GREEN EXPORTS

Azerbaijan has long established itself as a producer and exporter of oil, gas and electricity. Now the country is actively developing renewable energy sources (RES) and plans to become an exporter of green energy as well. There is an ongoing construction of export infrastructure and production facilities to meet this goal. This includes laying a power cable in the Black Sea (Black Sea Energy), which will connect Azerbaijan's RES with the energy system of European countries via Georgia. In addition, works are being carried out to supply green energy from Azerbaijan to the Nakhchivan Autonomous Republic and further to Türkiye and Europe. It is planned to export more than 5GW of green power to Europe through these two directions. This is not an easy task. And this is only part of the plan for an energy bridge between Europe and Asia.

Considering the prospects of green energy and its demand in the European Union, Azerbaijan expressed its readiness to organise transit from Central Asian countries to Europe. Relevant agreements have already been reached with Kazakhstan and Uzbekistan. It is expected that the implementation of this project will strengthen ties between the economies and energy systems of the three countries. Together with the construction of the Black Sea Power Cable, the importance of this project will further increase and strengthen Azerbaijan's role as a key link between Europe and Central Asia in this supply chain. The sources of financing and technical aspects will be studied by a joint working group, which the ministers of economy and energy of the three countries agreed to set up at a meeting in Baku.

Green transit

In November, Baku hosted a trilateral meeting of relevant ministers to discuss the prospects of electric power exports from Central Asia to Europe via Azerbaijan.

The creation of the Caspian-Black Sea-Europe energy corridor by Azerbaijan, Georgia, Romania and Hungary, as well as the Nakhchivan-Türkiye-Europe route were also discussed.

It was noted that the access of Kazakhstan and Uzbekistan to these corridors will contribute to further development of their electricity markets, strengthening co-operation in the production and supply of green hydrogen and ammonia, enhancing energy security, etc.

"Generation of 7GW of green energy by 2030 and export of 5GW of this energy along the Caspian-European Union and Azerbaijan-Türkiye-Europe transport corridors, as well as plans to supply electricity from Central Asia to Azerbaijan and further to Europe will enrich the Chinese Road Initiative with green energy projects and technologies," Azerbaijan's Energy Minister Parviz Shahbazov believes.

Ministers also exchanged views on the possibility of building high-voltage lines along the Caspian Sea bed after the integration of the energy systems of Kazakhstan and Uzbekistan with the Azerbaijani one.

"The development of the green electricity transfer project will contribute to strengthening the links between our economies and energy systems, as well as enable the development of national energy sectors. We are ready to contribute to joint efforts on the successful implementation of this initiative," said Uzbek Minister of Investment, Industry and Trade L. Kudratov.

At the end of the meeting, the heads of the agencies signed a joint communiqué in which they pointed out the renewable energy potential of the three countries and their readiness to join the project to export electricity from alternative sources to Europe. The document highlights the importance of this project for the development of energy partnership and infrastructure in the involved transit countries.

The next meeting will be held in Tashkent between economy and energy ministers.

This year, Kazakhstan and Azerbaijan already started the construction of a fibre-optic communication line along the bottom of the Caspian Sea, which will diversify Internet traffic in the region.

Black Sea route

The implementation of the green energy transit project goes in parallel with works on the construction of the 1,000MW Black Sea Energy power cable (1,195 kilometres). It is designed to supply green electricity from Azerbaijan through Georgia and the Black Sea to Romania for subsequent transport to Hungary and the rest of Europe.

On December 17, 2022, Azerbaijan, Georgia, Romania and Hungary signed a partnership agreement to lay down an energy bridge from the Caucasus region to Europe. The construction of the cable will take 3-4 years.

A consulting company is currently being selected to develop a feasibility study. It is expected that the results of the tender will be summarised in December. A meeting of transmission system operators from the four countries will also be held in Baku by the end of this year to establish a joint venture for the project as soon as possible and to start the processes related to Bulgaria's admission to the Black Sea Energy initiative.

The EU expects the new cable to improve its energy security thanks to RES supplies via Romania and Hungary.

The European Commission is ready to finance the project as it is in the interests of the EU and neighbouring countries. It is planned to provide €2.3b for the construction of the cable that will be the longest in the world.

"The Black Sea electricity cable can also help supply electricity to Moldova and the Western Balkan countries, as well as to Ukraine. It will help Ukraine in restoring the energy system of the whole country," President of the European Commission, Ursula von der Leyen, said.

Uninvited guest

Brussels called on Armenia to join the Black Sea Energy as well. In the joint statement following the meeting between Nikol Pashinyan and Ursula von der Leyen in Granada, it was noted that the European Commission would support Armenia's participation in such regional projects as the Black Sea Electric Cable.

Perhaps, the European Commission assumes that the joint activity of Azerbaijan and Armenia will bring these countries closer together and bring long-awaited peace and stability to the South Caucasus region.

Yerevan claims that it could make a serious contribution to European energy security through its participation in this project. In other words, Armenia sees itself exclusively as an energy exporter through the green energy corridor created by Azerbaijan thanks to its own resources.

Armenian experts believe that their country has the technical capacity to produce and export large volumes of electricity. In particular, it is claimed that Armenia can already produce and export up to 1.3b kWh to Georgia. Allegedly, a new infrastructure is being built in the country. This is supposed to export up to 3b kWh in 2026. This electricity can be re-exported from Georgia to other countries, including the EU.

But what prevented Armenia from being the first to propose an initiative and create an energy corridor through Georgia to Europe on its own? Apparently, it is much easier to join a ready-made export infrastructure financed and built by someone from outside than to create something from scratch. It is important not to forget Yerevan's interest in the project initiated by Azerbaijan through the Armenian foreign minister during some political events. And to make it even more convincing, it is necessary to underline a significant contribution the Armenian side can make through the Black Sea power cable to the energy security of Europe.

In any case, no matter the good prospects that the initiative promises to the economies of the three South Caucasian nations, it is quite difficult to imagine that Azerbaijan will agree to Armenia's participation in it without normalising relations and signing a peace treaty. Especially since the corridor is being created primarily to export green energy produced in Azerbaijan. For this purpose, Azerbaijan is actively working to increase production capacity.

Energy potential

Azerbaijan is preparing a state programme to integrate green energy capacities into the energy grid. In accordance with the executive contracts for the assessment, development and implementation of the 4GW wind power and hydrogen production projects in the country, it is planned to build solar power plants in Neftchala, Bilasuvar and Gobustan. As a result, the share of RES in the energy sector of Azerbaijan will reach 33%, while the share in electricity generation will increase from the current 7 to 25%.

Azerbaijani authorities expect to create 7GW of green energy by 2030. However, depending on export demand, this indicator may grow significantly until 2037. By 2030, the share of RES in electricity generation is expected to reach 30%.

The Garadagh solar power plant built by Masdar (the UAE) was inaugurated in October. It will increase the share of installed RES capacities in Azerbaijan's energy system from 16.5 to 21.2%. This project will also help Azerbaijan reduce its dependence on thermal power generation and promote the development of renewable energy sources.

ACWA Power from Saudi Arabia will commission the 240MW Khizi-Absheron wind farm in Azerbaijan in 2025. In addition, the British BP is planning to start construction of a 240MW solar power plant in the Jabrayil region in 2024.

According to preliminary studies by the Japanese energy company TEPSCO, there is significant RES potential in the Garabagh and East Zangezur economic regions of Azerbaijan. In particular, the combined potential of solar energy in Gubadli, Zangilan, Jabrayil, Fuzuli districts is estimated at more than 7,200MW, and wind energy in Lachin and Kalbajar at approximately 2,000MW. In other words, thanks to the liberated territories, Azerbaijan has increased its capacity to develop renewable energy sources.

Thus, the implementation of the above projects will turn Azerbaijan into a major producer and exporter of electricity to Europe and strengthen the country's role in diversifying the energy supply of European partners with green electricity and hydrogen.