GREEN HUB

Global spending on clean energy technologies and infrastructure is projected to reach $2 trillion this year, according to a recent analysis by the International Energy Agency (IEA).

The funds will be allocated to the development of renewable energy sources (RES), electric vehicles, nuclear power, low-emission fuels, electricity distribution and storage systems, as outlined by the agency.

The total investment in energy this year is projected to exceed $3 billion, marking the first instance in which investment in clean energy and grids will surpass that in fossil fuels.

Azerbaijan, like many other countries around the globe, has also sought to mitigate the adverse effects of climate change by introducing low-carbon technologies in the energy sector, developing green energy sources, and striving towards carbon neutrality. There is much to be done, but it is important to recognise that the process is underway. In the period preceding the 29th Conference of the Parties (COP29), the country has intensified its efforts to develop renewable energy sources (RES). In October of last year, the inaugural solar power plant with a capacity of 230 MW was commissioned. In the medium term, the production of "green" energy in Azerbaijan is planned to reach 10 GW, while in the short term, up to 2030, the target is 5 GW. This is a challenging objective, but there is considerable potential for the country to exploit its hydro, solar and wind resources. In conjunction with high aspirations and a conducive investment climate, the aspiration to become a producer and exporter of "green" energy appears to be a realistic objective. This is particularly the case when one considers that the undertaking is not being pursued in isolation, but in collaboration with reliable and experienced partners who have already demonstrated their ability to successfully implement similar projects.

It is not coincidental that Baku has attracted Middle Eastern companies ACWA Power (Saudi Arabia) and Masdar (UAE) to construct the inaugural two projects. Moreover, it is not only about the financial resources possessed by both energy giants (although this is undoubtedly a significant factor), but also about experience. This is the key to future success.

The Eastern Partnership

Despite its considerable natural resources, Azerbaijan is only at the initial stages of developing clean energy. Consequently, the conclusion of each new agreement for the construction of a wind or solar power plant is accorded a significance comparable to that of oil contracts. For example, the Production Sharing Agreement on the Shahdeniz gas condensate field project.

In just 20 years' time, on the same day as the Baku Energy Week, a total of three solar and one wind power plants with a combined capacity of 1,000MW will be constructed in a videoconference format. The significance of this project can be gauged by its cost, which is approximately one billion dollars.

On 3 June, contracts for the construction of these power facilities were signed with Masdar. The construction of the Bilasuvar solar power plant with a capacity of 445MW, the Neftchala solar power plant (315MW) and the Absheron wind power plant (240MW) is the subject of the agreement. In total, Azerbaijan plans to implement 10 GW of renewable energy (RES) projects in collaboration with Masdar.

"This is an illustration of Azerbaijan's and its international partners' transition from fossil fuels to renewable energy, recognizing that fossil fuels will continue to be a significant source of energy not only for Azerbaijan but also for its partners for the foreseeable future," President Ilham Aliyev stated at the groundbreaking ceremony. This represents only the initial stage of a much larger project, given the country's considerable potential in this area. The companies in question are of a global scale. As previously stated, Masdar is a leading entity in the field of green energy and the transition to green energy.

It is also noteworthy that by the end of 2027, Azerbaijan plans to commission 2 GW of RES generating capacity in partnership with foreign companies.

This will result in an increase in the share of renewable energy sources to 33%. The total investment in these projects is expected to exceed two billion dollars. The introduction of the new plants will result in an annual production of 5.3 billion kWh of electricity, a reduction of 1.2 billion cubic metres of gas, and a reduction in emissions of up to 2.5 million tons, according to the country's Energy Minister Parviz Shahbazov.

By 2030, approximately 20 solar and wind power plants with a combined capacity of 7GW are scheduled for construction in the country. It is, of course, anticipated that ACWA Power, a leading figure in the field of energy transformation, will be involved. The Saudi company in Azerbaijan is currently constructing the Khizi-Absheron wind farm (240 MW), with the groundbreaking ceremony having taken place in January 2022. The total cost of the project is estimated to be $348 million. The wind power plant (WPP) has an estimated annual generation capacity of approximately one billion kWh, with commissioning scheduled for 2025.

In addition, in early May 2024, the Ministry of Energy of Azerbaijan and ACWA Power entered into an executive agreement regarding the construction of a 200 MW battery energy storage system and a framework agreement regarding the construction of onshore wind power plants (200MW). The potential for joint onshore and offshore RES projects with a total capacity of 2.5GW is currently under discussion with this company.

There are considerable prospects for renewable energy in Azerbaijan. In addition to its political stability, Azerbaijan is a highly favourable target country due to its advantageous transit routes and corridors. The company has been operating in this country for a considerable period of time. Abid Malik, the company's regional director, states that the company anticipates investing approximately $5 billion in Azerbaijan.

He further elaborated that these funds would be allocated to renewable energy (RES) projects.

"At present, we are implementing a project in Azerbaijan with the objective of constructing a wind farm with a capacity of 240 MW, designated as the Khizi-Absheron Wind Farm." Furthermore, the construction of wind farms at sea and on land is underway, and negotiations are in their final stages.

Furthermore, the company is engaged in a collaborative effort with SOCAR to facilitate the decarbonisation of petrochemical production. Malik expressed hope that the feasibility study of the project would commence in the near future. He further stated that ACWA Power attaches great importance to cooperation with Azerbaijan in the field of "green" hydrogen.

In addition to the Middle East, the Azerbaijani authorities have recently intensified their efforts to attract Chinese companies to renewable energy projects in the country. On 1 June, a Memorandum of Understanding was signed with China Gezhouba Group Overseas Investment regarding the implementation of renewable energy projects with a capacity of 2GW.

It is the intention of the governments of Azerbaijan and China to establish a working group with a view to fostering greater energy cooperation. In particular, the construction of solar power plants with a capacity of 60 and 100MW is planned with Chinese partners. Furthermore, the parties are engaged in discussions pertaining to the establishment of corridors and interconnectors for the purpose of facilitating the export, production, and transportation of "green" energy, as well as the production and transportation of "green" hydrogen and ammonia. Additionally, they are exploring avenues for collaboration in the field of energy storage systems.

The creation of new generating capacities in the field of renewable energy sources (RES) is expected to result in an increase in power generation capacity, despite rising consumption. This will lead to a reduction in the use of gas in power generation, with the freed volumes being exported, primarily to Europe. Moreover, the objective is to create opportunities for supplying 5GW of "green" energy to Europe and Türkiye. This is arguably the most challenging aspect of the plan, given that the proposed energy transit routes traverse multiple countries. This implies that the energy transmission infrastructure in each of the aforementioned countries will require strengthening and bringing it to a state of full readiness. Concurrently, new agreements will be required, for instance, on the tariffs applicable to the transmission of electricity across state borders.

Green Corridors

The city of Baku views the European and Turkish markets as potential sources of demand for "green" energy. It is evident that projects are being prepared for both directions.

The initial route entails the transmission of green energy generated in the Azerbaijani sector of the Caspian Sea to Georgia, where it will be distributed via a cable laid on the seabed of the Black Sea (Black Sea Energy). The feasibility study is nearing completion. It is anticipated that 4 GW of energy will be exported to Europe. The participating countries (Azerbaijan, Georgia, Romania, Hungary, and Bulgaria) have agreed to establish a joint venture (JV) for the realisation of the planned project, which will operate in Romania. A memorandum of understanding between the JV participants is also expected to be signed in the near future.

Concurrently, Azerbaijan put forth the proposal of establishing the supply of "green" energy to Europe and from Central Asian countries, predominantly Kazakhstan and Uzbekistan, via the Black Sea cable. In essence, this project will effectively unite three distinct regions, thereby transforming Azerbaijan into a regional energy hub.

It is also worth noting that on May 1, Azerbaijan, Uzbekistan and Kazakhstan signed a memorandum of cooperation on the integration of their respective energy systems. The parties agreed to develop a business model for the development of international transmission corridors and the sale of "green" energy to the European Union countries. Additionally, a memorandum of cooperation on the interconnection of the energy systems of Azerbaijan, Kazakhstan and Uzbekistan is currently being drafted. The wind potential of the Caspian Sea and the Aral Sea will be harnessed for the generation of energy.

The second proposed route entails the export of 1GW of renewable energy to Türkiye and Europe via Nakhchivan. A roadmap has already been signed between Azerenerji and Turkish TEIAŞ within the framework of this project. Efforts are underway to expand the capacity of renewable energy sources in Eastern Zangezur, Garabagh, and Nakhchivan.

These projects represent a significant advance towards the global climate goals and Azerbaijan's objective of reducing carbon dioxide emissions by 40% by 2050. It can be stated with a reasonable degree of confidence that the final goal is achievable, provided that consistency and the maintenance of momentum are maintained. The signing of cooperation agreements with Masdar, ACWA Power, bp, Fortescue Future Industries, China Gezhouba Group Overseas Investment and other companies on renewable energy projects with a total capacity of more than 28 GW in a short period of time serves to confirm international interest in Azerbaijan's "green" course of action and to give certain confidence in the country's energy future.