GREEN LIGHT FOR NEW PROJECTS

The EU has officially announced that it has been able to reduce its energy dependence on Russia by replacing about 80% of Russian natural gas.  Energy prices have returned to pre-war levels between Russia and Ukraine. However, Brussels believes they should not relax, and Europe should use the rejection of Russian energy sources as an opportunity not only to diversify suppliers but also to develop towards the transition to green energy.

President of the European Commission Ursula von der Leyen has voiced this call at the recent World Economic Forum in Davos. She had announced the European Defence Investment Programme (EDIP) even before the forum. In Davos, she emphasised that the EDIP should make Europe home to clean technical and industrial innovations and help it move down the road to zero emissions.

The future of green energy was the key theme of the 13th session of the International Renewable Energy Agency summit held on January 13-15 in Abu Dhabi. Discussions were later continued at the WEF in Davos.

In his keynote address in Abu Dhabi, UN Secretary General António Guterres called on countries to phase out the use of coal, boost the ‘renewable energy revolution’, end dependence on fossil fuels and end the war on nature. He recalled that renewable energy sources provide 30 per cent of global electricity needs. According to Guterres, this figure should double by 2030 and reach 90% by mid-century.

President of Azerbaijan Ilham Aliyev also made addresses at the opening ceremony of the Abu Dhabi Sustainable Development Week and in Davos about Azerbaijan's potential in developing green energy, the country's plans and projects being implemented in this direction. He also spoke about the natural gas supplies to Europe. This year this figure will be close to 12 billion cubic metres (bcm).

Coal replacement

Renewable energy sources (RES) will overtake coal to become the planet's main supplier of electricity by early 2025, International Energy Agency (IEA) reported.

"By 2027, renewables will account for almost 40% of the global electricity production. At the same time, the share of coal, natural gas and nuclear power plants will continue to decline," the IEA baseline scenario reads.

The development of renewable energy has been boosted by the energy crisis caused by the decline in oil and gas exports from Russia, according to IEA analysts. As a result, the main European importers of Russian oil and gas in 2021 have been compelled to accelerate the transition to alternative energy sources.

"The global energy crisis has sharply accelerated the introduction of new power generation facilities for renewables. The rate of aggregate capacity growth can double over the next five years," according to the IEA.

The agency expects that by 2027 the global renewable power generation capacity will reach  2,400GW, roughly equivalent to the total power generation capacity of modern China.

"There will be as much renewable energy in the world in the next five years as there has been in the past 20 years," predicted Fatih Birol, head of the IEA.

"The biggest driver of renewable energy development right now is energy security... Long-term solutions to energy security problems are linked to clean energy," Birol said at one of the recent WEF sessions in Davos.

The IEA estimates that total investment in RES technology and infrastructure should exceed $4.5 trillion by 2030 to meet climate targets by mid-century. 

Also, the UN Secretary-General in Abu Dhabi called for investment in renewable energy. He said the total amount of private and public investment in the sector should be raised to $4 trillion annually.

Meanwhile, the Norwegian independent consultancy company Rystad Energy has calculated that investment in various low-carbon projects (RES, nuclear power, etc.) alone will increase by more than 10% ($60b), to $620b during 2023 compared to the preceding year. 

The largest increase is expected to be from the investment in hydrogen power (up 149%, to $7.8b) and carbon dioxide processing and storage (up 136% to $7.4b).

Nevertheless, solar power ($250b in 2022) and onshore wind power ($205b) make up the lion's share of investment—almost 45% and 37% of total investment last year, respectively. This year, investment in solar and onshore wind power will increase by 6% and by 12%, respectively.

The world's largest countries have already joined the green energy race and expect to take leading positions in the RES development. For instance, China is now the undisputed global market leader in the solar energy industry not only because of its generating capacity, but also because of the production of components for solar energy plants, etc. The EU, India and the US are also seeking leadership in this area.

Europe believes that increasing the use of renewable energy, especially solar energy, will enhance its energy security. In December 2022, the European Commission formally launched the European Solar PV Industry Alliance. Brussels plans to create a vertically integrated solar PV production capacity of 30GW per year by 2025. The initiative will cover all segments of the value chain, i.e., polysilicon, ingots, silicon wafers, solar cells, modules as well as their processing. The industry is expected to add €60 billion to Europe's GDP annually and create more than 400,000 new direct and indirect jobs.

Targeted projects

Azerbaijan has also launched in cooperation with international energy companies a number of facilities for the large-scale production and exports of renewable energy.

For example, last year saw the start of the construction of two large power plants: Garadagh Solar (230MW) implemented together with Masdar, UEA and Khizi-Absheron Wind Farm (240MW) together with ACWA Power, Saudi Arabia.

The plans are ambitious. Azerbaijani authorities hope to increase the share of renewables in power generation to 30% by 2030 and to reduce the country's greenhouse gas emissions by 40% by 2050.

"We see Azerbaijan as one of the centres of renewable energy," President Ilham Aliyev said at the official opening ceremony of the Abu Dhabi Sustainable Development Week on January 16.

MoUs and agreements signed between Azerbaijan and international energy companies are expected to produce a total of up to 22GW of wind and solar energy in the country in the future, which will mainly be exported.

"Azerbaijan has been developing renewable energy sources not to ensure its own energy security... Our renewable energy programme has a completely different agenda. Firstly, because this industry has huge potential. Secondly, because it will help us diversify our exports and create a new environmentally friendly sector of our economy," President Aliyev said.

As to the resources for the development of RES, the Azerbaijani leader noted that the country had good potential for wind and solar energy generation both onshore and offshore.

"Our potential is almost 200GW. We certainly need a sufficient number of export routes. All these projects will be implemented in stages," President Aliyev said.

Just before the Davos Forum, during the official visit of the President of Azerbaijan to Abu Dhabi, SOCAR and Masdar signed two agreements on the implementation of new renewable energy projects in Azerbaijan.

"Thanks to the agreement signed with Masdar, we will produce 4GW of wind and solar power by 2027. And another 6GW by 2037. This is just one short-term project. Medium-term projects will increase this volume to 10GW. This is absolutely doable. We have a roadmap for both the projects. This Masdar project alone and our cooperation with this company will turn Azerbaijan into a very important source of green energy exports," President Ilham Aliyev explained.

Azerbaijan expects to build another 12GW of RES generation facilities with Australian Fortescue Future Industries.

A framework agreement signed between the company and Azerbaijan's Ministry of Energy provides for joint research and implementation of RES and green hydrogen projects.

As a result and in parallel to becoming a green energy country, Azerbaijan expects to become an important and reliable RES and hydrogen export partner for the EU.

It was therefore expected that Azerbaijan would also actively participate in a project to lay a 4GW subsea cable line from Georgia to Romania.

"A feasibility study is currently underway. As soon as it is done, we will think about the funding structure. We will also need the support of European financial institutions... Indeed, this is a new chapter in our energy policy. Everything is clear with oil and gas. Electricity and green hydrogen production are also in our plans", President Aliyev said in Davos to the participants of the panel session Eurasian Middle Corridor: From Road to Highway.

Thus, Azerbaijan is creating an entire chain from production to export of green energy to Europe. The scheme is actually similar to the Southern Gas Corridor system, but with a focus on clean energy.

Obviously, there are still a number of unresolved issues, including the organisation of hydrogen production. But if everything goes well, Azerbaijan will be able not only to become a producer and supplier of green energy to European markets, but also to significantly increase revenues from electricity exports. At the end of 2022, this volume hit $120 million. Given that raw materials for green energy production are basically inexhaustible, with the right process in place this is possible to realise indefinitely.