One of the world’s most historic trade routes is finding its place in the future of energy, as Uzbekistan clinches solar development deals.
The Abu Dhabi Future Energy Company, or Masdar, will build two 220-megawatt (MW) solar photovoltaic power plants in the Uzbek regions of Samarkand and Jizzakh, after signing a deal on July 12 in a ceremony held in Tashkent.
Masdar projected costs for the plants at $300 million after winning a tender in May.
Uzbekistan sat at the center of early trade between the Far East and Europe for centuries, and some of the top sights remaining from the ancient Silk Road remain in the central Asian country. For modern Uzbekistan, the country’s exit from the Soviet colossus has been plagued by energy shortages and rolling blackouts. Shifting to renewable energy generation is more about energy security, while also joining a platform for international engagement via climate change after years of isolation.
The strategy also benefits from the eagerness of international institutions to extend investment in renewable energy projects beyond markets where it has already gained traction. Efforts to cut carbon emissions will truly need to be global to limit effects.
International financial institutions such as the World Bank, IFC, Asia Development Bank (ADB), European Bank of Reconstruction and Development (EBRD) and others have played a major role in financing green projects in Uzbekistan.
The UAE sovereign renewable energy firm offered some of the lowest solar electricity rates available in emerging markets at 1.82 cents and 1.79 cents per kWh for the Jizzakh and Samarkand plants, respectively. It will supply the national electrical grid at those rates under a 25-year contract.
“These projects highlight that Uzbekistan is playing a real leadership role in clean energy projects in the region and contributing to global action to combat climate change,” Masdar CEO Mohamed Jamil Al Ramahi noted in Tashkent.
After assuming power following the death of longtime dictator Islam Kerimov in 2016, President Shavkat Mirziyoyev ratified the Paris Climate Agreement in 2018. In January 2021, he pledged to achieve carbon neutrality by 2050.
Last May, Uzbekistan’s Ministry of Energy unveiled a “concept note” that set the goal of generating 30 percent of the country’s energy from renewable sources by 2030. The ambitious plan calls for reducing reliance on natural gas from 66 to 46 percent and coal from 19 to 6 percent of total energy production. The country also plans to increase the share of solar (17 percent), wind (10 percent) and hydroelectric (13 percent) generation.
While hydro and wind projects have attracted international financing, including a recently announced 1 GW, $1.3 billion wind plant to be built by Saudi Arabian ACWA Power, solar is a natural solution for a country that has hundreds of days of sunlight each year.
In the fall 2019, as part of the World Bank’s “Scaling Solar” program, Masdar was awarded a contract to build a 100 MW solar plant in Navoi Region with a bid of 2.7 cents per kWh in Uzbekistan’s first public-private partnership.
The ADB is currently acting as transaction advisor on a competition for a 200 MW solar plant in the Surkhandarya region that has been narrowed down to five bidders, including Masdar, China’s Jinko Power and Risen, Saudi Arabian ACWA, and French Total Eren.
By 2030, Uzbekistan plans to create 8 gigawatts (GW) of solar and wind capacity, and the IFC and World Bank have already pledged to support PPP tenders for 1 GW of solar power. In addition to traditional financing from IFIs, in April the United Nations Development Programme and Islamic Development Bank completed a pre-feasibility study for the use of Islamic financial instruments, “green sukuk” bonds, to fund renewable energy projects.
Uzbekistan’s engagement is the sort of policy that will be necessary to encourage and develop in the many countries outside the G20 that can deliver results in the effort to cut emissions from fossil fuels.