Uzbekistan intends to reform tariff policy in energy sector

Uzbekistan Materials 19 May 2022 16:55 (UTC +04:00)
Uzbekistan intends to reform tariff policy in energy sector
Natavan Rzayeva
Natavan Rzayeva
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BAKU, Azerbaijan, May 19. Uzbekistan’s Ministry of Energy, in cooperation with the Ministry of Finance and the Ministry of Economic Development and Poverty Reduction, has announced a reform of tariff policy in the country’s energy sector, Trend reports via Uzbek Ministry of Energy’s statement.

The new policy will comprise a two-tier system. Up to a defined amount of energy usage, the existing system of subsidized energy prices will continue. Above this level, rates will be determined on the free market. This will apply to both electricity and natural gas tariffs.

The policy is intended to stimulate foreign and domestic investment in Uzbekistan’s energy sector, which requires a significant overhaul to replace infrastructure (power plants, transmission lines and energy storage systems) increasingly obsolete for the demands of Uzbekistan’s growing economy.

Various factors driving the need for urgent reform include:

- The need for investment capital, rather than increasing the country’s national debt, to fund 19 GW of new power plants to satisfy future electricity demand in Uzbekistan, at an estimated cost of at least $25 billion;

- Alleviating the financial burden of significantly higher subsidy costs in recent years as domestic demand has outpaced production;

- Reforming subsidies, which have unfairly benefited the affluent;

- Raising the capacities of many domestic transmission lines and transformers, which currently hinder electricity supplies to consumers;

- Replacing obsolete equipment in distribution networks and transformers, currently causing power outages and unstable power supplies.

Since 2017, Uzbekistan’s electricity production has increased by 18 percent from 61 billion kWh to 72 billion kWh. In the same period, electricity delivered to Uzbek citizens has increased over 45 percent from 11 billion kWh to 16 billion kWh.

Nevertheless, in 2021, Uzbekistan’s energy supply infrastructure still left 2-3 billion kWh of demand unfulfilled - meaning significant reform is vital and unavoidable.