This section explores barriers that could hamper the deployment of solar energy technologies in Uzbekistan by taking a look at its current solar policy. The section discusses Uzbekistan’s situation from the following perspectives, drawing on the approaches developed by Solar Energy: Mapping the Road Ahead (IEA and ISA, 2019):

• solar resource information and workforce
• policy, regulatory and market frameworks
• non-economic barriers
• financing and economic factors
• integrating solar projects into the Uzbek energy system and infrastructure.

Although the cost of renewable energy has been rapidly decreasing over the decades, government policy and regulations still play a critical role in attracting private investment and ensuring an appropriate energy market.

As discussed above, the Law on the Use of Renewable Energy Sources and the Law on PPP serve as a regulatory framework to accelerate the implementation of renewable energy projects, including financial incentives for the use of renewable energy sources. The Regulation for Connecting Businesses provides detailed technical aspects for integrating renewable energy facilities into the electricity system, but the permitting procedure is still unclear.

In terms of land availability, while no specific difficulties are reported for obtaining plots for the construction of large-scale solar farms, citizens who want to obtain plots to build small-scale solar power generators do seem to be encountering difficulties.

The Interdepartmental Tariff Commission under the Cabinet of Ministers, established in 2018 and whose working body is led by the Ministry of Finance, determines electricity tariffs. Electricity tariffs in Uzbekistan have been on an upward trend, reaching approximately 0.028 USD/kWh for households and 0.043 USD/kWh for others (IEA, 2020a). However, they are still lower than in neighbouring countries and lower in an international comparison, remaining inadequate to recover operation and maintenance costs and increasing financing for new projects. In this regard, the Interdepartmental Tariff Commission is working on setting electricity tariffs based on reasonable expenses for its production, transmission, distribution and sales, considering the reimbursement of capital costs and maintaining 10‑20% profitability. Moreover, in line with the Concept Note for ensuring electricity supply in Uzbekistan in 2020‑2030, differentiated tariffs for electricity for residential consumers based on time of day, working days and holidays will begin in 2022, while feed-in-tariffs for purchasing surplus electricity generated by own renewable sources will begin in 2023.

As regards the electricity market, Uzbekistan is transitioning to a competitive wholesale electricity market to be fully implemented in 2023, which would oblige all power generators to participate in the market and allow new market participants transparent and non-discriminatory access to the electricity network. To this end, the following measures will be undertaken:

• approve the models of: wholesale market (monthly contracts, day-ahead trade, intraday trade) and interim stages; balancing market; market operating rules; and market participant licensing rules (by 2022)
• establish an electricity market regulator – an independent body responsible for regulating, licensing and controlling functions in the power and natural gas markets (originally planned to be undertaken by 2021).

To promote the use of solar heat in the building sector, all new and refurbished buildings, except for individual houses, are required to be equipped with certified solar water heating installations for hot water supply, in accordance with the Decree on the Program for the Development of the Heat Supply System for the period 2018-2022. All state institutions also are set to be switched from the centralised hot water supply to solar water heating plants from 2022. Moreover, with a view to stimulating the use of solar heat in individual houses, in 2020, the government started to provide subsidies to individuals who purchase solar water heaters. The subsidies cover 30% of their upfront cost. In addition, the government approved a targeted programme for the installation of water heaters with a capacity of about 200 litres to cover 2-2.5% of households, as well as for the installation of 150 000 rooftop solar PV with a capacity of 2‑3 kW by 2025. 

Access to financing for solar energy technologies is a precondition for their deployment. Technological viability depends on financing costs due to the high upfront capital costs involved, the long-term economic lifetimes and the impact of the weighted average cost of capital.

As was described earlier, the Uzbek government, with financial and technical assistance from international financial institutions, has implemented competitive bidding processes to attract private sector investment in large-scale solar power projects since the enactment of the Law on PPP in 2019. Looking at one of the latest bidding projects, Abu Dhabi Future Energy Company PJSC, known as Masdar, was awarded a 220 MW solar PV project in the Samarkand region to supply electricity through the National Electric Grid of Uzbekistan JSC (NEGU) for 25 years at 17.91 USD/MWh (IFC, 2021). This is already lower than the global average auction prices for solar PV.

In line with the Law on the Use of Renewable Energy Sources Business, entities and individuals who install renewable energy facilities are eligible for the following benefits and incentives, including tax incentives:

• Manufacturers of renewable energy facilities are granted the right to create local networks and conclude agreements with legal entities and individuals for the sale of energy.
• Renewable energy generators are exempted from property tax for these installations and from land tax on the sites occupied by these installations (more than 0.1 MW) for ten years from the date of their commissioning. They are also granted the right to create local networks and conclude agreements with legal entities and individuals for the sale of energy.
• Individuals are exempted from property tax on property owned by persons using renewable energy facilities in residential premises with complete disconnection from the existing energy networks for three years from the date of using the facilities.