THE GREEN TRIO

The initiative by the Ministers of Energy and Economy from Azerbaijan, Kazakhstan, and Uzbekistan to export green energy from Central Asian countries to Europe via Azerbaijan has taken an interesting and logical turn. In November 2023, the three nations established a joint working group to develop terms of reference for cooperation on energy exchange, with a focus on renewable energy sources (RES) and the export of green hydrogen, ammonia, and related infrastructure.

During the Tashkent Investment Forum, the Ministries of Energy and Economy of these countries signed a memorandum of cooperation to interconnect their energy systems. This ambitious plan involves laying a power cable across the Caspian Sea, connecting Central Asian countries to Azerbaijan and providing access to European markets.

Green Exports

While the exact cost of the project—where Kazakhstan and Uzbekistan plan to sell RES-generated electricity via Azerbaijan to Europe—will be determined by year-end, it's evident that substantial investment will be required for energy transmission infrastructure and green energy production facilities. Minister of Economy of Azerbaijan, Mikayil Jabbarov, emphasized that implementing the memorandum would enable collaboration in "green" energy production and its efficient export through Azerbaijani territory to Europe. Azerbaijan is confident in its ability to produce clean energy, both offshore and on land, harnessing wind and solar resources. Ongoing projects aim to increase the share of renewable energy sources in the country's energy mix to 24% and to 30% by 2028, with signed contracts indicating the creation of up to 5,000MW of new energy capacity by 2030. Some protocols even suggest a higher figure of 10,000MW.

During discussions in Tashkent, the parties explored the possibility of engaging international consultants to study technical and economic conditions. They also addressed the preparation of a draft interstate agreement. The Ministry of Energy of Kazakhstan highlighted the potential of connecting the energy systems of the three countries via a high-voltage cable along the Caspian Sea bed and other territories, optimizing the trade in "green" energy from Azerbaijan, Kazakhstan, and Uzbekistan.

Kazakhstan's Energy Minister, Almasadam Satkaliyev, confirmed that the deep-water cable project is ready, including a business model for international transmission corridors and the sale of "green" energy to the European Union. Kazakhstan remains committed to the European market, having already engaged with EU countries interested in purchasing clean electricity. Meanwhile, Azerbaijan is exploring a project to lay a cable along the Black Sea floor.

Kazakhstan aims to tap into the wind energy potential of the Caspian Sea and Aral Sea zones, planning to export approximately 7GW of capacity, while Uzbekistan targets up to 5 GW of capacity. The initiative to export "green" energy from Central Asian countries to Europe via Azerbaijan has gained momentum. In November 2023, Azerbaijan, Kazakhstan, and Uzbekistan established a joint working group to develop terms of reference for energy exchange. Their focus includes renewable energy sources (RES) and the export of green hydrogen, ammonia, and related infrastructure. It should be noted that electricity generation in Kazakhstan is carried out by 222 power plants, 146 of which are RES facilities with a total capacity of 2.8GW.

In 2023, the share of renewable energy sources in the total volume of electricity produced in the country was just under 6%. Kazakhstan sets a target to achieve a 15% share of renewable energy by 2030 and 50% by 2050.

During the Tashkent Investment Forum, the Ministries of Energy and Economy of Kazakhstan and Azerbaijan signed a memorandum of cooperation, aiming to interconnect their energy systems. The ambitious plan involves laying a power cable across the Caspian Sea, connecting Central Asian nations to Azerbaijan and providing access to European markets.

While the exact project cost remains to be determined, it's evident that substantial investment will be required for energy transmission infrastructure and green energy production facilities. Minister of Economy of Azerbaijan, Mikayil Jabbarov, emphasized that implementing the memorandum would enable collaboration in "green" energy production and its efficient export through Azerbaijani territory to Europe.

Uzbekistan also views Europe as a major market for its electricity exports. According to the Uzbek Deputy Energy Minister Umid Mamadaminov, by collaborating with Kazakhstan and Azerbaijan, Uzbekistan explores supplying electricity along the Caspian Sea bed to Romania and other European countries. The country aims to utilize the green energy potential of regions like Karakalpakstan, Khorezm, Bukhara, and Navoi.

Uzbekistan's government has launched an investment program for major green energy projects, attracting over $2 billion in foreign investment for solar and wind generation capacity. By 2024, the volume of green energy generation is expected to exceed 10 billion kWh through the implementation of 14 projects. Looking ahead, Uzbekistan targets generating more than 20GW of renewable energy capacity by 2030, increasing its share in the energy balance to 40%.

The memorandum's signing underscores Azerbaijan's commitment. With the project's implementation, Azerbaijan will serve as an energy bridge between Central Asia and Europe. Together with Kazakhstan and Uzbekistan, it will create a new market for its own green energy. The energy resources allocated to Europe within this framework could significantly impact the regional energy balance.

The endeavour complements the 1GW Black Sea Green Energy cable, which will deliver green energy produced in Azerbaijan through Georgia and the Black Sea to Romania, onward to Hungary and the rest of Europe. Bulgaria has also expressed interest in joining the Black Sea Energy project. The cable's construction is estimated to take 3-4 years.

Beyond Energy: Telecoms and Oil

Interestingly, Azerbaijan and Kazakhstan have experience laying cables across the Caspian Sea. In 2019, they began work on the Trans-Caspian fiber-optic line, connecting China and the EU via Azerbaijan. This line, expected to be part of the Digital Silk Way project, facilitates data transit between Europe and Asia.

Additionally, Astana and Baku collaborate on transporting Kazakh oil to world markets via Azerbaijan. Plans are underway to study the possibility of laying an oil pipeline under the Caspian Sea, enhancing supply convenience. And, as it turned out, these are not just plans for the future; work in this direction has already commenced. A collaborative team is being assembled with international oil companies to analyse the current situation and develop recommendations covering technical, commercial, and legal aspects. "Based on the results obtained, the parties will determine the feasibility and their involvement in the project," explained the Kazakh state company KazMunaiGas.

Furthermore, there is another initiative - an undersea electric cable. All three countries exhibit the political will to materialize this project, high renewable energy potential, and all other necessary resources, including financial resources. The key now is to ascertain its commercial viability and proceed.

The advantages for the parties are evident - primarily, diversification of energy exports, access to new markets, increased foreign trade turnover and revenues from energy sales, and the strengthening of overall cooperation. This presents a significant opportunity for Europe to diversify its energy supply with clean energy, a goal it has been pursuing in recent years. In any case, certain countries, notably Hungary, Romania, Bulgaria, with the installation of the Caspian and Black Sea energy cables, may realistically work towards achieving energy transition and decarbonization goals with the support of Azerbaijan and Central Asia.

Moreover, the presence of such established export infrastructure may prompt neighbouring countries to express interest in joining. The example of the Southern Gas Corridor is quite illustrative in this regard. If a power cable lies at the bottom of the Caspian Sea, other Central Asian countries may potentially be open to supplying or receiving electricity through it in the future.

Incidentally, Kyrgyzstan has already expressed its readiness to receive electricity from Azerbaijan via Kazakhstan and Uzbekistan. Kyrgyz Energy Minister Taalaibek Ibrayev shared, "Azerbaijan produces electricity from natural gas and exports it to Iran, Türkiye, and Georgia. I had an opportunity to discuss with my colleagues (from Azerbaijan) the possibility of exporting this electricity to Kyrgyzstan."

Regarding Azerbaijan's intentions to lay a cable along the Caspian Sea bed for energy transmission with Kazakhstan and Uzbekistan, he further added, "I conveyed to the Azerbaijani side that if this power transmission network is established, we possess existing networks and acquiring electricity for Kyrgyzstan's needs through Kazakhstan and Uzbekistan will be feasible; we have all the necessary technical capabilities for this."

Hence, over time, the number of those interested in participating in this project as exporters or importers could rise. The initiators could emerge as significant players in the global clean energy market.