and 300-kilowatts) for rural households and communities living close to rivers.

According to Bogombayev, a 5-kilowatt hydropower unit can power a small farm, but with construction and installation costing several thousand dollars, such initiatives are mostly donor-funded. Off-grid energy amounts to less than 1 percent of the total produced and consumed in Kyrgyzstan, he says. Small, privately financed initiatives such as Kurmanov’s wind-powered incubator and larger commercial operations such as a 500-kilowatt hydro-powered dairy factory based in the western town of Belovodsk remain the exception rather than the rule.

Although unrelenting budget woes mean the government is short on cash for alternative energy, there is hope that amendments to the Law on Renewable Energies last August will stimulate private-sector investment in low-capacity hydropower stations. Mirroring a global trend, the amendments increased the fee energy producers can make by selling excess power to the national grid, a move that could help relieve stress on the system. Regulators are still working out the details.

Bogombayev sees foreign investment in renewables as integral to taming Kyrgyzstan’s energy risk and notes the interest of Toulouse-based MECAMIDI in constructing and renovating mini-hydro stations in the north of the country. He acknowledges, though, that instability in Bishkek remains a deterrent: “investors will react according to the political situation.”

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Nevertheless, despite falling prices over the last few years, fully green commercial operations are currently “not realistic,” a hotelier in Cholpon-Ata, a town on the shore of Kyrgyzstan’s main tourist attraction, Lake Issyk-Kul, told EurasiaNet.org. The hotelier, who insisted on anonymity for fear of hurting revenues, estimates her 15-room facility generates under $6,000 a year in utility bills. “I have six Chinese solar-paneled water heaters that cost $500 each and heat 150 liters of water each. But solar infrastructure to power the whole hotel would cost $25,000. It would take nearly five years to earn back.”

By contrast, in places where energy is expensive, such as in Scandinavia, solar users are prepared to wait up to seven years for their capital investments to pay off, notes Kuon, the Inkraft director. Kyrgyz reluctance is explained by “a lack of savings capital and the local mentality,” he explains. People are wary of investing long-term in anything because of ongoing political instability.

“While electricity costs [$0.015] per kilowatt-hour, why invest your own money in solar?” he asks. “People will wait for the system to collapse first.”

By. Chris Rickleton
Originally published on Eurasianet




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