CENTRAL ASIA

1. CENTRAL ASIA REMAP II (RIP) (Regional Energy Initiative) (Central Asian Energy Solutions) (Regional Power Markets) (Regional Energy Solutions) Joellyn Murphy, Chief of Party November 8, 2010

2. USAID Regional Energy Market Assistance Project: What it’s all about “The economic progress of all five Central Asian states continues to be held back by the failure of these states to deal with their common problems: • the absence of a regional trade regime, • the competition over water, and • the lack of a regional understanding of how to allocate energy resources most efficiently.” Martha Brill Olcott Central Asia’s Second Chance, 2004

3. With perfect hindsight…. • “Uzbek behavior (going it alone) reflects a growing regional trend that the international community inadvertently reinforced by economic reform strategies focused on country-specific agendas that emphasized local “ownership” rather than support for overarching regional goals. In their efforts to make their countries unique, the leaders of the CA states adopted nation-building strategies that maximized competition and minimized cooperation. … Each leader feared that his personal position would be damaged if these problems were addressed in concert.” Martha Brill Olcott

4. The Central Asian Regional Power Market • The great idea that hasn’t happened for 13 years • Despite “obvious” economic savings (e.g. $1.5 B in fuel and $2-4 B in uneconomic infrastructure investments), it hasn’t happened YET because: • Cooperation is hindered by paranoia or stuck in zero-sum thinking (How do we help build trust and shift focus to pursuing joint gains?) • Command & control habits (“Why doesn’t the WB just tell us what to do?”) (How do we speed up the Forgetting Curve”?) • There are different realities and different ways of “being rational” • Power systems are a venue for power politics as well as a source of significant “back pocket” income • A long list of capacity issues that include data & information systems, planning & analytic skills, lack of a commercial management perspective; eroding technical skills

5. USAID Regional Energy Market Assistance Project: Mission, Strategy & Method • Our “mission” is to help the countries put in place the enabling conditions that will: • Reestablish economic dispatch in Central Asia, • Attract the least-cost investment needed to assure a base-line of energy & water security in each country, and • Increase profitable energy trading within the region and open new markets to South Asia and beyond. • Our strategy is to leverage our Capacity Building skills and resources by interweaving them with CAREC’s studies & investment projects • Our method is to tailor building block projects to each country’s needs, priorities & revealed interests

6. Using Leverage for Maximum Effect in the Shortest Time • Borrow the leverage created by CAREC’s success in building a forum, doing the basic analytics & mobilizing investments • Collaborate with other existing initiatives that focus on establishing / facilitating a power market in Central Asia • Establish REMAP as the “arms and legs” of CAREC that can build the capacity of each country to put in place the enabling conditions under which an integrative market can evolve • Divide the initial regional focus into two sub-regions of willing players: • 1) Kazakhstan & Kyrgyzstan (& as possible) Tajikistan • 2) Turkmenistan & Afghanistan; Uzbek & Afghanistan; synchronization • Dialogue with Uzbekistan so it wants to facilitate reintegration and expansion of trade • Reconnect Tajikistan • Work with each country to define its needs and priorities; be alert and ready to exploit opportunities; create ways to reveal true interests; bring home some early wins.

7. Our N-1 Task • Catch up with CAREC • Successful forum established over last several years • Funding solid, targeted studies & decision tools • Big ticket investment projects • Catch up with other existing initiatives related to establishing a Central Asian Power Market • European initiative on harmonizing standards & regulations • May 2007 Agreement on formation of Common Power Market (signatories include Kazakhstan, Kyrgyz Republic Tajikistan) • Includes key market principles: • Sector reform, transparent tariff setting, effective regulation, uniform standards & rules • Separation of Generation & Transmission to ensure economic dispatch;

8. Our immediate challenge: Defining a sensible, pragmatic & effective ROAD MAP (aka “WORK PLAN”) • 3 objectives • 4 regional goals • 13 national goals • 47 indicative tasks • 6 countries • 3 years • And a bunch of audiences /counterparts /stakeholders: • State Dept, USAID, World Bank, ADB, EBRD, ISDB, EABR, EU, GTZ, EurAsEC, IFAS, JICA, Swiss, etc • Ministries, Presidents/Parliaments, Energy Companies, CDC Energia, energy traders, private sector investors • Consumers and companies that need least-cost, reliable power (They are, at the end of the day, the real reason why we are all here)

9. Objectives and the Goals Stated in Contract Three Objectives Four Regional Goals

10. OfGem’s Traffic Light Work Plan Management Method • Is it within our Mission? • Is it consistent with our Strategy • Do we have the resources? • Is it likely to work (jkm revision: is it worth taking a chance that it will work? • Is someone else doing this?

11. Market Mechanics Pricing Methods TJ Power Sector Assessment PSS/E Kyrgyz Management Audit PPA’s CDC Assessment Negotiations KZ Government Roles & Regulations Synchronization & Export to Afg Curriculum KZ Market Enhancements Training on Renewable Economics Reconnect TJ Bypass Assessment Training Center GDA in TK Regional Energy Security Information System CASA Support IFAS/ASBP 3