Uzbek energy reforms focus on energy saving, high efficiency in the first phase

Uzbek energy reforms focus on energy saving, high efficiency in the first phase
Uzbekistan has enough power for the meantime, but if the president's plans for growth are achieved the generation capacity needs to double in the coming decades. / wiki
By Ben Aris in Tashkent December 10, 2021

Uzbekistan under its new president, Shavkat Mirziyoyev, is a country gearing up for a bright future – in that the president wants to make sure there is enough power to keep all the lights on as both the economy and the population are growing fast.  

“Now the situation is very dynamic. There is rapid economic growth and the energy sector will not be able to meet all the needs. Today we have 15 GW of capacity and the plan is to increase this to 30 GW by 2030 of which 25% will be renewables,” Azim Akhmedkhadjaev, the newly appointed First Deputy Energy Minister told bne IntelliNews in an exclusive interview.  

The president launched a comprehensive five-year energy reform plan in 2019 that is, after the bank sector reforms, probably the most advanced of all the country’s reforms.  

Investments into power and electricity infrastructure have accelerated in the last four years, during which time investments into electricity infrastructure amounted to 75% of the total investment during the independent period, or 2.5 times more than in the previous 26 years, according to the ministry.   

Uzbekistan has enough power for the meantime, but it is already clear that if the pace of growth goes as predicted it will need to double its generating capacity by the middle of the decade.  

There are several other elements going into the transformation. One of those is the greenification of the power sector. Another is to repurpose gas from using it as a fuel and repurpose it as the feedstock of a burgeoning petrochemical industry.  

In August the energy ministry announced plans to increase its 2030 renewables targets and the EBRD reports that there has been a lot of interest in the proposed projects by international investors.

The original concept note on ensuring electricity supply in Uzbekistan for 2020-2030, published in last year, set out plans to develop power capacity by rebuilding existing power plants, inviting private power developers to take part in power sector development and deepening reforms in the energy sector. It also said that PV and wind power will account for a significant share of generation capacity. 

Among the deals signed so far, in 2019, Uzbekistan picked Masdar Clean Energy of the United Arab Emirates as the winner of its first ever competitively tendered solar power public-private partnership (PPP) to develop a utility-scale solar plant located in Navoi Region.

But the main drive of the programme for the moment is making more use of what Uzbekistan already has.  

“The green trend is very fashionable at the moment but it is a chicken and egg situation: we want to invest in renewables but people question the time and the expense of it, as it is complicated. Let's invest in what we have, they say. There is enough gas,” says Akhmedkhadjaev.  

“The president's policy is to invest in green energy and develop more capacity. Uzbekistan is committed to a net-zero carbon future. Now we are working out the best way to get there,” says Akhmedkhadjaev.   

The main fuel in Uzbekistan is coal, which is still used, but Akhmedkhadjaev says the state has invested heavily into scrubbing and other technologies to reduce emissions while the green generation is built up that will eventually replace much of the coal.  

That also frees up the country’s limited domestic gas production for other value-added uses. The country’s first petrochemical plant was built in 2001 under former president Islam Karimov but the new administration is investing heavily in expanding this profitable business.  

“We are self-sufficient in gas and there is some import and re-export of gas. Plus we have a lot of undiscovered gas and the exploration is ongoing in Sukhand and Karakalpakstan,” says Akhmedkhadjaev. “Mirziyoyev has emphasised that we should focus on adding value and creating more jobs so the gas is used in [the] petrochemical industry.”

Money has been poured into the gas separation plant built upon the crest of a cliff of the long-forgotten Aral Sea, which now produces polypropylene, polyethylene and hessian bags for export around the region and further afield.

“Added value” is the buzzword in Uzbekistan and in each sector part of each reform programme is hunting for chances to move up the value chain. The most obvious example is with cotton production, where the president simply banned the export of raw cotton and forced the local producers to invest in textile production. The same logic is being applied to energy where it is applicable.  

Uzbekistan is currently in talks with Russian petrochemical giant Sibur on a deal to form a joint venture, as the country’s own plant can’t keep up with the demand from just the domestic market. A second plant was launched in 2015 and the third is due to go online in the first quarter of 2022, says Akhmedkhadjaev.  

Exports of petrochemical products is also starting to grow with Uzbekistan neighbours. Exports to Afghanistan grew from nothing to $100mn, until the recent regime change there put business on hold. And exports to Kazakhstan have ballooned from $50mn to over $1bn turnover. Trade with the other ‘Stans is also growing fast, says Akhmedkhadjaev.  

At the same time, to keep up with demand the country has been mulling its first nuclear power station since 2018 that will be built in co-operation with Russia, which supplies the technology and funding. Russia’s nuclear exports are booming and it has brought several new nuclear power stations (NPPs) online in other countries of emerging Europe such as Belarus and Turkey.  

The government’s forecast, as set out in its power sector development concept for 2020 to 2030, is for the current demand of around 68bn kWh to increase to between 110bn kWh and 115bn kWh by the end of the decade. “This increase is because of two factors: the population is growing and will increase from 34mn today to close to 38mn by 2030, and consumption per capita, which is currently below the global average, is also expected to increase,” Bakhrom Umarbekov, project manager on renewables at the energy ministry, told bne IntelliNews in a separate interview.   

Efficient power  

The entire structure of the electricity market is being overhauled and put on a market basis. Uzbekistan is planning to introduce a wholesale electricity market by 2025 that can improve the management of the electricity industry and reduce state ownership.  

In June the energy ministry outlined its plans to create a wholesale electricity market by 2025, which again is intended to improve management and reduce state ownership. Such a market, if competitive, would improve the management of the electricity industry and reduce state ownership, the Uzbek Energy Ministry said on June 15.

The transition will take place in three stages. In the first, state electricity companies will be liberalised and private companies will be allowed to obtain licences to sell electricity. In the second stage, an operator of the electricity distribution system will be created, after which the functions of selling power to consumers will gradually be transferred to suppliers with licences. And in the final stage, the government will launch an intraday electricity trading platform. It will allow surplus or deficit volumes of hourly production and consumption of electricity to be traded online.

While this is going on in the background the ministry has been investing into new high-efficiency power plants. There are already several joint ventures with German engineering company Siemens and Turkish contractors that have already produced successful results.  

“They bringing energy-efficiency equipment. If it works well then we will either modernise our existing power facilities or rebuild them using newer more efficient equipment,” says Akhmedkhadjaev.

One project to construct a high-efficiency power plant in Tashkent has already been completed with Turkish partners and was built on a PPP basis.  

“The installed capacity was the same as the plant it replaced but the energy efficiency is twice [as good] and the plant covers a territory a third of the size,” says Akhmedkhadjaev. “It was an extremely successful project.”  

The plan is to extend this model and find investors to continue building more modern and high-efficiency power stations so that the old inefficient ones can be eventually closed. The first phase is going to continue for the next eight years but the whole programme to modernise all the power stations is set to run until 2050.  

The improving energy-efficiency policy runs through the entire energy reforms programme right down to the individual households, as simply using power more efficiently will be as good as generating more power.  

The state-owned enterprises (SOEs) consume 60% of all Uzbekistan’s energy, which Akhmedkhadjaev says “is not normal.” But he also tells a story of visiting a house in a remote village where they used an open flame from a gas pipeline to heat the house. “She was heating the street, not the house, but they had no money to buy a better system,” recounts Akhmedkhadjaev.  

The government intends to tackle this problem too with investments into improving energy use in communal housing and new developments. A fund has been set up and a TV, Facebook and YouTube campaign run to raise awareness for the programme, which is being supported by the World Bank.  


In the short term the government is investing into upgrading the power network to ensure there is enough power capacity, but in the longer term the goal is privatise the sector and put it on a market basis.  

“Now we are working on the privatisation concept for the energy sector,” says Akhmedkhadjaev. “The last-mile business will be sold off to private owners and in the first phase 25% of the gencos will be sold to private investors. Then any new power generating capacity will be 100% private. It will become a market where private investors meet the demands for supply and demand. It will be a fully market regulated system. It's not easy, but there is no other way.”  

Akhmedkhadjaev says that as Uzbekistan is late to the game it has the advantage of learning from the mistakes of other countries and has been watching their progress carefully.  

“We watch the failures but we are not in a rush,” says Akhmedkhadjaev. “We will proceed step by step and we will have to make people pay for the power they consume, as it is a closed circle.”