FT: Green Energy Becomes Locomotive of Uzbekistan's Economic Liberalization

Tashkent, Uzbekistan (UzDaily.com) — Uzbekistan, historically situated at the crossroads of the Great Silk Road, is striving for a large-scale modernization of its economy through an accelerated transition to renewable energy sources (RES).

A special report by the Financial Times notes that the massive reform of the energy sector has become the republic's primary tool for economic liberalization and attracting global capital.

For a long time, Uzbekistan's power system was entirely dependent on natural gas. However, since 1991, the country's population has nearly doubled, and an annual economic growth rate of 6–7% has triggered a sharp increase in energy consumption.

According to the republic's Minister of Energy, the country has already shifted from a net exporter of natural gas to a net importer. The situation is further aggravated by the depletion of approximately 85% of oil fields and the projected exhaustion of gas reserves within the next 20 years.

Against this backdrop, the country's leadership announced the dismantling of the old Soviet monopoly. In 2018, the unified energy system was unbundled into separate entities for generation, transmission, and distribution, and the generation sector was opened to private capital. Reforming consumer tariffs served as a critical step toward ensuring the investment attractiveness of the industry.

Large state funds from the Gulf countries were the first to enter the newly opened market. Since 2020, the Saudi company ACWA Power has built a project portfolio in Uzbekistan totaling US$15 billion, equivalent to 11,400 MW of capacity.

Another key player, Masdar from the UAE, has invested over US$2 billion in solar and wind generation projects, as well as industrial energy storage systems since 2019. At the same time, experts note that major Western investors are not yet rushing into the republic's market, as they are more sensitive to geopolitical risks and demand investment insurance compared to Arab funds.

The transition to green energy is extending beyond the macroeconomic level, reshaping the daily lives of citizens and businesses.

The number of electric buses and electric vehicles locally manufactured by BYD is growing on city streets. Residents of Uzbekistan are actively installing solar panels on their roofs, leveraging state subsidies and bank loans. For local businesses, particularly in the textile and agricultural sectors, switching to renewable energy has become a prerequisite for integrating into global supply chains, as international brands demand that suppliers meet green economy standards.

The primary challenge facing this ambitious program remains the condition of the power grids, more than 60% of which have been in operation for over 30 years.

Due to the wear and tear of traditional gas plants and a shortage of water resources for hydropower, energy storage systems are becoming the key solution for grid balancing. To overcome infrastructure constraints, the government is involving the power generators themselves in constructing substations and high-voltage transmission lines stretching over 5,000 kilometers.

The success of the initial reform phases has prompted Uzbekistan to revise its strategic goals upward. Tashkent now plans to increase the share of renewables in its energy mix to 54% by 2030, construct its first nuclear power plant by 2035, and achieve carbon neutrality by 2050.

Furthermore, the republic's plans include exporting electricity to South Asia (Pakistan and Afghanistan) and connecting to the European power grid via a "green corridor" underwater cable across the bottom of the Black Sea, in cooperation with Kazakhstan and Azerbaijan. The government intends to scale this public-private partnership experience in energy to the fields of healthcare, education, and irrigation.

Despite skepticism from some international observers regarding bureaucratic barriers and a lack of institutional capacity for such rapid growth, experts agree that the pace and vector of Uzbekistan's transformation make it a unique model for the entire region.