Azerbaijan emerges as new energy exporter
The world, including the Eurasian region, is increasingly moving towards green, low-carbon developments and renewable energy production. In 2022, the sums invested in green investments exceeded 1 trillion dollars on a global level, and it was also the first time that green investments were able to match the production costs of fossil energy sources.
Azerbaijan emerges as new energy exporter
The Economics of Geography

Azerbaijan emerges as new energy exporter

Photo: iStock
Szabolcs Veres 27/03/2024 10:13

The world, including the Eurasian region, is increasingly moving towards green, low-carbon developments and renewable energy production. In 2022, the sums invested in green investments exceeded 1 trillion dollars on a global level, and it was also the first time that green investments were able to match the production costs of fossil energy sources. However, the growing interest in the global green agenda can create opportunities not only for countries at the forefront of green technologies, but also for developing countries by attracting technology-orientated expertise and funding.

At the end of 2017, Azerbaijan's oil reserves accounted for around 0.4 % of global energy reserves. The Caucasian country's economy is still heavily dependent on fossil fuels (oil, natural gas) and around 93% of the country's energy supply comes from oil and natural gas. In addition, since February 2022, Baku has become one of the most important suppliers of oil and natural gas to several European countries. Nevertheless, Azerbaijan is taking serious steps in the field of renewable energy sources.

According to Baku's own official estimates, the country will be able to 27 GW of onshore renewable energy capacity (mainly solar energy) and a further 135 GW of offshore wind energy capacity in the future. To back up the Azerbaijani data, the World Bank has previously made similar estimates for the Caspian Sea and the interior of Azerbaijan.

In recent years, Azerbaijan has gradually promoted the development of new renewable energy projects with the aim of meeting 30% of the country's energy needs from renewable energy sources by 2030. Baku believes that by developing its renewable energy potential, the country can reduce its dependence on natural gas for energy production, making more gas available to meet the country's export needs, which are mainly directed towards European countries. At the same time as increasing Azerbaijan's natural gas exports, the Azerbaijani government is endeavouring to maintain its export revenues and cover a certain percentage of the expenditure required for the green transition. In addition, it is a realistic possibility for Baku to reduce the use of natural gas in Azerbaijan's energy mix for power generation.

Thanks to Azerbaijan's renewable energy projects and investments, the Garadagh solar power plant - the country's first large-scale solar power plant - is expected to generate enough energy to save 110 million cubic metres of gas annually. The project is based on plans by Masdar, a company operating in the United Arab Emirates, and is expected to generate 500 GWh of electricity annually.

During the Baku Energy Week, which took place in Baku in June 2023, Azerbaijan signed several cooperation agreements with the French company Total Energies and the American company Nobel Energy for the development of 900 MW of wind and solar energy capacity, of which 650 MW will be built in Nakhichevan, Azerbaijan.

In December 2022, the Azerbaijani Ministry of Energy signed a framework agreement with the Australian company Fortescue Future Industries to jointly explore the possibilities of up to 12 GW of renewable energy and green hydrogen projects in Azerbaijan. However, with this agreement, Baku has not only taken steps towards renewable energy sources, but also towards hydrogen technology, which great questions and enormous potential.

In the field of renewable energy, Baku wants to rely on foreign investors who can contribute to the expansion of renewable energy capacities in the Caucasian country. The Azerbaijani government must also ensure that as many of these projects as possible can be realised. However, it is undisputed that Azerbaijan has concrete export targets in the field of green energy by the beginning of 2024.

The most important market for green energy from Baku is Europe. On 17 December 2022, Azerbaijan, Georgia, Romania and Hungary signed a strategic partnership agreement to build an energy bridge from the Caucasus region to Europe. This agreement includes the construction of Black Sea Energy's 1,195-kilometre, 1,000 MW submarine cable, which will enable the transmission of renewable electricity generated in Azerbaijan via Georgia and the Black Sea to Romania, Hungary and the rest of Europe.

The author is a researcher at the Eurasia Center

#green energy #Azerbaijan
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