Tajikistan’s electricity sector is almost solely based on hydropower and is characterised by seasonal surpluses and shortages, and a state-owned electric utility with financial viability issues. The power sector is undergoing several institutional reforms to alleviate these challenges including restructuring the vertically integrated utility, implementing energy efficiency laws and measures, and updating its regulatory and tariff regimes.

Tajikistan’s electricity needs are largely supplied by hydroelectric power thanks to its abundant water resources, namely the rivers Amu Darya and Syr Darya with a total length of 28 500 km, as well as several glaciers with a total volume of 845 km³ (MEWR, 2021a). It has relatively little thermal generation. In 2019, 93% of its generation was from hydro and 7% was from coal-fired capacity. Tajikistan has limited sources for heating other than electricity which accentuates winter peak demand and deficits.

Installed generation capacity in Tajikistan today is 5 810 megawatts (MW), of which 3000 MW comes from the Nurek hydro facility, about 1900 MW from various run-of-river hydro plants, and just under 600 MW from combined heat and power (CHP) plants at just under 600 MW. Barki Tojik, the state-owned utility, owns and operates majority the electricity system except for the Gorno-Badakhshan Autonomous Region which is served by Pamir Energy through a concession agreement, and power plants Sangtuda-1 and Sangtuda-2. Several power plants and transmission lines were built during the Soviet era and are overdue for rehabilitation. Network losses are estimated to be 28% (EBRD, 2020). 

Historically, Tajikistan relied on imports from its Central Asian neighbours to make up for seasonal electricity shortages. But it was disconnected from the Central Asian Power System (CAPS) in 2009 effectively isolating the country and exacerbating the winter shortfall. However, in 2018 Tajikistan reconnected and initiated bilateral electricity trade with Uzbekistan in which it exported 1.5 terawatt-hours (TWh) at USD 20 per megawatt-hour (MWh). The price and quantities are expected to be renegotiated every season.

Electricity shortages in the winter are critical for Tajikistan. Load shedding has been a regular practice. The most recent was in December 2020 in response to a drop in water levels at the Nurek hydropower facility (Eurasianet, 2021). Further development of its thermal and hydro resources has been a priority. The first two generating units of the six planned at the much delayed Rogun hydro development were installed by 2019, but only one operated in 2020. Full development at Rogun is expected to provide 3 600 MW of capacity by the end of 2030 (Corporate Solutions, ADB and MEWR, 2017).

Tajikistan’s GDP increased 73% in the 2010-2018 period and total energy consumption rose 48%. Even with the boost in economic activity, Tajik households remain among the poorest in the region in terms of average income and this influences measures to keep the government-regulated residential electricity tariffs low.

A high rate of uncollected payments for electricity use due to illegal connections, power theft and outdated metering infrastructure contribute to the worsening financial health of Barki Tojik (BT). The state-owned utility has been operating with losses in recent years. In 2019, BT experienced losses before tax at USD 506 million (about Tajikistani Somoni 5.8 trillion1) and had an equity value of USD 793 million and debt of USD 1.66 billion. Such financial conditions make it difficult to raise capital to invest in new generation capacity and to sustain payments to private operators. In 2019, for example, BT owed USD 114 million to the Sangtuda-1 hydro plant, one of the first hydropower joint-ventures in Tajikistan (Sputnik Tajikistan, 2019).

The residential sector accounts for about 47% of electricity demand. Industry accounts for about 31%, primarily from the aluminium production company, Tajik Aluminium Company (TALCO). Agriculture accounts for about 16% (MEWR, 2017a). Aluminium and agriculture are strategically important as significant contributors to GDP and to exports. Currently, TALCO pays industrial tariffs of USD 6 per megawatt-hour (MWh) in the summer and USD 10/MWh during the winter whereas residential tariffs are USD 20/MWh.

The government has taken steps recently to address the financial viability issues of BT. It increased average end-user electricity tariff by 22% and is developing a methodology for future tariff increases in order to achieve cost recovery. In addition, some USD 450 million, equivalent to about 35% of Barki Tojik’s long-term debt, has been restructured to help with liquidity issues (ESMAP, 2020). 

Limited cross-border electricity trading opportunities hinder Tajikistan from optimising the advantages of its hydro resources. This affects its ability to pay liabilities and raise capital to further develop its power generation fleet (ADB, 2016). Its hydropower potential is around 527 TWh, of which only 23 TWh is developed. If Tajikistan tapped most of its hydropower potential, it is estimated that by 2030 it could generate an average exportable surplus of 10 TWh and a firm exportable surplus of 5.6 TWh (excluding its thermal generation capacity).

As private participation in electricity generation is currently limited, developing its hydropower resources would require significant investment from Barki Tojik. Improving the utility’s financial conditions is essential to raise capital. Obtaining additional income through electricity exports could help. In 2019, BT exported 3.2 TWh and imported 0.3 TWh of electricity.

While exports are the prime motivation of Tajikistan to pursue cross-border electricity trade in order to gain revenue, the option to import electricity in times of shortage should be open. Imports could also delay or avoid the need to build new thermal generation capacity. This is an important consideration as several lending institutions such as Asian Infrastructure and Investment Bank (AIIB), European Bank for Reconstruction and Development (EBRD) and European Investment Bank (EIB) are restricting funding for coal-fired power projects and coal mining (IEEFA, 2021). In Tajikistan’s power sector plan, coal is the main fuel choice in several of its scenarios to address increasing electricity demand, especially in winter.

In the long term, climate change could pose risks in terms of melting glaciers and increasing droughts. Given Tajikistan’s reliance on hydro, it exposes the power system to risks arising from potential water unavailability. Apart from higher evapotranspiration affecting agricultural water demand, recent studies show that Tajik glaciers could lose 15-20% of their original volume over the next 50 years. This is estimated to lead to an initial increase in water flow in key hydropower rivers such as the Vaksh - a tributary river to the Amu Darya, but with a long-term decrease due to the depletion of glacial reserves (Tajik NIIGiM, 2020).

Diversifying electricity sources and trading partners through cross-border trading could help Tajikistan manage the risks related to water supply and hydropower output. Given the country’s goal for energy independence, opting for short-term flexible contracting allows it to undertake strategic trades without being tied to long-term agreements.

Tajikistan’s primary energy legislation is the Law on Energy (2000) that grants the government the authority to develop the energy sector including investment and concessions, pricing and tariff structures, and to control the use of fuels and renewable energy resources. Other relevant energy legislation includes the Law on Renewable Energy Resources (2010) and the Law on Energy Saving (2013).

The electricity sector is largely owned and operated by Barki Tojik, a vertically integrated state-owned utility responsible for generation, transmission, distribution and retailing. Several restructuring efforts were conducted to help improve the power system’s operation. The transmission, distribution and retail have been financially unbundled based on Decree No. 431 “On an individual plan for the restructuring of Barki Tojik” (2011). Based on Resolution No. 234 (2018) efforts were undertaken to establish separate legal entities for the transmission network operator and the distribution network operator for the country, except for the Gorno-Badakhshan Autonomous Oblast (GBAO). The heads of these entities were appointed in 2020, and in 2021 the operating entities were legally registered with the official names OJSC “Shabaqahoi intiqoli barq” (transmission) and OJSC “Shabaqahoi taqsimoti barq” (distribution). OJSC Barki Tojik remains responsible for electricity generation and for export and import. In the GBAO autonomous region, the Pamir Energy Company, a public-private partnership established in 2002, owns and operates the generation, transmission and distribution system.

Energy prices and electricity tariffs are administratively set by the Antimonopoly Committee of the Ministry of Economic Development and Trade on an ad hoc basis. In the past, tariffs have not been reflective of the cost of service. Hence, in 2017, a new tariff methodology was established that aimed to increase electricity tariffs incrementally to achieve cost recovery by 2025 by establishing a required income for the generation, transmission and distribution assets. Excluded are the Sangtuda 1 and 2 hydropower plants, and Pamir Energy in the GBAO autonomous region which have separate investment agreements (Republic of Tajikistan, 2017). Tariff increases were implemented in 2018 and 2019, the next incremental increase was postponed in 2020 due to the COVID-19 crisis.

The power sector is considered a strategic industry for Tajikistan. In 2016, it launched the National Development Strategy 2030 which includes a goal to become energy independent. The strategy’s primary aims are summarised as “10-10-10-10-500”, which is shorthand for:

• Increasing installed capacity by 10 GW.
• Reducing technical grid losses by 10%.
• Increasing electricity exports to 10 TWh per year.
• Diversifying generation sources by increasing non-hydro generation capacity to at least 10% of the total share.
• Achieving energy savings of 500 GWh from energy efficiency measures.

In order to achieve these goals several laws related to investment were streamlined. Investment in the power sector is governed by laws on: Privatisation of State Property (1997, updated 2017); Production Sharing Agreements (2008); Credit Histories (2009); Concessions (2011); Public-Private Partnerships (2012); and Investment Agreements (2016). Some of the mechanisms under these laws involve:

• Income tax exemptions based on amount invested
• Tax and customs benefits for relevant machinery and equipment for energy production
• Legal status for the investor, such as right to transfer profits abroad
• Capital protection, with legal frameworks, partnership and investment agreements.

Developments that facilitate private sector participation in the power sector are relatively recent. The Pamir Energy Company was the first public-private partnership, which is a concession agreement to serve the GBAO autonomous region. The hydropower plant Sangtuda-1 was commissioned in 2009 and is operated by the Russian company, Unified Energy Systems. Sangtuda-2 was commissioned in 2011 and is operated by Iranian company, Sangob. Both Sangtuda hydro projects were executed under a build-own-operate-transfer arrangement.

The Ministry of Energy and Water Resources is responsible for the management of the country’s water and energy resources. Its mandate is to harmonise water and energy policy through planning the development of water and energy resources, management and regulation, capacity building and exercising state control over the rational use and protection of water resources. It facilitates investment and concession agreements in the energy sector, is responsible for co-ordinating activities of the ministries and agencies involved in water resources, and acts as the authority and leading body in the national dialogue on policy related to integrated use of water resources.

The Ministry of Economic Development and Trade is in charge of developing short-term, medium-term and long-term strategies for socio-economic development in conjunction with state programmes for internal and external investments. Through its Antimonopoly Committee, it is the regulator for the tariffs of BT. It is also responsible for sectoral and regional development programmes, as well as developing principles and mechanisms for economic reform.

The Ministry of Finance allocates budgets for state-owned companies and also handles debts and financing from multilateral institutions.

The Agency on Statistics, Tajikistan (TajStat) is the central statistical office tasked with collecting and disseminating key data on demographics, prices and enterprise surveys.

The Open Joint Stock Holding Company (OHSC) Barki Tojik (BT) is the state-owned electric utility responsible for generation, transmission, distribution and retail sales. It has been legally unbundled into three separate companies, with ongoing separation of responsibilities. It is responsible for supplying Tajikistan’s electricity needs, except for the GBAO autonomous region. BT manages electricity imports and exports.

Pamir Energy is a company established as a public-private partnership. It was formed in 2002 to meet the energy needs of the residents of the Gorno-Badakhshan Autonomous Region, a mountainous territory bordering the People’s Republic of China (hereafter, “China”) to the east.

The Central Asia-South Asia (CASA)-1000 Intergovernmental Council was established by the governments of Tajikistan, Kyrgyzstan, Afghanistan and Pakistan to make decisions about the transmission system project implementation and operation, common policies and rules, and use of established technical, safety and environmental standards. The council also selects the operator of the CASA-1000 transmission system.

The Interstate Commission for Water Coordination of Central Asia (ICWCCA) is an interstate body that includes Tajikistan, Kyrgyzstan, Kazakhstan, Turkmenistan and Uzbekistan. It is the only interstate body established and authorised by the heads of the respective Central Asian countries to make binding decisions on current and emerging issues related to interstate water allocation and use. It is responsible for determining regional water policy, establishing water limits and schedules for reservoir operating regimes.

The Coordination Electrical Power Council of Central Asia (CPC) is a deliberative body to co-ordinate the operation of power grids in Central Asia. Its current members are the grid operators in Kazakhstan, Uzbekistan, Kyrgyzstan and Tajikistan. Turkmenistan was a member until 2003 when it disconnected from the Central Asian Power System to fully operate in parallel with Iran. The body agrees on operating concepts, decisions and rules to ensure cost-effectiveness and reliability for Central Asian energy systems, and approves methodologies, rules, instructions and regulations governing the interaction of the various power systems.

The Central Dispatch Centre Energiya (CDC) is an operating and dispatch institution under the CPC responsible for calculating transfers between the countries of Central Asia in the former Central Asian Power System. Located in Uzbekistan, it received investments from the five Central Asian countries. The withdrawal of Turkmenistan and Tajikistan reduced the co-ordinating activities.

In Tajikistan’s neighbouring countries, the various national ministries for energy, economy and trade as well as the entities involved with generation, transmission and distribution of electricity as trading partners are relevant stakeholders in establishing efficient cross-border electricity trading.