Legislative initiatives on RES

In accordance with the Decree of the President of the Republic of Uzbekistan dated 01.02.2019 No. YH–5646 "On measures to radically improve the management system of fuel and energy industry of the Republic of Uzbekistan'çthe Ministry of Energy was established, which was assigned a function of authorized body for implementation of the unified state policy in the field of renewable energy sources (RES).

In May 2019, the Laws of the Republic of Uzbekistan "On use of renewable energy sources'' and "On Public–Private Partnership'' were adopted creating a regulatory framework for accelerating the implementation of RES projects.

In addition, the Resolution of the Cabinet of Ministers No.610 dated 22.07.2019 approved the Regulations for connecting business entities producing electric energy to the unified energy system, including from renewable energy sources, defining the main technical aspects of integrating renewable energy facilities into the UES of Uzbekistan.

In addition, the Decree of the President of the Republic of Uzbekistan dated 23.10.2018 No. HH–3981 "On measures for accelerated development and ensuring financial stability of the electric power industry'' instructs the following:

to develop a modern scheme for organizing the production of electric energy, while providing for the broad attraction of private, including foreign, direct investments in electric energy production enterprises, including on terms of public–private partnership, and to work with potential investors on new investment projects in the field of electric power on PPP terms, based on the available resource base, modern technological trends and use of alternative sources of electricity.

In this connection, the Ministry of Energy is currently implementing a set of measures aimed at implementing investment projects in the field of RES on the principles of public–private partnership (PPP) in order to diversify the generation structure for increasing the share of RES.

The introduction of PPP mechanisms in the field of RES will ensure the attraction of foreign direct investment to the generation market of leading foreign companies with advanced innovative technical and technological solutions as independent electricity producers (IEP).

It should be noted that the implementation of investment projects in the field of RES on PPP terms has many advantages, since the entire process of project implementation (attracting financing, carrying out a feasibility study, choosing technologies, the logistics process, construction and installation work, operation of energy facility during the life cycle and the ownership process) lies with the investor, and the task of a single buyer of electric energy, i.e. "National Power Grids of Uzbekistan'' JSC is to carry out a guaranteed purchase of generated electricity.

Target parameters for development of the renewable energy sector

In accordance with the Decree of the President of the Republic of Uzbekistan dated 27.03.2019 No. PP–4249, the Ministry of Energy, together with the relevant ministries and departments, as well as with the technical assistance of international financial institutions (the World Bank, the Asian Development Bank), developed the concept of fuel and energy supply of the country for 2020–2030.

In addition, the international consultant Mott MacDonald (Great Britain) has developed a Master Plan for the long–term development of the electric power sector of Uzbekistan, including in terms of RES.

It should be noted that the Decree of the President of the Republic of Uzbekistan dated 21.09.2018 No. YH–5544 "On approval of the Strategy of Innovative Development of the Republic of Uzbekistan for 2019–2021" determined an increase in share of electric energy production using RES to the level of at least 20% by 2025.

In addition, in accordance with the Decree of the President of the Republic of Uzbekistan dated 22.08.2019 No. HH–4422 "On accelerated measures to improve the energy efficiency of economic and social sectors, introduction of energy–saving technologies and development of renewable energy sources", long–term target parameters for development of RES and plan of organizational and practical measures for further development of RES were approved.

This Decree defines an increase in RES share to at least 25% by 2030.

To achieve the targets, it is planned to build almost 10 GW new renewable energy facilities, including 5 GW solar (excluding the capacity of individual households), 3 GW wind and 1.9 GW hydroelectric power plants.

At the same time, the construction of new RES facilities with a total capacity of more than 10 GW and modernization of existing HPPs will ensure the production of more than 37 billion kWh of electricity from RES facilities (in 2018 – 5.9 billion kWh), as well as conditional annual savings of more than 8.1 billion m3 of natural gas.

Stimulating the RES sector

In order to stimulate the use of renewable energy sources, the Law of the Republic of Uzbekistan "On use of Renewable Energy Sources" provides a number of benefits and preferences:

exemption of producers of RES installations from paying all types of taxes fora period of five years from the date of their state registration;

exemption of RES energy producers from paying property tax for RES installations and land tax on sites occupied by these installations (with a nominal capacity of 0.1 MW or more) for a period of 10 years from the date of their commissioning;

property tax is not levied on property owned by persons using renewable energy sources in residential premises with complete disconnection from the existing energy resources networks, for a period of three years starting from the month of using renewable energy sources;

and land tax is not levied on persons who use renewable energy sources in residential premises with complete disconnection from the existing energy resources networks for a period of three years starting from the month of using renewable energy sources.

Also RES energy producers and RES installations producers are granted the right to create local grids (electric, thermal and/or gas) and conclude contracts with legal entities and individuals for sale of electric, thermal energy and (or) biogas produced from RES supplied through the local grid.

In order to further stimulate the use of renewable energy sources, the Decree of the President of the Republic of Uzbekistan No. HH–4422 dated 22.08.2019 provides for introduction of an order according to which, from January 1, 2020, the following activities are financed from the State Budget of the Republic of Uzbekistan within the annually approved parameters:

a) providing compensation to individuals in the amount of 30% of costs for purchase of solar photovoltaic stations, solar hot water heaters, as well as energy–efficient gas–burning units, but no more than:

3 million soms — for solar photovoltaic plants;

1,5 million soms - for solar hot water heaters;

200 thousand soms - for gas–burning units;

b) providing compensation to individuals and legal entities to cover interest on loans of commercial banks for the purchase of RES installations, energy–efficient gas–burning units and boilers, as well as other energy– efficient equipment:

individuals - on loans whose amount does not exceed 500 million soms–in the part exceeding the refinancing rate of the Central Bank of the Republic of Uzbekistan, but not more than 8 percentage points;

for legal entities – on loans, the amount of which does not exceed 5 billion soms - with regard to portion exceeding the refinancing rate of the Central Bank of the Republic of Uzbekistan, but not more than 5 percentage points.

Investment projects

Thus, according to the resolution of the Cabinet of Ministers of 08.08.2018 No. 633, the International Finance Corporation carried out a competitive selection of potential companies for implementation of pilot investment project of solar power plant with a capacity of 100 MW in Navoi region on the basis of PPP, and as a result (04.10.2019) Masdar Energy (UAE) was recognized as the winner with a tariff of 2.679 cents USA/ kWh.

On October 18, 2019, taking into account the positive result of the tender, an agreement was signed between the Government of the Republic of Uzbekistan and the International Finance Corporation to attract consulting services and increase the capacity of the Scaling Solar project to 1000 MW of solar thermal power plants.

Currently, the EBRD, on the basis of Memorandum of Understanding dated 14.01.2019 signed between the EBRD, the State Investment Committee and Uzbekenergo JSC concluded agreements with Juru Energy (Great Britain) and Synergy Consulting (India) at the expense of donor funds for consulting services and relevant technical studies within the framework of auctions for construction of 100 MW wind power plant in the Republic of Karakalpakstan.

In addition, on August 16, 2019, the Ministry of Energy, the Ministry of Investment and Foreign Trade and the Asian Development Bank signed a Memorandum on provision of consulting services in implementation of investment projects of solar power plants with a total capacity of up to 1 GW in 2019–2025. The Ministry of Energy is taking a set of measures to announce and conduct competitive bidding in 2020 for construction of solar power plants with a total capacity of up to 600 MW in the Jazakh, Samarkand and Surkhandarya regions based on PPP principles.

On May 3, 2021, an agreement for implementation of wind power plant project was signed between ACWA Power, the Ministry of Energy of Uzbekistan and the Ministry of Investment and Foreign Trade of the Republic. The project includes development, construction and operation of wind power plant project with a capacity of 1,500 MW and after commissioning, it will become the largest wind power plant in Central Asia and one of the largest in the world. ACWA Power is also an investor in two wind power plant projects in Bukhara and Navoi, concluded earlier this year, with a combined power generation capacity of 1000 MW. Under these projects, agreements for purchase of electricity (PPA) and investment agreements were signed. In addition, the Saudi company implements a project for construction of highly efficient gas power plant with a capacity of 1500 MW in Syrdarya.

The Ministry of Energy of Uzbekistan is implementing a project to build a second solar photovoltaic station in Sherabad area, Surkhandarya region (Sherabad II). The plant with a capacity of 300 MW should be built by 2024 in the immediate vicinity of Sherabad I project (200 MW), which was announced in February 2020. Project will be implemented by the Ministry of Energy within the framework of general memorandum between the Government of Uzbekistan and the Asian Development Bank on providing technical assistance for conducting competitive bidding for 1 GW solar energy. Total capacity of two photovoltaic plants is 500 MW with an annual output of more than 1.1 billion kWh will be sufficient to provide about 30% of annual electricity consumption in the region. On May 12, 2021, auctions were held for implementation of Sherabad SPP project (Phase 2). The results of auction showed new records in minimum tariff for implementation of the project.

Thus, the winner was Masdar company (Abu Dhabi Future Energy Company PJSC), which offered a tariff of $0.018045 / kWh (7.7 KZT/ kWh at the exchange rate of the National Bank of the Republic of Kazakhstan effective on May 12, 2021).