Despite being energy self-sufficient thanks to its gas sector, Uzbekistan's ageing infrastructure struggles to meet growing domestic demand. Losses, overuse and financing remain problematic. Wide-ranging reforms focused on improving and diversification the energy sector are being introduced and the government has adopted the Strategy of Actions 2017-2021, which prioritizes improving energy efficiency and increasing generating capacity and use of renewables
The recent announcement of a $1.2 billion deal between Uzbekistan’s Ministry of Energy and a private Dutch-registered company for the construction of a Thermal Power Plant (TPP) in the Surkhandarya Region in South-East Uzbekistan, is significant in many ways.
A private Dutch company will be responsible for designing, financing, building, commissioning, operating and managing the 1,560 MW power plant for a period of 25 years and employ the latest technologies manufactured by Siemens Energy.
This deal stands is an important milestone for the foreign investment community and living proof of the economic opening in Uzbekistan and the resulting stable and reliable investment climate, with energy as one of the most attractive sectors.
Uzbekistan is the largest electricity producer in Central Asia – with total installed capacity exceeding 12 GW – and energy consumption is expected to double in the next decade, requiring $26 billion in investments and an additional 17 GW of generation capacity to meet this goal.
However, the electricity generation infrastructure is ageing and inefficient and almost exclusively based on natural gas. The ageing power grid results in high transmission and distribution losses. Uzbekistan is one of the most energy-intensive economies, as measured by energy intensity per unit of GDP. In 2019, the Uzbek government furthermore decided on the unbundling of Uzbekenergo, the state-owned power utility providing electricity for Uzbekistan with a legally endowed monopoly in charge of electricity generation, transmission, and distribution.
Uzbekenergo had struggled to meet the fast-growing power demands and in 2017 made losses worth USD 840 million (absorbed by the government). In the framework of the restructuring of the energy sector, in 2019 the Ministry of Energy was formed to “develop and implement a single state policy in the Oil & Gas and Power industry aimed to ensure the country’s energy security”.
The establishment of an independent energy regulator (in charge of electricity and natural gas) is also expected in the near future, which will be subordinate to the President and the Parliament. The Uzbek Ministry of Energy signed a memorandum of understanding (MoU) with Siemens Energy, agreeing a roadmap for future joint projects between the two entities.