Driving Uzbekistan’s Renewable Energy Growth Through PPPs and Policy Reform

Uzbekistan’s rich domestic reserves of coal, oil, and gas have long fueled its economic development. However, this abundance has been a double-edged sword. It has discouraged investments in energy efficiency and delayed the planning and infrastructure needed to harness renewable energy. As a result, Uzbekistan remains one of the most energy- and carbon-intensive economies in the world.

Despite having a relatively stable gas supply, the country’s power supply remains unreliable. Since 2010, electricity demand has surged, driven by growth in both industrial and residential sectors. At the same time, power generation assets are aging and operating with declining efficiency. This has led to frequent power outages that affect the quality of life for Uzbekistan’s 37.5 million people, disrupt business operations, and hinder the delivery of essential social services. In rural areas, outages during the cold season can last for hours, deepening urban–rural disparities. Urban areas also experience regular blackouts.

Uzbekistan will face major obstacles in meeting its Nationally Determined Contributions under the Paris Agreement and in achieving its goal of reducing the carbon intensity of its economy without changing its heavy reliance on fossil fuels.

To address these challenges, the government adopted a power sector development plan for 2020–2030. The plan commits to ensuring uninterrupted and reliable electricity for all consumers, investing in the rehabilitation, modernization, and expansion of power infrastructure, and diversifying the energy mix. It also promotes a hybrid financing model that combines public funding with private capital through public–private partnerships (PPPs). These partnerships are expected to play a central role in transforming the country’s energy landscape.

Government budgets alone often cannot meet the rapidly growing infrastructure needs of the energy sector. Public–private partnerships offer a way to bridge this gap by mobilizing private capital and introducing innovation and efficiency, often delivering better value for money than traditional public procurement.

In Uzbekistan, however, private sector participation in energy infrastructure has been limited. The key challenge is attracting sufficient investment volume and deploying it effectively to meet the country’s energy needs while ensuring social protections for vulnerable groups.

Energy projects carry unique risks. Their returns are measured over decades, and they typically rely on a single national off-taker, creating an exclusive source of demand and payment. This structure makes investors cautious, especially in markets without a proven track record of successful PPPs that guarantee payment reliability.

To address these concerns, the Government of Uzbekistan has taken steps to create a more investor-friendly regulatory environment. It restructured the state-owned utility to separate functions along the energy value chain and enacted new laws governing both renewable energy and PPPs. Despite these reforms, the government still needed support to turn solar power PPPs into viable, bankable projects.

To accelerate its transition to a low-carbon, inclusive, and market-driven economy, Uzbekistan partnered with development institutions to implement targeted interventions across the energy sector value chain.

Structure bankable solar projects through transaction advisory services.
The Asian Development Bank’s transaction advisory services helped ensure that Uzbekistan’s renewable energy tenders were fair, transparent, and commercially viable. In August 2019, the government selected ADB’s Office of Public–Private Partnership (now the Office of Markets Development and Public–Private Partnership, OMDP) to advise the Ministry of Energy and the Ministry of Investment and Foreign Trade. The mandate covered 1 gigawatt (GW) of solar projects under the ADB Uzbekistan Solar Program, to be developed by independent power producers by 2025.

ADB also supported project preparation by confirming the suitability of the Sherabad photovoltaic plant site, conducting due diligence, determining the project structure, and drafting key documents. The advisory also included preparing tender documents, managing the bidding process, and reaching commercial close for the Sherabad Project, which followed a design-build-finance-own-operate-maintain model.

The transaction advisory services included project preparation, confirming suitability of the Sherabad photovoltaic plant site, conducting due diligence on the project, determining the project structure, and drafting project documents. It also extended to tender document preparation, tendering and commercial close of the Sherabad Project, developed as a design-build-finance-own-operate-maintain scheme.

Mitigate off-taker risk through partial credit guarantees.
To reduce the risk of nonpayment or delayed payment by Uzbekistan’s electricity off-taker and encourage private sector participation, ADB offered a partial credit guarantee as part of the tender package. The winning bidder, Masdar (Abu Dhabi Future Energy Company PJSC), received this guarantee through a multitranche financing facility comprising four tranches of $11.5 million each ($10 million from ADB and $1.5 million from the government per tranche). This facility provides long-term, phased support for implementing Uzbekistan’s renewable energy roadmap.

Mobilize private capital through nonsovereign financing.
ADB’s Private Sector Operations Department (PSOD) promotes private investment in developing member countries through direct financing, credit enhancements, and risk mitigation tools. In Uzbekistan, PSOD has invested in five active solar energy projects, including Sherabad, and had three more either proposed or approved as of January 2025.

ADB’s transaction advisory services, sovereign guarantee facility, and nonsovereign investments have complemented the efforts of other development partners, including the International Finance Corporation and the European Bank for Reconstruction and Development. As of January 2025, EBRD had at least 19 renewable energy projects in Uzbekistan either signed or in the process of disbursement.

During the Sherabad advisory process, ADB built on the documentation developed for Uzbekistan’s first solar project, which was supported by IFC. The government then used the Sherabad templates for subsequent solar tenders, creating a standardized and replicable model for future projects. Similarly, the structure of the partial credit guarantee and letter of credit documentation developed for Sherabad is now being applied across the Uzbekistan Solar Program to attract private investment and mitigate credit risk.

Following the successful completion of Sherabad, the same process was used in 2023 for the Guzar solar photovoltaic and battery energy storage systems project.

These projects deliver measurable climate and development benefits. The Sherabad project is expected to mitigate 623,477 tonnes of carbon dioxide annually and supply electricity to 94,000 homes. The Guzar project is projected to reduce emissions by 401,000 tonnes of carbon dioxide per year and provide electricity to 60,000 homes.

Uzbekistan demonstrates the effectiveness of a whole-of-value-chain approach to energy sector reform. A sustainable PPP program requires both strong policy support and the delivery of high-quality, bankable projects. The government’s adoption of a partial credit guarantee (delivered through a multitranche financing facility) occurred alongside broader sector reforms and reflected its ambitious goals for energy transition and renewable energy expansion, especially in light of declining natural gas reserves.

The government embraced ADB’s advisory services and credit guarantee mechanisms as practical tools to accelerate project timelines and close financing gaps. These instruments helped Uzbekistan move from policy intent to implementation, enabling the country to attract private investment and build momentum for its renewable energy roadmap.

Innovation also lies in adaptation. While partial credit guarantees are not new, applying them to this context required creative thinking and technical adjustments. Traditionally used for other types of debt, the guarantee had to be tailored to suit the specific risks and structures of renewable energy PPPs. This adaptation proved critical in making the financing model work for Uzbekistan’s needs.