ADVISING ON POWER SECTOR INSTITUTIONAL REFORM IN UZBEKISTAN

In 2017, the Government of Uzbekistan launched an ambitious program of economic reforms aimed at transitioning the country to a market-oriented economy. The energy sector was a central focus: decades of Soviet-era vertical integration had left Uzbekistan with a power sector characterized by institutional fragmentation, weak governance, limited private sector participation, and tariffs that fell short of cost recovery. The Government asked the World Bank to lead energy sector institutional and sector restructuring as one of two key areas of reform, and the World Bank hired DHInfrastructure to provide the analytical foundation for that agenda.

DHInfrastructure reviewed the policy, legal, regulatory, institutional, and governance framework governing Uzbekistan's power sector, meeting with a wide range of stakeholders to understand their objectives for reform and the options they were considering. We benchmarked Uzbekistan's energy sector against the sectors of comparable countries, using case studies and performance indicators to identify where Uzbekistan lagged and what factors explained the gap. Drawing on this analysis, we developed a set of reform recommendations covering the full arc of institutional change: restructuring the sector's vertically integrated entities, strengthening the regulatory framework, improving governance and accountability, creating the conditions needed for private sector participation, and sequencing reforms to build momentum while managing the political economy of change. Our recommendations were presented to a wide range of government and sector stakeholders and formed the analytical basis for the World Bank's engagement on institutional reform.

Following the Government’s adoption of a broad energy sector reform agenda in 2019, Uzbekistan undertook one of the most significant power sector restructurings in Central Asia. The vertically integrated state utility Uzbekenergo was unbundled into separate generation, transmission, and distribution companies; a new Ministry of Energy was established to lead sector policy and reform implementation; and the Government initiated tariff, governance, and regulatory reforms aimed at improving financial sustainability and creating the conditions for private investment. These reforms helped lay the groundwork for a rapid expansion of independent power producer (IPP) and renewable energy projects supported by the World Bank, IFC, ADB, EBRD, and other development partners. Since 2019, Uzbekistan has attracted billions of dollars in energy sector investment, including some of the region’s first competitively procured utility-scale solar and wind projects, positioning the country as a leading example of energy sector transition and market reform in Central Asia.