Renewable energy is becoming an increasingly important facet of the economy under the Government of Uzbekistan (GOU). In 2019, the GOU set out to undertake an ambitious initiative titled “The Strategy for the Transition to a Green Economy for 2019-2030” which aims to reduce greenhouse gas emissions and increase energy efficiency. At the C5+1 (Central Asian nations plus the United States) meeting in August 2021, Uzbekistan committed to reaching a renewable energy target of 25 percent of its energy mix by 2030. To achieve that ambitious goal, the GOU is seeking partners in wind, solar, and hydroelectric power generation.
On January 25, 2022, millions of people in Uzbekistan and two other Central Asian countries were left without electricity due to a blackout that caused disruptions to transportation and utilities including railways, airports, telecommunications, water supplies, gas distribution, and heating. The incident demonstrated the vulnerability of the Central Asian regional energy system, which has moved away from the centralized system built in the Soviet era, but remains without regional interstate coordination mechanisms that meet the technological maintenance and modernization needs of the grid.
Uzbekistan’s aging and unreliable infrastructure, energy systems, and equipment are in dire need of upgrades as electricity transmission losses are estimated at 20 percent of net generation. Power generation capacity remains much lower than the actual domestic demand, and as a result, modernization efforts are a top priority for the GOU. Combined with renewable technologies, grid modernization projects represent an attractive entrée into the market for U.S. companies.
Current Market Status & Trends
Extensive Renewable Resources
Uzbekistan is just beginning to explore its renewable energy potential. Hydro, nuclear, and solar power are recognized as sectors with the greatest potential.
Hydro: Currently only 27 percent of Uzbekistan’s hydropower potential is being utilized. To diversify Uzbekistan’s energy mix and to reduce the nation’s overreliance on natural gas, the GOU announced 62 hydropower projects to be completed by 2030. Once active, these projects will represent 13 percent of Uzbekistan’s total energy mix.
Nuclear: Uzbekistan, a global leader in uranium mining, is planning to use a portion of its internal production for domestic consumption. Russia’s Rosatom and the GOU plan to complete the first unit of a four-unit nuclear power plant (NPP) facility. Though no timeline for completion has been announced, the NPP project is currently undergoing environmental impact review and afterward will be presented for public comment. The industry remains a major opportunity for U.S. companies looking to enter the market.
Solar: With more than 320 sunny days each year and average summer temperatures that climb to nearly 100 degrees Fahrenheit, the GOU has chosen to emphasize solar power generation, as planned photovoltaic (PV) capacity will increase from 5GW to 7GW. The International Finance Corporation (IFC) estimates that power generation upgrades will cost $14.7 billion. In Uzbekistan, public-private partnership (PPP) frameworks are fre-quently used investment strategies designed to reduce risk, often through multilateral development bank in-volvement.
Wind: Uzbekistan has set a goal of installing 5 GW of wind farm power by 2030. Many experts agree the target is feasible and cite wind energy development as a “necessity” due to geopolitics in the region that stem from competition surrounding the sharing of water resources with neighboring countries. Recent International Energy Agency (IEA) reports indicate that the country has more wind energy resources than previously thought.
Renewable Energy Expansion
According to UN forecasts, Uzbekistan’s population will increase by 3 million people by 2030, and with it, the country’s demand for increased energy supplies. According to the GOU’s Ministry of Energy calculations, if current consumption trends continue, the energy deficit may amount to 65.4 percent of total demand by 2030. In other words, with 6-7 percent annual growth in electricity consumption, production will have to increase by 70-75 percent from the current 71 billion kWh (2021) to 124 billion kWh (2030). To meet these needs, the GOU is offering incentives for renewable energy investments, while also considering nuclear energy generation options.
Energy Grid Modernization
Since 2016, Uzbekistan has attracted an increased amount of foreign investment, and with a hope of improving efficiency rates, much of those funds are directed toward rehabilitating and upgrading conventional power plants. One issue prohibiting Uzbekistan from integrating renewable energy systems is the cost of those upgrades. Oleg Ryaskov, Deputy Chief of Party for USAID’s Central Asia Regional Electricity Market (CAREM) project, said, “The cost in Uzbekistan is high because it’s not just about adding flexible energy generation that’s absolutely necessary, but you need to overhaul the entire system and grid, change dispatch disciplines, and change dispatch intervals, among other necessary changes.”
Currently, there are only five of the approximately fifteen needed dispatchers in Uzbekistan to remotely monitor the energy grid. These dispatchers are essential because, due to fluctuations in renewable energy levels, real-time constant digital adjustments are needed to disperse energy at any given time. Ideally, changes would be made every five minutes, but the current system only allows for manual adjustments every hour by phone on a fixed schedule. USAID is providing technical assistance and training.
Uzbekenergo, the state owned power utility company, suffers from poor financial management and a reliance on limited sovereign financing. In 2019, the GOU created the Ministry of Energy to increase private investment, split Uzbekenergo into three companies to decrease the impact the organization’s monopoly had on the market, and enacted the Law on Public-Private Partnership which will reduce government expenditures for renewable energy projects. By 2025, the GOU hopes to reduce the number of its State-Owned Enterprises by 75%.
The following international companies are already working in renewable energy in Uzbekistan:
- ACWA Power (Saudi Arabia)
- Engie (France)
- Fotowatio Renewable Ventures (Spain)
- Juru Energy (U.K.)
- Masdar Clean Energy (UAE)
- SkyPower (Canada)
- Stone City Energy (Netherlands)
- Synergy Consulting (India)
- TOTAL Eren (France)
- Voltalia (France)
Multilateral Development Bank Involvement
Investing nearly $690 million in 22 projects, Uzbekistan became the largest recipient of European Bank for Reconstruction and Development (EBRD) funds in 2021 for the second straight year. The EBRD now has three regional offices in country.
In 2020, the Asian Development Bank (ADB) provided Uzbekistan with its first public-private partnership project in renewable energy with a loan of $17.5 million for a 100-megawatt solar power plant. The bank plans to implement three projects worth $524 million in 2022, and has expressed a commitment to develop Uzbekistan’s solar and wind energy sources.
Best Prospects for U.S. Exporters
The Government of Uzbekistan seeks foreign suppliers of new technology, technical know-how, and expertise and has released renewable energy tenders operated by the PPP Development Agency under the Ministry of Finance of Uzbekistan.
- Decommissioning Activities
- Smart Grid and Grid Stability Solutions
- Maintenance and Repair Services, including Artificial Intelligence (AI) Diagnostics
- Power Stations
- Rehabilitation and Renovation
- Electro-Mechanical Equipment
- Small Modular Reactors (SMR)
- Photovoltaic Panels
- Power Inverters
- Solar Cells
- Solar Panels
- Wind turbines and related equipment
Uzbekistan’s Law on the Use of Renewable Energy Sources came into effect in May of 2019. The law regulates the use of renewable energy sources and its major provisions cover incentives, tariffs and other state support mechanisms, and grid connections.
While the law does not specify the types of “incentives and preferences” that may be granted, support and incentives for energy producers, negotiated directly with the government, can include exemptions from customs duties, property and land taxes, liquidity support mechanisms, and a state guarantee to connect equipment to the national grid system. Tariffs are determined on the basis of a competitive bidding process.
Market Entry Strategies
Due diligence conducted on potential partners is advisable to ensure buyer solvency. Additionally, the government and the public sector are major consumers, and therefore building face-to-face relationships with decision-makers in key ministries to build trust is vital for success in the market. Uzbekistan has a complex set of import procedures and seeking the counsel of a local partner to guide your transaction is advisable. For additional guidance and resources to use when entering the market, visit our Uzbekistan Country Page or the Uzbekistan Country Commercial Guide.
While opportunity exists, exporters should keep in mind that even with advances in the rule of law, the sanctity of contracts, and trade legislation, issues remain with a lack of transparency when dealing with SOEs. For more details, visit our Country Commercial Guide and for assistance with foreign government procurements, please contact ITA’s Advocacy Center.