Transition to a Resource Efficient Pattern of Growth in Energy Sector
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Uzbekistan aims for sustainable economic growth of 7-8% annually by transforming its GDP structure and addressing increased energy demand due to demographic changes. The energy sector can transition to a resource-efficient model through two options: a phased approach or a fast-track strategy, each with different impacts on economic growth and energy balance. Additionally, implementing institutional reforms and developing solar energy are crucial for achieving energy efficiency and generating multiplier effects in related sectors.
Transition to a Resource Efficient Pattern of Growth in Energy Sector
- 1. Transition to a Resource-Efficient Pattern of Growth in Energy Sector Tashkent, 2015
- 2. Uzbekistan: New Development Goals Towards 2030 Development goals and trends towards 2030: • Ultimate goal – to ensure sustainable economic growth at 7-8% per annum; • Transformation of GDP structure by increasing the share of manufacturing from 9% in 2012 to 22% in 2030; shift towards production of more sophisticated services; • Transformation of pattern of enterprises: more large and medium enterprises; • Population growth, change in the demographic pattern and growth of personal income; • Transformation of employment pattern and related social transformations contributing to the change of the lifestyle, consumption pattern, behavioral stereotypes; All this will expand the demand for energy resources to 6.88% per annum To cope with the new challenges and employ the emerging opportunities the revision of the existing pattern of energy consumption may be required 9,1 9 17 22 14,1 26,4 19,4 15 28 19,5 10,5 8 48,9 45,1 52 55 0% 20% 40% 60% 80% 100% 2005 2012 2020 2030 Processing industry Mining industry Agriculture Services Uzbekistan: Transformation of GDP structure to 2030, % Population Growth and Transformation of Demographic Structure: 2012 vs 2030 2,3 18,2 9,1 5,1 22,1 10 0 5 10 15 20 25 Above the working age Working-age people Below the working age 2012 2030 44,5 32,3 19,1 4,1 0 10 20 30 40 50 2015 2020 2025 2030 Transformation of the pattern of enterprises: Value added Uzbekistan: Transformation of the Structure of Society
- 3. Transition to the Energy-Efficient Growth Pattern: 2 Viable Options • Two viable options of transition to the resource-efficient model in energy sector: • Option 1 – phased approach: increase in extraction of energy resources by 1.5%, while reducing energy intensity down to 40% by 2030 Energy balance shortage at 31.9%, maximum economic growth of 5% towards 2030. • Option 2 – fast-track: growth in extraction of energy resources by 2%, combined with reduction of energy intensity by 2.3-fold until 2030 5.5% surplus of the energy balance; growth at more than 8% per annum. Option 2 will enable to attain the goals of the Strategy Option Annual growth of production of energy resources, % Annual growth of energy efficiency, % Structure of energy balance Energy balance, % Maximum economic growth? % Phased approach 1.5 2.8 33.5% of demand covered by expansion of production & energy efficiency 0.6 % - by solar energy, 0.4% - by biogas, shale oil, etc. - 31.9 5 Fast – track approach 2 4.7 70 % of demand covered by expansion of production & energy efficiency 0.6 % - by solar energy, 0.4% - by biogas, shale oil, etc. +5.5 Over 8%
- 4. How to implement Resource-Efficient Growth Pattern in Energy Sector: Improve Energy Efficiency of Economy Strategies to improve energy efficiency towards 2030: 1. Complete phase-out of incandescent bulbs, upgrade outdated heating boilers and pumps in all sectors; 2. Introduce within 2 years special systems to track energy and financial flows in the sector (ERP systems, electronic trading, IFRS reporting); 3. Introduce online system of monitoring and billing for households (the integrated system of metering of energy consumption), change the principles of settling accounts with farmers; 4. Introduce technologies to monitor energy flows while transportation (SCADA); complete modernization of power distribution networks and transformers by 2020;
- 5. How to implement Resource-Efficient Growth Pattern in Energy Sector: Develop Solar Energy • Solar energy should become the key driver of energy sector development and account for 6% in the power balance in 2030. • Potential of renewables in Uzbekistan is 3.1 times as high as the current production of primary energy resources. • Development of solar energy will generate direct and multiplier effects by boosting demand in the associated sectors, expanding consumption and thus, generating demand for labor and accelerating transformation processes. 2020 2025 2030 Generation of solar energy (3000 MW), GWt 1827.7 3655. 4 5483. 1 Total amount of electricity generated 67500 78600 90100 Share of solar energy in energy balance 2.7% 4.7% 6.1% Share of solar energy could grow to 6% by 2030 Multiplier effects to be generated from solar energy Effects of solar energy development 2013-2030 Direct and first level multiplier effects 3.5 bln USD Second-level multiplier effects 0.87 bln USD Gas savings 2.9 bln USD Net benefit (annual) 204.5 mln USD Energy source Technical potential Employed potential Hydro 2.32 0.72 Solar 176.8 appr. 0 Wind 0.4 appr. 0 Biomass 0.5 appr. 0 Total 182.3 0.72 Potential of Renewables in Uzbekistan, mln t.o.e.
- 6. How to implement Resource-Efficient Growth Pattern in Energy Sector: Institutional Reforms 1. Implementation of the suggested solutions is not possible without the institutional reforms 2. To identify the strategies for institutional reforms in Uzbekistan, we looked at the experience of countries, that encountered with the problem of scarcity of energy resources - net importers of energy resources What does experience of net importers suggest? Regulatory function not performed by NOC NOC budget is not approved by Government Chairman is not a minister of energy and not appointed by government officials Competition Privatization in the system of energy distribution Emphasis on energy efficiency, prices for energy are higher than in net exporters What we recommend for Uzbekistan? Split up business functions from regulatory functions in the energy sector. This requires to set up one regulatory body (Ministry of Energy) and leave companies to explicitly focus on business operations Gradually reduce the difference between prices for domestic consumers and export prices of gas by raising domestic tariffs (with mechanisms to ensure affordability for low-income group) After 2020 gradual privatization in the system of energy distribution and transmission could be started to attract private investments into the sector.
- 7. Effective Solutions for Institutional Reforms: Net Exporters VS Net Importers of Energy Resources Korea China Malaysia Vietnam KOGAS CNPC SINOPEC CNOOC Petronas PetroVietna m Ownership (public vs private) 60,9 vs 39,1 86.29 vs 13.71 76 vs 24 66% vs 34% 100% public 100% public Competition Yes, a number of foreign companies on the market Yes, main competitors –Chinese companies, foreign companies. Competition is limited No competition Is chairman also minister of energy or appointed by head of state? No No No No Yes Yes Institutional structure score: 100 - regulatory function not performed by NOC; 0 – All the regulatory functions are performed by NOC 66 66 66 66 45 40 Independence of NOC capital and budget process: 100 - No governmental approval of NOC budget required; 25 - NOC budget is approved by central government 75 75 75 75 50 50 Performance: E&P production growth, % (2008) 6,62 1,99 15,5 3,67 Reserves replacement rate, % 121,25 80,39 68 90
- 8. Road Map Towards 2030
- 9. Questions for discussion • Are we on the right path? • Are there any dimensions, critical issues which were omitted, should get considered in more detail? • What approaches, methods and indicators need to be revised? • What’s next? How can we jump to formulating the detailed Action Plan and Road Map for the Vision? Suggested formats and models. • Are there windows for synergies?
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