Context
Electricity demand in Kazakhstan, Kyrgyzstan, and Uzbekistan is rising due to economic growth and energy-intensive lifestyles. As power generation relies largely on fossil fuels (coal in Kazakhstan, natural gas in Uzbekistan) higher demand drives greenhouse gas (GHG) emissions. Electricity demand in Kazakhstan, Kyrgyzstan, and Uzbekistan is rising due to economic growth and energy-intensive lifestyles. As power generation relies largely on fossil fuels (coal in Kazakhstan, natural gas in Uzbekistan) higher demand drives greenhouse gas (GHG) emissions. Kyrgyzstan depends on hydropower but imports carbon-intensive electricity in winter, making decarbonisation a regional challenge.
A major yet under-addressed issue is transmission loss: 14% to 16% of electricity is lost in distribution grids. A key cause is reactive power from common appliances, which heats wires and wastes energy. Existing compensation technologies focus on high-voltage industrial systems, leaving low- and medium-voltage distribution networks largely unaddressed.
The project introduces cost-effective reactive power compensation at distribution level to reduce loses, avoid additional generation, lower emissions and strengthen grid stability. Piloted in Kazakhstan, it will scale regionally, supporting climate targets and renewable integration across Central Asia.
Goals and approach to transformational change
The “Harnessing Reactive Power for Energy Efficiency and Decarbonisation” (“Multi-Country – Reactive Power for Energy Savings”) project pilots large-scale reactive power compensation to reduce transmission losses, lower coal-based generation needs, and improve grid stability. As the first initiative of its kind in Kazakhstan, it demonstrates the economic viability of the technology under current market conditions. Upon successful demonstration, the project will be scaled up to include Uzbekistan and Kyrgyzstan, offering a replicable model for clean energy transition across Central Asia.
Transformational change is pursued by:
- generating evidence to inform tariff and regulatory reform,
- reducing perceived technology and investment risk,
- mobilising green finance instruments (e.g. bonds, loans) for scale-up, and
- creating a replicable model for nationwide and regional rollout.
By unlocking private investment in grid modernisation, the project enables sustained emissions reductions in the highest-emitting sector of the economy.
Components and support mechanisms
The Financial Cooperation (FC) component provides targeted CAPEX grants to pilot reactive power compensation and incentivise private co-investment in grid modernisation. Follow-on grants will support scale-up through green bonds and loans, leveraging additional private capital.
The Technical Cooperation (TC) component addresses key technical, regulatory, and market barriers. It includes the development and adoption of national technical standards, pilot-based performance assessments, and adjustments to tariff and regulatory frameworks to enable investments by electricity distribution companies. The project will also raise awareness of the economic costs of reactive power losses and strengthen financial sector capacity. By generating real-life performance and business case data, the TC component reduces investment risk and supports sustainable market uptake.
Long-term impact
The project’s direct mitigation impact from the pilot phase is modest but catalytic. Direct emissions reductions amount to 255,185 tCO₂e during implementation and 928,040 tCO₂e over the project lifetime plus ten years.
The transformational impact lies in large-scale replication. If 80% of transmission lines are equipped with reactive power compensation by 2036 (with uptake accelerating from year three), the indirect mitigation potential is substantial: 29,271,944tCO₂e over the project lifetime plus ten years.
With a cost efficiency of EUR 22 EUR per tCO₂e, the project delivers strong value for money in Kazakhstan during the piloting phase of the implementation. While the pilot itself generates limited reductions during the implementation of the project, it aims to establish the regulatory, financial, and technical conditions required for systemic grid modernisation and long-term decarbonisation of Kazakhstan’s power sector.
