A Place for Uzbek Renewables Amid Sector Restructuring
Government plans to diversify the energy sector are aggressive. Whether these plans succeed or fail is likely to depend on how committed the government remains to opening up and attracting international investment and buy-in.
By Jordan Bekenstein, Analyst
Uzbekistan has historically been a resource base for cotton and hydrocarbons. Since Shavkat Mirziyoyev became president in 2016 and began introducing market reforms such as lifting foreign exchange restrictions and cutting taxes, the global outlook for the Uzbek economy has improved rapidly. In the realm of energy, Mirziyoyev created a Ministry of Energy in 2019 and announced plans to not only create an energy market, but to diversify energy sources, by adding solar, wind, and nuclear capacity.
This article uses media sentiment to explore what Uzbekistan’s adoption of renewable energy means for its place in Central Asia. It also compares how different energy sources are perceived in Uzbekistan.
A System Rethink
Prior to 2018, there were no plans for any sort of clean energy in Uzbekistan. As economic growth and electricity demand skyrocketed, however, the Uzbek government announced plans to quickly add capacity. These plans emphasized developing clean energy sources, especially solar and nuclear energy. Although Uzbekistan is rich in hydrocarbons, diversifying sources of energy is a way to modernize and liberalize the energy sector, while also freeing up hydrocarbons for other purposes, such as increasing exports or processing.
Although Uzbekistan is rich in hydrocarbons, diversifying sources of energy is a way to modernize and liberalize the energy sector, while also freeing up hydrocarbons for other purposes, such as increasing exports or processing.
While gas and coal currently make up about 85% of Uzbekistan’s energy mix, the Ministry of Energy plans to expand the share of renewable sources in Uzbekistan’s overall power generation mix to 25% by 2030, including 5000MW of solar, 1600 MW of hydro, and 1700 MW of wind energy. Although Uzbekistan has had a 10 MW reactor for nuclear research since 1980, it was only in 2018 that the government laid out a plan to develop nuclear energy production capacity to cover 15% of Uzbekistan’s electricity production by 2030. Notably, the plan calls for renewables to be 26% of new electricity generation brought online in 2022, but this rate of deployment is expected to double for the period 2023–2030, reaching 52% of new generation.
Uzbekistan has already taken some steps to accomplish this transition and buildout. In 2018, plans were announced for 2 x 1200 MW nuclear reactors to come online in 2028. In 2019 the plans were doubled, for a total of 4800 MW. In addition, Uzbekistan has already announced two solar projects by Helios energy, a Thai company, for 40 MW and 110 MW, with assistance from the World Bank and International Finance Corporation (IFC). These projects are set to become operational by 2023. Meanwhile, already been fielded for further projects, with help from IFC and the Asian Development Bank (ADB).
This aggressive buildout is a pipe dream without two key factors — political stability and foreign investment. Nuclear reactors take more than a decade to come online and often run behind schedule and over budggeth. During that time, shifts in the domestic political landscape can lead to conflict, delay, or cancelation, as has been seen in Bulgaria. At the same time, building out power generation infrastructure is expensive, and transitioning to a real market economy in the energy sector can bring economic pain in the short term, creating political costs. Large sums of foreign investment will be needed to keep the plan on pace while continuing Uzbekistan’s opening up.
Uzbek Sentiment Toward Renewables is Stratified, But Largely Positive
Among Uzbekistan’s media sector as well as other actors that are part of the public policy process, renewable energy reporting is considerably more positive than what is typical for other issues, but this is not uniform across sources.
Sentiment towards clean energy by the Institute for Strategic and Regional Studies (ISRS), a state-run think tank, is only slightly more positive than what is typical for the organization. This could be because the language typically used by a think tank regarding potential outcomes and future cooperation is standardized. In contrast, Podrobno, a privately-owned digital newspaper, reports 70% more positively about clean energy than its baseline sentiment. In recent years in particular, Podrobno has also reported considerably more about clean energy with regard to international, especially Chinese, cooperation and assistance to Uzbekistan. Apart from the media and research institutions, the Ministry of Foreign Affairs also reports very positively about clean energy, as nuclear energy in particular offers opportunities for international engagement and exchanges. The greatest shift in sentiment came in and after 2019, when the Ministry of Energy was created. While some sources’ perceptions immediately spiked in 2019, the rest ticked up in 2020 as more projects were announced.
The greatest shift in sentiment came in and after 2019, when the Ministry of Energy was created. While some sources’ perceptions immediately spiked in 2019, the rest ticked up in 2020 as more projects were announced.
Uzbekistan is Most Optimistic about Nuclear Energy, Least Optimistic about Solar Energy
An interesting comparison is between the different sources of energy. While sentiment towards nuclear, solar, and wind energy largely tracks along the same pattern, sentiment toward solar energy has consistently been lower than other energy sources. A few possible explanations for this are that the initial projects that have been announced are small, or that much of the manufacturing would take place outside Uzbekistan due to the lack of solar panel manufacturing experience in the country, leading to less of a positive economic impact. In 2020, there was a clear divergence — positive sentiment towards wind and solar energy dipped along with overall positive sentiment toward clean energy, whereas sentiment towards nuclear energy saw a boost. It is possible that reporting on wind and solar energy in 2020, while still positive, became less optimistic about the opportunities because there was considerably more international activity before the 2020 coronavirus pandemic. However, the uptick in positive sentiment toward nuclear energy could be because Uzbekistan’s international nuclear cooperation has made significant progress even during the pandemic. In fact, Uzbekistan’s Minister of Foreign Affairs met with IAEA representatives on July 20, 2020 to discuss the development of the country’s nuclear infrastructure. Moreover, nuclear projects have a longer, more strategic time-scale that is less vulnerable to short-term market disruptions that would affect smaller, more immediate projects. Wind energy saw less of a decline in 2020, as a deal was struck for construction of a wind farm by UAE’s Masdar.
The most telling information comes when looking at each source individually. Podrobno, Review, and Uzdaily, three leading privately-owned news sources, report less positively than ISRS, a state-run think tank, and the Ministry of Foreign Affairs. ISRS and the Ministry of Foreign Affairs, as Uzbek government organizations, likely see alternative sources of energy through a political and economic lens, and are thus more positive in their language and optimistic about the projects and plans coming to fruition.
Uzbek government organizations likely see alternative sources of energy through a political and economic lens, and are thus more positive in their language and optimistic about the projects and plans coming to fruition.
Implications
Uzbekistan’s engagement with the ADB and IFC to source deals for renewable energy indicates a greater international involvement and opening up. The nuclear program in particular opens an interesting set of geopolitical complications, since working with Rosatom deepens Uzbekistan’s relationship with Russia and other CIS countries, but the nuclear program also creates possibilities for diversifying Uzbekistan’s relations, such as with India. The sector restructuring also has regional implications. Historically, hydroelectric power from Kyrgyzstan and Tajikistan has been an integral part of the Soviet regional grid. Since the breakup of the Soviet Union and the regional grid, however, there have been tensions over the building of dams. Diversification of the Uzbek energy sector could lead to greater energy independence.
Such energy independence presents opportunities for Uzbekistan to establish itself as the region’s energy leader. Increasing the use of renewable energy in the domestic energy mix might allow for increased hydrocarbon exports, which would boost government revenues, though there are also plans to use the freed up gas in petrochemicals manufacturing. Uzbekistan’s power-hungry growth presents opportunities for further reintegration in the region, as a rising tide lifts all boats, and greater serious engagement with a diverse array of actors will hopefully draw wealth and investment to Central Asia more broadly. ‘Hopefully’ is the key word here, as Uzbekistan’s renewable energy plan aims high and is not lacking for ambition.
It is clear that government and expert sources are more bullish on Uzbekistan’s energy sector, but private media haven’t bought on to the same degree. The complexity of the projects and range of timelines shows that the diversification initiative can’t be done by Uzbekistan alone. As the coronavirus pandemic makes it harder to finance projects, the government is going to have to continue to show commitment to these projects and create a favorable business environment to keep attracting tenders. As projects ramp up and come online, will naysayers be convinced, or is the plan for the next decade too rosy?
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ABOUT THE AUTHOR
Jordan Bekenstein is an analyst at Hillhouse Consulting Group. A graduate student studying Eurasian, Russian, and East European Affairs at Georgetown University, he has particular interest in Sino-Russian cooperation and competition, as well as political legitimacy in the post-Soviet space. He speaks Russian and Mandarin and previously spent two years teaching English in Harbin, China.
ABOUT HILLHOUSE
Hillhouse Consulting Group specializes in data driven analysis on issues related to sustainable development, infrastructure, and energy in frontier markets, helping organizations understand today’s challenges and opportunities. We bring world-class expertise to regional challenges by combining the best of international academic and research practices with a rigorous and informed local perspective, delivering the best of both words. To learn more about retaining our team for custom analysis and reports, please click here.
