Catalog

Win-Win Solutions
ADB Review [ October 2005 ]

ADB and the World Bank are encouraging Central Asian countries to optimize water and energy resources through a new power trade system, but traditional “zero-sum” attitudes remain a barrier

By Ian Gill, (igill@adb.org)
Principal External Relations Specialist

GULISTAN, TAJIKISTAN

In a village not far from Tajikistan’s principal hydropower facility, the Nurek reservoir, a widow with 10 children says she has electricity for only 4 hours a day, even in the bitterly cold winters.

“In summer it is fine, but in winter, it is too difficult. What can we do with 4 hours of power?” asks Sogigul Ragabova in the village of Khusnobod. “There is no heat and the houses are cold; everywhere is cold. Because there is not enough electricity, the workshops where we sew are closed; we cannot clean the school because the water is so cold, and the kindergartens are not open.”

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It is a sad irony that mountainous Tajikistan is rich in hydropower resources but the majority of its impoverished population has little electricity.

On the larger canvas of Central Asia, the irony runs deeper. Between them, the five Central Asian countries have more than enough water and fuel for their requirements and could earn much-needed revenue by exporting hydropower, natural gas, crude oil, and coal—if they could get their act together.

With their glaciers, Tajikistan and the Kyrgyz Republic have the snowmelt to produce hydropower as well as to feed Central Asia’s two major rivers, the Syr Darya and Amu Darya. For their part, low-lying Kazakhstan, Turkmenistan, and Uzbekistan have abundant fossil fuels, notably oil, coal, and gas.

In the Soviet era, these complementary resources were harnessed to irrigate vast cotton- and wheat-growing regions and to produce electricity downriver. The Soviets also established a very high-voltage power grid linking the Central Asian republics.

In return for irrigation water in summer, the downstream countries provided the upstream countries with coal and gas on a barter basis for heating in winter.

“For all intents and purposes, everyone was happy,” says Simon Kenny, the World Bank’s regional program coordinator in Almaty. “But as soon as the Soviet system collapsed, that trade cooperation system fell apart.”

Since independence, understandably, national interests have prevailed. For example, the Kyrgyz Republic, not content with the compensation it receives for irrigation water, prefers to operate its Totogul reservoir in the power mode to maximize electricity generation in winter. The same holds true for Tajikistan and its Nurek reservoir.

The downstream countries are unhappy either because they do not get enough water for their crops in summer, or they get flooded when the upstream countries release water for electricity in winter.

Both the World Bank and Asian Development Bank (ADB) are trying to help countries reach a new power trading agreement.

ADB has been supporting a bilateral agreement between Tajikistan and Uzbekistan by encouraging win-win scenarios. For example, both sides would gain if Uzbekistan bought more hydropower from Tajikistan in summer and provided Tajikistan with enough income to buy gasfired electricity from Uzbekistan in winter. As an inducement to reach agreement, ADB is offering to finance repairs to the power grid’s aging infrastructure, including the dispatch center in Tashkent.

However, issues of pricing and control of the load dispatcher have been held up as sticking points in protracted negotiations.

Outside observers, however, say that political factors might be more of a barrier than technical issues. “There is a deeply embedded socialist idea that regional relations are a zero-sum game and that a gain for one country entails a loss to another,” says one analyst. “There is resistance to the idea that a country might benefit from regional cooperation by ceding any of its national interests.”

Such prejudice notwithstanding, “The case for more cooperation is that a power trade agreement between Tajikistan and Uzbekistan would encourage others to form a regional market,” says Xavier Humbert, an ADB energy specialist. “Increased power trade would also bring long-term savings to businesses and consumers. Also, a fairer and more transparent operation of power systems in Central Asia would attract outside investment in new hydropower capacity and enable the Kyrgyz Republic and Tajikistan to export hydropower.”

An obstacle to monetizing the costs and benefits involved is the widely held view that water is a natural resource that should be free. The Kyrgyz Republic and Tajikistan do not argue with this, but claim they should be compensated for the storage costs in operating and maintaining their reservoirs.

BIG POTENTIAL Tajikistan’s main hydropower facility at Nurek: power could be traded more effectively

Here, too, are different views. World Bank estimates that while the Kyrgyz Republic incurred $35 million to operate the Totogul reservoir in an irrigation mode in 2001, it was compensated with only $29 million worth of coal and gas by the downstream countries.

Or, from another view, the Kyrgyz say that while it cost them $35 million to operate Totogul in an irrigation mode, Uzbekistan and Kazakhstan gained $69 million in agricultural produce with the extra water. The Kyrgyz wonder aloud if they should not get a share of that benefit.

A new power agreement remains elusive for the time being, but Mr. Kenny takes the long view.

“We are not looking at resolving regional cooperation issues overnight,” he says. “We have to be patient and find ways of selling a lot of these options as win-win situations, not as ‘you win, we lose’ situations.”

One win-win scenario would be if the Kyrgyz Republic and Tajikistan could develop their hydropower potential and export to Afghanistan, Iran, Pakistan, and Russia through the existing or a new transmission system. Earning more revenue would give them less reason to release water in winter. For Uzbekistan, too, an expanded regional power trading system would provide cheaper electricity, enabling it to export gas at international prices rather than use it to fuel expensive thermal plants.

Meanwhile, rehabilitating the power grid, along with institutional improvements, is estimated to raise available generation by as much as 30% in Tajikistan— providing electricity for longer periods for long-suffering consumers.

Such news would be welcome indeed to impoverished villagers such as Ms. Ragabova and her family.

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