Towards Secure and Sustainable Energy Supply in Central Asia: Electricity Market Reform and Investment Protection

Abstract

This study focuses on the modernisation of the electricity infrastructure in Central Asia, in particular energy efficiency improvements and clean energy development. The starting point of the analysis is the recognition by the Central Asian states that the modernisation of electricity supply depends on the active participation of private – and in particular foreign – investors in these markets. Private capital and technology, know how and operational efficiency is needed to improve the efficiency of the system and finance the investments needed to ensure secure and sustainable energy supply. Taking an investor’s perspective, this study examines the regulatory framework governing the electricity market in Central Asia and questions the extent to which these rules and the ongoing reform initiatives provide a sufficiently strong basis for investments in the modernisation of energy supply. Taking into account the capital intensity and long term payback period of electricity investments, together with the perceived weaknesses of the general investment climate in Central Asia, this study focuses on investment risks and available protection against the occurrence of these risks.