ANALYZING THE IMPLEMENTATION OF COMPETITIVE MARKET MECHANISMS IN THE ELECTRICITY SECTOR WHILE ENSURING STABLE INTEGRATION OF RENEWABLE ENERGY SOURCES

As global electricity demand continues to grow – projected to increase by 60% by 2040 – ensuring a reliable, efficient, and sustainable power supply becomes increasingly critical. This paper explores the transition stage of Uzbekistan’s electricity sector from a vertically integrated, state-owned structure toward a more liberalized and competitive electricity market. The paper highlights the country’s recent reforms, including unbundling, increased private sector participation in the energy generation, and renewable energy expansion. Despite notable progress, the absence of a fully competitive electricity market and continued reliance on long-term power purchase agreements (PPAs) present structural challenges that may hinder long-term flexibility and renewable energy integration. Drawing on international experiences – specifically from Türkiye and Georgia – the paper identifies critical lessons and best practices, such as the importance of independent regulation, dynamic pricing mechanisms, and transparent market design. It also synthesizes common pathways taken by countries that successfully liberalized their electricity sectors. The study concludes by outlining key recommendations for Uzbekistan to build a resilient, market-oriented energy system, and sets the stage for future research on integrating variable renewable energy sources (VRES) into competitive wholesale and retail markets.