AN ELECTRONIC CORRIDOR INTO EUROPE

In the past fifteen years Azerbaijan has been able to radically modernize its electric power industry and significantly increase the sector's generating capacity. This opens up great possibilities for export to neighbouring countries. A few days ago the delivery of electric power to Turkey began, via Georgian transmission infrastructure.

In the past decade Azerbaijan has seen the opening of seventeen new electric power plants of various types, with the country's energy system reaching an output of 7,129 megawatts. By the look of things, soon these figures will only increase. The construction of a second 400 megawatt power unit at the Simal combined cycle power plant is in its final stages. In the near future a new modular electric power plant with an output of 16.5 megawatts will go into service in Lerik, as will the small hydroelectric plants Ismailla 2, Oguz 1, Oguz 2, Oguz 3, and Astara. Reconstruction work on the Mingacevir and Varvara hydroelectric plants is nearing completion; thanks to modernized equipment, productivity will increase. Looking further ahead, the 920-megawatt Yasma thermal power station will go into service. The effectiveness of this strategy is proven by the numbers: in the past year, new and alternative energy systems accounted for 41.2 per cent of the electricity produced in Azerbaijan. With an output of 2,300 megawatts, new generating capacity ensured the production of 9.27 billion kilowatt-hours of electricity. By comparison, the entire combined generation for the previous year provided 22.5 billion kilowatt-hours. 

Last year's electricity production figures are not the limit either, since some of the facilities of the energy system's main operator, OAO Azerenergy, are not running at full capacity. This is partly due to decreased domestic electricity consumption: last year electricity production decreased by 0.9 per cent when compared to figures from 2014. This trend, characteristic of recent years, is thanks to the efforts of energy agencies, who with the help of modernized equipment have been able to significantly reduce technical losses of electricity within distribution networks. Until recently these losses amounted to something on the order of 15 to 20 per cent each year. The streamlining of electricity consumption in Azerbaijan has been helped by the introduction of contemporary control equipment (smart meters), as well as the switch to more efficient energy-saving schemes in corporate and civil sectors (the computerization of lighting systems, the switch to energy-saving lightbulbs, etc.). 

In a word, thanks to increased generating capacity and judicious use of its electricity on the domestic market, Azerbaijan's energy system now has a sizeable production reserve. Today Azerenergy is capable of producing over 24 billion kilowatt-hours of electricity each year - meaning that it can now export approximately 2.1 billion kilowatt-hours without any risk to the country's energy security.

It is worth noting that since 2008 Azerbaijan has completely eliminated electricity imports, switching to its net export, and for many years has worked on systems of electric power exchange with neighbouring countries. In particular, the energy systems of Azerbaijan and Russia have for some times been united by two powerlines - Derbend (330 kilowatts) and Yalama (110 kilowatts). Energy exchange between Azerbaijan and Iran is also carried out by five high-voltage lines. Despite a significant decrease in electricity deliveries abroad last year, Azerbaijan still retains a positive balance in its exchange operations with its neighbours. In the past year Azerbaijan exported 276.8 million kilowatt-hours, while its imports via mutual exchange totalled 107.4 million kilowatt-hours. 

Without a doubt the figures given above are comparatively small and in no way match the potential of Azerenergy's energy system. According to a number of experts, alongside plans to exchange energy on a set-off system, export to the voluminous markets of additional countries should be increased by the use of transit schemes. This is the goal of the joint project "Energy Bridge Azerbaijan - Turkey - Georgia", in place since April 2009. This project was conceived as a component of a large-scale Black Sea transmission network designed to provide secure energy deliveries to the Black Sea region, as well as southern Europe. In the years since the project partners have carried out a large-scale modernization of their transmission system, and in 2013 the main facilities of a new energy corridor went into service, consisting of electric substations and powerlines joining the energy systems of Azerbaijan, Georgia, and Turkey. 

As part of this energy bridge Azerbaijan and Georgia initially planned to deliver from 700 to 1,200 megawatts of electricity to Turkey. At subsequent stages of the project, re-export from Turkish territory is planned into Bulgaria, Greece, and other southern European countries, totalling up to 2,000 megawatts annually. These are entirely feasible volumes, since today the energy potential of Azerbaijan alone can provide for the export of no less than 2 to 2.5 billion kilowatt-hours to the eastern regions of Turkey. 

The switch to export of electricity was planned for the middle of last year, but a number of outside factors necessitated a postponement of the process until this year. Fairly recently talks concluded with Turkey's EPDK, the Energy Market Regulatory Authority, which gave the Azerbaijani party a license to sell electricity. "On February 7, 2016, the export of electricity from Azerbaijan to Turkey via the territory of Georgia began. The initial output of our country's deliveries is approximately 80 megawatts a day," the report from the Azerbaijani Ministery of Energy reads. 

The transit of Azerbaijani electricity is carried out through the Qardaba powerline, while on its part OAO State Energy System of Georgia (GES) is also increasing the volume of its exports, using the potential of the energy bridge's infrastructure in the direction of Turkey. In 2015 GSE increased its electricity deliveries to Turkey by 77.4 per cent, bringing them to a yearly volume of 419.5 million kilowatt-hours. Notably, last year's devaluation of the Azerbaijan and Georgian national currencies - the manat and the lari - is also indirectly stimulating the increased export of electricity. In particular, government-regulated rates on natural gas and fuel oil - the primary raw sources for producing electricity at a thermal power station - have remained unchanged. Accordingly, the basic costs of generating electricity in the Azerenergy system have remained practically the same, which allows it to maintain competitive rates on exported electricity. Moreover, export operations are making a fairly high margin while moving electricity to the Turkish domestic market.

Here it would be proper to note that Azerbaijan plans to utilize the opportunities created by the transfer infrastructure created by these three countries to pay off Azerbaijan's debt to Turkey. This debt was incurred by deliveries of Turkish electricity to the Naxcivan Autonomous Republic and has yet to be fully repaid. The use of an energy bridge is more profitable for Azerbaijan, since it allows for a practically single-instalment repayment of the debt, thus not stretching out the process for years, with growing production and technical expenses. Such a plan for paying off the energy debt to Turkey, as well as the volumes of electricity to be exported, will allow the generating capacity of Azerenergy to be fully employed, noticeably increasing efficiency and lowering electricity production costs in Azerbaijan. Finally, the setting up of sustained electricity export to Turkey, and subsequently on to southern Europe, will help strengthen Azerbaijan's image as a reliable partner on the issue of energy security for the large Black Sea region.