UZBEKISTAN IN OR OUT OF THE CENTRAL ASIAN ENERGY GRID?

UNCLAS SECTION 01 OF 04 TASHKENT 001904

SENSITIVE
SIPDIS
DEPARTMENT FOR SCA/CEN, SCA/FO ROBERT DEUTSCH

E.O. 12958: N/A
TAGS: ECON ENRG KPWR UZ
SUBJECT: UZBEKISTAN IN OR OUT OF THE CENTRAL ASIAN ENERGY GRID?

REF: 08 TASHKENT 1425; 09 DUSHANBE 121; 09 DUSHANBE 224
09 ASTANA 1620; 08 TASHKENT 1052

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1. (SBU) SUMMARY. In recent weeks GOU officials have sent
frightening signals to Uzbekistan's neighbors by saying that the
country cannot guarantee reliable transit of power, wants payments
for power overflows, and may even withdraw from the United Central
Asia Power System (CAPS). Now nearly energy independent,
Uzbekistan appears to have decided that this is the time to flex
its muscle and reap greater benefit from its location and key role
in CAPS. Although near-term withdrawal from CAPS is unlikely, the
coming winter could be another cold and dark one for Tajikistan and
Kyrgyzstan as Uzbekistan increases fees for transit and
occasionally interrupts power for "technical" reasons. END SUMMARY



CAPS: WHAT IS IT?

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2. (SBU) The United Central Asia Power System (CAPS) was developed
in Soviet times to integrate the power generation and distribution
infrastructure for the Central Asian Region (CAR). Uzbekistan,
Kyrgyzstan, and Tajikistan were the core members of this regional
power transmission grid, which also included the transmission
systems of southern Kazakhstan and portions of Turkmenistan.
Uzbekistan generated 51 percent of the grid's power, followed by
Tajikistan at 15 percent, Kyrgyzstan at 14 percent, Turkmenistan at
11 percent, and southern Kazakhstan at 9 percent. (NOTE:
Kazakhstan, due to its geography, was connected to the Siberian
Power System in the north and to CAPS in the south, with only
limited connection between the two.) Tajikistan and Kyrgyzstan
generated electricity mainly in the summers via hydro-power and
imported electricity during the winter consumption peaks. Southern
Kazakhstan was always a net importer of electricity, mainly from
Uzbekistan.




3. (SBU) CAPS was an advanced solution for its time. It ensured
reliable, stable, balanced, and harmonized power sharing between
the republics by using one united and self-balanced 500kV
transmission ring. It was designed and built without consideration
of the administrative borders between the republics, and it was
coordinated directly by a dispatch center in Moscow.




4. (SBU) After 1991 all CA states except Turkmenistan agreed to
maintain this system under the direction of the Coordination Power
Council of Central Asia (CPCCA). The Council is chaired on a
rotating basis by the energy ministers of the member states. The
technical operation of CAPS is provided by the Coordination
Dispatch Center (CDC),which works under the direction of CPCCA and
is located in Tashkent. CDC is responsible for maintaining the
balanced and synchronized operation of the 500 kV and 220 kV
transmission systems of the four Central Asian states.




5. (SBU) Although it is almost impossible to control the timing and
location of so-called overflows of electrical power in member
countries, CAPS does have a limited ability to anticipate these
events. It also has the ability to regulate the operation of the
Naryn-Syrdarya and Amurdarya cascades. The CA governments agree on
the actual volumes of power swaps on an annual basis through
bilateral negotiations.



CAPS: THE BILATERAL COMPONENT

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6. (SBU) The bilateral agreements between Uzbekistan and Kyrgyzstan
are based mainly on energy swaps. Kyrgyzstan generates almost all

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of its power from hydroelectric plants located in the Naryn River
basin, which is also an important source of water for Uzbekistan's
eastern provinces and for Kazakhstan. Historically, in summer
Kyrgyzstan produced more power than it needed because it released
water for the irrigation needs of its neighbors, to whom it also
exported its surplus power. In winter it released only small
amounts of water and thus needed to import electricity and gas from
Uzbekistan and Kazakhstan.




7. (SBU) This balance began to fail after 2000. Uzbekistan and
Kyrgyzstan generated a long list of mutual charges of
infringements. Several times Uzbekistan suspended gas supplies to
Kyrgyzstan due to Kyrgyz debts, and Kyrgyzstan, in response, began
to generate power in the winter, releasing water and creating
floods in Uzbekistan and Kazakhstan. Kyrgyzstan also began urging
its neighbors to buy its excess electricity at low rates (4 cents
per 1kWh). The political will for compromise was lacking in both
countries. Instead, Uzbekistan built a new 169 km, 500kV line from
the Novo-Angren power plant to the Fergana Valley, thereby making
it fully independent of power imports from Kyrgyzstan. Kyrgyzstan
in turn announced plans to build two new power plants on the Naryn
River (Kambarata 1 and 2),which would give it even greater power
to regulate water releases to downstream Uzbekistan. Kyrgyz
national electrical grid operator NESK recently signed a memorandum
of understanding with the Chinese company TBEA to build "Datka"
hub-station in southern Kyrgyzstan, and construction of 500kV lines
to the north and south of the country, which will allow Kyrgyzstan
to transmit power independently on its territory by avoiding
Uzbekistan's transmission grid.




8. (SBU) Tajikistan also relies on hydro-power. Like Kyrgyzstan,
Tajikistan exports excess power in summer and imports it in winter.
Because of its limited generation capacity, however, Tajikistan is
a net importer of electricity. In 2008 the country exported about
1 billion kWh and imported 3.25 billion kWh. The country has two
separate electrical networks, the northern and southern grids, and
energy passing between the two must transit the Uzbek network.
Next year, however, the "South-North" transmission line, a
four-year project funded by the Export-Import Bank of China that
will link the two grids, is due to be completed.




9. (SBU) Even with the South-North line, Tajikistan remains heavily
dependent on winter energy imports. According to bilateral
arrangement, Uzbekistan has agreed to supply 600 million kWh to
Tajikistan in winter in exchange for imports of 900 million kWh in
summer. This summer Tashkent declined to accept some of
Tajikistan's energy, claiming it had adequate capacity, leaving
open the possibility that it may decline to send Tajikistan energy
in the winter under the swap arrangement. Under a separate
agreement, Turkmenistan provides an additional 1.2 billion kWh to
Tajikistan in winter. This electricity passes through the Uzbek
grid in exchange for transit fees (refs B and C).




10. (SBU) These arrangements with Tajikistan have also been
problematic. The Uzbek power system suspended its supply to
Tajikistan during the anomalously cold winter of 2007-08. It did
the same in the winter of 2008-09, when it also refused to allow
the transit of most of the Turkmen electricity until winter was
almost over. In both cases Uzbekistan explained the disruption as
being due to "technical problems."




11. (SBU) Tajikistan continues to dream of completing the Rogun
hydro-plant that remains unfinished from Soviet days. In 2008
President Rakhmon is reputed to have said, "I will bring Uzbekistan
to its knees" (ref E). Uzbekistan has officially denounced Tajik
plans, which Uzbekistan claims will lead to water shortages in
downstream countries. At the same time, before the end of the year
Uzbekistan expects to complete its new Guzar-Surkhan 500kV power
line that connects its southern regions with the core power grid
without crossing Tajik territory (ref A). This development does
not bode well for Tajikistan in the coming winter of 2009-10.

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12. (SBU) For their part, Tajik officials have publicly pronounced
that they are prepared to weather the winter with no electricity
imports. They say additional energy from the recently-completed
670 MW Sangtuda-1 hydropower station will help overcome other
deficits. Given Sangtuda's relatively modest size, few believe
Tajikistan can make it through the winter on domestic supplies
alone without serious rationing. The recent visit of President
Rahmon to Turkmenistan suggests that the Tajik leadership is eager
to secure power from Ashgabat.



AS CAPS EVOLVES

--------------




13. (SBU) It is clear that CAPS is in transition from a unified
regional power grid to a combination of separate national power
systems. Turkmenistan removed itself from CAPS ten years ago,
connecting instead to the South Caspian power grid. Kazakhstan
recently completed construction of a second North-South 500kV line
that serves as an interconnection between the Siberian Power System
and CAPS, and President Nazarbayev used the occasion to declare
that Kazakhstan has "become fully independent from all other
exporters" and would no longer need to depend on its southern
neighbors for electricity (ref D). Earlier a Kazakh industry
official said that the function of regional power regulator should
be moved from Tashkent to Almaty, because CAPS now has
interconnections with Russian and Afghan grids and should therefore
be reviewed as part of a broader system.




14. (SBU) This year Uzbekistan has been sending its own strong
signals of future intentions. In late August an official Uzbek
newspaper published an article saying that Uzbekistan's electrical
network cannot guarantee reliable transit of "irrationally" large
volumes of power from one neighboring country to another, an
obvious reference to the power supply contract between Turkmenistan
and Tajikistan. Calling such contracts irresponsible, the article
explained that when the Uzbek grid receives energy from sources
located in a neighboring country, it affects the operation of Uzbek
power stations, leads to inadmissible load decreases on hub
substations, and, as consequence, to equipment failures.




15. (SBU) On October 15 Kazakh media reported that Uzbekistan is
about to withdraw from CAPS. At the last minute, Kyrgyzstan's
Minister of Energy Davydov travelled to Tashkent and pleaded with
UzbekEnergo to refrain from doing so. They gave him a 48-hour
reprieve; and then, on 17 October, UzbekEnergo announced in a
letter to the national grid operators that they would indefinitely
delay the action. At the same time UzbekEnergo notified Kyrgyzstan
that Uzbekistan will begin charging for what previously had been
free electricity transmission to Kyrgyzstan through Kazakhstan.




16. (SBU) Meanwhile, despite hopes and bluster, the power systems
of Kyrgyzstan and Tajikistan remain vulnerable, and it is in the
interest of both countries to maintain the system as it was in
Soviet and early post-Soviet times. The breakdown of CAPS likely
will lead to network failures in these countries and undermine
their energy security. In reaction, Kyrgyzstan has renewed
warnings to Uzbekistan that it may charge for water. Unexpectedly,
in early October President Berdimuhamedov of Turkmenistan --
previously a supporter of the Uzbek point of view on water issues
-- came out in favor of compensating Tajikistan for water releases,
infuriating Uzbek leaders.



COMMENT

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17. (SBU) Although Uzbekistan's power system is now almost
completely self-sufficient, permanent withdrawal from CAPS in the
near future is not likely. Both Uzbek and Kazakh officials are

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enjoying their new-found independence as a way to make political
statements, but engineers such as those at CDC understand that
balancing a smaller national system is more difficult than
balancing a large regional grid that was designed from the ground
up with balance as an operational requirement.




18. (SBU) What is more likely in the near term is that Uzbekistan
will continue to increase its pressure on Tajikistan and Kyrgyzstan
by imposing or increasing transit fees. It is also likely to
continue making political statements by periodically shutting off
the flow of electricity. Given the energy-swap failures of the
last two years, whether or not Uzbekistan formally withdraws from
CAPS may not ultimately change much for some of its upstream
neighbors, who are likely to see another cold and dark winter this
year.




19. (U) This cable was cleared by Embassies Astana, Ashgabad,
Bishkek, and Dushanbe.
NORLAND