Reducing Carbon Emissions by Scaling Heat Pumps Adoption in the Kyrgyz Republic

Quantitative Employment

The project activity replaces carbon intensive coal fueled space heaters with electricty run heat pumps leading to heat pumps.

The project implementation requires significant equipment purchase, civil and installation work, and commissioning, none of which can be recovered solely from operating revenues within a commercially viable timeline without carbon financing. Due to the high investment cost, it is difficult for households to afford heat pumps. Additionally, in cities, people live in rented flats, and investing in a rented property is not a good ROI investment.

To overcome this obstacle to adoption, the project owner has provided a rental model, Energy-as-a-Service (EaaS) / Pay-As-You-Go (PAYG), in which Clean Choice LLC finances, installs, and owns the heat pump equipment, while beneficiary families pay a monthly usage-based service fee. The GIZ feasibility study confirms this quantitatively: at current power prices of 2.16 KGS/kWh, the total cost of heat from a heat pump (electricity plus service fee) is 1.52 KGS/kWh, which is roughly equivalent to coal’s 1.48 KGS/kWh. From the standpoint of a project developer, this indicates that the margin between PAYG revenue and running costs is nearly negative, with no surplus to repay capital expenditure.

The project’s NPV without carbon revenue is therefore negative, and the project fails to meet any commercially acceptable return threshold in the absence of carbon finance.