“Green Energy” is gaining importance in Azerbaijan – Minval.az

The renewable energy potential is currently estimated at 27,000 MW. Of these, 3,000 MW of wind energy, 23,000 MW of solar energy, 380 MW of bioenergy and 520 MW of mountain rivers. These optimistic estimates are also reflected in a recent report from the International Renewable Energy Agency. In 2020, the total electricity production in Azerbaijan reached 25 billion kWh, while the share of electricity produced from renewable energy sources was 6%. The long-term goal is to increase this share to 30%, which is also supported by developments in this direction in recent months.

The first pilot projects with the participation of foreign investors

In 2020, after a multi-stage selection process, Azerbaijan entered into strategic cooperation with ACWA Power (Saudi Arabia) and Masdar (UAE). ACWA Power will build a 240 MW wind farm in the country’s windiest Khizi region. Masdar will build a 230 MW solar power plant near the village of Aliyat (along the Caspian Sea). The first contracts (“Investment Agreement”, “Power Purchase and Sale Agreement” and “Transmission Network Connection Agreement”) have already been signed, while the so-called “build, own and operate” operator model has been envisaged. These two large projects provide a total investment of 400 million US dollars and, as Azerbaijan’s largest plants in the future, should cover 5% of the country’s current energy needs. At the same time, negotiations are underway with other companies and investors: it is known that a significant increase in the share of renewable energy sources in the total final energy consumption requires more private (foreign) investment.

Expanding international cooperation

The project “Auctions on Renewable Energy Resources in Azerbaijan” is being implemented jointly with the European Bank for Reconstruction and Development. Among other things, auction rules, contract terms and forms, and appropriate positioning of investments are developed. Azerbaijan is set to organize the construction of wind and solar parks with a total capacity of about 1,000 megawatts through auctions. In parallel, cooperation is underway with the International Finance Corporation as part of the World Bank Group regarding the development of a plan for the development of offshore wind turbines in the Caspian Sea. In addition, the Ministry of Energy, jointly with the Asian Development Bank, is implementing a pilot project to install a 100 kW PV plant on Buyukchur Lake and developing business models for the private sector to install solar panels.

The “green” energy zone in the liberated territories

In recent months, the potential of renewable energy sources in Karabakh and neighboring regions has been intensively analyzed. With regard to solar energy, eight areas have been identified where the total potential for building solar power plants is estimated at more than 4,000 MW. For wind power, the initial potential of wind power is assumed to be 500 MW: in the mountainous part of the Lachin and Kalpjar regions there are vast areas with an average annual wind speed of 7-8 m / s at an altitude of 100 m above sea level. Finally, 25% of Azerbaijan’s domestic water resources come from Karabakh. Some preparations have already been made to start repair and restoration work on some of the small hydroelectric power stations. The 8-MW Gülabird power plant located on the Khakari River in Lachin was also recently commissioned.

On 3.6.2021, a cooperation agreement was concluded between the Ministry of Energy and the British Petroleum Company (BP) to evaluate and implement a project to construct a 240 MW solar power plant in Zangilan / Jibril. Thus, the agreement lays the groundwork for the creation of a “green energy” zone in the liberated lands and aims to pave the way for foreign investment in Karabakh.

Improving the regulatory framework

Several legislative acts have also been adopted in recent months to improve the institutional and legal framework. The main objective is to promote the use of renewable energy sources and stimulate private investment in this sector. It should also be noted the two Republican decrees “On Acceleration of Reforms in the Energy Sector” of 29.5.2019 and “On Procedures for Implementation of Pilot Projects in the Field of Using Renewable Energy Sources” of the last 12.5.2019 which provides for the establishment of a government commission that will be responsible for monitoring the implementation of pilot projects The above-mentioned. Also, by Presidential Decree No. 1159 of September 22, 2020, the Renewable Energy Agency was established under the Ministry of Energy, which is responsible for implementing the state’s policy in the field of renewable energy. The law “On the use of renewable energy sources in the production of electricity”, adopted on May 31, 2021, deserves special attention. Other bills are currently under consideration.

Finally, it is worth noting the strategy “Azerbaijan 2030: National Priorities for Social and Economic Development”, approved by a presidential decree on February 2, 2021. Section 5 of this strategy provides for the expansion of the use of renewable energy sources and the inclusion of “green energy” principles in all sectors of the economy with relevance. Promoting renewable energy will certainly help the country fulfill its commitment to reduce greenhouse gas emissions under the 2015 Paris Climate Protection Agreement.

Orkhan Ismailov, Principal Legal Counsel

He has been at LGP since 2012 as a legal advisor and regional manager for Azerbaijan, providing support to international projects related to Azerbaijan in the field of international trade law, infrastructure, fundamental rights and human rights. Orkhan Ismailov actively contributes to the development of economic relations between Austria and Azerbaijan; It advises clients, including in Azerbaijan, France, and Russia.

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