Green Energy in Uzbekistan: An Opportunity for the Gulf?

Faced with mounting economic, environmental, and geopolitical challenges, the governments of post-Soviet Central Asia are increasingly prioritizing the expansion of renewable energy within their economies. Rapidly growing populations, a dire need of new sources of revenue for limited state budgets, and risks to food and water security posed by changing climate have prompted the governments of the post-Soviet Central Asian countries. For Central Asia’s two largest economies, Uzbekistan and Kazakhstan, the issue of green energy also has a significant geopolitical dimension. Specifically, if these countries do not increase the share of green energy in their respective energy mixes and quickly turn it into a source of revenue, they will not only lose lucrative contracts with foreign companies and investors but are likely to preserve their strategically ominous reliance on Russia in terms of energy consumption. 

Recognition of these aspects was underscored during the 29th Conference of Parties to the UN Framework Convention on Climate Change, or COP29, in Baku in November. At that meeting, the leaders of Kazakhstan, Uzbekistan, and host country Azerbaijan signed a strategic partnership agreement on production and transfer of green energy. However, because they lack technological capabilities and finances, these countries have repeatedly stressed that they welcome foreign investments and expertise. Among others, the countries of the Gulf region—primarily Saudi Arabia and the United Arab Emirates—have showcased a specific interest in these technologies, and willingness to financially commit to the development of Central Asia`s potential in the realm of green energy.

Mutual Benefits to Investment

Among other countries, Uzbekistan boasts several competitive advantages in the green energy sector. It has a rapidly growing population and thus a surplus of inexpensive workers, a strategic geographic location, a steadily growing domestic manufacturing potential, as well as excellent natural conditions—making it particularly suitable for production of certain types of green energy, such as solar and wind power. According to President Shavkat Mirziyoyev, the country can produce 10 to 12 times more wind and solar power than the supply needed domestically, which makes the country`s export potential look formidable. Uzbek political leadership has made serious legislative commitments aimed at achieving a drastic increase in production of these two types of green energy. Furthermore, Uzbekistan has signed 38 agreements with international companies aiming to build solar and wind power plants with a combined capacity of over 20,000 MW. Notably, the key roles are allocated to renowned international actors such as ACWA Power (Saudi Arabia) and Masdar (UAE), which possess world-class technologies and much-needed financial capital. 

Rapidly growing interest of the Gulf actors in Uzbekistan`s green energy domain is driven by a combination of factors. First, the country’s worsening climate conditions, its growing population, its ambitious plans in manufacturing and perils on foreign energy providers make it essentially mandatory for Uzbekistan to drastically increase the share of green energy in its energy mix. This was clearly articulated by Mirziyoyev at the COP28 Summit in Dubai, who underscored the strategic importance of the “green transition”. 

Second, the desperate need of technologies and financial capital prompts Uzbekistan to search for foreign partners. In addition to the Gulf actors, the country could attract partners from the EU and China—which it has also sought to do, especially with China—but it is Saudi Arabia and the UAE which can be viewed as the most ideal partners for Uzbekistan. In addition to a much more relaxed approach to the country`s domestic affairs, the GCC states do not have geopolitical ambitions in Central Asia and could not reasonably be seen as a threat by their governments, as Beijing is in some corners. 

Third, Gulf companies are also interested in expanding their economic footprint in the country. Aside from internal qualities that push Uzbekistan closer to integration of green energy in its energy mix and huge export capabilities, the country is said to be handsomely endowed with various types of critical metals including uranium, beryllium, lithium, gallium, indium, vanadium, germanium, titanium, tungsten, and molybdenum—all essential for production of various types of green energy and new technologies. Having secured their presence in the green energy sector, companies from the UAE and Saudi Arabia could tap into an emerging and extremely lucrative market. 

Finally, projects in Uzbekistan—as well as other countries of so-called Global South—will contribute to the image of the Gulf states, and perhaps the UAE in particular, as stalwarts, pioneers, and global leaders in the realm of renewable energy and technology, which could help to secure them lucrative contracts in other emerging markets around the world. 

Progress So Far

So far, several very important projects between Uzbekistan and Gulf corporations have either been completed or are in the process of development. The UAE`s Masdar energy company has committed to building a 1,000-megawatt (MW) wind power plant in the Uchkuduk district of the Navoi region in Uzbekistan. According to Uzbek sources, completion of this project will not only generate around 3.5 billion kilowatt-hours of clean electricity per year, but will also allow the country to make a decisive step toward reducing its carbon footprint by saving an estimated 1 billion cubic meters of natural gas annually. This project is not the only initiative in expanding Uzbek-UAE energy partnership. Masdar is to play a crucial role in other projects, including the construction of a 500-megawatt wind plant in Zarafshan, solar stations in Karmana, Gallaaral, Kattakurgan, and Sherobod with a collective generation capacity of around 1,000 MW, and solar projects in Bukhara’s Alat district (250 MW) and Kashkadarya’s Guzar district (300 MW). 

Saudi companies are also emerging as a very important factor in Uzbekistan`s transition to a green energy economy. Saudi Energy Minister Prince Abdulaziz bin Salman Al Saud met with Uzbek President Mirziyoyev on November 11,  at the  Arab and Islamic Summit in Riyadh. Uzbekistan`s Saudi partner, ACWA Power Corporation, is interested in developing complex ties and expanding its presence in Uzbekistan`s green energy sector—potentially becoming involved in the production of several types of renewable energy, including wind, solar, and green hydrogen. Importantly, Saudi companies are actively engaging in cooperation with the Uzbek banking sector in pursuit of these initiatives. For instance, ACWA Power entered into a strategic partnership with Ipoteka Bank to develop a 1,500 MW Combined Cycle Gas Turbine (CCGT) plant in Uzbekistan’s Syrdarya region. Some experts have speculated that this project, altogether worth over $1 billion, will soon become one of Uzbekistan’s most efficient power plants. Once complete, the project will also reduce Uzbekistan’s natural gas consumption, decreasing annual carbon emissions by around 200,000 cubic meters, and contributing to the creation of more than 1,300 local jobs. Indeed, job creation may be the most significant short-term benefit for Uzbekistan, as Uzbeks who have long sought jobs in Russia are increasingly reluctant to travel there due to reports of migrants being forced to join the Russian military and participate in its war of aggression against Ukraine. 

Harder Than It Seems?

Despite Uzbekistan`s political leadership’s vocal commitment to prioritize the development of green energy and its undisputed potential in this domain, some experts have expressed doubts that the declared goals will be achievable. In their criticism, experts usually name three main reasons. 

First, Uzbekistan has long suffered from endemic corruption, a critical drain on foreign investment. Uzbek investigative journalists working with foreign partners recently conducted an investigation that uncovered the unsavory side of the reportedly rapidly developing sector of the country`s green energy sector. Among other aspects, their report discussed the lack of innovation of Uzbekistan`s power grid—reportedly in a dire state—and multiple corruption schemes that create the veneer of change while leaving things mostly the same under the surface. The report also doubts Uzbekistan`s genuine commitment to achieve declared objectives, due to the country`s strengthening ties with Russia—and in particular the Rosatom state nuclear corporation and the Gazprom energy giant. If Uzbekistan were truly devoted to transforming its economy away from fossil fuels and toward renewables, the latter partnership would make no sense. 

Second, green energy still has high production costs. Experts have argued that even in the economically-developed countries of the West, production of green energy still serves an auxiliary role to traditional sources. For Uzbekistan, at least as long as costs of production are not dramatically brought down, the use of green energy may become a luxury. 

Finally, even if Uzbek authorities manage to crack down on corruption and costs of production of green energy are brought down, the country’s climate could pose another challenge. Uzbekistan is frequently affected by sandstorms, impacting solar panels and wind turbines. In order for green energy projects to be feasible at scale, they must include consideration of these challenges, further increasing the cost—and the risks incurred by any investing company.

Nonetheless, it is clear that the transition underway will have benefits for both the nation of Uzbekistan and the planet, and will provide short-term gains for the lives of ordinary Uzbeks. The long-term prospects for the transformation remain unclear, but the nations of the Gulf appear to be willing to take the risks associated with investments in such projects—a positive early indicator that they will succeed, and Uzbekistan will continue on its path to a green energy sector.