Understanding Caspian Region’s

Ro le in Ensuring C e ntra l Asia ’s

Ene rg y Se c urity
Pro spe c ts fo r C o o pe ra tio n a nd
Inte rde pe nde nc e

The views expressed in this presentation are the views of the author and do not necessarily reflect the views or policies of the Asian Development
Bank Institute (ADBI), the Asian Development Bank (ADB), its Board of Directors, or the governments they represent. ADBI does not guarantee the
accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be
consistent with ADB official terms.

‘Achieving Energy Security in Central Asia: Role of Renewable Energy’

12- 13 Ma rc h, 2018
Ayhan Gücüyener- Re se a rc h Fe llo w, NATO Ene rg y Se c urity C e nte r o f Exc e lle nc e
Intro duc tio n: Pa ra dig m Shift in G lo b a l Ene rg y Po litic s

 The tra ditio na l pa ra dig m in “energy politics” is shifting in

ma c ro a nd mic ro le ve ls.
 Asia n e ne rg y dyna m ic s ha s b e e n c ha ng ing c o nsta ntly.
 Like c o nsume rs, e ne rg y se c urity is still a pro b le m a tic fo r the
Asia n e ne rg y pro duc e rs
 “Competition for ensuring energy security” ha s b e e n a
so urc e fo r c o nflic t; “cooperation on energy” c o uld a lso
p ro vid e a so lid p la tfo rm to trig g e r a po sitive
inte rde pe nde nc e a nd m utua l b e ne fits
 Re se a rc h Pro b le m a tic : Could “cooperation around
Caspian energy resources” generate a suc c e ssful m o de l
o f re g io na l c o o pe ra tio n a nd stre ng the n re g io na l e ne rg y
se c urity ?
C o o pe ra tio n o n Ene rg y: Pro spe c ts & C ha lle ng e s

 During the histo ry e ne rg y re so urc e s ha ve lo ng b e e n a

m a in c a use o f c o nflic ts o r simila rly the y ha ve b e e n use d a s
a to o l o r le ve ra g e
 Ea rly stud ie s o f e ne rg y p o litic s we re mo tiva te d b y the
na tio na l se c urity im plic a tio ns o f re so urc e d e p e nd e nc e
a nd e ne rg y re so urc e s -p a rtic ula rly o il- wa s ha nd le d
 To d a y, in c o ntra st; “ne o - liberal” the o ry fits a nd c o uld
b e tte r inte rp re t “cooperation” d ime nsio n in e ne rg y fie ld .
 “Energy cooperation”- No unifo rm d e finitio n. Ta rg e t a nd
the purpo se o f e ne rg y c o o p e ra tio n is e nsure the e ne rg y
se c urity
 Lim ita tio ns o f this b rie f: Po we r Tra d e (Re ne wa b le s) & G a s
Infra struc ture , C a spia n Re g io n in b ro a d se nse
 C o o pe ra tio n o n Ene rg y: Pro spe c ts & C ha lle ng e s
Ex o f Re g io na l m a rke ts o f Re g io na l Po we r
System Integration’s: C e ntra l Ame ric a n
Ele c tric a l Inte rc o nne c tio n Syste m, G ulf C o a st
C o untrie s, Nile Ba sin Initia tive , Euro p e a n Ne two rk
o f Tra nsmissio n Syste m O p e ra to rs fo r Ele c tric ity…
Why sta te s a re ke e n to c o o pe ra te o n e ne rg y
 C o o pe ra tio n o n e ne rg y : A ke y ro le in so c io -
e c o no mic d e ve lo p me nt
 Whic h m o tiva tio ns ma ke s a ttra c tive to c o o p e ra te
o ve r e ne rg y se c to r ? ( Fo r e x: Po we r Tra de 
Regional Power System Integration’s  Re lia b le ,
a ffo rd a b le e le c tric ity); a ttra c ting inve stme nts a nd
fa c ilita te fina nc ing ; e c o no mic g ro wth thro ug h
tra d e e tc .
 Infra struc ture de ve lo pm e nt  Driving fo rc e fo r
na tio na l a nd re g io na l e c o no mic g ro wth a nd
p ro sp e rity
C o o pe ra tio n o n Ene rg y: Be ne fits a nd Inte rde pe nde nc e
The fo rm s o f re g io na l
e ne rg y c o o pe ra tio n:
- De ve lo p me nt o f ma rke t
re la tio ns
- Tra nsit a rra ng e me nts
- Inve stme nts
- Re la tio nship s und e r
a g re e me nts o f jo int use
o f se a -b e d o r tra ns-
b o rd e r rive r re so urc e s
- Kno wle d g e a nd
info rma tio n sha ring
 (ADB, 2011): In Euro p e , e le c tric ity syste m inte rc o nne c tio n
ha s re sulte d with a 7- 10% re duc tio n in g e ne ra tio n
c a p a c ity c o sts
 Ad va nta g e s o f e m e rg e nc e o f a la rg e r m a rke t
 Se c urity o f supply imp ro ve d thro ug h b e tte r
inte rc o nne c tio ns,
 Mo re fle xib ility thro ug h a c c e ss a wid e r ra ng e o f e ne rg y
re so urc e s
 Lo we r re q uire m e nt fo r c a pita l
 Tra nsfe r o f te c hno lo g y; kno w- ho w sha ring
 Re d uc e vulne ra b ility fo r supply disruptio ns
 Inte rde pe nde nc e  The c o sts o f dise ng a g e m e nt a re so
hig h tha t the re la te d p a rtie s te nd to se p a ra te p o litic a l
issue s fro m e c o no mic c o o p e ra tio n; the y ne e d to se e k
pe a c e ful so lutio ns to re d uc e the risk o f c o nfro nta tio ns.
 C o o pe ra tio n o n Ene rg y: C ha lle ng e s a nd O b sta c le s

 O b sta c le s: Alig ning na tio na l a nd re g io na l inve stm e nt de c isio ns, d iffe re nc e s in re g ula to ry
e nviro nm e nts, insuffic ie nt re g io na l institutio ns, a nd p ro b le ms with fina nc ing , c ha ng e s in
po litic a l fra m e wo rks, na tio na l so ve re ig nty a nd e ne rg y inde pe nde nc e c o nc e rns.
 The re is no o ne size fits all a p p ro a c h (The d iffe re nc e s in re so urc e s, e nd o wme nts, ma rke t mix
a nd re la te d inte re sts o f d iffe re nt p a rtie s)
 O ve rc o m ing c ha lle ng e s  De sig n, a p p ro a c he s a nd the p ha sing o f re g io na l e ffo rts must
a d a p t to lo c a l re a litie s with a c o nsid e ra b le ro o m fo r fle xib ility a nd a djustm e nt

Ea st a nd So uth Asia So uthe a st Asia C e ntra l a nd We st Asia

Drive n b y la rg e c o untrie s
Ba se d o n the ir re so urc e
dive rsific a tio n stra te g ie s
(Inc luding C a spia n
Re g io n)
G re a te r Me ko ng Sub re g io n Effic ie nt e ne rg y
Pro g ra m c o o pe ra tio n during the
So vie t Pe rio d
Multila te ra l fra m e wo rk in a
c o m pe titive m a rke t with Intra - re g io na l c o o pe ra tio n
inte rc o nne c te d g rids is lo w, re inte g ra tio n is
re q uire d
Unlocking Producers’ Side: Examples from Middle East and North Africa

Ex. From producers’ side:

 No rth Afric a n c o untrie s ha ve no t ye t ta ke n full
a d va nta g e o f c o o p e ra tio n. Intra -re g io na l tra d e
re p re se nte d le ss tha n 4% o f to ta l tra d e
 Va st q ua ntity o f e ne rg y re so urc e s in the MENA
Re g io n, the le ve l o f we a lth distrib ute d is lo w a nd
inste a d o f c o o p e ra ting , e ne rg y-ric h sta te s ha ve
p ursue d a g o it alo ne appro ac h
 Little e ne rg y c o o p e ra tio n o n m utually b e ne fic ial
e ne rg y re la tio ns a nd ma ny a tte mp ts to
c o o p e ra te ha ve b e e n d e ra ile d b y g e o po litic al
rivalrie s
 The la c k o f e ne rg y c o o p e ra tio n ha s b e e n
a sso c ia te d with the lac k o f g o o d g o ve rnanc e
 “Cooperation requires leaders with a vision that
g o e s b e y o nd ide o lo g ic al and histo ric al b arrie rs to
focus on future”
Be st Pra c tic e fo r Re g io na l Po we r Tra de C o o pe ra tio n: No rd Po o l

 World’s most developed international market for

p o we r e xc ha ng e ha s a lre a d y e sta b lishe d in 1996
 A fa vo ra b le re g io na l pla tfo rm : Lo ng e xisting tra d itio n
o f c ro ss-b o rd e r b ila te ra l tra d e , c o o p e ra tio n, la rg e
d iffe re nc e s in g e ne ra tio n a nd the e xiste nc e o f c ro ss
b o rd e r tra nsmissio n struc ture s
 Mig ht no t b e a suita b le m o de l o r b e st p ra c tic e fo r
d e ve lo p ing c o untrie s who a re just p a ssing fro m a
tra d itio na l g o ve rnme nta l o wne rship mo d e l to a mo re
ma rke t-o rie nte d struc ture
 Re a l p ro o f a nd e vid e nc e o f a fully inte g ra te d p o we r
tra d e syste m a nd inte rna tio na l e ne rg y c o o p e ra tio n
Unlo c king C a spia n Ene rg y C o o pe ra tio n: To wa rds Inte rde pe nde nc e

MAIN PO INTS :
 La rg e unta ppe d o il a nd g a s re se rve s in the
wo rld .
 De finitio n o f C a spia n Re g io n ? (In b ro a d
se nse ) + Re g io na l / G lo b a l p la ye rs a nd the ir
inte re sts
 Inc lud e s So uthe rn C a uc a sus a nd C e ntra l
Asia while Russia a nd Ira n ma ke up wide r
C a spia n to g e the r with the o the r p ivo ta l
e c o no mic p o we rs
 (Existing Lite ra ture ) First c o nc e rn :
“Extraction of fossil fuels” and their safe and
fe a sib le e xp o rt to wo rld ma rke ts ?
 Intra - re g io na l c o o pe ra tio n ha s d e c re a se d ?
: O n e ne rg y p o litic s, g o it a lo ne a ppro a c h ?
Re g io na l Po we r Tra de Syste m : C e ntra l Asia Po we r Syste m (C APS)

 C e ntra l Asia Po we r Syste m (C APS)

d e sig ne d in fo rme r So vie t Unio n to se rve to
fo rme r So vie t re p ub lic s
 Aim : Allo w the c o o rd ina te d a nd o p timize d
use o f fo ssil fue l a nd hyd ro e le c tric re so urc e s
to me e t e le c tric ity d e ma nd a nd ma na g e
wa te r flo ws.
 The c urre nt sta tus: Ec o no m ic a lly ine ffic ie nt
use o f re g io na l e ne rg y re so urc e s, a c o stly
situa tio n fo r the re g io n
 Ta jikista n suffe re d mo st, d ue to se a so na l
va ria tio n in hyd ro e le c tric ity p ro d uc tio n a nd
limite d fo ssil fue l re se rve s
 La c k o f c o nfide nc e in jo int o p e ra tio ns
b a se d o n the re a l p ro b le ms, so lve d b y jo int
o p e ra tio n a nd wo rk
C aspian: A Frag m e nte d Ene rg y O utlo o k; C o m ple m e ntary Ene rg y Se c urity Appro ac h
MAIN PO INTS :
 Ene rg y o utlo o k o f the C a sp ia n
c o untrie s : Fra g m e nte d Pic ture
 Dive rsitie s trig g e rs unity ? :
C o mp le me nta ry e ne rg y se c urity
a p p ro a c he s
 Inte re sts o f ma jo r p o we rs in the
region : “Cooperation and
development” in energy sector
mo stly ta rg e ting e xte rna l ma rke ts ;
intra - re g io na l a tte m pts re m a ine d
we a k
Wha t if the y c o o pe ra te :
 Sta te s with suffic ie nt e ne rg y re so urc e s fo r
e xp o rts se c ure a c c e ss to e xp o rt ma rke ts
 Sta te s ric h in hydro po we r re so urc e s la c king
fo ssil fue ls g a ining a c c e ss to e xp o rt ma rke ts
fo r hyd ro e le c tric ity
 Tra nsit c o untrie s e a rning va lua b le tra nsit
a nd tra nsmissio n fe e s, b e c o ming a n
a lte rna tive e ne rg y tra nsit ro ute
 C hina imp o rting o il a nd na tura l g a s fro m
C AC
 Aze rb a ija n tra d ing la rg e r vo lume s o f p o we r
 C e ntra l Asia n c o untrie s e xp o rting p o we r
a nd na tura l g a s to So uth Asia
 Aze rb a ija n Ka za khsta n Kyrg yz Ta jikista n Uzb e kista n Afg ha nista n C hina
Re pub lic

Aze rb a ija n xx Ka za kh o il a nd
g a s e xpo rts thro ug h
BTC a nd BTE unde r
Disc ussio n; Litto ra l
a g re e m e nts in
pla c e

Ka za khsta n Ka za kh o il a nd g a s xx Im po rts Kyrg yz Im po rt o f Ta jik Im po rt o f Uzb e k Expo rt o f

Expo rts thro ug h BTC Hydro po we r; Tra nsit fo r hydro po we r. g a s/ po we r. Ka za kh o il to
a nd BTE unde r Po we r e xpo rts no rth b y Wa te r sha ring C hina
Disc ussio n; Litto ra l Swa p a rra ng e m e nts; a g re e m e nts Wa te r sha ring
a g re e m e nts Wa te r sha ring a g re e m e nt
in pla c e . a g re e m e nts

Kyrg yz Im po rt o f xx Expo rt o f Im po rt o f Uzb e k c o a l a nd g a s. Po we r

Re pub lic Ka za kh o il, c o a l Po we r; Ele c tric ity Expo rt o f e le c tric ity to e xpo rts
a nd g a s. Expo rt tra nsit no rth – so uth in Uzb e kista n to C hina
o f po we r to re la tio n to Ta jikista n
Ka za khsta n

Ta jikista n Expo rt o f Tra nsit fo r Po we r e xpo rts xx Po we r tra nsit, Po we r Expo rt o f

po we r to no rth e xc ha ng e s & Im po rt o f Uzb e k Ta jik Po we r
Ka za khsta n a nd g a s To AFG

Uzb e kista n G a s e xpo rts/ po we r Expo rt o f Uzb e k g a s Expo rt o f Uzb e k xx Expo rt o f O il a nd g a s

tra nsit/ Wa te r g a s/ po we r tra nsit/ wa te r Uzb e k po we r Explo ra tio n
a g re e m e nts a g re e m e nts c o nc e ssio ns to C hina

Afg ha nista n Im po rt o f Ta jik po we r Im po rt o f xx

Uzb e k po we r

C hina Ene rg y Inve stm e nts in Im po rt o f a b o ut 1 G Wh o f C hine se fina nc ing o f Inve stm e nts in UZB. O il a nd xx
Ka za khsta n.; Im po rt o f po we r/ ye a r During 2003- No rth- So uth po we r line gas
Ka za kh o il 2007 a nd hydro po we r e xplo ra tio n
pro je c t
C aspian Re g io n Ene rg y C o o pe ratio n: Barrie rs and O b stac le s- Marke t

 Evo lving m a rke t c o nte xt: Ne wly a nd e me rg ing

e ne rg y hub s a nd p o rts in, ne w e xtra c tio ns in
Me d ite rra ne a n c o uld shift the tra d e fo c us to
De c re a sing C rude O il Prices…
C a sp ia n
 De c re a sing o il a nd g a s pric e s: Inve sting le ss
a ttra c tive a nd d e c re a se the inc o me , Diffic ultie s to
find p ro p e r inve stme nt a nd fina nc e o p tio ns
 Mo re ro b ust a nd c o he sive C a spia n po lic y
fra m e wo rk whic h will b e sha re d b y wid e r C a sp ia n
sta ke ho ld e rs a nd mo ve s b e yo nd ind ivid ua l sta te s
 The fra g ile a nd a g e ing e ne rg y infra struc ture : To b e
c o mp e titive with the e ntra nc e o f ne w
c o nve ntio na l a nd unc o nve ntio na l re so urc e s (Ea st
Me d , Arc tic e tc .)
C aspian Re g io n Ene rg y C o o pe ratio n: Barrie rs and O b stac le s- Re g io nal C o m pe titio n

 Ma rke t/ Infra struc ture re stric tio ns +

Inte re sts/ C o mp e titio n o f Pivo ta l Sta te s
 C o untrie s in the No rthe rn C a spia n mo re
a d va nc e d in the re g io na l c o o p e ra tio n
initia tive s
 Riva lry a nd c o m pe titio n c o ntinue to c re a te a
b urd e n e sp e c ia lly o n So uth C a spia n
 Le g a l sta tus o f C a spia n Se a is still a
p ro b le ma tic
 Sub sta ntia l C a spia n Sum m its we re p la c e fo r
d e limita tio n, ho we ve r b y no w no a g re e me nt
ye t. (Will 2018 ma ke a surp rise ? )
 Future o f the (Tra ns- C a spia n Pipe line ) ye t to
b e d e te rmine d
No rth C aspian Re g io n Ene rg y C o o pe ratio n: Be st Prac tic e s

 Re a liza tio n o f BTC a nd TANAP : Stro ng

po litic a l a nd fina nc ia l c o m m itm e nt
 BTC : C o rne rsto ne o f the re g io na l e ne rg y
c o o p e ra tio n a nd g a ve a b o o st to the
imp le me nta tio n o f o the r re g io na l
c o o p e ra tio n a nd inte g ra tio n p ro je c ts: BTK
(Ba ku- Tb ilisi- Ka rs) Ra ilwa y Pro je c t
(tra nsp o rta tio n)
 Eme rg e nc e o f a po sitive inte rde pe nde nc e
among region’s states
 Im ple m e nta tio n o f TANAP : G e ne ra te
e c o no mic a c tivity a nd e mp lo yme nt,
d e c re a se the vulne ra b ilitie s in te rms o f
e ne rg y se c urity.
Re g io nal C o o pe ratio n o n Re ne wab le s in C aspian: Ne w O ppo rtunity o r Missio n Im po ssib le ?

 (IEA, 2012) : By 2050 it is e stima te d tha t ne a rly 50% o f g lo b a l

e le c tric ity will c o me fro m RES
 Hig hly re lia nc e o n fo ssil fue ls; sig nific a nt a mo unt o f
a lte rna tive a nd re ne wa b le s.
 The p o te ntia l fo r e ne rg y e ffic ie nc y g a ins is va st a nd re ma ins
la rg e ly unta p p e d
 Aze rb a ija n (2016), re ne wa b le e ne rg y so urc e s a c c o unte d fo r
a b o ut 8 p e rc e nt o f e le c tric ity p ro d uc e d in, ta rg e t % 15 b y
2020
 Ka za khsta n, o il a c c o unte d 50% o f G DP 2017,
 Pla n : To inc re a se the sha re o f re ne wa b le e ne rg y in p o we r
g e ne ra tio n to 30% b y 2030 a nd 50% b y 2050
Re g io nal C o o pe ratio n o n Re ne wab le s in C aspian: Ne w O ppo rtunity o r Missio n Im po ssib le ?

 AZ sig ne d me mo ra nd um o f und e rsta nd ing with the EU o n

the im ple m e nta tio n o f re fo rm s in fie ld o f a lte rna tive e ne rg y
 IEA Re po rt 2015: Inc re a sing e ne rg y e ffic ie nc y a nd
re ne wa b le e ne rg y use wo uld he lp to re duc e e ne rg y
c o nsum ptio n b y ha lf in the C a sp ia n re g io n
 The IEA d o e s no t p re d ic t a ra dic a l c ha ng e ; ho we ve r a lte re d
b y "ra ising pub lic a wa re ne ss o n the ta ng ib le b e ne fits o f
e ne rg y e ffic ie nc y a nd RE
 The p o ssib ilitie s d e p e nd s la rg e ly o n g o ve rnm e nt po lic ie s,
e sp e c ia lly o n e ne rg y pric ing , m a rke t re fo rm a nd im pro ve d
a c c e ss to fina nc ing fo r e ne rg y p ro je c ts.
Re g io nal C o o pe ratio n o n Re ne wab le s in C aspian: Finding the Rig ht Mo de l

Re g io na l C o o pe ra tio n Me c ha nism s fo r the De ve lo pm e nt o f

Re ne wa b le s:
 Ro le o f c o o p e ra tio n to p ro mo te re ne wa b le s: Le arning fro m
the o the rs, sharing re so urc e s and e xpe rtise (p o o ling
re so urc e s), re duc e d c o st, e xpand m arke ts, trans- b o undary
issue s
 Plan B fo r Re g io n ? : C aspian Ene rg y G rid: Le a d b y ma inly
Ira n fo c using o n c o o p e ra tio n in p ursuit o f the re d uc tio n o f
c o st whic h ma y b e a pplic a b le fo r a ll C a spia n litto ra l sta te s
 Aim : De ve lo p ing a ne two rke d p hysic a l a nd fina nc ia l e ne rg y
infra struc ture thro ug ho ut a nd c o nne c te d C a sp ia n fo r the
re g io na l tra nsitio n to a lo w c a rb o n e c o no my.
 C ha lle ng e s: Re q uire me nt o f hug e inve stme nt, ne w a nd
c o nse nsua l C a sp ia n le g a l fra me wo rk fo r e ne rg y
c o o p e ra tio n a nd c re d it instrume nts
Re g io nal C o o pe ratio n o n Re ne wab le s in C aspian: Finding the Rig ht Mo de l

 A c o re so lutio n to re g io na l p ro b le ms like c lima te c ha ng e ,

e c o no mic re c e ssio n o r e nviro nme nta l issue s
Sug g e ste d type s o f RC M (Re g io na l C o o pe ra tio n Me c ha nism )
o n Re ne wa b le s:
 Inte rg o ve rnme nta l a g re e me nts (IRENA)
 Pa rtne rship s
 Ne two rks
 Pro g ra ms a nd Pla ns
 Info rma tio n a nd e xp e rie nc e sha ring p la tfo rms/ initia tive s
Whic h m o de l is m o re c o nve nie nt fo r C a spia n Re g io n ?
 Think g lo b a lly, a c t lo c a lly
 Ra the r tha n fo c using o n the c o nflic tua l d ime nsio ns like the
sta tus o f C a sp ia n Se a , p rio ritize a d va nta g e s !!
Tha nk yo u fo r liste ning
Ayhan Gücüyener
a yha n.g uc uye ne r@ e nse c c o e .o rg
a yha ng uc uye ne r@ ho tm a il.c o m