BRIGHT PATH

Difficult situation on the European gas market has prompted the European Commission to make a very specific decision by reconsidering its view on green projects. Investors are now encouraged to consider, beyond renewable energy sources (RES)ç nuclear energy and gas. The decision to include gas and nuclear poüer on the list of green technologies was approved by European Commissioners at a meeting held on February 2, 2022. However, it is expected to become effective in the next four months unless it is blocked by the EU Council and the European Parliament.

Green light for nuclear power

The EC’s controversial decision has already sparked fierce criticism from environmentalists and even from investors, and has divided Europe internally reaching threats of court trials. The initiative is supported by France, Poland and a number of other EU countries. Germany, Austria and Luxembourg opposed the new idea; the latter two are even threatening to challenge it in the court. To justify its decision, the EC says that gas and nuclear projects are essential to Europe at this stage, and denying this thesis would be equal to denying reality. Although alternative energy will play an instrumental role in achieving ‘zero emissions’, the region also needs stable energy sources, commissioners say.

French President Emmanuel Macron believes that without nuclear power, France and the EU will not achieve carbon neutrality by 2050 as previously planned. The French leader announced plans earlier this month to build at least six EPR2-type nuclear reactors in the country by 2045. Indeed, this is a U-turn in Macron’s statements, who in 2017, during his election campaign, promised to reduce the share of nuclear power in the country's electricity production from 75% to 50%.

Nuclear power is the backbone of the post-war French economy, the second largest in Europe after Germany. Nuclear power plants cover 70% of France's electricity needs, at low cost, and have made the country a major energy exporter, mainly to Italy and the UK.

In addition to France, the Czech Republic, Slovakia, Hungary, Romania, Poland and Slovenia also support nuclear power generation in the EU. Of the non-EU countries, nuclear power plants continue to be constructed in the UK.

Hungary hopes to receive a licence to build the Paks II nuclear power plant soon. According to Hungarian Prime Minister Viktor Orban, this would be a ‘great achievement’ for the country, where the authorities intend to ensure the country's energy independence and ‘do it in the most climate-neutral way possible’.

The Czech Republic also plans to start building a new power unit at the Dukovany nuclear power plant. “Nuclear power plants play a very important role for us, they generate about 40% of the country's electricity,” Czech Prime Minister Petr Fiala said. The Czech authorities have long been unable to decide on funding the project, so the construction of the power plant has been delayed. It has now been decided that the state will allocate about €6bn for the project.

And while Europe is choosing between investing in nuclear power plants or abandoning them altogether, Azerbaijan is paving its own way in the field of power exports. In doing so, Europe is seen as a promising destination for energy supplies.

A different way

In Azerbaijan, there were plans to build a nuclear power plant near Baku during the Soviet times. The project started but abandoned soon after the 1986 accident in Chernobyl—only the foundations of the plant had been constructed by that time.

After the collapse of the USSR, the issue was discussed at various meetings between the presidents of Russia and Azerbaijan, as well as at meetings of the Azerbaijani-Russian intergovernmental commission on economic cooperation. In 2019, the head of Rosatom, Alexei Likhachev, stated that Russia was ready to build a nuclear power plant in Azerbaijan, noting that Baku could increase its gas exports thanks to this energy facility. No decision has been made yet, but the issue is still relevant. Declaration on Allied Cooperation signed between Russia and Azerbaijan on February 22, 2022, following the Russian-Azerbaijani summit in Moscow, has a separate paragraph where the parties agree “to consider opportunities for mutually beneficial cooperation to ensure the peaceful use of nuclear energy”. It is possible that this issue will be discussed more broadly at the next meeting of the Intergovernmental Commission to be held in Baku in April-May 2022.

In the meantime, all development projects are focused on the construction of new power generation facilities working on natural gas and RES.   

“We have made large investments in the power generation infrastructure. According to the Davos World Economic Forum, we rank second in the world in terms of access to energy. We have invested a lot of money in this sector. I can say that we have completely upgraded power lines and built new ones,” President of Azerbaijan Ilham Aliyev said.

Incidentally, Mr. Aliyev took part at the opening ceremony of the Gobu energy hub, which includes a 330/220/110kV substation with a transmission capacity of 1000MW and a 385MW power station on February 11, 2022.

The Gobu energy hub is very important in terms of meeting the growing electricity demand in Azerbaijan, in particular in Baku and the Absheron peninsula, as it reduces their dependence on regional power plants, maximises the sustainability and reliability of power supply, reduces technical losses, minimises the threat of system accidents and other factors.

A 108 km long 330kV transmission line has been installed to integrate the Gobu hub into the power grid to the Janub power plant in Shirvan.

Commissioning of the Gobu power plant increased the capacity of Azerbaijan's energy system to nearly 8,000 MW.

In 2021, electricity production in Azerbaijan increased by 7.9% compared to 2020, while consumption increased by 6.7%.

Electricity exports, according to the Azerbaijani leader's estimates, reached a record 1.6 billion kWh in 2021. “There is a demand for our electricity in the regional market. Perhaps we can go even further and reach Europe. Today we export electricity to four neighbouring countries, Turkey, Russia, Georgia and Iran (...). I am aware of some plans regarding the construction of transmission lines under the Black Sea connecting Central Europe to our region. Azerbaijan, as a supplier of electricity to Georgia, can participate in this process. We do have great potential here,” believes President Ilham Aliyev.

Export routes

Increasing export volumes and organising the transit of third-country power supplies through Azerbaijan is planned through the development of two energy corridors: East-West between Azerbaijan, Georgia and Turkey and North-South between Iran, Azerbaijan and Russia.

Interconnection of energy systems in these countries will create an opportunity to expand export-import operations and strengthen Azerbaijan's position as a power exporter and transit country.

The construction of the East-West energy bridge is complete—on February 7, 2016, Azerbaijan started the first power supplies to Turkey (about 80MW daily) via Georgia.

As for the North-South energy bridge, the project is in the stage of a feasibility study conducted by Iranian company Monenco Iran. The project is still relevant. On February 21-22, Azerbaijani Minister of Energy Parviz Shahbazov had a chance to discuss the progress of the project with his colleagues from Russia and Iran, Nikolay Shulgin and Ali Akbar Mehrabian, in Doha within the framework of the Gas Exporting Countries Forum.

Under the project, the energy networks of Iran and Russia will be connected through Azerbaijan. Iran and Russia do not have the same peak electricity consumption periods. So, Iran can export electricity to Russia in winter and import it from Russia in the summer season.

Azerbaijan is technically ready to connect its energy grid with that of Iran and Russia. Azerbaijan has powerful energy facilities—Derbent-Yashma and Imishli-Parsabad transmission lines. It also have experience of parallel operation with the Russian energy system.

Another opportunity to increase electricity exports and transit to Turkey and Iran may be the construction of power transmission infrastructure that would connect Azerbaijan with the Nakhchivan Autonomous Republic (NAR). Incidentally, Azerbaijani leadership has already announced its intentions to implement a project for the construction of new power transmission line through the Zangezur corridor.

“We have to expand our export-related activities, enter new export markets. As I said, we have established energy links with all four neighbouring countries. We are now working on a new project. Our plans include the construction of a new line via the Zangezur corridor from Azerbaijan to the Nakhchivan Autonomous Republic, and from there to Turkey and Iran. Zangezur corridor is not designed for railroad, automobile and air transport only. It will also contribute to the export of energy,” President Aliyev said in his interview with AzerTAG.

“We will have a new supply line to Nakhchivan, which is an integral part of Azerbaijan, to reach external markets from there, including Europe after Turkey. One line goes through Georgia and Turkey (East-West energy bridge), the second one should go from Nakhchivan. We are working on it; growing export volumes will increase Azerbaijan’s significance, our geopolitical significance bringing in additional currency. In addition to oil and gas exports, we will earn currency from electricity. Our country will prosper even more,” Mr. Aliyev said.

As the current situation on global markets shows, fuel and energy projects will remain the most profitable in the long term. Therefore, the more Azerbaijan is involved in such major projects, the more confident it will be about the stable development of its economy.