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Southern Energy Watch

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By eo reporter HAN Xiaotong

Editor Jiang Li

Audit Feng Jie

Like many nations, Uzbekistan, a doubly landlocked country in Central Asia, is seeking a low-carbon energy transition. Uzbekistan’s energy sector, once dominated by its “blue gold” natural gas, is now striving to diversify into solar, wind, nuclear, and hydro energy sources. To achieve this goal, Uzbekistan is promoting market reforms in its energy sector, with the aim of creating a more attractive investment climate.

Uzbekistan's power grid is interconnected with other Central Asian countries. During the transformation, there are conditions for "mutual assistance and multiple energy complementation" with neighboring countries. The Regional Coordination and Dispatch Center (CDC Energia) of the Central Asian Power System (CAPS) is located in Uzbekistan.

In recent years, Chinese companies have been involved in the construction of new energy projects in Uzbekistan, and the process of energy low-carbon transformation in Uzbekistan is also the process of comprehensive acceleration of cooperation between China and Uzbekistan in the field of new energy. At the beginning of 2024, with the visit of President Mirziyoyev of Uzbekistan to China, another batch of China-Uzbekistan energy cooperation strategic framework agreements were signed.

From Natural Gas to New Energy

Uzbekistan is a "doubly landlocked" country located in the heart of Central Asia, with no access to the sea from any of its five neighboring countries. However, it is known as the "Four Golds" country due to its abundant resources of gold, oil, natural gas, and cotton.

Uzbekistan, the "Blue Gold Country", ranks 11th in the world for natural gas production and 5th in uranium production. The country has proven natural gas reserves of 3.4 trillion cubic meters and oil reserves of 100 million tons, in addition to coal reserves of 1.9 billion tons and uranium reserves of 185,800 tons.

Uzbekistan’s energy supply comes almost entirely from fossil fuels. In 2020, natural gas accounted for 83% of the country’s total energy supply, followed by oil (9%) and coal (6%). Renewables made up less than 1% and were almost entirely hydropower.

In October 2019, Uzbekistan issued the "Strategy for Uzbekistan's Transition to a Green Economy for 2019-2030", proposing to strengthen the construction of renewable energy power generation projects such as photovoltaic, wind, hydro, and biogas, and to increase the share of renewable energy power generation to over 25% by 2030.

Uzbekistan has huge photovoltaic development potential, which is several times its primary energy reserves, and its valuation is between 177 Mtoe (million tons of oil equivalent) and 265 Mtoe. Uzbekistan has abundant sunshine and large areas of land suitable for building solar power plants, especially in the southern Bukhara, Samarkand and Karshi regions.

In 2021, Uzbekistan outlined targets for solar and wind power generation in its updated Nationally Determined Contribution (NDC) under the Paris Agreement, aiming for 8 GW by 2026 and 12 GW by 2030, including 7 GW of solar and 5 GW of wind.

Compared with photovoltaics, the wind energy potential of Uzbekistan has not been fully demonstrated. A report released by the International Energy Agency (IEA) roughly estimates its technical potential as 360 Mtoe. Uzbekistan's best wind energy resources are concentrated in the western region of the country, especially in underdeveloped areas such as Karakalpakstan, west and south of the arid Aral Sea.

However, only 4 MW of solar PV capacity had been installed in Uzbekistan by the end of 2020. Currently, the country is attracting foreign investors in its renewable energy sector through tenders, and preliminary investment agreements for 4 GW of solar and wind projects had been signed by June 2022. The IEA suggests that the Uzbek government could further improve the investment climate by undertaking further energy sector reforms, such as establishing an independent energy regulator and simplifying regulations.

The International Energy Agency (IEA) report notes that the reform of the electricity market is a priority area for the energy sector in Uzbekistan, with goals including phasing out old power plants and increasing the total installed capacity to 29.2 gigawatts by 2030, reducing natural gas-fired generation, and privatizing most power plants except hydropower and nuclear power.

Due to its vast uranium reserves, Uzbekistan is also planning to develop nuclear energy. On September 7, 2018, Uzbekistan and the Russian government signed an agreement on cooperation in the construction of a nuclear power plant in Uzbekistan, which will have an installed capacity of 2.4 gigawatts.

In addition, In accordance with the decree of the President of the Republic of Uzbekistan No. PP-44 “On measures for the further development of hydropower” dated December 10, 2021, by 2030. plans to increase the installed capacity of hydropower to 3416 MW, due to the gradual modernization of existing hydroelectric power plants and new construction.

From Integrated to Marketized

Prior to 2019, the National Energy Company (Uzbekenergo) of Uzbekistan was an integrated enterprise that was responsible for all links of the country's electricity generation, transmission, distribution, grid dispatching and retailing. In 2019, in accordance with a resolution of the Government of Uzbekistan, the company was split into three separate companies responsible for electricity generation, transmission and distribution.

Today, the country's power generation business is handled by thermal power plants Thermal Power Plants JSC and Uzbekhydroenergo, which sell electricity to a single buyer, transmission system operator, Uzbekistan JSC, which in turn sells electricity to the Regional Grid (JSC), which supplies electricity to all users, including large industrial users, at fixed rates.

According to the IEA, the Uzbek government is gradually increasing electricity prices. However, compared with neighboring countries, they remain low and are not yet sufficient to cover the operating and maintenance costs of its power grid or to finance new investments.

The Ministry of Energy of Uzbekistan emphasized that the financial situation of power companies is deteriorating because electricity prices are not based on market pricing. This is particularly evident in the State Grid of Uzbekistan (JSC), which lost 2.1 trillion Uzbekistan sums (approximately US$200 million) in 2021.

In 2020, 15.5% of transmission and distribution network line loss is generated in Uzbekistan’s power grid, with a 2.7% transmission loss and a 12.8% distribution loss. This is because most of its grid components have been in service for over 30 years. The ageing extent of the grid is 66% in the transmission network, 62% in the distribution network, and over 50% in transformer substations. The aforementioned electricity market reform targets include::Reduce the transmission grid line loss rate to 2.35% and the distribution grid line loss rate to 6.5%.

In Jan. 2022, China's Ministry of Commerce website quoted information from Uzbekistan's Ministry of Energy website, indicating that Uzbek President Mirziyoyev approved the "New Uzbekistan Development Strategy (2022-2026)", which explicitly promotes liberalization reforms in the energy sector, and introduces market competition mechanisms. Specific measures include improving relevant legislation, drafting the "Market Supervision Law" bill, regulating the operating behavior of electricity market participants, and revising the "Electricity Law", "Natural Gas Law" and relevant regulations on grid construction; carrying out institutional reforms, establishing regulatory agencies for the natural gas and electricity markets and a national dispatching center; promoting the privatization reform of local power grid companies, and attracting private operators, etc.

Regional Power Interconnection

Uzbekistan's power grid is interconnected with other Central Asian countries and it is connected to Russia via Kazakhstan through 220 kV and 500 kV transmission lines and to Afghanistan via a 220 kV transmission line.

As of 2022, Uzbekistan's cross-border electricity interchange capacity is 4,150 MW. Specifically, with Kazakhstan is 1,000 MW, with Tajikistan is 850 MW, with Afghanistan is 450 MW, with Turkmenistan is 850 MW, with Kyrgyzstan is 1,000 MW.

Uzbekistan typically exports electricity generated from natural gas during winter and imports hydropower during summer. Before 2019, Uzbekistan maintained a relatively balanced cross-border electricity exchange, after which imports exceeded exports. In 2021, Uzbekistan imported 6.2TWh of electricity from Tajikistan and Kyrgyzstan and exported 2.15TWh of electricity to Afghanistan.

In August 2020, governments of Uzbekistan and Afghanistan inked a decade-long deal on electricity export, including construction of a 500 kV power transmission line that will help to increase Uzbekistan’s electricity export potential.

In the past, the five Central Asian states had a unified energy network, in which the water and energy resources of the five countries were managed as an "integrated system," with the control center located in Uzbekistan. In the winter, Kyrgyzstan and Tajikistan would store water in their reservoirs and receive electricity, coal or natural gas from Kazakhstan, Turkmenistan, and Uzbekistan in exchange. In the summer, Kyrgyzstan and Tajikistan would provide hydroelectric power to Uzbekistan and Kazakhstan downstream. Since then, this system has gradually disintegrated and is no longer operated in a centralized manner.

Today, the power systems of Kazakhstan, Kyrgyzstan, Uzbekistan, and Tajikistan are connected to the Central Asian Power System (CAPS) via 220 kV and 500 kV lines, which is in turn connected to the Unified Energy System (UES) of Russia via Kazakhstan.

CAPS was established in 2007 and is coordinated and controlled by the Regional Coordination and Dispatch Center (CDC Energia) in Tashkent, the capital of Uzbekistan. CDC Energia is an international non-commercial organization under the jurisdiction of Uzbekistan. It operates transnational transmission lines to ensure the reliable operation of CAPS; coordinates the planning and supervision of international power flows, regional emergency automation and relay protection systems; and is responsible for cross-system frequency control and power transit service management.

In January 2024, the Department of Commerce website quoted the Central Asia Times as reporting that the U.S. Agency for International Development (USAID) handed over $1.4 million worth of modern energy sector management equipment and software to CDC Energia, a technology that will allow CDC Energia dispatchers to display information about the region's energy situation. Delivery of the above equipment was achieved through the U.S. Agency for International Development's flagship regional energy project, Central Asia Power.

Chinese firms stake out new energy

The past year has been a year of comprehensive acceleration of Sino-Ukrainian cooperation in new energy.

Uzbekistan President Mirziyoyev has visited China twice and attended the First China-Central Asia Summit and the Third Belt and Road Forum for International Cooperation. On October 17, 2023, the Chinese government authorized representative, Zhang Jianhua, Director of the National Energy Administration, and the Uzbek government authorized representative, Jurabek Mirzamakhmudov, Minister of Energy, jointly signed the "Agreement between the Government of the People's Republic of China and the Government of the Republic of Uzbekistan on Cooperation in the Field of Renewable Energy" in Beijing. The agreement stipulates that the two sides will further deepen and expand cooperation in the fields of renewable energy power generation, supporting power grid construction and renovation, technical equipment, and scientific and technological innovation.

With the construction of photovoltaic power generation projects and the export of equipment as the foundation, the scope of energy cooperation between China and Ukraine is expanding continuously, and the modes of cooperation are becoming increasingly diverse.

On February 20, 2023, the Minister of Energy of Uzbekistan, Akhmmedjan Mukhitdinov, led a delegation to China to sign cooperation agreements with Power China Overseas Engineering Co., Ltd. and Huaneng New Energy Co., Ltd. for the construction of 2GW photovoltaic power stations in the provinces of Jizzakh and Tashkent.

In terms of wind power, in December 2023, the first wind turbine of the Zarafshan project in Uzbekistan, equipped with a wind turbine generator from CRRC Corporation Limited, was successfully connected to the grid and began generating electricity. This unit is also the first megawatt-class wind turbine connected to the grid in Uzbekistan.

In terms of hydrogen energy, in December 2023, the groundbreaking ceremony was held for the first green hydrogen project in Uzbekistan, in which POWERCHINA (hereinafter referred to as "POWERCHINA") served as the general contractor. The project includes the construction of a new green hydrogen production plant with a capacity of 4,000 cubic meters/hour and a 52-megawatt onshore wind farm. The Tashkent Green Hydrogen Project is the first green hydrogen project in Central Asia to enter the formal implementation phase, and it is also the first green hydrogen project implemented by POWERCHINA overseas.

Chinese President Xi Jinping held talks with visiting Uzbek President Shavkat Mirziyoyev at the Great Hall of the People on Tuesday afternoon, January 24, 2024, according to Xinhua News Agency. The two heads of state signed and issued the Joint Statement of the People's Republic of China and the Republic of Uzbekistan on Comprehensive Strategic Partnership in the New Era (hereinafter referred to as the Joint Statement).

The Joint Statement points out that "it is very necessary to expand cooperation in the areas of traditional energy, renewable energy, green energy, and the transformation of high-tech achievements", and that "Ukraine welcomes Chinese companies to participate in solar, wind and hydro power projects, hopes to introduce Chinese technology and investment to implement renewable energy projects, realize the localization of materials and equipment required for the development of green energy, including solar panels, silicon wafers and batteries, and jointly cultivate professional talents".

On January 22, 2024, China Datang Corporation signed five agreements, including a strategic cooperation framework agreement, with departments and enterprises of the Ministry of Energy of Uzbekistan in Beijing. The next day, China National Petroleum Corporation signed a strategic framework agreement on expanding energy cooperation with the Ministry of Energy of Uzbekistan.

On January 25, 2024, Mr. Meng Zhenping, Chairman of China Southern Power Grid Co., Ltd. met with President Mirziyoyev of Uzbekistan at the request of the latter in Shenzhen during the state visit to China. At a time when China and Uzbekistan decided to develop a comprehensive strategic partnership at all times in the new era, the two sides exchanged views on strengthening cooperation in such fields as new energy development and utilization and power system construction.

In recent years, China Southern Power Grid and Uzbekistan Energy System have strengthened their power exchange and cooperation. During the 3rd “Belt and Road” International Cooperation Summit Forum held in 2023, the Ministry of Energy of Uzbekistan signed a Comprehensive Power Cooperation Memorandum of Understanding with Southern Power Grid International. In accordance with the memorandum, both parties will adhere to the principle of mutual benefit and win-win results and promote cooperation in the areas of high-voltage direct current transmission, pumped storage, and talent training.

references:

[1]商务部国际贸易经济合作研究院. 《对外投资合作国别（地区）指南乌兹别克斯坦（2022年版）》[G]. 北京：2023 年 3 月. https://www.mofcom.gov.cn/dl/gbdqzn/upload/wuzibieke.pdf.

[2]IEA (2020), Uzbekistan energy profile, IEA, Paris https://www.iea.org/reports/uzbekistan-energy-profile, License: CC BY 4.0

[3]IEA (2022), Uzbekistan 2022, IEA, Paris https://www.iea.org/reports/uzbekistan-2022, License: CC BY 4.0