|Project Rationale and Linkage to Country/Regional Strategy
Uzbekistan's power generation plants are generally old and inefficient, requiring urgent modernization. More than 75% of the power plant units are over 30 years old reaching or exceeding their economic life. The thermal efficiency averages 31%, while that of energy efficient CCGT exceeds 50%. Replacing the existing power generation assets with energy efficient equipment is a key strategy for saving energy, securing reliable power supply, and reducing greenhouse gas (GHG) emission. To this end, State Joint-Stock Company Uzbekenergo (Uzbekenergo), a 100% government-owned vertically integrated utility company, has developed a $5.3 billion investment plan (2011 2015) that includes construction of 15 thermal power plants (2,412 megawatt [MW]).
The project that constructs a 280 MW CCGT is a priority project identified under this investment plan. The 730 MW TPP is the main power supply source for the Karakalpakstan and Khorezm regions with over 3 million people located in the western part of Uzbekistan. The power demand outlook is strong with a number of industrial development projects envisaged for the region, exceeding currently available capacity. In the medium term, the transmission capacity for the region also needs to be expanded, and power generation capacity of Takhiatash TPP needs to be further expanded.
Out of the five gas-fired steam turbine units in operation at Takhiatash TPP, three units built in 1969 (two units of 100 MW) and 1974 (one unit of 110 MW) are some of the oldest units in operation with 23.7% efficiency. After the new power unit becomes operational, these units will be decommissioned. Decommissioning requires careful planning and implementation without disrupting reliable power supply and in compliance with safety and environmental standards, as well as cost effectiveness consideration.
Uzbekenergo is improving its organizational performance through the assistance of ADB. The investment unit will be restructured. Financial transparency will be improved through introducing financial reporting and auditing that complies with international standards. Further restructuring envisage a more efficient cost-centered approach. Management and planning systems will be modernized to increase its operational performance. The electricity tariffs have been raised continuously since 2004 to ensure full cost recovery. The introduction of advanced electricity metering will further strengthen financial sustainability.
Notwithstanding, further reform efforts are necessary. Uzbekenergo faces a $1.6 billion funding gap to fulfill its $5.3 billion investment plan. It needs to develop a strategy and build the capacity to attract and raise investment funds required to transform its infrastructure facilities into efficient assets. While there is a substantial opportunity, knowledge and technical capacity to attract investment funding, including climate change funds and carbon financing, are limited.