Gas was cut off for greenhouses in Uzbekistan – they are forced to switch to “clean” coal!

EastFruit analysts have repeatedly drawn attention to the problems of the greenhouse industry in Uzbekistan. One of the stumbling blocks for the local greenhouse industry was issues with access to gas, which, by the way, is one of the main export positions of Uzbekistan. A little over two years ago, we explained why exporting greenhouse tomatoes is much more profitable than gas – greenhouse vegetables and berries are high-value-added products that allow creating many more jobs in the country, unlike gas which is exported through pipes.

Another problem is that the main competitors of Uzbekistan, which are the greenhouse complexes of Turkmenistan and Russia, have no problems with access to gas. Moreover, the prices paid per year by greenhouse workers in Turkmenistan are several times lower than in Uzbekistan. Therefore, Turkmenistan is ousting Uzbek exporters from the Russian market of greenhouse vegetables, and Uzbekistan has very few alternative markets for exports.

On February 16, 2023, the Decree of the President of the Republic of Uzbekistan with a rather ironic title, given the content, “On measures to accelerate the introduction of renewable energy sources and energy-efficient technologies in 2023”, was released. And at the very beginning, they are really talking about solar and wind power…

But now let’s quote the resolution concerning greenhouse enterprises in Uzbekistan:

“22. Approve the planned indicators and address lists for the transfer of 1147 greenhouses and 250 enterprises producing building materials to coal fuel in 2023 in accordance with Annexes No. 8, 8a, 8b, 8c.

Establish that in the regions of the republic:

personal responsibility for the transfer of greenhouses to coal fuel lies with the Minister of Agriculture Voitov A.B. and Deputy Chairman of the Council of Ministers of the Republic of Karakalpakstan and deputies of regional khokims on agricultural issues;

personal responsibility for the transfer of enterprises for the production of building materials to coal fuel in accordance with annexes No. 8a, 8b, and 8c to this resolution rests with the Deputy Minister of Construction and Housing Khidoyatov Sh.S., Chairman of the Board of JSCB “Uzpromstroybank” Annaklichev S.S. and Deputy Chairman of the Council of Ministers of the Republic of Karakalpakstan, deputies of regional khokims and the city of Tashkent on construction issues.”

Of course, coal is not a renewable energy source. What’s more, it is one of the worst solutions for the greenhouse industry and for the country’s ecology, especially compared to gas.

Let us explain why coal is a bad solution that worsens the competitiveness of the greenhouse industry in Uzbekistan. When switching from gas to coal, greenhouses face the following problems:

• An increase in the cost of heating greenhouses by 12-17%, that is, a decrease in the income of producers and the competitiveness of products – after all, the greenhouses in Turkmenistan will not increase costs;
• An increase in capital investment per hectare, as more land is needed and additional warehouses for storing coal, as well as the purchase of equipment for its constant movement. In addition, it is necessary to purchase expensive filters to reduce emissions from coal combustion;
• Higher capital costs, since coal needs to be purchased in advance – this means frozen money and additional costs for servicing loans;
• Higher labor costs for working with coal – loaders, stokers, security guards, etc. are needed;
• Higher costs for replacing boiler filters;
• Reduced yields in greenhouses and deterioration in product quality due to a decrease in the transparency of glass or film after ash and soot from burning coal hit the surface of greenhouses (the problem is almost completely solved by an expensive filter system and their regular replacement). It can lead to a decrease in the selling price and an increase in cost, that is, the competitiveness of greenhouse products from Uzbekistan.

In other words, the transition to coal for a greenhouse is an increase in costs with a decrease in income if coal is not sold much cheaper. However, if we consider the possible sharp increase in demand for coal in the context of the transition of greenhouses and other consumers (this is also discussed in the Decree) to coal, prices can rise sharply. Therefore, it is hardly worth counting on low prices. Moreover, the document deals with ensuring the import of affordable coal, i.e. it will have to be bought at global prices.

The worst news is a possible decline in product quality, which is currently a critical factor for successful competition in the international market for fruits and vegetables.

Well, not to mention the environment. According to the US Energy Information Administration, natural gas emits almost 50% less CO2 when burned than coal. Natural gas also releases less carbon dioxide when burned.

It must be said that the resolution provides for measures to support the greenhouse industry when switching to coal, but they are not “digitized”, and greenhouse growers will have to solve all problems at the expense of loans. If we take into account that many enterprises in the industry have already taken too many loans, it looks very complicated. We will quote the document.

“23. Government Commission on Foreign Trade, Investments, Development of Local Industry and Technical Regulation (Khojaev Zh.) shall:

together with commercial banks, ensure the timely allocation of credit funds for the purchase of equipment for enterprises converted to coal fuel;

take guaranteed incentive measures for the export of products produced by enterprises that switched to coal fuel;

promptly resolve problematic issues arising from the import of coal products and related equipment at enterprises that switched to coal fuel;

take additional measures to support domestic greenhouse farms in order to increase the competitiveness of products grown there in the main export markets.”

With the declining population and consumer incomes in Russia, which is Uzbekistan’s main buyer of greenhouse vegetables, it looks like Uzbekistan’s most high-tech agricultural sector is in for a tough time.