Overview of Renewable Energy Legislation in Kyrgyz Republic

I. INTRODUCTION 

The Kyrgyz Republic possesses significant renewable energy potential and is increasingly positioning itself to become a regional clean energy hub in Central Asia. According to the report by the Eurasian Development Bank, Kyrgyzstan ranks highly in terms of environmental sustainability, placing 47th in the Sustainable Development Goals (SDG) Index and 78th in the Energy Transition Index, which demonstrates progress in sustainable development and alternative energy transition.[1] 

Historically, the country’s power sector has relied almost entirely on hydropower, with a potential estimated at 140-160 billion kWh per year, of which only about 10 per cent is currently utilized[2]. However, driven by rapid economic and demographic growth, the country faces a persistent power deficit of approximately 3.5 billion kWh[3].

To cover this deficit, reduce reliance on electricity imports, and ensure energy security, the government is executing a rapid shift toward solar and wind generation. The fundamental regulatory architecture governing this transition is primarily based on the Law "On Renewable Energy Sources" (the “RES Law”) and the Law "On Public-Private Partnership" (the “PPP Law”)[4].

II. THE YEAR IN REVIEW 

The energy deficit, triggered by global climate challenges and low water inflows, has served as a powerful catalyst for emergency economic and institutional reforms. Against the backdrop of a deteriorating electricity infrastructure, the government has undertaken unprecedented statutory measures:

• Energy Emergency Decree: In July 2023, the President of the Kyrgyz Republic issued a decree declaring a state of emergency in the energy sector, valid until 31 December 2026[5]. This order grants the Ministry of Energy exclusive powers to coordinate state bodies, lift bureaucratic barriers, and expedite land allocation for renewable energy sources (RES).
• Institutional Reforms: The Green Energy Fund under the Cabinet of Ministers was established as a specialized state institution responsible for accumulating funds, financing, and centralizing land allocation for RES projects[6].
• Guaranteed Off-take Mechanism: A major breakthrough in February 2025 was the adoption of a statutory mechanism ensuring the guaranteed off-take of electricity[7]. Under this regulation, the Green Energy Fund provides sovereign guarantees backed by the republican budget to secure off-taker payment obligations for large-scale RES projects.
• National program 2026-2030[8]: In 2026 the Cabinet of Ministers adopted a Program on development of the renewable energy sources in the Kyrgyz Republic for 2026–2030: distributed and microgeneration. By 2030, the Kyrgyz Republic will be a country with a sustainable, decentralized, inclusive, and environmentally friendly energy system. The main objectives of the program are to decentralize the country’s power system and create conditions for the widespread installation of small-scale renewable energy facilities. The first phase of implementation involves developing the regulatory framework, launching pilot projects, and initiating subsidy programs and preferential loan schemes. The second phase of implementation involves the large-scale deployment of microgeneration, the digitization of grid connections, and the launch of energy audits and building certification.

III. THE POLICY AND REGULATORY FRAMEWORK

i. The regulatory and consenting framework 

The electricity market in the Kyrgyz Republic features a single state-owned off-taker model. JSC National Electric Grid of Kyrgyzstan (NEGK) acts as the national transmission grid operator, the system operator, and the exclusive purchaser (single off-taker) of electricity from RES facilities[9].

To protect investors against off-taker insolvency risks, the Cabinet of Ministers enacted a formal guaranteed off-take procedure. Under this mechanism, the Green Energy Fund directly covers payment defaults from the state budget for the entire duration of the investor's credit agreement[10]. To qualify for this statutory sovereign guarantee, an investor must meet strict criteria mandated by law[11]:

1. Hold a valid investment agreement with the Cabinet of Ministers.
2. Have a track record of successfully implementing at least two similar projects, with a combined value no less than the current project.
3. Invest at least 20 per cent of its own equity out of the total investment volume.
4. Provide a bank guarantee amounting to 2 per cent of the planned investment prior to facility commissioning.
5. The project must have an installed capacity exceeding 30 MW, and the investor must possess an impeccable international business reputation without offshore registrations, pending insolvencies, or tax arrears.

IV. RENEWABLE ENERGY PROJECT DEVELOPMENT 

i. Corporate Structures and Merger Control

Foreign investors typically establish a special purpose vehicle (SPV) in the Kyrgyz Republic to implement energy projects. Under the Civil Code and the Law on Business Partnerships and Companies, the most suitable corporate form is a Limited Liability Company (LLC) rather than a Joint Stock Company (JSC)[12]. LLCs are subject to less stringent corporate governance requirements, do not mandate the issuance of securities, and offer a highly streamlined state registration process. Notably, foreign investors may hold up 100 per cent of the participation interests in a LLC, and there is no minimum charter capital requirement prescribed by law. The establishment of a project company, or the acquisition of participation interests therein, may be subject to merger control clearance under the Law on Competition and the Rules for Controlling Economic Concentration if specific statutory thresholds are met[13].

ii. Foreign Investment Protection 

The Law "On Investments in the Kyrgyz Republic" provides a robust protective framework for foreign capital. Foreign investors are explicitly guaranteed the right to freely repatriate profits, dividends, and other investment-related funds out of the country in freely convertible currency[14]. Investments are statutorily protected against direct or indirect expropriation, except in cases of public interest, which require prompt, adequate, and effective compensation. Crucially, the law permits the inclusion of stabilization clauses in investment agreements, shielding investors from adverse legislative changes if the investment exceeds the equivalent of US$3 million[15]. In addition, the Kyrgyz Republic is a party to a number of bilateral investment treaties (BITs) and is a member of the Multilateral Investment Guarantee Agency (MIGA), providing an additional layer of international legal protection for foreign investors. 

iii. PPP Procurement and Direct Negotiations 

Large-scale international institutional investors primarily structure their RES transactions under the PPP Law. As a general statutory rule, the selection of a private partner for infrastructure projects must be conducted through a competitive two-stage tender process. However, the PPP Law establishes a critical exemption: for projects with an investment volume exceeding 1 billion Kyrgyz Som (approximately US$11.4 million), the project may be lawfully awarded through direct negotiations, entirely bypassing standard competitive tender procedures[16]. The PPP Law also provides a strong statutory stabilization guarantee ("grandfather clause"): laws and regulations adopted after the execution of the PPP agreement that adversely affect the project do not apply, unless initiated by the private partner[17].

iv. Power Purchase, FX Protection, and Grid Connection 

The RES Law establishes a statutory grace period (15 years for hydropower and 25 years for solar, wind, biomass, and geothermal energy) during which a multiplier of 1.3 is applied to the maximum end-user tariff[18]. However, PPP projects may opt for tariffs determined competitively through the PPP agreement. To address currency risks for international lenders, tariffs for electricity generated by RES installations under PPP or investment agreements are legally subject to indexation to a foreign currency (US Dollar, Euro, Russian Ruble, or Chinese Yuan) based on official National Bank exchange rates[19]. Under the RES Law, the national grid operator must provide non-discriminatory access to the grid and mandates priority dispatch for all RES-generated electricity[20].

V. PROJECT FINANCING, SECURITY, AND INSOLVENCY 

i. Security Interests and Lender Rights 

To secure project financing, the Kyrgyz Law "On Pledge" permits the creation of security interests over a wide range of assets, including movable and immovable property, property rights, shares, and future receivables[21]. Pledges over immovable property (mortgages) must be registered with the state registration authority to be enforceable against third parties. Pledges over movable property may also be registered in order to establish priority. The PPP Law expressly permits the private partner and project company to conclude financing agreements with lenders, establishing the statutory basis for customary direct agreements and step-in rights[22]. Disputes arising from PPP agreements may be subject to resolution through international arbitration[23].

ii. Insolvency Regime 

Corporate insolvency is primarily governed by the Law on Bankruptcy. The law establishes a strict four-tier hierarchy for satisfying creditor claims; (i) claims arising from harm to life and health; (ii) wages and employment-related claims; (iii) claims secured by pledged property; (iv) all other unsecured creditor claims Crucially for project finance lenders, the claims of secured creditors are exempt from this mandatory four-tier queue; they are satisfied directly from the proceeds of the pledged property, completely separately from and without regard to the unsecured creditors[24].

VI. LAND AVAILABILITY AND SITE CLEARANCE 

While general land legislation mandates that state-owned land plots must be allocated through public auctions, Chapter 5-1 of the Regulation on the Procedure for Providing State-Owned Land Plots creates a specialized carve-out for PPP infrastructure projects. Under this regime, state-owned land plots are leased directly to the private partner or project company without separate public bidding, regardless of the size of the requested plot, for a period of up to 49 years[25]. The lease rate is strictly equal to the annual land tax amount, and the PPP agreement may exempt the investor from rent entirely during the construction phase[26]. Should the allocated site contain state-owned structures subject to demolition, the public partner bears the legal and financial responsibility for their dismantling and the procurement of all associated permits[27].

Statutory Conditions and "Use-It-Or-Lose-It" Rules for RES Land Allocation 

Specific statutory criteria apply to land allocated for RES facilities. To be granted land rights, the developer must provide a preliminary feasibility study (detailing technical-economic indicators, output volumes, financing volume, payback periods, and construction timelines) and an Environmental Impact Assessment (EIA) report. Furthermore, demonstrated prior experience in RES project implementation is legally recognized as a competitive advantage in the allocation process[28].

Once the land is allocated, the lease agreement is subject to mandatory termination ("use-it-or-lose-it" rules) if the investor fails to meet strict developmental milestones. The state will lawfully revoke the land rights if the developer fails to:

1. Provide a preliminary feasibility study and confirmed financing within 6 months of receiving the land plot.
2. Finalize the full feasibility study and confirmed financing within 1 year.
3. Secure approved design and estimate documentation within 2 years.
4. Commence actual construction works within 3 years of receiving the land plot[29].

VII. FISCAL REGIME, CUSTOMS AND TAX INCENTIVES

The Tax Code and supranational customs legislation of the Kyrgyz Republic provide robust fiscal incentives that significantly optimize capital and operational expenditures for green energy projects[30]:

• Corporate Income Tax (CIT): Newly established RES electricity producers are fully exempt from the standard 10 per cent CIT for a period of 5 years from commissioning, provided the facility is commissioned no later than 1 January 2030[31].
• Value Added Tax (VAT): The import of specialized equipment and technologies for RES installations, including those meeting energy and resource efficiency requirements, is exempt from import VAT. Furthermore, under Article 293 of the Tax Code, all supplies of goods, works, and services carried out by the private partner in the course of implementing the PPP agreement are fully exempt from VAT for the entire term of the agreement.[32]
• Customs Duties: As the Kyrgyz Republic is a member state of the Eurasian Economic Union (EAEU), import customs duties are governed by supranational legislation, namely the EAEU Customs Code and the Unified Customs Tariff[33]. While the RES Law generally provides for customs privileges,[34] there is no automatic statutory exemption from EAEU import customs duties for RES equipment. To secure an exemption from import duties for specialized equipment (e.g., solar panels or wind turbines), the investor must negotiate and secure a specific resolution (decree) from the Cabinet of Ministers, typically formalized within an investment or PPP agreement.
• Property Tax: Buildings and structures meeting state energy and resource efficiency standards benefit from a 50 per cent property tax reduction[35].

The Tax Code expressly guarantees the application of a stabilization regime to tax obligations (including VAT) in accordance with investment legislation[36].

VIII. CLASSIFICATION OF RENEWABLE ENERGY SOURCES

Unlike certain jurisdictions where solid household waste incineration is broadly supported, the Kyrgyz RES Law maintains a specific distinction. Energy derived from the anaerobic decomposition (fermentation) of organic biomass (e.g., via biogas plants) legally qualifies as green energy. However, the direct thermal incineration of solid municipal waste is not equated to renewable energy sources under the current law[37]. Geothermal energy is fully integrated into the RES legal framework, benefiting from a 25-year grace period, yet remains an entirely untapped market for future investments[38].

IX. CONCLUSIONS AND OUTLOOK 

The Kyrgyz Republic is rapidly reforming its regulatory landscape in response to severe energy challenges. By combining the flexibility of the PPP Law (featuring statutory stabilization clauses, direct negotiation frameworks, and international arbitration) with highly preferential land procurement, comprehensive tax holidays until 2030, robust security pledge mechanisms, and steadfast sovereign financial backing via the Green Energy Fund, the country has established a highly bankable environment for major IPPs and international lenders. The adoption of the National Program for 2026-2030 on distributed and microgeneration further signals the government’s commitment to building a decentralized and sustainable energy system over the medium term. Nevertheless, investors should remain mindful of certain practical challenges, including the developing state of grid infrastructure, the capacity constraints of the single off-taker model, and the evolving regulatory environment that, while increasingly investor-friendly, is still in the process of development. With the energy state of emergency accelerating project approvals through 2026, the Kyrgyz Republic is poised to attract significant foreign direct investment to overcome its domestic power deficit.

 

ABOUT THE AUTHORS

GRATA International, Kyrgyzstan

Elvira Maratova, Partner

Sultan Tolomushev, Counsel

This information does not constitute legal advice. It is prepared for the general information of our clients and other interested persons. This information should not be acted upon in any specific situation without appropriate legal advice. We hope the information above will be useful to you. Please feel free to contact us at bishkek@gratanet.com if you have any questions or comments. We would be happy to receive any feedback.

 

References
 
[1] Vinokurov, E., Akhunbaev, A., Kabylbaev, D., Chuev, S., Sarsembekov, T. (2026). Power Sector of Central Asia: Modernization and Energy Transition, Report 26/4, Almaty: Eurasian Development Bank, https://eabr.org/upload/iblock/2ea/EDB_2026_Power-sector-of-CA_Report_EN.pdf;
[2] Statements by the Cabinet of Ministers of the Kyrgyz Republic on the national power deficit; 24.kg News Agency report, 19 May 2026.
[3] Ibid. 
[4] Law of the Kyrgyz Republic No. 49 "On Renewable Energy Sources," dated 30 June 2022 (the "RES Law"); Law of the Kyrgyz Republic No. 98 "On Public-Private Partnership," dated 11 August 2021 (the "PPP Law").
[5] Decree of the President of the Kyrgyz Republic No. 178 "On the Emergency Situation in the Energy Sector of the Kyrgyz Republic," dated 24 July 2023
[6] Decree of the Cabinet of Ministers of the Kyrgyz Republic No. 621 "On Establishment of the Green Energy Fund under the Cabinet of Ministers of the Kyrgyz Republic," dated 14 November 2022.
[7] Decree of the Cabinet of Ministers of the Kyrgyz Republic No. 70 "On approval of the Regulation on the procedure for providing guaranteed off-take of electrical energy generated by renewable energy facilities", dated 14 February 2025.
[8] Program “Development of Renewable Energy Sources in the Kyrgyz Republic for 2026–2030: Distributed and Microgeneration” (approved by the Decree of the Cabinet of Ministers No. 332, dated 12 May 2026); 
[9] Law of the Kyrgyz Republic No. 8 "On Electricity," dated 28 January 1997, as amended.
[10] Regulation on the procedure for providing guaranteed off-take of electrical energy generated by renewable energy facilities in the framework of investment agreements (approved by Decree No. 70), Chapter 3, Clause 15. 
[11] Ibid., Chapter 2, Clause 3 and Clause 5. 
[12] Civil Code of the Kyrgyz Republic No. 1, dated 5 January 1998; Law of the Kyrgyz Republic No. 60 "On Business Partnerships and Companies," dated 15 November 1996.
[13] Law of the Kyrgyz Republic "On Competition," as amended; Decree of the Cabinet of Ministers No. 617 "On Approval of the Rules for Controlling Economic Concentration".
[14] Law of the Kyrgyz Republic No. 66 "On Investments in the Kyrgyz Republic," dated 27 March 2003, Article 8.
[15] Ibid., Articles 4 and 6
[16] PPP Law, Article 11(4).
[17] PPP Law, Article 6(2)
[18] RES Law, Article 8(1)(9) and Article 12(1)(7).
[19] RES Law, Article 12; see also Methodology for setting tariffs for electricity generated using renewable energy sources (approved by Order of the Ministry of Energy of the Kyrgyz Republic No. 13-7, dated 22 January 2024), Clause 6.
[20] RES Law, Article 12(1)(14) and Article 12(1)(17). 
[21] Law of the Kyrgyz Republic No. 49 "On Pledge," dated 12 March 2005.
[22] PPP Law, Article 15(4).
[23] PPP Law, Article 19.
[24] Law of the Kyrgyz Republic No. 74 "On Bankruptcy," dated 15 October 1997.
[25] Regulation on the Procedure for Providing State-Owned Land Plots (approved by Decree of the Government of the Kyrgyz Republic No. 535, dated 9 October 2019, as amended), Chapter 5-1, Clause 64-1 and 64-4. 
[26] Ibid., Clause 64-5
[27] Ibid., Clause 64-7
[28] Ibid., Chapter 4-1, Clause 55-2.
[29] Ibid., Chapter 9, Clause 84. 
[30] Tax Code of the Kyrgyz Republic No. 3, dated 18 January 2022, Article 239(1)(10).
[31] Ibid., Article 297(1).
[32]Ibid., Article 293.
[33] Customs Code of the Eurasian Economic Union. 
[34] RES Law, Article 12(2).
[35] Tax Code of the Kyrgyz Republic, Article 409(2)(3)
[36] Ibid., Article 1(4).
[37] RES Law, Article 3(1)(3)(b).
[38] RES Law, Article 8(1)(9).