THREE SIGNALS OF TRANSFORMATION

Since the beginning of the year, three developments have taken place in Azerbaijan's renewable energy market that can be regarded as a qualitative shift of the sector to a new level. Firstly, MVM Energetika Zrt. has entered the Shafag solar power plant construction project in the Jabrayil district.

The second is the European Commission's approval of Project of Mutual Interest (PMI) status for the Black Sea Energy cable project.

The third is the entry of the Hidro-3 project into the international carbon market and the issuance of the country's first-ever international carbon credits in the renewable energy sector.

When considered as a whole, these decisions demonstrate that Azerbaijan's green energy market is evolving from being just an internal part of the power system to becoming integrated into global financial, infrastructure and climate mechanisms.

Power surplus

Over the past two decades, Azerbaijan has successfully increased its generation capacity to 10,000 MW, representing a substantial expansion. At the same time, the power system currently has around 2,000 MW of unused capacity. This resource is viewed as a strategic advantage.

President Ilham Aliyev made a statement at a meeting dedicated to the unified action plan entitled "New digital architecture of Azerbaijan". He noted that the availability of spare capacity supports the development of digitalisation, artificial intelligence and data centres. The energy base is becoming the foundation for attracting energy-intensive technologies and shaping a new digital economy.

Concurrently, a large-scale green contour is being formed. The head of state emphasised that, according to signed contracts — not memoranda of understanding — Azerbaijan will receive an additional 7-8 GW of solar and wind energy by 2032. He made this statement while receiving a delegation from the US Chamber of Commerce led by Senior Vice President for International Relations, the Middle East and Türkiye, Khush Choksy.

Of the eight solar and wind power plants (excluding Nakhchivan), the first phase has already been implemented—the 230 MW Garadagh solar power plant. In the coming years, major projects are expected to be launched in Bilyasuvar, Neftchala, Gobustan and Absheron-Garadagh, as well as the Ufuq, Shams and Shafag stations. This will have a significant impact on the country's generation structure and export potential.

Shafag is not an isolated project, but rather part of a large-scale programme to create a sustainable green cluster with export potential.

In this context, the announced sale by BP of a 10% stake in Shafag Jabrayil Solar Limited to the Hungarian MVM is a positive step for European involvement in Azerbaijan's renewable energy sector. MVM is involved in the development of Black Sea Energy, thereby linking generation with future exports. Whereas previously the focus was largely on strategic dialogue and support for gas supply diversification, Hungary is now entering the green electricity generation segment.

MVM has experience in power system management and electricity transmission, which is particularly important in view of the future integration of Azerbaijan’s green generation into the European grid. Thus, the company is participating not only as a financial investor but also as a technological partner.

The shareholder structure is as follows: BP—40.01%, SOCAR Green—39.99%, Azerbaijan Business Development Fund—10%, MVM—10%.

The 240 MW Shafag solar power plant will generate around 500 GWh of electricity annually. Construction has already begun, key contracts have been signed, equipment deliveries are proceeding on schedule, and completion is planned for 2027.

The power plant is being built in the Jabrayil district and forms part of the creation of a green energy zone in Garabagh, in line with the programme for the restoration of the liberated territories.

Export infrastructure framework

An important institutional step was the granting of PMI status to the Black Sea Energy cable project. This status is designed to accelerate administrative procedures, regulatory coordination and the possibility of European Union financing.

The project involves the laying of a 1,195-km subsea cable with a transmission capacity of up to 4 GW of green energy. The estimated cost of the project is €3.5 billion, with the European Commission planning to allocate €2.3 billion.

MVM, in collaboration with Azerenerji, Transelectrica and Georgian State Electrosystem, is among the founders of the Green Energy Corridor joint venture, which has been established to construct the green energy corridor to Europe. In summary, the Hungarian side is involved in both the generation and the cross-border transmission infrastructure.

In effect, a new energy axis—Caspian–Black Sea–Central Europe—is taking shape.

Another significant development in the country's renewable energy sector was the entry of the Hidro-3 project into the international carbon market as part of cooperation between SOCAR Trading and Azerenerji OJSC. The project encompasses the small hydropower plants Mirik and Garagyshlag, situated in the Lachin district. On 28 May 2025, the project was officially registered in the Gold Standard system, a globally recognised and respected international carbon certification organisation. On 28 January 2026, the Hidro-3 carbon credits were formally introduced.

These are the first international carbon credits in the renewable energy sector in Azerbaijan's history. The report covers the period from April 2024 to August 2025 and has a total volume of 10,745 units.

Registration with Gold Standard is a globally recognised mark of excellence in the global climate market. This initiative is not merely about domestic emissions reduction, but about the creation of an exportable environmental asset – carbon credits that can be sold to international companies to offset their emissions.

The project is being implemented in the Garabagh region, which further strengthens its status as a zone of green recovery and internationally recognised climate contribution.

If the Southern Gas Corridor were to become the inaugural phase of Azerbaijan's energy integration with Europe, the current processes would constitute the second phase, which relates to electricity and climate.

MVM's investment in Shafag is a strategic move that will enhance the company's investment portfolio. PMI status for Black Sea Energy will consolidate the export infrastructure base, while Hidro-3's entry into the carbon credit market will add a financial-climate instrument.

Consequently, a comprehensive model is emerging, involving production in Azerbaijan, export via Georgia and the Black Sea, integration into Romania's energy system, and further expansion into Central Europe.

Azerbaijan is therefore strategically strengthening its position as a regional energy hub, demonstrating its ability to combine traditional generation, scalable renewable energy projects, surplus capacity and export infrastructure. The three developments at the beginning of the year already demonstrate that green energy is no longer an auxiliary area; it is becoming an independent factor in the country's foreign economic and geopolitical strategy, as well as a new source of revenue—both energy and climate-related.