KYRGYZ REPUBLIC: Enabling Renewable Energy Development and Private Sector Participation through Sector Financial Recovery

The proposed activity will enable the government of Kyrgyz Republic to pass necessary reforms for private sector participation (PSP) in renewable energy (RE) through subsidy and tariff reform, as well as an energy sector financial recovery program. The activity included a detailed study of the electricity tariff and considered sector costs, optimal tariff structures, and pathways for tariff rationalization while considering the distributional impact and sector financial assessment. Social mitigation measures were also explored to minimize the impact of tariff reforms on vulnerable groups. The results of the study and recommendations on future tariff design were shared with the government, which decided to embark on a gradual tariff increase beginning in the spring of 2023 that eventually would lead to a financially sustainable electricity sector. The World Bank will support the government through the Kyrgyz Republic Electricity Sector Modernization and Sustainability Project, which was approved in June 2022, with energy tariff reform as its core, while the Kyrgyz Renewable Energy Development Project is being prepared to support the establishment of an enabling environment for PPPs and renewable energy. The activity successfully created a concrete understanding within the government of the importance and need for tariff reforms to build a sustainable energy sector that includes private sector participation.