March 24, 2022
Renewable Energy in Uzbekistan
Renewable energy is an integral part of the energy development in Uzbekistan in the context of the overall national policy. In particular, the State plans to increase the share of renewable sources of energy (hereinafter – “RSE”) to 25% by 2030 and, thus, takes active measures in the implementation of promising projects in this industry. We will consider:
1.THE RANGE OF ONGOING AND PLANNED PROJECTS IN THE FIELD OF RENEWABLE ENERGY
2.FEATURES OF THE RENEWABLE ENERGY INDUSTRY
1.THE RANGE OF ONGOING AND PLANNED PROJECTS IN THE FIELD OF RENEWABLE ENERGY
Solar Energy
Currently, the project “Scaling solar ll” is being implemented in the direction of RSE with the participation of the International Finance Corporation (IFC) for the construction of solar (photovoltaic) power plants (SPS) under the public-private partnership (PPP) program. In particular, on October 4, 2019 with the support of the IFC, a tender was announced for the construction of the first 100 MW SPS in Navoi region, which was won by Masdar, one of the leading international companies for the development of renewable energy in the world. According to experts, this SPS will produce 260 million KWh of electricity per year.
Moreover, since the beginning of 2020, the organization of the second stage of tenders for the above-mentioned project is underway. Particularly, a tender was announced for the construction of two SPS with a capacity of 200 MW in the Samarkand and Jizzakh regions.
In addition, on February 1, 2020, the Ministry of Energy with the support of the Asian Development Bank (ADB) announced the launch of the first pilot project for the construction of SPS in the Sherabad district of Surkhandarya region. Due to this project, the SPS with a capacity of at least 200 MW, a 220 kV substation and a 52 km long power transmission line will be built. At the moment, 54 companies have submitted applications for participation in the tender, which indicates a high increase in investor interest in implementing projects in Uzbekistan in the field of renewable energy.
In addition, the agreement was signed with the French company “Total Eren” for the construction of a 100 MW SPS in Nurabad district of the Samarkand region.
Moreover, the Canadian company Sky Power Global plans to install several SPSs with a capacity of about 1 GW in Uzbekistan, while the total investment is estimated at $ 1.2-1.3 billion.
The state’s strategy is to bring the SPS capacity to 2 GW, and the capacity of all solar power generation to 7,000 MW with the support of the IFC and ADB based on the PPP mechanism.
Wind power
A project is planned to build wind farms with a total capacity of 500 MW near Zarafshan with the participation of Masdar.
In addition, an agreement was signed with ACWA Power from Saudi Arabia for the construction of a 500-1000 MW wind farm. Investments in this project will amount to $550-1. 1 billion and the commissioning of the wind farm is scheduled for 2023.
Along with the above, a number of agreements have been signed between Uzbekistan and the Mudabala investment holding (UAE), which results in an agreement with the above-mentioned Masdar company for the construction of a wind power plant in the Navoi region with a capacity of 102-500 MW.
Moreover, on the basis of the Memorandum of understanding dated 14.01.2019 signed between the European Bank for Reconstruction and Development (EBRD), the state investment Company and JSC Uzbekenergo, agreements were concluded to provide consulting services for the supply of the first auction for the construction of a 100 MW wind power plant in the Republic of Karakalpakstan.
Hydropower
In the field of hydroelectric power in Uzbekistan, a number of hydroelectric power plants (HPP) were built, namely, Chirchik, Shamaldysay, Khojikent, Tyuyamuyun, Kurpsay, Kadyrinskaya, Golovnaya, Andijan, Tupolang, AK-Kavak HPP, etc.
In addition, according to the Concept of development of the hydropower industry of the Republic of Uzbekistan for 2020-2024, by 2025 it is planned to put into operation 4 HPPs with a capacity of more than 30 MW and 16 small HPPs with a capacity of up to 30 MW. The total cost of all projects will exceed $2.68 billion, including $2 billion of own funds and $643 million of credit funds.
Other Projects
An agreement was signed with Mubadala on the implementation of a project for the privatization of existing and construction of new power units based on the thermal power plant of Talimarjan TPP JSC.
2.FEATURES OF THE RENEWABLE ENERGY INDUSTRY
Public Administration in the Use of RSE
According to the Law of the Republic of Uzbekistan of 21.05.19 No. 539 “On the Use of Renewable Sources of Energy” public administration in the sphere of renewable energy is exercised by the Cabinet of Ministers of Uzbekistan, Ministry of Energy of the Republic of Uzbekistan and local public authorities.
Specifically, the powers of the Cabinet of Ministers in the sphere of RSE include:
- ensuring the implementation of a unified policy;
- approval of state programs;
- creating conditions for innovative research and scientific and technical achievements;
- coordination of international cooperation.
In addition, the Cabinet of Ministers adopts regulations in the field of renewable energy, which establish the rules for connecting businesses to the unified electric power system, the procedure for state support of renewable energy producers, pricing and tariff policy in this area, as well as the procedure for maintaining state accounting of renewable energy resources.
In turn, the Ministry of Energy in the field of renewable energy carries out:
- unified state policy;
- government and other programs;
- coordination of activities of state and economic administration authorities;
- the development and adoption of technical regulations in limits of their powers;
- monitoring the implementation of state and other programs;
- measures to increase investment attractiveness;
- international cooperation;
- training, retraining and advanced training of personnel.
Moreover, the Ministry of Energy:
- makes proposals to the Cabinet of Ministers of the Republic of Uzbekistan on issues of state support;
- maintains state accounting of resources;
- promotes the introduction of innovative technologies, scientific and technical developments.
In turn, local public authorities in the field of renewable energy:
- participate in the development of programs, develop, approve and implement territorial programs;
- promote the creation and implementation of innovative technologies;
- cooperate with energy producers;
- make decisions on the provision of land plots for the placement of renewable energy installations.
Also, citizens’ self-government bodies, non-governmental non-profit organizations and citizens themselves in the field of renewable energy have the right to:
- participate in the development and implementation of programs;
- assist in the implementation of measures for the use of renewable energy;
- carry out public control.
Producers of energy from RSE and RSE installations have the right to:
- participate in the development and implementation of programs;
- enjoy the benefits and privileges provided;
- create a local network;
- enter into agreements with both legal entities and individuals for the sale of energy.
Also, producers of energy from RSE and RSE installations are required to:
- comply with legislation, norms, regulations and rules in the field of renewable energy;
- keep separate accounting of energy.
Features of RSE Use in the Production of Electric Energy
Producers of electricity from RSE can connect to the unified electric power system on the terms of block stations, as well as on a competitive basis. The expenses required before connecting to the unified electric power system are made by the energy producer. However, the expenses required for the reconstruction of existing power plants are made by the owner of RSE installations. It is noteworthy that the energy producer is prohibited to connect renewable energy installations to the unified electric power system without permission.
- i). Regulations for connection to the unified electric power system
To connect to the unified electric power system, the manufacturer must obtain technical specifications from the organization that is supposed to connect to the electric networks (in some cases, obtaining technical specifications is not required) (DCM of 22.07.19 No. 610). Further, in accordance with the technical conditions, a project for connecting electrical installations to the unified electric power system is developed at the request of the manufacturer. Connection to the unified electric power system is made according to the starting scheme. Also, the scheme is checked and the manufacturer’s electrical energy metering devices are sealed.
Features of RSE Use in the Production of Heat Energy
Heat energy producers are prohibited from connecting RSE installations to territorial and main heat networks. Also, the construction of a local heat network, as well as the connection of installations to it, is reproduced at the expense of the manufacturer.
Features of RSE Use in Biogas Production
Producers of biogas from biomass are prohibited from connecting renewable energy installations to territorial and main gas networks. The construction of a local gas network and the connection of installations to it is reproduced at the expense of the manufacturer.
Government Accounting and Tariffs
State accounting of RES resources and energy produced from these sources is carried out by the Ministry of Energy. The state accounting of energy produced from renewable energy sources, as well as renewable energy installations, includes data on the actual locations of installations, on energy producers and the capacity of installations.
Tariffs for electricity produced from RES are identified based on competitive bidding.
Technical Regulation and Standardization
The law stipulates that energy produced from renewable energy sources and renewable energy installations (other than those used for their own needs) are subject to certification. Also, activities in the field of RSE use must be carried out in accordance with technical regulations, norms and rules, which, in turn, are published in the media and on the official website of the Ministry of Energy.
3.ADVANTAGES OF THE RENEWABLE ENERGY INDUSTRY IN UZBEKISTAN AND THE BUSINESS INTEREST OF A POTENTIAL INVESTOR ARISING FROM THEM
Benefits and Preferences
Renewable energy producers are exempt from paying property tax and land tax for a period of 10 years from the start of operation of renewable energy installations.
Producers of renewable energy installations, in turn, are exempt from paying all types of taxes (UTP, profit tax, property tax, VAT, land tax, excise tax, water use tax, taxes and special payments for subsoil users) for a period of 5 years from the date of their state registration.
In addition, the property of owners who use renewable energy in residential premises with complete disconnection from existing energy resources is not taxed on the property of individuals tax for a period of 3 years. Also, such owners are exempt from land tax for a period of 3 years. The basis for obtaining the benefits specified in this paragraph is a certificate on the use of renewable energy sources with complete disconnection from the existing energy networks.
Moreover, the state has introduced customs privileges until January 1, 2022. Equipment, components, appliances, spare parts, and technical documentation, raw materials not produced in Uzbekistan and imported within the framework of implementation of investment projects on the lists approved by the Cabinet of Ministers are exempt from customs duties.
In addition, the state provides compensation to individuals in the amount of 30 percent of the cost of purchasing solar photovoltaic stations, solar water heaters, and energy-efficient gas-burning devices.
In addition, the state budget provides compensation for interest expenses on loans from commercial banks for the purchase of renewable energy installations, energy-efficient gas burners and boilers, as well as other energy-efficient equipment. Particularly:
- individuals – on loans that do not exceed 500 million Soums in the part exceeding the refinancing rate of the Central Bank of the Republic of Uzbekistan, but not more than 8 percentage points;
- legal entities-on loans, the amount of which does not exceed 5 billion Soums in the part exceeding the refinancing rate of the Central Bank of the Republic of Uzbekistan, but not more than 5 percentage points (DP from 22.08.19 No. 4422).
The state also provides such support as the establishment of customs privileges, assistance in the creation and application of innovative technologies, ensuring guaranteed connection to the unified electric power system of installations, and others. A striking example of the summarized support provided by the state in the field of RSE is the support provided to SkyPowerGlobal on the basis of an agreement between It and Uzbekenergo JSC on the purchase of electricity from RES (DP dated 28.04.18 No. DP-3687). Specifically, the state has exempted the company from payment for the period of the agreement:
- customs payments for the import of new equipment and materials;
- corporate income tax;
- value added tax, mandatory deductions and fees;
- property tax on equipment and installations.
Also, a guarantee was determined that in case of insolvency of JSC “Uzbekenergo” payment for the supplied electricity by the company will be made from the State budget. Moreover, the state was instructed to ensure the registration, issuance and extension of multiple-entry and entry visas, temporary residence, registration at the place of stay of foreign specialists participating in the project, without charging consular and other fees and state duties. In addition, the state has provided for the issuance and extension of permits to attract the project’s labor force.