Economic & Financial Analysis

The Kyrgyz Republic has substantial small hydropower potential, but potential and viability are not the same thing. Whether small hydropower plants make economic sense for the country as a whole, and whether they are financially viable for private developers without government support, are questions that require careful analysis—and the answers have direct implications for feed-in tariff policy and the level of public subsidy needed to stimulate investment. The World Bank hired DHInfrastructure to provide that analysis, assessing both the economic case for small hydropower development and the financial support that would be required to make it commercially attractive.

DHInfrastructure used our proprietary LCOE-z tool to calculate the levelized cost of electricity for specific small hydropower sites in both economic terms—reflecting the true cost to the economy—and financial terms, under both concessional and commercial financing assumptions. We developed supply curves comparing small hydropower costs to those of alternative energy sources, including thermal generation and imports, to determine how much of the technically viable potential should actually be developed from a least-cost perspective. We then quantified the gap between the current feed-in tariff and one based on marginal cost of supply, giving the Government a clear picture of the financial burden that small hydropower development would place on public finances and end-users under different support scenarios. We also demonstrated that longer offtake periods could improve the financial viability of small hydropower projects, providing a practical policy lever that could reduce the level of direct subsidy required. Together, these analyses gave the Government and the World Bank a comprehensive, quantified basis for designing support mechanisms that balanced the development of a valuable domestic resource against the fiscal and tariff implications for the country.

The heating sector across Eastern Europe and Central Asia is at a crossroads. District heating systems—a legacy of Soviet-era infrastructure—vary enormously in financial and technical performance, while many households rely on aging gas or coal boilers and coal or wood stoves that are inefficient, polluting, and costly to operate. Transitioning the region toward more sustainable heating requires a clear analytical framework: understanding where district heating utilities stand today, what cleaner and more efficient alternatives would cost for individual houses and multi-apartment buildings, and how policy and financing can support the transition in very different country contexts. The World Bank wanted to develop exactly that framework as part of a regional Sustainable Heating Strategy, and hired DHInfrastructure to provide the economic and financial analysis underpinning two of its core chapters.

For the district heating chapter, DHInfrastructure developed a shortlist of financial and technical key performance indicators (KPIs) and designed a utility questionnaire to collect the data needed to calculate them. Working with local consultants in Bulgaria, Kyrgyzstan, Poland, and Serbia, we collected data, analyzed utility financial statements, and built an Excel database to calculate KPIs and assess utility performance. We developed a scoring methodology that grouped utilities into four performance categories—ranging from strong performance on both financial and technical dimensions to poor performance on both—and made recommendations for how each group of utilities could improve performance and move toward greater sustainability. The resulting framework gave the World Bank a systematic, evidence-based tool for categorizing utilities and targeting policy recommendations to their specific circumstances.

For the levelized cost of heating chapter, DHInfrastructure developed data collection instruments for local consultants in Armenia, Kyrgyzstan, Poland, Serbia, Türkiye, and Uzbekistan, who provided data on residential building stock and heating technologies in each country. We built country-level financial and economic models to assess the levelized cost of heating for existing technologies and sustainable alternatives, and conducted sensitivity analyses on the impact of improved building energy efficiency and changes in fuel and technology prices. The building energy efficiency sensitivity analysis was particularly important: in many of the countries studied, improvements to building insulation and thermal performance had the potential to reduce heating costs substantially regardless of the fuel or technology used, making building efficiency a critical lever for any sustainable heating transition. The analysis gave policymakers a quantified basis for comparing heating technology options across a wide range of country contexts — from relatively wealthy EU-adjacent economies to lower-income Central Asian countries — and for understanding how the cost picture would shift as energy prices, technology costs, and building efficiency standards evolved.

Gas distribution utilities across the United States have been investing heavily in infrastructure replacement and modernization programs, recovering those costs through customer bills. At the same time, state clean energy policies are accelerating the transition away of natural gas for heating and cooking, raising a question that consumer advocates and regulators are increasingly grappling with: what happens to the customers who remain on the gas system as others switch to electric alternatives? If the customer base shrinks while infrastructure investment continues, the costs of that investment are spread across fewer customers—potentially driving bills higher, accelerating further switching, and creating a self-reinforcing cycle that leaves the most vulnerable customers paying the most. DHInfrastructure has conducted a series of engagements for consumer advocacy organizations in Maryland, Illinois, Minnesota, and Michigan, analyzing these dynamics and their implications for residential ratepayers.

In each engagement, DHInfrastructure reviewed historical capital investment by the relevant gas utilities and projected future investment levels based on company plans and stated shareholder commitments. We developed revenue requirement models and projected typical residential customer bills under different investment scenarios, giving consumer advocates a quantified picture of how continued infrastructure spending would affect ratepayers over time. Where state clean energy policy created the prospect of meaningful electrification of the heating sector, we also modeled scenarios under which a declining customer base would face escalating bills—quantifying the risk of a utility "death spiral" in which higher costs drive further switching, leaving remaining customers with an increasingly unaffordable service. In Illinois, we assessed the financial impacts of gas utility investment plans across different service areas and customer classes, and projected timelines for customer transitions to electric alternatives—adding a distributional dimension to the analysis by examining how bill impacts would vary across different types of customers.

Taken together, this body of work represents a sustained analytical contribution to one of the most consequential questions in energy policy: how to manage the long-term financial risks of gas infrastructure investment in a decarbonizing economy, and how to ensure that the costs of transition do not fall disproportionately on customers with the fewest alternatives. The clients for this work—state-level consumer advocacy organizations and utility boards—rely on independent, rigorous analysis to represent residential ratepayer interests in regulatory proceedings, and DHInfrastructure's financial modeling and bill impact analysis has provided that analytical foundation across multiple jurisdictions.

Water utilities in developing markets face a fundamental tension: tariffs need to be high enough to cover the costs of operating and expanding service, but affordable enough that customers can and will pay them. Getting the balance right requires understanding both sides of the equation—the utility's cost structure and the customers' willingness to pay—and translating that understanding into a regulatory filing that the tariff-setting authority will accept. When the Arusha Urban Water Supply and Sanitation Authority (AUWSA) sought to improve and expand Arusha City's water and sanitation network with African Development Bank financing, it needed exactly that kind of analysis before approaching its regulator with a new tariff proposal.

DHInfrastructure conducted a two-part study that addressed both sides of the affordability question. On the demand side, we designed and administered a contingent valuation survey to 477 households, supplemented by focus group discussions, to understand how much existing customers were willing to pay for improvements to water and sewerage services—including new connections and septic tank vacuum truck services. On the cost side, we reviewed AUWSA's historical and planned costs, customer consumption patterns, and recent operating performance, and developed recommendations for determining revenue requirements, allocating costs, and structuring tariffs. The cost-of-service work culminated in an Excel-based financial model that implemented our recommendations and projected tariffs over a ten-year horizon, including the ability to model how increased debt service from the proposed investment program would affect the utility's financial performance and the tariff levels needed to sustain it. DHInfrastructure trained AUWSA staff on the model and developed an implementation and transition plan to support the authority in adopting the proposed tariff structure.