Operational context
In 2020, the Government of Uzbekistan called on AFD to work with the Asian Development Bank to co-finance a loan based on the energy-climate policy. At the completion of sub-programme 1 (2022-2023), the Uzbek authorities should have a renewed action plan. This is backed up by a coherent fiscal and budgetary strategy to restructure the electricity sector, strengthen the regulatory environment, improve financial stability, decarbonise the electricity sector, and increase energy efficiency on the demand side. This base will enable Uzbekistan to accelerate its transition towards a greener economy (reduction in resource consumption and CO2 emissions) that is sustainable and benefits the Uzbek people.
However, the transition to such an economy is a long-term process which AFD intends to support until 2026. From now until then, AFD plans to provide various types of assistance, which includes a possible series of policy-based loans. To this end, AFD needs to validate the objectives of the ongoing reform, and identify the relevant reforms in the energy sector for the future lending activities.
Technical assistance implemented by Expertise France will facilitate the public policy dialogue in the energy sector and contribute to phase 2 of the policy-based loan in 2024, and possibly phase 3 in 2026. It will also conduct capacity building activities.
National energy situation in Uzbekistan
Uzbekistan is the second largest electricity producer in Central Asia, with an installed capacity of almost 16 GW. In 2019, Uzbekistan generated around 63.5 TWh, including 90% from fossil fuel-fired power plants. As consumption exceeded production in 2019, Uzbekistan was a net importer of around 1.3 TWh.
While the household electrification rate is close to 100% in Uzbekistan, the ageing infrastructure and insufficient and inefficient investment have increasingly widened the gap between supply and demand and disrupted electricity supply.
According to the calculations of the Uzbek Government’s Ministry of Energy, if the current consumption trends continue, the energy deficit could reach 65.4% of total demand by 2030.
It is for this reason that Uzbekistan is taking steps to establish a legal framework to develop the energy sector in a more sustainable way. The need to reform the electricity sector is recognised in the Strategy for the Transition of the Republic of Uzbekistan to a Green Economy for 2019-2030 and in the Concept of Providing the Republic of Uzbekistan with Electricity for 2020-2030.
Uzbekistan ratified the Paris Agreement in 2018 and submitted its updated Nationally Determined Contribution (NDC) in 2021. In its second NDC, Uzbekistan declared its intention of reducing greenhouse gas emissions per unit of GDP by 35% by 2030 compared to their 2010 level. This is substantially higher than the objective of 10% set out in its first NDC.
According to the Strategy for the Transition of the Republic of Uzbekistan to a Green Economy for 2019-2030, Uzbekistan’s aim is to increase the share of renewable energies in total power generation to more than 25% by 2030.
Lines of action for Expertise France’s support
AFD has asked Expertise France to provide technical assistance for a period of three years (from 2023 to 2025) in the context of monitoring the reforms, encouraging public policy dialogue, and the need to take the social effect of the increase in electricity tariffs into account. The activities of the technical assistance programme will be conducted in Uzbekistan in coordination with the Ministry of Energy and the Ministry of Economy and Finance. They will focus on:
- The regulation of the electricity sector
- The increase in the share of renewable energies
- Smart grid management
- The fossil fuel phase-out
- Energy efficiency
