This study estimates the size and evolution of Uzbekistan’s shadow economy by applying an enhanced Electricity Consumption Model (ECM) using annual and hourly electricity data from 2018 to 2024. In economies where informal activity is substantial, electricity use serves as a reliable physical proxy for total economic output—both formal and informal. We estimate a cointegration model linking electricity consumption and official GDP, incorporating a linear time trend to account for structural efficiency improvements. The long-run elasticity of electricity with respect to GDP is approximately 0.29, indicating that economic growth has significantly outpaced electricity usage due to modernization and energy-saving technologies. The shadow economy, calculated as the gap between electricity-implied and officially recorded GDP, is estimated to have declined from over 60% of official GDP in the early 2000s to around 35–40% by 2023. These results are validated against MIMIC model estimates and government data, and the downward trend is attributed to post-2017 reforms, including tax and regulatory simplification and currency liberalization. The study highlights sectoral variations in informality, with services and agriculture being underrepresented in electricity-based models due to low energy intensity. Despite data limitations, findings suggest that Uzbekistan is undergoing a gradual formalization of its economy. Policy recommendations include strengthening digital payments, improving energy metering, and lowering formalization costs. The ECM approach, when adjusted for local conditions, offers a practical and replicable method for tracking informal economic activity in transitioning economies.