ACTION PLAN

Azerbaijan is actively developing its renewable energy sector and aims to leverage its abundant low-carbon resources to supply green energy to Europe while providing transit opportunities for Caspian countries.

In early September, energy agency heads from Azerbaijan, Georgia, Romania, and Hungary signed a shareholders' agreement in Bucharest to establish the JV-Green Energy Corridor joint venture. This marks the start of the next phase of the extensive Black Sea Energy Corridor project, with a feasibility study set to be presented in Baku during the UN climate conference (COP29) in November this year.

The Green Potential

Azerbaijan is making significant strides in the global "big energy transition of 2030" and has made notable progress in developing its renewable energy sources (RES) sector in recent years. According to the Ministry of Energy, as of early June, the installed capacity in the RES segment reached 1,748.6 MW, accounting for nearly 20.1% of the country's total power grid capacity. Over the past two years, there has been a robust growth trend in the share of green energy. For example, green energy accounted for 12% of total electricity production in 2023, up from 10% in 2022. Hydropower represents the majority of domestic alternative energy capacity.

Through partnerships with Masdar from the UAE and ACWA Power from Saudi Arabia, Azerbaijan is implementing large-scale solar and wind power generation projects. In the coming years, with assistance from foreign partners, plans are in place to build solar power plants (SPP) with capacities of 315MW in Neftchala and 445MW in Bilasuvar districts, as well as a wind power plant with a capacity of 240MW in Garadagh district, among others. A green energy zone is also being developed in the Garabagh region. Preliminary studies by TEPSCO, a consulting firm for the Ministry of Energy, indicate that the potential for solar and wind generation in this area exceeds 9.2 MW. Approximately two dozen small hydroelectric power plants (HPPs) have been reconstructed or built in the liberated territories by specialists from Azerenerji CJSC. Similar initiatives are underway in the Nakhchivan Autonomous Republic (NAR), where solar stations and HPPs are being constructed, alongside new power lines and modernized substations. The surplus "green" electricity generated in Garabagh is planned to be transmitted to NAR, creating an energy transit hub for exports to Türkiye and Europe.

The Ministry of Energy projects that by 2028, nearly 1,900 MW of additional "green" capacity will be commissioned, increasing the share of RES within the country’s energy system to 33%. Consequently, in just a few years, Azerbaijan will possess a substantial surplus (several gigawatts) of capacity. Future plans include exporting approximately 80% of "green" electricity primarily to energy-deficient regions in Europe.

To facilitate these initiatives, Azerbaijan, Georgia, Romania, and Hungary signed a strategic partnership agreement on December 17, 2022, to lay a 1,195 km long submarine electricity cable under the Black Sea with a capacity of 1 GW. Preliminary estimates suggest that this cable will enable the annual supply of up to four gigawatts of "green" electricity. In 2023, Bulgaria joined the project as a prospective partner, followed by Serbia, which expressed its intention to connect its energy system to the distribution networks of Romania and Hungary. Recently, project participants have begun developing a feasibility study for this energy bridge. The Italian consulting company CESI has been engaged in studies related to laying an underwater cable connecting Georgia and Romania. Meanwhile, partners are exploring potential financing for this project from the European Commission (EC), which plans to allocate €2.3 billion. The implementation of the Black Sea Energy project is anticipated to take 3-4 years.

Speeding Up The Process

The logical outcome of these efforts was the signing of a shareholder agreement on September 3rd to establish a joint venture (JV) for the Azerbaijan-EU green corridor. The agreement was signed by the system operators from all four countries: Azerenerji, Georgian State Electricity System, Transelectrica, and MVM.

"The ministerial meeting held in Bucharest by the steering committee for establishing a green energy corridor between Azerbaijan, Georgia, Romania, and Hungary concluded with the signing of the Shareholders' Agreement for the establishment of the JV-Green Energy Corridor. We agreed that the management of the JV should operate on a rotational basis and also agreed to develop an Action Plan to expedite processes before our next meeting," stated Azerbaijani Energy Minister Parviz Shahbazov. According to him, this decision represents a significant step towards implementing the quadripartite agreement and establishing Azerbaijan as a European supplier of "green" energy.

As a result of this meeting, both the Green Energy Corridor and the working group were tasked with expediting joint processes alongside a consulting firm to finalize the feasibility study, prepare an action plan for the JV before the next ministerial meeting, and initiate consultations regarding potential business models for the project. Discussions also covered Bulgaria's involvement in Black Sea Energy. During talks, it was noted that the European Commission may include this feasibility study for the regional "green" project in its list of projects of common interest (PCI/PM). The four countries initiating this energy bridge have collectively submitted an application to launch relevant EC procedures. The inclusion of the European Commission in this initiative marks a significant milestone, indirectly demonstrating collective Europe’s support for "green" projects initiated by Azerbaijan and acknowledging our country’s role as a regional energy hub. Hungarian Minister of Foreign Affairs and Trade Peter Szijjártó echoed similar sentiments during a ministerial meeting in Bucharest: "Hungary anticipates EU financial backing for the 'green' corridor with Azerbaijan; this project will facilitate future electricity imports from Azerbaijan and Georgia to Hungary and Romania and is approaching a pivotal moment." He emphasized its importance as a critical element for energy and national security during these challenging times. Minister Szijjártó added that companies from participating countries are forming a joint venture and expect to sign an updated green energy partnership agreement soon.

"The presentation of the Black Sea Energy Feasibility Study will occur in Baku during COP29 in November this year. The access that European states in our region will gain to energy from an entirely different market such as the Caucasus will undoubtedly lead to diversification of supply sources and access to more affordable energy," remarked Sebastian Burduja, Romanian Minister of Energy, regarding key decisions made in Bucharest. "This is not an inexpensive project; final costs will be clarified upon completion of the feasibility study; however, we estimate that approximately €3.5 billion will be necessary to lay the submarine cable between Georgia and Romania. Nonetheless, we believe this project will enhance energy security and benefit the market overall." During the eighth ministerial meeting in Bucharest, both sides also agreed that the feasibility study for the energy cable will encompass plans for laying an optical fibre line as well. "The energy bridge project includes a component for establishing an optical communication line which will connect all four countries, enhancing internet data flow and supporting regional digitalization," Burduja stressed.

Promising Partnership 

Future considerations are underway for exporting "green" electricity from Central Asian countries to Europe via Azerbaijan. In this context, a Memorandum of Cooperation focusing on integrating energy systems among Azerbaijan, Kazakhstan, and Uzbekistan was signed in Tashkent on May 1, 2024. This document aims to promote joint electricity production at RES capacities, along with its exportation, integration of energy systems, and efficient utilization of alternative energy resources. The memorandum includes studying possibilities for connecting energy systems through high-voltage cables laid along the Caspian Sea bed.

Turkmenistan represents another promising partner within Central Asia. This country has officially expressed its readiness to supply electricity to Azerbaijan and Türkiye via the Caspian Sea. Its energy system has long been surplus, supplying Uzbekistan and Kyrgyzstan while also engaging in energy exchanges with Iran. Furthermore, Ashgabat consistently invests in expanding export generating capacities; notably, at the end of 2023, groundwork was laid for a new power plant with a capacity of 1,574MW near Turkmenbashi port. The transit of Kazakh electricity through Azerbaijani territory also appears equally promising; Kazakhstan currently operates about 145 RES facilities with a total capacity exceeding 2,600MW.

"As part of our green electricity transfer project, Azerbaijan and Uzbekistan—partnering with Kazakhstan—plan to construct a 2,450-kilometre DC power transmission line," stated Uzbek Minister of Investment, Industry and Trade Laziz Kudratov. "We are actively preparing a feasibility study for this project; as part of this effort, we intend for the DC power line to traverse Kazakhstan, Azerbaijan, and Georgia with access to European markets." The minister further noted that Uzbekistan is making strides in wind power generation with a total capacity reaching up to 10,000 MW. Uzbekistan's development strategy aims to increase total generation capacity by 2.4 times to 44.9 GW by 2030 while raising renewable energy's share within total generation to 40 percent.

It should be reiterated that substantial investments are being made into building and modernizing substations and high-voltage lines within our country to realize these ambitious goals. In addition to the Black Sea Energy project, Azerbaijan is establishing two more transit corridors: Azerbaijan-Georgia-Türkiye (2015) and one currently under construction from Nakhchivan Autonomous Republic (NAR) to Türkiye. All these initiatives significantly enhance Azerbaijan's stature as a transit country and establish its role as an essential hub for electricity transshipment to Europe.