Hydropower in Uzbekistan is expected to account for 3.8 GW of developed capacity according to official estimates. For this reason, the country will have to call for international investment and cooperation. AFD has already granted a €55.8 million loan.
Hydropower in Uzbekistan to meet growing electricity demand
Electricity demand to double by 2023
The hydropower revolution in Uzbekistan must primarily meet the energy and electricity demands of the population. This demand is much higher than in developed countries.
Two phenomena are involved. Firstly, Uzbekistan suffers huge energy losses during its production process. At the same time, last November, a cold snap hit the country leading the population to increase its electricity consumption.
Combined, these two phenomena cause a higher demand for electricity, which the government estimates will double by 2023. A new action plan is therefore needed to achieve a more efficient and diversified energy production by 2030.
Focusing electricity supply on hydroelectricity: 3.8 GW by 2030
Approved by the Uzbek executive on May 4, 2020, the country’s new energy strategy is rather ambitious. The goal is to produce a quarter of all electricity from renewable sources (RE) by the end of this decade.
Currently, the share of hydropower is only 15% of the final energy consumption of Uzbekistan. The rest of the domestic electricity production relies on natural gas (about 70%).
The hydroelectric revolution in Uzbekistan consists then, by 2030, to produce 3,8 GW thanks tohydroelectric energy. In general, the country wants to double its installed capacity (from 12 to 29 GW) and its electricity production from about 64 TWh to 120 TWh.
At the same time, Uzbekistan has to address the problem of its huge energy losses, making production efficiency a sensitive issue.
The financial challenge: attracting foreign investment
Financial incapacity of national companies
To optimize the country’s energy mix, for more efficiency and less energy loss, change is needed. Renovating and modernizing existing hydroelectric plants and building new ones are fundamental steps. However, the Uzbek government has stated that the national energy companies do not have enough financial resources.
Construction of hydroelectric dams of the magnitude of these dams would therefore seem to be viable only through international cooperation and foreign investment.
EUR 55.8 million in AFD loans
Public-private partnerships are not new in Uzbekistan. By 2019, the country had already signed a partnership with the French group Total for the construction of a solar power plant. Regarding hydropower, the Uzbek Ministry of Energy has announced an agreement with theFrench Development Agency (AFD) in September 2020.
This EUR 55.8 million loan, allocated over 20 years, offers a solution for leading the hydroelectric revolution. AFD offers the possibility to build, modernize and renovate Uzbekistan’s national infrastructure for hydroelectric production. The construction and renovation sites are located primarily in the Tashkent and Andijan regions.
Prioritize the construction of small infrastructure
Of the funds allocated to the Uzbek energy sector, EUR 46.5 million will be used for small hydroelectric plants near Tashkent. Small factories will also be built in the south, near the Ferghana Canal. The Uzbek media Gazeta.uz estimates that these infrastructures should be finished in 2023.
The total cost of these constructions amounts to EUR 52.5 million, with AFD covering 88% of the total cost. This loan agreement allows for the purchase and maintenance of modern technologies needed for hydroelectric production. This would never have been possible with Uzbekistan’s domestic budget resources alone.
Renovate and modernize certain existing infrastructures
The remaining EUR 9.3 million will be used for the Hydroelectric Power Plant Safety project. In other words, 27% of the loan is earmarked for the renovation of the Charvak plant. Modernization is just as important a process as building new plants. Rethinking existing hydroelectric plants will reduce fossil fuel exports and unnecessary energy expenditures.
These foreign investments, in short, allow Uzbekistan to liberalize its energy market. This new energy strategy of the Uzbek executive puts hydroelectricity in the spotlight. In the future, consumers will not only benefit from cheap electricity, but also from a more environmentally friendly energy balance.
Of course, the challenges of meeting the government’s ambitious goals are not simple. However, with international financial support, the country will surely succeed in diversifying its energy mix.