GAUGING INTEGRATION OF ELECTRICITY MARKETS IN CENTRAL ASIA
The integrated electricity market of Central Asia which hinges on high-voltage transmission lines – also known as the Central Asian Power System – is currently running afoul of its principal goal. Kyrgyzstan and Tajikistan are actively seeking ways to address the problem of their dependence on Uzbekistan, which for its own part is seeking to increase electricity exports outside Central Asia.
Allusions to the region’s electricity surplus stem from the fact that Central Asian states are well endowed with energy resources, such as hydro power and natural gas, which are essential for power generation. For instance, the hydropower capacity of Kyrgyzstan makes it possible to trade in electricity with Kazakhstan. It is claimed that participation in competitive bidding for the supply of electricity for Kazakh consumers increased the electricity price that Kyrgyzstan was to receive (the price had previously been negotiated through bilateral agreements between Kazakhstan and Kyrgyzstan) by 21 percent, providing an extra US$ 10 million for the state budget. Tajikistan in turn has about 1,5-2 kWh of excess capacity in the summer and it is claimed that the Nurek hydroelectric power plant discharges idle water in the summer time which may instead generate an additional 700 megawatts of export capacity.
Some opine that Russia, China, Afghanistan, Pakistan, Iran are potential markets for electricity generated in Central Asia. However, against a backdrop of potentially lucrative markets in Russia which considers Central Asian electricity as a cheaper alternative to their own generated capacity, the region itself is confronted with the challenge of meeting its own domestic demand, particularly during winter peaks. For upstream economies – Tajikistan and Kyrgyzstan – whose energy sectors are hugely dependent on hydro energy, ensuring security of supply when the reservoir level is usually low is no small undertaking, as the recent experience illustrates. Indeed, the notion of secured energy supplies for Kyrgyzstan and Tajikistan regained currency in the beginning of 2008, when they were unable to meet domestic demand as a result of an extremely cold winter. Unusually cold weather conditions (particularly in January-February 2008) brought horrendous consequences for Tajikistan, whose economy had to cope with nearly USD 250 million in losses.
Tajikistan’s energy sector is undergoing substantial transition. The ultimate ratification of the Kyoto Protocol by the Tajik Parliament is expected to put the construction of the Roghun hydroelectric power station – the most controversial project in Tajikistan which received wide publicity as well as opposition from Uzbekistan – on a solid economic footing. It is claimed that compensation for each kWh of electricity generated will have a redeeming effect on the scale of investments necessary for its implementation, and that it would also prove the viability of building other new capacities through the Clean Development Mechanism and thereby contribute to Tajikistan’s energy independence.
According to Zuhra Musoyeva, the chief expert of the Tajik Ministry of Economic Development and Trade, the state budget for 2009 envisaged the allocation of nearly US$ 160 million for the construction of the Roghun power plant, implying that the government is clearly set to implement the project intended to not only improve Tajikistan’s energy independence but also turn it into a major electricity exporter to Central Asian and Middle Eastern energy markets.
In terms of thermal energy supplies, Tethys Petroleum Limited, the Canadian gas firm, has recently signed an agreement with the government to appraise gas deposits in Tajikistan, as the report by privately-owned Tajik weekly newspaper Tojikiston states. The head of Tethys Petroleum Limited, David Robson, contends that the company is able to make a vast contribution to meeting country’s demand for natural gas within 2-3 years.
Meanwhile, according to a recent report by the state-owned Kyrgyz Television 1, the energy sector of Kyrgyzstan is also undergoing expansion. The Ministry of Industry, Energy and Fuel Resources of Kyrgyzstan and the South Korean EBPIK Ltd have signed an agreement aimed at the reconstruction of the Uch-Korgon hydroelectric power station and construction of the Datka, Kurshab substations and a power transmission line in the south of the country. Investments in the range of US$ 200 million to be made by EBPIK Ltd in return for the licensed development of a coal deposit are expected to virtually end Kyrgyzstan’s dependence on foreign electricity imports.
The Islamic Development Bank has approved funding for building a 500 kV transmission line to Afghanistan. The consequences are twofold. First, it suggests that the share of electricity generated in Uzbekistan and exported to Afghanistan will be increased. Second, shifting more supplies to Afghanistan implies that Uzbekistan will have less electricity to sell to its neighborhood.
For Uzbekistan on the other hand, the sustainability of an integrated electricity market with diversified export routes would pave the way for projects on a regional scale. Uzbekistan was seeking to privatise a minority of the shares in its “strategic” energy assets during 2005-2007 – the two biggest gas-fired power stations which account for a substantial amount of the capacity generated in Central Asia were up for auction. According to RBC daily, Russian Inter RAO UES was one of those interested in the Syrdarya thermoelectric power plant due to opportunities for electricity exports to neighbouring Tajikistan and Kyrgyzstan.
The energy policies of Central Asian states are polarized and evidently undermine the sustainability of common electricity markets and energy integration in Central Asia. Every effort aimed at integrating the energy markets of these states has so far been fruitless.
