TOPIC OF THE WEEK: Uzbekistan is making good progress with renewable energy sources
In the past several days, two stories about the energy industry of Uzbekistan have made headlines. First, Uzbekistan and SOCAR Azerbaijan have entered into a production sharing agreement (PSA) on the Ustyurt plateau with expectations of investing US$2bn and discovering an impressive 100mn tons of oil and 35bcm of natural gas. Second, the energy ministry informed that in the month of July alone, solar and wind power plants produced 1.246 billion kWh of electricity, which was a new record for the country and accounted for 17 percent of total electricity generation for the month.
This is interesting because, on one hand, it suggests that Uzbekistan may still be attractive for foreign players that operate in the hydrocarbon market despite the steady downtrend of energy (chiefly natural gas) production over the last 15 years or so. On the other hand, however, data suggests that, despite the observed increase in electricity production from solar and wind power, the total electricity produced from renewable sources has been quite constant in the last 40 years or so.
This is due to the fast-declining electricity production from hydropower driven by unfavorable climate changes. However, the recent accelerating pace of growth of generated electricity from solar and wind sources does suggest that Uzbekistan may be able to successfully counteract declining rates of gas production, which currently makes up almost 80 percent of Uzbekistan's energy balance and a similar percentage of total electricity production. This would have meaningful (and positive) implications for medium-term growth prospects and for external vulnerabilities given Uzbekistan's 2023 transition to a net gas importer status.
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