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Energy of Uzbekistan: transition to market relations and increasing generation

23 сентября 2021
Views: 717

By 2030, Uzbekistan will need to generate twice as much electricity as today in order to meet the needs of the economy and the population, or, in other words, to ensure the country's energy security. To achieve this goal set by the country's leadership, the Ministry of Energy of the Republic of Uzbekistan is gradually implementing large-scale projects and coordinating the processes of reforming the industry in order to transfer it to market relations.

 

Reforming the energy sector

The energy sector today is the basis for any country. Energy sector provides opportunities for the development of the economy, comfortable living for people, creating conditions for the normal functioning of such important social spheres as education, medical care, social security, public services and so on. However, it is no longer possible to maintain a huge energy infrastructure in normal operating state, and to increase electricity production, without transferring the energy sector to the rails of a market economy. Only when the most modern achievements in the construction and operation of power plants, power grids and other elements of the energy infrastructure, all of which have their own and very responsible role, are used in the energy sector, the set goals will be achieved. The development of energy based on the market laws creates conditions for competition, which makes it possible to attract the most qualified investors to the implementation of projects, who have not only funds, but also modern technologies and experience that allow bringing technology and methodology into the energy sector of Uzbekistan that will be relevant for decades.

The Ministry of Energy in its current form was established more than 2 years ago. Then a lot was said about this in the press, and at various meetings. It is unnecessary to repeat too much, but briefly it’ possible to say that the main reason for the transformation was the lack of flexibility and inefficiency of the previous structures. Some of them did not correspond to modern tasks, such as a coordinated approach to the development of the fuel and energy complex; introduction of innovative management principles; building a healthy competitive environment and creating an attractive investment climate in our country.

Currently, the Ministry of Energy coordinates the development of the entire fuel and energy complex of Uzbekistan. The Ministry of Energy and the organizations included in its structure and coordinated by it carry out state regulation of the processes of production, transmission, distribution and consumption of electric and thermal energy, coal, as well as the extraction, processing, transportation, distribution, sale and use of oil, gas and their products.

These fundamental changes in the fuel and energy complex required a radical reform of the entire basic structure. So in the energy industry at the beginning of 2019, a radical restructuring of Uzbekenergo JSC was carried out, on the basis of which three joint-stock companies were organized: Thermal Power Plants, National Electric Grids of Uzbekistan and Regional Electric Grids.

The purpose of this reorganization was the transition to modern methods of organizing the production, transportation, distribution and sale of electricioty.

A new organizational structure of Uzbekneftegaz JSC has been formed and redundant intermediate links in the company's management system have been reduced. JSC "Uztransgaz" was withdrawn from JSC "Uzbekneftegaz", which was determined as a single operator for the purchase of natural gas from gas production organizations for further transportation, including export and import, as well as sales to consumers connected to main gas pipelines.

On the basis of JSC "Uztransgaz" gas supplying  territorial branches,  JSC "Khududgaztaminot" was created to operate gas distribution networks and supply natural and liquefied gas to the population and social facilities.

In addition, to the structure of the Ministry of Energy were added some government bodies that were previously in the system of the Cabinet of Ministers of the republic: the Agency for the Development of Atomic Energy - "Uzatom"; Inspectorate for Control over the Use of Petroleum Products and Gas (formerly the State Inspectorate for Control over the Use of Petroleum Products and Gas); and the Inspectorate for Control in the Electricity Industry (formerly the State Inspectorate for Supervision in the Power Sector).

During the period that has passed since the establishment of the Ministry of Energy, a number of cardinal changes have been made. In particular, priority was given to the development of generation based on renewable energy sources (RES), which is confirmed by the adoption in May 2019 of the Law of the Republic of Uzbekistan "On the use of renewable energy sources", as well as the development by the Ministry of Energy of the Concept for the development of renewable energy sources in the country on period 2019-2023.

At the end of April 2020, the Government approved the "Concept for the provision of the Republic of Uzbekistan with electrical energy for 2020-2030", developed by the Ministry of Energy jointly with the involved ministries, departments, as well as international consultants.

Our main task is to provide the country with energy, that is, to create such conditions when both the population and the economy as a whole are uninterruptedly supplied with electricity and fuel. This means increasing generating capacities, modernizing electrical networks, and improving consumption metering and control. These tasks are challenging but realistic.

 

Public-private partnership (PPP)

One of the successful steps towards market relations in the energy industry was the implementation of generation projects, including renewable energy sources, on a fundamentally new model for the energy sector of Uzbekistan - public-private partnership (PPP). Today it has become the basis for almost all power plants planned and under construction. Thus, the commissioning of new power plants, including thermal (TPP), solar photovoltaic (PVP), wind (WPP), is in many ways an example of the market changes that are taking place in the energy sector of the country.

PPP-based projects are carried out on a tender, that is, a competitive market basis, while technical assistance to bring the best international experience in tendering is provided, in particular, by the International Finance Corporation, a member of the World Bank Group, the Asian Development Bank, the European Bank for Reconstruction and Development.

It should be noted that the winner of the tender is responsible for the design, construction and operation of the new power plant. A long-term agreement is concluded with him on the purchase of generated electricity for a period of 20-25 years. The main criterion for winning the tender is a favorable price offer (tariff) for electricity. However, before submitting their proposal, tender participants must pass a qualification stage, in which they must prove their experience, availability of funds and the ability to implement and support such projects. Thus, the market rules that have been intensively implemented in the energy sector of Uzbekistan over the past 3 years make it possible to create healthy competition in this area, which is proved by the interest of independent electricity producers.

 

Current situation

To date, a total of 13 power purchase agreements have been signed, which is a significant milestone in creating a competitive environment for the energy sector. Among independent energy producers are such companies as: Total Eren SA (France), Abu Dhabi Future Energy Company - Masdar (UAE), Aksa Enerji Üretim A.Ş. (Turkey), ACWA Power (Saudi Arabia) and others.

Thanks to the creation of a favorable investment climate in Uzbekistan, there is no need to attract loans guaranteed by the government.

In accordance with the decree of the President of the Republic of Uzbekistan dated March 27, 2019 No. PP-4249 "On the Strategy for Further Development and Reform of the Electricity Industry of the Republic of Uzbekistan", a Project Office was created under the Ministry, which, among other things, works with international financial institutions. International experts with extensive experience in reforming the energy sectors of various countries are involved.

The Project Office experts have developed a Concept that includes a consistent transition to the wholesale competitive electricity market, with the passage of three stages in the period 2021-2025.

At the first stage, it is planned to liberalize electric power enterprises and obtain licenses by private (independent) producers wishing to sell the generated electricity.

During the second stage, a single operator of the electricity distribution system will be created, and the functions for selling electricity to consumers will gradually be transferred to suppliers. Consumers will be able to purchase electricity through an online trading platform or through any supplier.

The third stage is “Intraday (hourly) sales”. In accordance with it, on a planned basis, online purchase and sale of excess or deficient volumes of hourly production and consumption of electricity will be carried out on the trading floor.

Also, work will continue to improve the regulatory framework of the energy industry. In particular, work is being actively carried out on the examination of the developed projects: the Law of the Republic of Uzbekistan "On Electricity" (work on it was carried out jointly with experts from the European Bank for Reconstruction and Development and the World Bank), the Decree of the President of the country "On Additional Measures to Reform the Power Sector", Government Decree "On approval of the Code of main electrical networks."

 

Energy efficiency

The issue of increasing the energy efficiency of the economic and social sectors is today in the focus of the Government of the country. At present, the energy intensity of the national economy, according to expert data, is 2-2.5 times higher than the indicators of developed countries.

If in the world the residential sector accounts for about 23% of energy consumption, then in Uzbekistan - 40%. In particular, energy consumption per 1 square meter in Europe is 120-150 kWh per year, while in Uzbekistan this figure exceeds 390 kWh.

Carrying out work to improve energy efficiency, in 2020, due to the implementation of organizational and technical measures, savings of 1,352.4 million cubic meters of natural gas, 917.5 million kWh of electricity in the sectors of the economy were ensured.

 

Generation

Whatever reforms take place in the energy sector, the result is important, that is, the achievement of the set goal, a stable supply of energy resources to the population and economy of Uzbekistan. Taking into account analytical forecasts that indicate a double increase in the demand for electricity in the country in less than 10 years, one of the main tasks of the Ministry of Energy and the entire structure of the fuel and energy complex at the present stage is the construction of new power plants, including thermal (TPP), the development of renewable energy, the search for and implementation of other projects based on renewable energy sources, further expanding the capabilities of hydropower (HPP), including small, etc.

So what is there in increasing such generation today?

By the end of 2021, it is planned to increase the volume of generating capacities from 14 thousand MW to 15.8 thousand MW or to commission an additional 1.8 thousand MW. Compared to 2016, the production capacity will increase by 50%.

On the basis of PPP, an additional 514 MW will also be launched, among them a thermal power plant with a capacity of 240 MW in the Tashkent region, a gas piston power plant (174 MW) in the Khorezm region, and a solar power plant (100 MW) in the Navoi region. Also this year, two thermal power plants with a total capacity of 470 MW in the Tashkent region, a thermal power plant of 270 MW in Bukhara, and a solar power plant with a capacity of 100 MW in the Samarkand region will be commissioned.

The commissioning of new modern TPPs will also save about 1.5 billion cubic meters of natural gas per year, which will make it possible to generate additional electricity for the needs of the population.

By 2025, the capacity of the power system is expected to reach 25.6 GW, of which thermal power plants will provide 18.8 GW, hydroelectric power plants - 2.5 GW, and solar and wind power plants -  4.3 GW. At the same time, physically obsolete capacities will be gradually decommissioned.

By 2030, the total production capacity will be 29,200 MW, or twice more than today.

As a result, in 2030, electricity generation will amount to 120.1 billion kWh (in 2020 this figure is 66.4 billion kWh).

 

Modernization

No matter how many power plants are built today, an important task is to maximize the modernization of existing thermal power plants and hydroelectric power plants, that is, the introduction of equipment and technologies based on the latest achievements in energy efficiency. An example of this is the combined cycle gas turbines produced by the world's leading companies, which are installed at operating thermal power plants throughout the country. And behind each such modernization is the work of hundreds of domestic and foreign specialists, without whose professionalism it is impossible to implement such projects that require the most accurate calculations and taking into account all available factors - from the time of operation of a particular TPP, its capacity to the peculiarities of this thermal power plant design, which, as a rule, from one point of view is standard but from the other most individual. It cannot be otherwise in the case of such a complex and sophisticated technical structure as a power plant.

What has been done today to modernize the existing thermal power plants and the national power transmission line system?

These facts are best illustrated by numbers. The production capacity of the energy system of Uzbekistan in 2000 was 7750 MW, and in 2016 - 10830 MW.

Thus, over the past 16 years in the electric power industry, only 3 thousand MW was practically commissioned.

Currently, the available production capacity of the power system has grown from 10,830 MW (in 2016) to 14,131 MW. That is, the next 3,300 MW of capacity have been commissioned in the last 4 years.

This year alone, about 1,800 MW of new capacities will be commissioned. The production capacity in 2021 will amount to 15,800 MW.

Such a sharp increase in production capacity in 2017-2021 was achieved mainly due to the commissioning of new combined cycle gas turbines (CCGT) at Navoi, Talimarjan, Tashkent thermal power plants. Also in 2019, a new Turakurgan TPP with a capacity of 900 MW was launched.

At the same time, due to the introduction of modern energy-saving technologies and equipment, a decrease in the conventional fuel consumption at TPPs was ensured - from 375.8 g / kWh in 2016 to 333.9 g / kWh in 2020, or by 11% (- 41, 9 g / kWh).

In addition, the Syrdarya TPP is being modernized, which will increase its capacity by 150 megawatts and the Farhad HPP, which will add another 13 MW to its capacity.

Working in this direction, the task is being implemented to achieve an increase in the capacity of the country's power system up to 25,600 MW by 2025 and up to 29,200 MW by 2030.

It is simply necessary to increase generation with parallel modernization and renewal of the transmission infrastructure of the electric power industry. Only the unity of these two areas will ensure the implementation of the most important task to ensure the country's energy security. The work carried out in recent years to strengthen power lines is also evidenced by the numbers.

Low-voltage power lines have been modernized over the past 4 years, and also built in the amount of 25 thousand kilometers. Note that in the period from 1991 to 2016 or in 25 years, 9,300 km of low-voltage power transmission lines were modernized and built, that is, almost 2.7 times less.

Transformer substations have been modernized and also updated in recent years in the amount of 9575 units, which is 60% of the total number of transformer substations.

At the same time, in the current 2021 alone, 13% more low-voltage power lines or 26,300 km will be repaired compared to the previous year, and 16% more transformer substations - more than 9 thousand units.

Intensive work on updating the transmission infrastructure of the electric power industry continues in accordance with the adopted document "On measures for the reconstruction and modernization of 0.4-110 kV networks for 2021-2030." It provides for a phased modernization and renewal of 130 thousand kilometers of power transmission lines and more than 40 thousand units of transformer substations. 

 

Renewable energy

Uzbekistan is a sunny country, and this is an important argument in the development of such an important direction for the creation of generation based on renewable energy sources (RES), such as solar photovoltaic plants  (PVPs).

The Ministry of Energy, in partnership with the Asian Development Bank (ADB) and the World Bank (WB), has developed a ten-year power supply  plan for Uzbekistan. By 2030, in the renewable energy sector, the implementation of this plan will lead to the creation of additional energy capacities, which will include 5 GW of solar power, 1.9 GW of hydropower and up to 3 GW of wind power.

The state has set a goal to increase the share of renewable energy sources in the total volume of electricity production by 2030 to 25%. Today this figure is 10%.

In the fall of 2021, the country's first industrial solar photovoltaic power plant (PVP) with a capacity of 100 MW is being prepared for commissioning. It is being built in Karmaninsky district of Navoi region by Masdar company (UAE).

It is also planned to commission a 100 MW power plant in the Samarkand region in the coming months, the investor of this project is Total Eren (France).

it would be well to cite one example in which the Scaling Solar program plays a significant role in the implementation of renewable energy projects, within the framework of which a tender was announced in 2020 for the construction of two power plants with a capacity of at least 200 MW each in Samarkand and Jizzakh regions. 83 companies submitted applications for participation in the tender, which proves the strong growth of investor interest in the implementation of projects in Uzbekistan in the field of renewable energy.

At the beginning of this year, the second stage of the tender was held and in May the tender commission announced the Masdar company (UAE).

One of the strengths of the Emirati company was the proposal for the supply of electricity, which will be produced at these PVPs, at record low tariffs for 25 years. Thus, electricity from the Jizzakh FES will be supplied to the unified power grid at a rate of 1.823 US cents per kWh and the Samarkand FES - 1.791 US cents per kWh.

And there are not a few such examples, while I would like to draw attention to wind stations, which in the near future will also begin to generate electricity into the general network of the country.

It is worth noting about the first tenders for the construction of a wind power plant (WPP) in the Republic of Karakalpakstan.

A new wind farm with a capacity of 100 MW, based on renewable energy sources, will be commissioned in Uzbekistan within 2 years from the date of signing the project agreements.

Based on the evaluation of the proposals received, ACWA Power was announced the winner of the tender for the construction of the wind farm, which offered a tariff of 2.5695 US cents per kilowatt-hour of electricity.

Thus, with the participation of Masdar, a project is being implemented to build wind power plants with a total capacity of 500 MW in the Tamdy district of Navoi region. The commissioning date for the first stage of the wind farm's generating capacities is scheduled for 2024.

Agreements were signed with another company - ACWA Power (Saudi Arabia) on a project for the construction of wind power plants with a capacity of 500 MW each in the Gijduvan and Peshkun districts of the Bukhara region. At the same time, the volume of direct investments will amount to USD 1.3 billion. The commissioning date for these wind power plants is scheduled for 2023.

Renewable energy projects introduced in the country of Uzbekistan will contribute to the implementation of the task set for the energy sector of Uzbekistan. It will also help reduce annual greenhouse gas emissions by about 500,000 tonnes of CO2 equivalent.

Thus, as evidenced by figures and facts, the last few years have become breakthrough for the development of the energy sector in Uzbekistan. Development based on the best international experience, ensuring the dynamic movement of the energy sector towards the transition to work in a market economy, which will provide an opportunity to flexibly respond to growing consumption demands and ensure the country's energy security at present and in the future.

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