Friday, 19, July, 2024

Good morning Mr. Neil McKain, you are the IFC Regional Manager for Uzbekistan and Turkmenistan. Thank you in advance for this interview to the Tashkent Times.

Could you give us an overview of the current state of renewable energy in Uzbekistan?

Thank you for having me. Uzbekistan has significant renewable energy potential — primarily solar and wind — and is well equipped to fulfill its growing energy needs and transition to a clean energy economy. Renewable energy can help diversify the energy mix and reduce the country’s heavy reliance on natural gas.

The government is focused on increasing the share of renewables in power production by up to 25 GW, or 40 percent of the country’s overall electricity consumption, by 2030. These efforts support the country's clean energy transition and address the increasing demand for energy in Uzbekistan’s economy and among its citizens. In this context, the World Bank Group is helping Uzbekistan develop 1,000 MW of solar and 500 MW of wind energy by attracting private sector investments.

With these developments, what challenges does Uzbekistan face in transitioning to renewable energy?

Uzbekistan, like many countries, faces a myriad of challenges as it endeavors to make this transition. The country has substantial natural gas reserves, and the economy is heavily reliant on fossil fuels. Transitioning away from these energy sources can be economically and politically challenging. It requires building public support and raising awareness of the many benefits of renewable energy.

In addition, building the necessary infrastructure, such as solar farms, wind turbines, and an updated electrical grid, requires significant investment, time, and technical expertise. As renewable energy sources are intermittent, developing efficient energy storage solutions will be key to ensuring a stable energy supply. Also, securing the required capital can be difficult, as it often involves large upfront costs and long-term investment before seeing returns.

Addressing these multifaceted challenges will require coordinated efforts from the government, private sector, and international partners.

Could you tell us about IFC's involvement in renewable energy projects in Uzbekistan?

IFC is deeply committed to supporting renewable energy in emerging markets, and Uzbekistan is a key country in this regard. We've been involved in several initiatives, including advising on and financing solar power projects. One of our first projects is a solar plant in the Navoi region, which provides electricity to 31,000 homes. This project was established through a public-private partnership (PPP) between the Uzbek government and Masdar, the United Arab Emirates’ flagship renewable energy company. As transaction adviser, IFC assisted the government in designing and tendering the PPP under its Scaling Solar Program. It is now a major milestone in the country's renewable energy journey.

In collaboration with other lenders, IFC also provided a financing package to support the construction of a 500-megawatt wind farm in the Navoi region, which is also being built by Masdar. Capable of powering 500,000 homes, it will be the largest facility of its kind in Central Asia — and, incidentally, the largest wind farm IFC has ever sponsored.

Together with our state and private sector partners, we are currently exploring the use of shallow geothermal energy for heating and cooling buildings. Utilizing this energy source within the country can help reduce reliance on gas and electricity and ease the burden on the grid. We are currently mapping the licensing and permit processes, as well as the local production and distribution of heat pumps. Additionally, we are exploring regulatory and incentive policies to encourage investments, promote the expansion of surface geothermal solutions, and implement surface geothermal projects in the country.

And finally, just recently, a financial package for a 250-megawatt solar photovoltaic plant has been signed between the World Bank Group, Masdar, and the government of Uzbekistan. This new solar power plant, to be constructed in the Alat district of the Bukhara region, will provide clean, reliable electricity access to approximately 75,000 households. In addition, the project introduces an innovative battery energy storage system (BESS) component that will help improve the efficiency and flexibility of the power system, providing greater security of supply and helping to mitigate the intermittency of renewable generation. The project, which IFC also acted as transaction advisor to the government, marks Central Asia's first renewable energy initiative with an integrated BESS component. 

Could you please tell a bit more about the battery energy storage system technologies?

One key innovation in the solar energy sector is the integration of battery energy storage systems. These systems are crucial for addressing the intermittent nature of solar power, as they store excess energy produced during peak sunlight hours and make it available during periods of low solar generation or high demand. This not only ensures a stable energy supply but also enhances the efficiency of solar plants.

The battery energy storage market is at a critical juncture in its evolution, with prices and technologies expected to become even more favorable over time. The technology is now cost-effective for various applications, both on- and off-grid, in countries around the world. However, most of the new project development and associated benefits are concentrated in developed economies.

In Uzbekistan, the use of innovative battery storage with solar plants is still new, but the potential benefits are significant. Battery storage can help stabilize the national grid, reduce reliance on fossil fuels, and provide a more reliable power supply to remote areas. It can also support the country's goals of reducing greenhouse gas emissions and transitioning to a more sustainable energy system.

For these reasons, supporting energy storage technology is a strategic focus for the government of Uzbekistan as it will extend the reach and uses of renewable energy. By helping to introduce technologies in the energy sector, IFC supports Uzbekistan’s efforts to ramp up its use of renewables, improve energy security, increase grid stability, and expand access to electricity. 

You mentioned PPP projects. Could you please elaborate on PPPs in Uzbekistan?

Public-private partnerships, or PPPs, are important tools that leverage private sector expertise and resources to help deliver public services or manage public assets. Through our global experience in PPPs, we are helping governments identify, structure, and procure PPP projects transparently and competitively.

Since late 2018, Uzbekistan has been building a successful track record in PPPs. The government’s reformist mindset, as well as the urgency and pragmatism in pursuing needed reforms, is helping create a series of bankable PPP projects that are being delivered under a robust and transparent PPP framework.

At this point, IFC’s portfolio in PPP Transaction Advisory in Uzbekistan includes projects at various stages of development and covers the energy, healthcare, and education sectors with an overall expected mobilization of approximately $700 million. In addition, we have closed several projects in the energy, and healthcare sectors, with an overall expected mobilization of approx. $1.8 billion.

But there is still more that can be done. While most current PPP projects are in the energy generation, utilities, and health sectors, the government is now starting to turn its attention to other important sectors such as education, irrigation, transport, water supply and wastewater treatment. These sectors have been strained by years of underinvestment and sub-optimal operation and maintenance, as well as rapid rates of urbanization, but we believe PPPs can attract much-needed investment and private sector expertise to these sectors. We stand ready to support this, including through developing, structuring and implementing PPP projects. 

Looking ahead, what's the future of renewable energy in Uzbekistan?

The prospects are very bright. The government is highly supportive and responsive, having implemented reforms to attract foreign investment and liberalize the energy market. This creates a favorable environment for investment in renewable energy in the country, and with the government's proven commitment and implementation of ongoing projects, Uzbekistan is on track to become a regional leader in renewable energy. Moreover, the country's strategic location and rich natural resources provide a unique opportunity not only to meet its own energy needs but also potentially to export clean energy in the future. IFC remains strongly committed to facilitating sustainable energy projects. We also encourage other investors to explore these opportunities and contribute to the country's renewable energy future.

Neil McKain 1

Neil McKain, IFC Regional Manager for Uzbekistan and Turkmenistan

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