Solar energy developer SkyPower has announced a landmark foreign direct investment of $1.3 billion into Uzbekistan to build 1 gigawatt (GW) of solar capacity throughout the country, which will be sold to the country’s government through its first Power Purchase Agreement.
The agreement, announced on Monday, means that Canada-based SkyPower will be the first independent power producer in Uzbekistan’s history, moving forward with the full backing of the country’s President Shavkat Mirziyyoyev, who has signed a decree signifying the government’s full support of the government and sovereign guarantees.
“There are still more than a billion people globally without access to energy services, and our mission is to bring solar power to people who need it most,” explained Kerry Adler, SkyPower Chief Executive Officer. “This is a historic partnership that will benefit both the Government of Uzbekistan and SkyPower, and we are happy to be building Uzbekistan’s first solar power installation. President Mirziyoyev’s forward-thinking vision for Uzbekistan, along with the commitment of the Deputy Prime Ministers and the leadership of the National Project Management Office in concert with Uzbekenergo leadership, together have really helped move this project forward. Uzbekistan is a country that holds tremendous opportunities for foreign investors under the vision for growth and expansion of President Mirziyoyev.”
SkyPower might not make the news as often as other renewable energy developers, but it can confidently bill itself as “the largest and one of the most successful developers and owners of utility-scale solar energy projects in the world.” The company has 25 GW worth of solar in operation or in various stages of development, representing over $80 billion in long-term renewable energy sales.
As for Uzbekistan, with this single deal the country’s share of renewable energy technology will skyrocket — depending on your definitions. Uzbekistan has 1,430 megawatts (MW) of large-hydro capacity, which the International Renewable Energy Agency (IRENA) deems to be renewable energy but which the Climatescope project fails to classify as renewable energy. Rather, Uzbekistan relies heavily on fossil fuels — with 9,395 MW worth of natural gas capacity and 2,734 MW worth of coal generating capacity. As a result, and somewhat unsurprisingly, Uzbekistan was ranked 67th on the 2017 Climatscope report.
But Uzbekistan is another of those countries which will be growing, and already is, and estimates suggest that electricity consumption will increase by 25% by 2020, meaning that more electricity generating capacity is necessary — and soon. Increasing renewable energy capacity, therefore, is an important next step forward for the country. And, as confirmed by this month’s announcement, Uzbekistan is now looking to focus on renewable energy develoment, specifically as part of the country’s Strategy of Actions on the Five Priority Areas of Development of Uzbekistan for 2017-2021.
The move also speaks of a shift in the country’s view of renewable energy.
Dario Traum, policy analyst at Bloomberg New Energy Finance, speaking to me via email, said of the news, “It’s great news because it shows that there is the will and flexibility needed to review renewables deployment plans upwards in acknowledgement of the sharp drop in PV costs and Uzbekistan’s need of investment. The existing targets were 450 MW for solar by 2025 which is far below the ambition of the Sky Power project alone.”
Specifically, according to Climatescope 2017, in June of 2017 Uzbekistan published plans to install only 2 GW worth of renewable energy between 2017 and 2025. Specifically, that included only 450 MW worth of solar and 300 MW of onshore wind.
Not only does this move by SkyPower and Uzbekistan speak of a shift in the government’s way of thinking, Dario Traum thinks it also reflects well on the energy sector within the country: “It’s also a good example of a market with a heavily regulated national utility, typically slow to adopt innovation and renewables, recognising its obligation to adopt renewables as a low-cost option to increase its generation capacity — albeit certainly with some clear instructions from the presidency.”
And there’s a lot more opportunity for Uzbekistan to continue building on this shot to the arm for the solar industry.
“Uzbekistan has a great solar potential and is in need of a lot of investment to upgrade its power system,” Dario Traum added. “1 GW is quite a lot considering where the system is today but from the announcement, it seems that they will be distributed in smaller projects around the country which makes a lot of sense. This means that they should be able to build the first projects quickly and get some first positive experiences that will confirm their ambition to raise the solar targets.
“Uzbekistan currently produces most of its power with gas and a bit of hydro which can cope with the increase solar penetration well,” Traum added. “Solar generation in turn will free up some gas that Uzbekistan can then use in exports.”
Even before SkyPower announced its deal, Uzbekistan was making noise about the potential of developing significant renewable energy resources. The country’s capital, Tashkent, was host to a workshop on renewable energy in December of 2017, jointly organized by the Government of Uzbekistan and the World Bank Group, in partnership with IRENA. Speaking at the event, Sameer Shukla, Practice Manager of World Bank’s Energy and Extractives Global Practice, made a strong case for renewable energy in Uzbekistan:
“Why [renewable energy (RE)] development is important for Uzbekistan? Firstly, it will ensure the country’s energy security, by helping diversify the energy mix and improve the long-term reliability of supply. Secondly, it is more economically efficient as it reduces the use of natural gas and coal for power production, which have a high opportunity cost.
“Thirdly, introduction of RE also represents new business opportunities as it creates an industry with new jobs. Fourthly, there are environmental and health benefits related to RE as it reduces fossil fuel combustion detrimental for environment and human health. Last but not least, it would help the country’s commitment to address the climate change challenges.”
What comes next for the renewable energy industry in Uzbekistan is anyone’s guess, but if developers and investors were looking for a new market to explore — especially one with rich renewable energy resources — Uzbekistan is apparently open for business.