Context
Central Asia consists of five countries, three of which - Kazakhstan, Uzbekistan, and Turkmenistan - are rich with oil and gas while Tajikistan and Kyrgyzstan are upstream countries endowed with water resources. Downstream countries tend to generate electricity from fossil fuels while upstream countries rely on hydroelectric power. Specifically, Uzbekistan and Turkmenistan generate electricity mostly from gas while Kazakhstan uses coal to power more than 70% of its electricity generation. Meanwhile, Tajikistan and Kyrgyzstan generate most of their electricity from hydropower plants.
However, upstream countries face power outages when there are droughts or water freezes and downstream countries when they fail to supply power plants with fossil fuels. Unfortunately, the occurrence of power outages only increased during the COVID-19 pandemic. For example, in January 2021, the lights went out in parts of six of Uzbekistan's 12 provinces and in November 2020, more than 50 people gathered in Kashkadarya Province to demand the restoration of electricity in their homes. Similarly, Tajik populations reported that they are only receiving electricity for a handful of hours daily since the start of November. Even more recently, Kazakhstan's Energy Minister Magzum Mirzagaliyev linked an unusual increase in electricity demand to cryptocurrency mining farms and proposed the government limit supplies of electricity to 1 MW per mining farm and to 100 MW for the whole sector. Kyrgyzstan is also facing power outages given that this has been a drought year and Kyrgyzstan uses hydropower to generate most of its electricity.
Renewable energy might be a solution for Central Asia's electricity challenges. Progress here has already been made. In 2020, the World Bank helped Uzbekistan launch the construction of the country's first private solar power plant, enough to power more than 31,000 households. In the same year, the United States Agency for International Development (USAID) partnered with the Tajik government and Pamir Energy to install a solar power plant in Murghab, which represents a 50 percent increase in daytime electricity for Murghab's communities. In Kazakhstan, Italian and Hungarian companies are expected to install two solar power plants in Turkestan and Aktobe regions.
Although Central Asia's path towards renewable energy adoption has just begun, the region has considerable potential due to its ample sun and wind resources. Even more important is the fact that electricity generation from hydropower will need to be complimented and/or replaced sooner than later because of declining water resources. Solar power plants in Uzbekistan, Tajikistan, and Kazakhstan have already supplied communities with electricity and continuing this trend at a larger scale will likely be beneficial for all Central Asian countries.
While arguments in favor of renewable energy development in Central Asia abound, there are a number of challenges that hinder this process. Eurasianet reports that 70% of financing for renewable energy projects comes from international development banks while private companies are reluctant to invest, mainly due to lack of returns. Specifically, companies have to purchase solar power plants and wind turbines in foreign currencies, as well as profit in local currencies, which have been recently devaluing against the dollar. Another challenge might be that in energy-rich countries of Central Asia, elites that receive rents from oil and gas may fear the loss of leverage that rents from oil and gas provide.
While transitioning into renewable energy is challenging for Central Asian countries due to their domestic political organization and lack of interest from private companies, they have still made progress towards this goal with the help of international banks and actors like USAID. The region is still attractive to foreign investors due to its vast, and largely untapped, renewable energy potential. The right incentives and cooperation from the Central Asian governments can encourage private companies to consider investing in the region.
Switching to alternative energy sources in Central Asia will be inevitable as water resources in the region gradually deplete. Water shortages will have negative effects on electricity generation in hydro power-dependent Kyrgyzstan and Tajikistan and even downstream countries which receive most of their electricity from fossil fuels. For instance, the Uzbek government has recently declared that the volume of output of electric power at the country's hydroelectric stations has fallen by almost 23 percent in connection with this year's water shortage, even though the country generates most of its electricity from natural gas.
Failing to take action now and allowing water resources to deplete further could be disastrous for Central Asian countries. Power outages are already causing protests and demonstrations and will only get worse as temperatures increase, while water levels decrease. Central Asian governments' cooperation with USAID, the World Bank, and private companies is a good starting point, however, it needs to expand to a larger scale to accelerate the transition to renewable energy in the region. Without such growth, these countries risk further public backlash and political instability.
By Maia Nikoladze via Global Risk Insights
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