Uzbekistan: The New Face Of Energy Poverty In Uzbekistan

Artyom Tchen – Junior Analyst at GDF Suez, Graduate of International Energy Master, Sciences Po Paris.

Artyom Definition of Energy PovertyWith 1.3 billion people living without access to electricity in addition to 2.7 billion living without clean cooking facilities, energy poverty has become a pressing issue on global and local agendas.[i] Central Asia, and in particular, Uzbekistan are not exceptions, although energy poverty is relatively new for this industrialized and well-electrified country. Moreover, energy poverty takes new forms and dimensions in Uzbekistan. While globally energy poverty touches those who live in remote areas or who were affected by the 2008 financial crisis and cannot pay their energy bills, the energy poverty in Uzbekistan does not correspond to either of its traditional definitions (see the inset box on the right). The energy poverty is increasingly disconnected from the issues of solvency and geographical isolation, as people who live in large cities with all necessary infrastructure at hand and, more importantly, who are able to pay are affected by the lack of energy supply.

The lack of energy supply in Uzbekistan is alarming. Occasional blackouts and halts of gas deliveries throughout the city grids have become increasingly common in the country since mid 2000s, especially during winter season when there is an increased demand on heating and electricity. Blackouts occur for 2-6 hours a day in both small rural settlements as well as in big cities, including capital city Tashkent. During the last two years, the degree of disconnections has largely increased to the extent that some areas have stayed without electricity and hot water for the most part of the day during winter. The problems have become especially acute in the southern and western regions and in the valley of Fergana.

As a result, people in these regions had to massively resort to coal and wood for heating. This puts increasing pressures on local ecosystems, including rising deforestation and increasing consumption of coal that releases sulfur dioxide harmful for health. Moreover, the use of these alternative resources becomes more difficult as market responds to increasing demand by rising prices. Coal costs 400 000 sums per ton, which is enough to heat a house for 20-25 days. This is equivalent to a rural worker’s monthly income in many parts of Uzbekistan.[ii]

There are, however, more pressing issues arising from energy poverty. Schools and hospitals are not able to fully operate in late autumns and winters, thus putting educational and healthcare systems at risk. From an economic standpoint, frequent blackouts and low pressure in gas grids stall heavy industries, especially chemical plants relying on gas as on heating source and feedstock for the production of polyethylene and other industrial goods. In the end, energy poverty hinders the development of small and medium business – the backbone of Uzbek economy–and impedes foreign investments needed to keep industries competitive. As a matter of fact, power shortages were ranked as the third most significant obstacle for doing business in Uzbekistan according to the Doing Business Report (2009).[iii]

The situation of Uzbekistan, seen from the Central Asian region perspective, is not unique, as neighboring countries, namely Kyrgyzstan and Tajikistan, have similar problems of access to energy. But those countries are energy scarce, while Uzbekistan is energy abundant. The paradox of the current energy supply demand disruption in Uzbekistan is that the country is major producer of natural gas in Central Asia with 1.8 trillion cubic meters (tcm) of gas proven reserves and 55.2 billion cubic meters (bcm) of production as of 2013.[iv] However, this bonanza has been exponentially reoriented to export in the recent years at the expense of domestic consumption, propelling the energy poverty to the heights the country has never seen before.

Uzbekistan has been a traditional exporter of gas in the neighboring Kyrgyzstan, Tajikistan and in the Southern part of Kazakhstan. Moreover, Russian Gazprom has been buying a considerable amount of Uzbek gas in order to subsequently resell it to its European customers. However, in 2012 Uzbekistan made a long-term contract with China and committed itself to increase exports to China at the rate of 10 bcm by 2015.[v] Coupled with all existing commercial commitments, new exports are increasingly moving into the internal consumption share, which is, by the way, covered by over 80% by gas directly in the form of heating or indirectly though electricity generation.[vi] The reason why government prioritizes export over internal consumption is simple: export of gas is a major source of cash revenue for the country who suffers from decreasing revenue from traditional cotton and gold exports. Another reason is that internal consumption is subsidized by government, meaning an additional budget expense for every cubic meter consumed amid drowning state incomes.

Thus, energy demand of 30 million population is undersupplied in Uzbekistan. However, this is only a part of the problem. Much of gas and electricity simply do not reach consumer because of inefficiency of the country’s grids. Uzbekistan is the most energy hungry country in Europe and Central Asia.3 Nearly 40 percent of available electricity generation capacity is past or will reach the end of its lifespan by 2017.3 Moreover, a legacy from the Soviet Union times –thefts from grids and corruption among the workers of utilities – are frequent. As a result, government does not get enough revenue to ensure maintenance and renovation of grids. Furthermore, the immigration from rural areas to Tashkent, the area relatively shielded from energy supply disruptions for the moment, is further causing rural-urban disparities. Together, these reasons are among the main drivers of energy poverty in Uzbekistan.

If no positive steps are made at the level of investments in exploration and production of gas, or, more importantly, if revenues from other non-energy sectors (tourism, manufacturing, services, etc.) are not boosted, the situation may get further out of control. In this business as usual scenario, the shortage of heating, electricity and gas can reach 20% of its consumption by 2020 according to the estimations of the World Bank.3 This scenario can still be avoided as Uzbekistan has sufficient energy efficiency potential that may be released through well-conceived programmes that modernize the electrical and gas grids and resetting of priorities back in favor of domestic consumption.

[i] IEA (International Energy Agency) World Energy Outlook 2011, Energy for all, financing access for the poor excerpt, p.3

[ii] Gas Shortages in Energy-Rich Uzbekistan  http://iwpr.net/report-news/gas-shortages-energy-rich-uzbekistan

[iii] Uzbekistan- Energy/Power Sector Issues Note,World Bank, June 2013, pp. 5, 6, 24

[iv] BP statistical review of World Energy 2013, p.22

[v] Uzbekistan to increase natural gas exports to China, Times of Central Asia, 19 may 2014, http://www.timesca.com/index.php?option=com_content&view=article&id=13832:uzbekistan-to-increase-natural-gas-export-to-china&catid=84:market-a-companies&Itemid=576

[vi] CENTRAL ASIA’S ENERGY RISKS http://www.crisisgroup.org/~/media/Files/asia/central-asia/133_central_asia_s_energy_risks

 

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