EDB: "Middle Path" Will Reduce Central Asian Energy Modernization Costs by 30%

Tashkent, Uzbekistan (UzDaily.uz) — The Eurasian Development Bank (EDB) has presented a report on energy sector modernization and energy transition in Central Asia, prepared jointly with the International Renewable Energy Agency (IRENA).

The key findings of the document were presented by Demir Kobylbaev, Senior Analyst at the EDB Center for Sectoral Analysis, during the bank's annual meeting. According to him, the region faces the urgent need to strike a balance between an accelerated energy transition and the actual economic capabilities of Central Asian countries.

Kobylbaev began with the global context, noting that the global energy transition has gathered significant momentum over the past decade. In 2024, renewable energy sources (RES) accounted for 92% of all newly commissioned capacities, and this indicator stood at 86% in 2025. Investment in renewables reached 2.2 trillion dollars in 2024, doubling the amount invested in fossil fuels. Economics remain the primary driver of this growth, as the cost of solar generation has dropped by 70% and wind by 55% over ten years. Notably, in the first half of 2025, electricity generation from RES exceeded coal-fired generation for the first time in history.

However, the analyst warned that the future growth trajectory of renewables is not entirely straightforward. Any technology passes through an S-shaped development curve and eventually reaches a plateau. Among the slowing factors, Kobylbaev named the inability of grid infrastructure to keep pace with the commissioning of new capacities, noting that more than 3,000 GW of renewable projects are waiting in grid connection queues with wait times reaching up to seven years.

Additional strain is created by the need to balance variable generation, which increases the total cost of the system. Tightening monetary policy raises the cost of capital, to which capital-intensive energy projects are highly sensitive. Finally, as markets saturate, state incentives for renewables are being reduced, forcing new facilities to compete on general market terms. A clear reflection of these trends is seen in the forecast for China: following a record-breaking 2025 with the commissioning of 420 GW of renewables, the expected figure for 2026 is only 250–300 GW.

Global demand for electricity is also growing faster than projected, primarily driven by developing countries in Southeast Asia, the Middle East, and South America. For Central Asia, this issue is particularly acute, as consumption in the region has grown by 37% in recent years, and the growth rate is projected to accelerate with an expected increase of 54%. The main drivers will be the development of energy-intensive industries, urbanization, digitalization, and the emergence of completely new consumer categories, such as data centers, electric vehicles, and crypto-mining facilities.

To diagnose the state of the regional energy sector, the authors of the report applied the energy trilemma concept of the World Energy Council, which involves the simultaneous achievement of three goals: energy security, energy affordability, and environmental sustainability. Kobylbaev emphasized the fundamental importance of this approach, stating that none of the three goals should be achieved at the expense of the other two.

The diagnosis revealed a series of systemic problems. The region's generating infrastructure and grid networks are outdated, leading to electricity losses that reach up to 20%. There is an acute shortage of flexible, peak-load capacities needed to integrate renewable energy. Cross-border trade remains at a low level. Furthermore, each country in the region relies heavily on a single dominant source of generation, which carries significant risks under conditions of technological and geopolitical instability. The water-energy balance is particularly sensitive, as water in the region simultaneously serves as a resource for hydropower, irrigation, and drinking water supply.

Analyzing the experience of countries with a high share of renewables, Kobylbaev pointed out the necessity of parallel development of backup and balancing capacities. As an example, he cited Germany, where periods of windless and cloudy weather can last for two to three weeks, during which the system requires a reliable backup source. This need for duplication explains the record growth in gas-fired capacity commissioning in countries with high renewable shares. The report also notes the rapid development of battery energy storage systems, highlighting that in the state of Texas, the battery storage fleet grew from 7.5 to 15 GW in 2025 alone—a figure comparable to the operating load of Kazakhstan's entire power grid.

Based on this analysis, the EDB proposed a so-called "Middle Path" for Central Asian countries—an approach that combines elements of various strategies without strict adherence to a single ideology. It includes modernizing active thermal power plants, developing renewables in conjunction with the necessary balancing infrastructure, constructing gas-fired capacities to smooth out loads, recognizing the role of nuclear generation, and accelerating the upgrade and expansion of electrical grids. Market reforms and regional cooperation are highlighted separately, with the latter topic being large enough to be allocated into an independent study.

Kobylbaev backed the economic justification of the "Middle Path" with scenario calculations. Compared to an accelerated energy transition scenario, the proposed model allows for a 30% reduction in capital expenditures and a reduction in the levelized cost of electricity by up to 45%. Compared to an inertial (business-as-usual) scenario, it ensures a five-fold reduction in carbon intensity at a comparable final energy cost.

The analyst acknowledged that modernization will require investments and a certain increase in tariffs in any case, but expressed confidence that the proposed trajectory is optimal from the standpoint of balancing cost, reliability, and environmental performance.