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National market structure

The Regional Electric Networks JSC was established in accordance with Presidential Decree No. PP-4249 of 27 March 2019 on the Strategy of Further Development and Reform of the Electric Power Industry of the Republic of Uzbekistan, its main functions being to manage the enterprises of the territorial electricity networks and to distribute and sell electricity to end users.

Regional Electric Networks encompasses 16 enterprises, including 14 within territorial (regional) power networks, which operate 0.4/6/10/35/110‑kV power grids and oversee new construction and reconstruction as well as capital and routine repairs within their developments.

Through these 14 regional power network enterprises and 209 district and city power supply companies, electricity is transferred to 1 623 substations with voltages of 110-35 kV, then to 79 122 transformer points and through 252 600 km of power transmission lines to supply domestic and legal consumers.

Regional Electric Networks currently operates the following substations:

  • 652 110‑kV units with a total transformer capacity of 14 895.6 megavolts (MV) and 15 267.5 km of 110‑kV lines
  • 971 35‑kV units with a total transformer capacity of 6 142.5 MV and 13 374.7 km of 35‑kV lines
  • 223 987 km of 0.4/6/10‑kV lines and 79 122 transformer points.

In terms of electricity consumers, Uzbekistan registers 303 900 legal entities and 6.6 million individuals (https://www.het.uz/ru/pages/view/general_info).

Heat supply

Thermal energy is generated by the Thermal Power Plants JSC’s TPPs and boilers (more than 72% of all thermal energy is generated at boiler houses). The main fuel for co‑generation plants and boiler houses is natural gas. In 2019, 126 petajoules (PJ) of heat were supplied to consumers. The population at large used more than half of the heat energy consumed, about 35% was consumed by industrial enterprises, and the remaining 14% went to public and administrative buildings.

Uzbekistan’s heating networks have a total length of 4 965 km, 65% of which is in Tashkent and the surrounding region (54.5% in Tashkent alone).

Heat and hot water are supplied mainly by boilers owned by local and regional municipalities. Boilers account for 72% of heat energy production, and the rest is supplied by the Fergana, Mubarek, Tashkent, Navoi and Angren TPPs of the Thermal Power Plants JSC.

Some of Uzbekistan’s boiler houses and heat supply networks are outdated and worn out, as this domain has never attracted foreign investment. As no technological modernisation has been carried out for years, the industry's expenditures on energy resources take up 85% of its revenues, and losses reach 35-40%. The excessive consumption of energy resources and consumer non-payment of bills leads to imbalances in accounts payable and accounts receivable.

The sector needs radical reformation, including renovation of existing capacity and improved management. For the qualitative organisation of heat supply, it is necessary to modernise the sector’s enterprises, especially by adopting the widespread use of energy-saving and multipurpose technologies as has been done in European countries.

These innovations include a closed-loop heat supply system based on the principle of circulation and heat reuse. For example, switching to a closed system in Tashkent city would prevent the loss of 3 million Gcal of heat (worth UZS 300 billion), saving 320 mcm of natural gas (UZS 160 billion) and 85 GW of electricity (UZS 25 billion).

It is necessary to restore district heating to about 5 000 homes in 12 cities and transfer them to a closed system. Thus, in the cities of Bukhara and Chirchik such networks would have to be commissioned in 2020.

To modernise and reconstruct the heating system, USD 150 million in credit from the European Bank for Reconstruction and Development (EBRD) and USD 780 million from the Japan International Cooperation Agency are being raised to introduce new technologies into the heating supply systems of Bukhara, Fergana, Kuvasai, Urgench and Nukus. USD 55 million from the Asian Infrastructure Investment Bank will be used to modernise the Angren TPP.

Steps are being taken to create a competitive environment through the widespread introduction of market mechanisms, which requires, above all, tariff liberalisation. Measures have been identified to make investment more appealing and to attract enterprises to Tashkent city’s heat supply system on the basis of PPPs.

Uzbekistan also plans to introduce automated systems to record heat use in an effort to eliminate losses and reduce excessive consumption.

There are almost 6 million individual houses in 119 cities and more than 11 000 villages in Uzbekistan. The Ministry of Housing and Communal Services needs to ensure that all citizens (not only those living in apartment buildings) have access to electricity and heat, and must also develop a unified state policy in this area (https://president.uz/ru/2905).

Uzbekistan’s Programme for the Development of the Heat Supply System for the Period 2018-2022 was adopted to consistently implement measures to develop and modernise the heat supply system, introduce modern resource-saving technologies, and improve the quality and level of thermal energy and hot water provision.

The Ministry of Housing and Communal Services, the Council of Ministers of the Republic of Karakalpakstan and regional khokimiyats are responsible for ensuring that heat supply enterprises provide their services in accordance with the concluded contracts, and that consumers receive uninterrupted heat energy and hot water supplies. They also ensure that payments for heat energy and hot water are made in a complete and timely manner, based on the indications of intra-apartment metering devices, normative consumption volumes and size of the heated area.

For the 2020‑21 heating season, settlements for district heating services are being transferred to a payment system in which consumers pay a daily rate based on the number of square metres being heated.

The costs of developing and modernising heat supply systems are taken into account when consumer tariffs for heat supply services are formulated, and the government plans to gradually introduce mechanisms to cover service expenses by reducing production costs as well as losses in heat supply networks.

The Ministry of Energy is responsible for regulating the production, transmission, distribution and consumption of electric and thermal energy and coal, as well as the production, processing, transportation, distribution, sale and use of oil and gas and their products. The Concept of Development of the Oil and Gas Industry of the Republic of Uzbekistan to 2030 has been developed.

The Uzbekneftenaz JSC is engaged in producing hydrocarbons, processing oil and gas, transporting and storing petroleum products, geological exploration, research and design work, and training personnel.

The company’s main goal is to ensure that industrial hydrocarbon reserves exceed production volumes. To do this, it has begun to widely apply new methods and advanced technologies to search for oil and gas deposits. Ongoing work has confirmed the high prospects of the country’s Bukhara-Khiva and Surkhandarya regions, and rich reserves were found in Ustyurt, where the large Surgil, East Berdakh and Uchsay gas fields were discovered. Alternatively, synthetic oil can be produced from shale oil using high-speed pyrolysis technology.

In accordance with the Presidential Decree of 9 July 2019 on Measures to Ensure a Stable Supply of Energy Resources to the Economy and Population, Financial Rehabilitation and Improvement of the Oil and Gas Industry Management System, Uzburneftegaz, Uzneftegazdobycha, Uznefteprodukt and Uzneftegazmash were merged with Uzbekneftegaz. Uztransgaz was withdrawn from Uzbekneftegaz, and Hududgaztaminot was established on the basis of Uztransgaz’s territorial gas supply branches (http://uza.uz/ru/documents/o-merakh-po-stabilnomu-obespecheniyu-ekonomiki-i-naseleniya--10-07-2019).

Uztransgaz is responsible for:

  • Purchasing natural gas from gas production and processing organisations, including joint ventures and foreign companies operating under production-sharing agreements, for its further transportation, including natural gas exports and imports, as a single operator.
  • Selling natural gas under direct contracts to consumers connected to main gas pipelines, as well as under commission agreements with Hududgaztaminot for consumers connected to gas distribution networks.

Khududgaztaminot is responsible for:

  • Operating gas distribution networks and related equipment in compliance with the regulatory requirements of the rules of safe operation.
  • Purchasing, supplying, storing and selling LNG to the general population and social facilities.

Uzbekistan’s current coal resource base is the Angren lignite deposit and the two smaller Shargun and Boysun coal deposits. According to British Petroleum, proven coal reserves amounted to 1.4 billion toe (Gtoe) (2 Bt) in 2017, which is comparable with data from other organisations (for example, the World Energy Council gives a figure of 1.9 Bt).

Management of the coal industry changed in July 2017: Uzbekugol JSC and Shargunkumir JSC were withdrawn from the structure of Uzbekenergo JSC and transferred to Uzbekistan Temir Yullari JSC.

Uzbekistan plans to allocate USD 690.5 million to coal mining development by 2021: USD 68.7 million from the Fund for Reconstruction and Development of the Republic of Uzbekistan; USD 378.7 million in loans from the Shanghai Cooperation Organisation; USD 87.5 million from private funds and enterprises; and USD 155.6 million from the country’s commercial banks.

Approximately USD 170 million is expected to be spent on modernising Uzbekugol's enterprises. At the Angren field, USD 165 million has been designated to increase annual production to 4 Mt (2.8 million toe [Mtoe]). In late 2017, Uzbekistan Temir Yollari JSC and the China Railway Tunnel Group signed a USD 105.5‑million agreement to implement the project.

After 2021, the deposit will produce 900 kt of coal per year, increasing supplies to the Angren and Novo-Angren TPPs, cement plants, and the general population. Plus, the enterprise will provide jobs for 600 people.

So far, 2 km of the tunnel to the field’s main deposits has been laid, with another 1.5 km remaining. According to experts, the main array of deposits contains 33 Mt (https://nuz.uz/politika/40330-shargunskiy-ugol-i-baysunskiy-gaz-prezident-osmatrivaet-predpriyatiya-surhandari.html).

Projects planned in Uzbekistan’s Programme for the Further Development of the Coal Industry for 2020-2024 will multiply coal production to 12.98 Mt or 9.1 Mtoe per year (https://regulation.gov.uz/uz/document/3767).

Uzbekistan’s uranium resources occur in sandstone-type and black shale deposits. All significant sandstone roll-front-type uranium deposits are in the Central Kyzylkum area, in a 125‑km-wide belt roughly 400 km long extending from Uchkuduk in the northwest to Nurabad in the southeast. Only sandstone-type deposits have been exploited so far. In 2014, the State Committee for Geology and Mineral Resources (Goskomgeo) evaluated that Uzbekistan has 185 800 tonnes of elemental uranium (tU) in situ: 138 800 tU of the sandstone type and 47 000 tU of the black shale type. As of 1 January 2017, Uzbekistan’s total identified uranium resources at a cost of <USD 130 per kilogramme of uranium (/kgU) amounted to about 140 000 tU. Predicted resources are evaluated at about 25 000 tU.

Uranium-containing raw materials have been mined at approximately 20 sites in Central Kyzylkum in the Navoi region near the cities of Uchkuduk, Zarafshan, Zafarabad and Nurabad since 2000. Most production comes from six or seven mines and approximately ten sandstone-type deposits, developed by the underground mining method (at depths of 120‑600 m) and in-situ leaching.

Mining and the processing of uranium ores and other types of raw materials is carried out by the state-owned company Navoi Mining and Metallurgy Combinat (MMC) (abnormal concentrations of molybdenum, vanadium, zinc, phosphorus, arsenic, antimony, copper, silver and gold reaching industrial values have been discovered in uranium-producing areas). Uranium-containing raw materials from the mines are fed into the processing plant, where they are processed by thermal, chemical and physical methods to obtain uranium salts, then higher uranium oxides (uranium dioxide, trioxide, etc.) (https://oecd-nea.org/ndd/pubs/2018/7413-uranium-2018.pdf).

Construction of a 2 400‑MW NPP began in 2019, with commissioning planned for 2028.

The Ministry of Energy is entrusted with implementing a unified state RES policy. In May 2019, the Law on the Use of Renewable Energy Sources and the Law on Public-Private Partnerships were adopted, creating a regulatory framework to accelerate the implementation of renewable energy projects.

The Resolution of the Cabinet of Ministers No. 610 of 22 July 2019 approved the Regulation for Connecting Businesses that Produce Electricity, Including from Renewable Energy Sources, to the Unified Electric Power System. The regulation defines the main technical aspects of integrating renewable energy facilities into Uzbekistan’s single electricity system.

Presidential Decree No. PP-3981 of 23 October 2018 on Measures to Accelerate Development and Ensure the Financial Stability of the Electric Power Industry provides for the attraction of private direct investments in enterprises producing electricity, including through PPPs.

In addition, Presidential Decree No. PP-4422 of 22 August 2019 on Accelerated Measures to Improve the Energy Efficiency of Economic and Social Sectors, Implement Energy Saving Technologies and Develop Renewable Energy Sources calls for electricity produced from RESs, including hydropower, to expand to at least 25% of total electricity generation by 2030.

Almost 10 GW of new renewable energy facilities are therefore slated for construction, including 5 GW of solar (excluding individual household installations), 3 GW of wind and 1.9 GW of HPPs. These new facilities as well as the modernisation of existing HPPs will ensure renewable energy production of more than 37 billion kWh (compared with 5.9 billion kWh in 2018), as well as conditional annual savings more than 8.1 bcm of natural gas.

RES stimulation

Uzbekistan’s Law on the Use of Renewable Energy Sources details a number of benefits and preferences to stimulate renewable energy use. Renewable energy producers and manufacturers of renewable energy generating units are granted the right to create local networks (electric, thermal and/or gas) and to conclude contracts with legal entities and individuals to sell electric and thermal energy and biogas produced from RESs, supplied through a local network.

To further promote renewable energy use, Presidential Decision No. PP-4422 of 22 August 2019 provides for the state budget to finance the following as of 1 January 2020, within the limits of annually approved parameters:

  • compensation to individuals for 30% of the cost of acquiring solar photovoltaic (PV) installations, solar water heaters and energy-efficient gas-fired devices, up to UZS 3 million for solar PV; UZS 1.5 million for solar water heaters; and UZS 200 000 for gas burners
  • compensation to individuals and legal entities to cover the interest expenses on commercial bank loans for the purchase of renewable energy generating units, energy-efficient gas burners and boilers, and other energy-efficient equipment.

Investment projects

Through a competitive selection process, the IFC chose Masdar Energy of the United Arab Emirates to implement a pilot 100‑MW solar power plant investment project in the Navoi region, based on a PPP arrangement with a tariff of USD 0.027/kWh. Construction work was scheduled to begin in the first quarter of 2020, with commissioning planned for the first quarter of 2021.

Meanwhile, on 18 October 2019, the Government of the Republic of Uzbekistan and the IFC signed an agreement to attract consulting services and increase the capacity of the Scaling Solar project to 1 000 MW of solar TPPs.

In wind energy, agreements have been concluded with Juru Energy (United Kingdom) and Synergy Consulting (India) to provide consulting services and conduct relevant technical studies (financed by donor funding) as part of the auction for construction of a 100‑MW wind farm in the Republic of Karakalpakstan. These agreements are based on a 14 January 2019 memorandum of understanding between the EBRD, the State Investment Committee and JSC Uzbekenergo.

In addition, the Ministry of Energy, the Ministry of Investment and Foreign Trade and the Asian Development Bank have signed a memorandum on providing consulting services for the implementation of up to 1 GW of solar power plant investment projects during 2019‑25.

The Ministry of Energy is currently taking measures to announce and conduct competitive bidding in 2020 for the construction of solar TPPs with a total capacity of up to 600 MW in the Jazakh, Samarkand and Surkhandarya regions, based on PPP agreements.

Energy efficiency

According to the World Bank, Uzbekistan's economy is one of the most energy-intensive in the world. For example, the energy intensity of the country's GDP is 35% higher than in neighbouring Kazakhstan and three times that of Germany. The industry sector, which often uses outdated technologies in its production processes, accounts for 40% of all energy consumed in the country.

The Uzbek government aims to reduce the energy intensity of the economy by about 50% by 2030. To this end, state programmes have been initiated to modernise key energy-intensive sectors.

Upgrading obsolete equipment and production processes is critical to make enterprises more competitive. Greater energy efficiency not only reduces equipment maintenance and operations costs, it increases productivity, cuts energy consumption (which further reduces expenses) and mitigates climate change.

In recent years, Uzbekistan has raised its standing in the World Economic Forum’s Energy Architecture Functionality Index by six positions. Formerly 84th out of 125 countries for energy efficiency, it now ranks 78th.

Regulatory framework

Tariffs

The Interdepartmental Tariff Commission (ITC) under the Cabinet of Ministers was established in 2018 to determine tariffs in Uzbekistan. The ITC’s composition is approved by the Cabinet of Ministers, and it reviews and approves regulated tariffs (surcharges) on the following goods and services:

  • electric and thermal energy produced by generating organisations
  • electricity distribution and sales by distribution companies
  • natural gas, crude oil and gas condensate production by JSC Uzbekneftegas and the Shurtan Gas Chemical Complex JSC
  • LNG produced by extractive and/or processing companies and sold to organisations responsible for supplying households and social facilities.

The working body of the Commission is the Ministry of Finance, which provides organisational arrangements for the Commission's work.

Retail prices for gasoline and diesel fuel are determined on a market basis.

The government is working on switching to setting electricity tariffs based on reasonable expenses for its production, transmission, distribution and sales, taking into account the reimbursement of capital costs and maintaining 10‑20% profitability. Starting in 2020, energy tariffs approved in the established manner will be set for at least a three-year period, and the purchase of electricity by a single purchaser will be carried out at tariffs determined by the ITC.

State support for low-income segments of the population will be provided by applying the basic rate of electricity and natural gas consumption, determined directly for low-income groups, and by providing compensation for rising energy prices and tariffs for financially vulnerable consumers (https://regulation.gov.uz/ru/document/2879).

Electricity, natural gas and hot water tariffs increase regularly. The most recent tariff increase was on 15 August 2019, which raised the price of one cubic metre of natural gas for consumers with meters to UZS 380 (USD 0.04) – an 18.7% rise from the previous price of UZS 320 (USD 1 = UZS 8 839). In the absence of a meter, one cubic metre of gas for cooking and water heating costs UZS 660 (up 19.3% from UZS 553), and for heating the cost is UZS 380 (an 18.7% rise from UZS 320).

The cost of 1 kWh of electricity for household consumers is UZS 295 or USD 0.03 (an 18% rise from UZS 250 before the increase), and for other categories of consumers the tariff is UZS 450 (an increase of 36% from UZS 330) (https://www.gazeta.uz/ru/2019/07/30/tariffs/).

Regional markets and interconnections

Uzbekistan’s energy system works closely with those of Kyrgyzstan, Kazakhstan, Russia and other Commonwealth of Independent States (CIS) countries through 220‑kV and 500‑kV lines. The small Lochin station in the Fergana valley is connected to Kyrgyzstan’s power system by a 500‑kV line. Seven 220-kV and two 110-kV interstate networks operate in the valley regions. In addition, 220‑kV and 500‑kV lines from the Tashkent TPP connect the power systems of Kazakhstan and Uzbekistan, ensuring their mutually co‑ordinated operation.

The energy systems of Kyrgyzstan and Kazakhstan are interconnected in the same way. As a result, the energy ring linking Uzbekistan, Kyrgyzstan and Kazakhstan ensures optimal energy regimes.

In 2019, Tajikistan exported electricity to Uzbekistan through Surkhandarya Province and imported it to Khujand Province in Tajikistan through Syrdarya Province, indicating that the countries are connected to a single-network electricity system. Uzbekistan currently has 220‑kV and 500‑kV lines, and Tajikistan is implementing projects to use emergency automatics and relay protection.

Uzbekistan is developing international energy co‑operation based on mutually beneficial economic relations. It particularly helps neighbouring Afghanistan by exporting electricity to it and plans to build a 500-kV line in the Surkhandarya region to increase its exports. In addition, Uzbekenergo plans to establish co-operation with Tajikistan's energy system.

Co‑operation with Turkmenistan’s energy system is also in view, which will allow Uzbekistan to use its energy system to transit Turkmen electricity to other regions.

The Central Asian countries signed a joint declaration on regional co‑operation in energy reforms and the creation of a single electricity market as part of the Second Central Asian Conference on Energy Reforms held in Istanbul (https://www.podrobno.uz/cat/economic/strany-tsentralnoy-azii-podpisal/).