Azerbaijan places a stake on the renewable energy sources

A far-reaching milestone event occurred in Azerbaijan: the Qaradag solar power plant (SPP) was launched – the pilot project implemented at the expense of foreign investment. The construction contractor was Masdar company of the United Arab Emirates – one of the global leaders in power generation using the Renewable Energy Sources (RES). This project was the start of big joint energy journey for Baku and Abu-Dabi. The parties have already planned further specific steps of cooperation. Other RES projects with other international companies will be coming next. Azerbaijan is getting ready for a breakthrough in green energy to become one of the leading exporters of eco-friendly electricity.

Successful start

The Qaradag solar power plant was built in record-short time: only 19 months since the moment of laying the foundation until the moment of launching. Ilham Aliyev, the President of Azerbaijan, highlighted this fact during the ceremonial opening of this SPP on 26 October. «Today we are proud that in the period a bit longer than a year and a half this deserted part of the Absheron Peninsula was turned into a green energy source. This is a remarkable achievement», the Azerbaijan leader said. He congratulated Masdar (also known as Abu Dhabi Future Energy Company) with making an effective contribution into the green energy development in Azerbaijan emphasizing that this project was a good example of partnership with the UAE. «I would like to express my sincere gratitude to our dear guests for being with us today. A special thank you goes to Masdar company for giving credence to Azerbaijan by starting massive investment into the Renewable Energy Sources and thus providing an opportunity to our country for achieving the targets of our green agenda», Ilham Aliyev emphasized.

The installed capacity of the Qaradag  SPP is 230 MW, and the cost of its construction made USD 262 mln. The project was funded jointly by the Abu-Dabi Development Foundation, Asian Development Bank, European Bank of Reconstruction and Development and Japanese Agency for International Development. 

The Qaradag  SPP will be generating 500 mln KW-h of power per annum satisfying the needs of more than 110 thou households. The plant occupies the territory of 550 hectares, where 50 thou photovoltaic panels are installed. Thanks to this project, Azerbaijan will reduce domestic consumption of gas by â 110 mcma. These saved volumes from now on will be exported to the markets of Turkey and the European Union. The new SPP will also allow for reducing the atmospheric emissions of carbon dioxide by 200 ktpa. 

Masdar company was established in 2006, and today it is one of the global leaders in Renewable Energy Sources and producing green hydrogen. Its geography covers more than 40 countries of the world. During the period of its activity, the company implemented the projects for the total capacity of 20 GW, and the total costs of the implemented and planned projects exceed USD 30 bn.

The first one out of many

The Qaradag  Solar Power Plant is the biggest SPP not only in the Caspian Region, but across the entire CIS. On top of that, it is the first commercial SPP built in Azerbaijan with participation of foreign capital.

This SPP is the first RES project out of many coming next, which Baku intends to implement together with the United Arab Emirates. «We have ambitious plans, and I am sure that friendly and fraternal relation between the UAE and Azerbaijan will continue to develop. I am convinced: there will be more projects», Ilham Aliyev announced. On the same day, Parviz Shahbazov, the Minister of Economy, the Head of the SOCAR Supervisory Board, and Jameel Al-Ramahi, the Masdar CEO, signed three investment agreements for new RES Projects for the total capacity of 1 GW. They include building a 445 MW SPP in Bilasuvar District, a 315 MW SPP in Banka village of Neftchala District, and a 240 MW wind power plant on the border of Absheron and Qaradag Districts.

These contracts constitute the initial phase of the executive agreements with Masdar signed back in June 2022 with a focus on evaluation, development and implementation of RES projects for the total capacity of 4 GW. They are expected to play an important role in increasing the RES share in the electricity generation mix up to 33% by 2030.

The joint plans of Azerbaijan and the UAE in the sphere of green energy are not limited to just these agreements. «We plan to gradually generate up to 10 GW of electricity from the Renewable Energy Sources», the President of Azerbaijan claimed at the ceremonial opening of Qaradag SPP emphasizing his confidence in achieving all the targets. Ilham Aliyev added that it will be a full-scale revolution in the energy sphere development in the region.

It is worth reminding that in January 2023 during the official visit of President Ilham Aliyev to the UAE, Masdar and SOCAR executed two agreements concerning the alternative energy projects. They stipulate for the development of wind power generation and hydrogen projects of 2 GW, solar generation projects of 1 GW, as well as on-shore wind power generation of 1 GW.

At present, another major RES project in Azerbaijan is implemented by another leading energy company – ACWA Power from Saudi Arabia, which is building the wind power plant Khizi-Absheron of 240 MW, and the launch is scheduled for 2025. It will be the largest wind power plant in Azerbaijan. Within this project 40 wind-driven turbines 6 MW each are to be installed. Khizi-Absheron is expected to generate 1 bn KW-h of electricity saving up to 220 mcm of gas. This capacity will be enough for providing power to 300 thou households and will prevent over 400 thou tons of carbon dioxide atmospheric emissions per annum. The project is implemented based on the principle: Build – Own – Operate.

ACWA Power intends to continue to develop the RES market in Azerbaijan. The Ministry of Energy in Azerbaijan and this company has already signed a number of documents. They include the executive contract for implementing the project of building the off-shore wind power plants of up to 1.5 GW, the MOU on creating the on-shore wind power plant of 1 GW, the MOU on developing the energy storing systems in Azerbaijan. Within the perimeter of these agreements, the parties signed the Road Map for building on-shore energy accumulators and wind power generation plants of 200 MW.

On top of that, there is an effective framework agreement between the Ministry of Energy of Azerbaijan and Fortescue Future Industries from Australia concerning the evaluation and implementation of RES projects of up to 12 GW.

Impressing outlook

According to the official data, the RES potential in Azerbaijan is estimated at the level of almost 200 GW. «On-shore we have the potential of 27 GW of wind and solar generation, 10 GW – in the territories liberated during the Patriotic War of 2020, and 157 GW of the off-shore wind generation in the Azerbaijan’s sector of the Caspian Sea. Overall, we have the potential of 200 GW», Ilham Aliyev informed.

According to the estimates of Global Solar Atlas, the solar generation potential of Azerbaijan may be compared with that of Southern Italy and exceeds the potential of Germany almost 1.5 times, and the wind generation potential of the Absheron Peninsula  may be compared with that of the North Sea continental shelf.

It is important to highlight that Azerbaijan has undertaken a number of important steps to promote the green agenda. The necessary legal framework was developed including the Law «On Using the Renewable Energy Sources». The State Agency for Renewable Energy was established with the Ministry of Energy of Azerbaijan. The specialized Task Force within this new Agency will be coordinating the activities with regional development plans and defining the priorities. It will monitor, supervise and service the facilities in the regions with wind and solar generation potential.

The renewable energy development task is reflected in the «Strategy of Social and Economic Development of the Republic of Azerbaijan for 2022-2026». Another policy document «Azerbaijan 2030: National Priorities of Social and Economic Development» stipulates that by the end of the current 9-year period Azerbaijan will become the territory of «green growth» with clean environment. Achieving the above-mentioned goals will allow for meeting the voluntary commitment under the Parus Agreement to reduce the level of GHG emissions by 35% by 2030. Azerbaijan plans to bring this indicator down to 40% by the mid of the century.

So far, the RES share in the energy mix of Azerbaijan is only 17%. The plan is to bring on stream 1,800 MW of solar and wind power plants until the end of 2026. It means the release of about 1 bcm of gas to be sent for export.

In the long-run, Azerbaijan intends to take the position of a major green energy supplier. To achieve this objective, the country is actively attracting foreign investment in the sphere of Renewable Energy Sources. Big attention is paid to creating the favorable investment climate. Thus, the investors are supported in such important decision-making as allocation of land plots to implement pilot project, provision of government guarantees, economic evaluation of projects and preliminary proposals on integrating RES into the national energy system.

«Azerbaijan is an investment-friendly country. Over the recent 30 years, total amount of investment into Azerbaijan made over USD 300 bn, of which USD 200 went to the non-oil sector. Right now our task is to continue diversification of our economy to reduce the dependency on the fossil fuels», Ilham Aliyev stated at the Qaradag SPP opening ceremony.

The interest towards the alternative energy market of Azerbaijan on behalf of foreign companies is growing from year to year. The big role in RES development is given to the territories liberated three years ago – Karabakh and Eastern Zangezur, as well as Nakhichevan Autonomous Republic, which were proclaimed «the green energy zone».

According to the estimates, the potential of solar and wind generation in the liberated territories may achieve 9-10 GW. There are also plentiful water resources allowing for development of small hydropower plants (HPPs). As of today, small HPPs of 170 MW have already been commissioned in Karabakh and Eastern Zangezur. By the end of 2024, their capacity will be making 270 MW already, and after two or three years it will be 500 MW. Nakhichevan also has significant potential for construction of solar, wind and hydro power generation.

Going back to Baku’s plans in the RES sphere, they are growing every day, just like the number of international investors interested in Azerbaijan market. Thus, Masdar intends to launch major green projects in the liberated territories. In March 2022, this company and the State Agency for Renewable Energy of Azerbaijan signed the MOU on cooperation in the sphere of renewable and clean energy in Karabakh and Eastern Zangezur economic regions.

On top of that, in June 2022, at the dedicated session in Shusha within the Baku Energy Week the representative of ACWA Power from Saudi Arabia claimed its commitment for cooperating with Azerbaijan on the de-carbonization and hydrogen projects.

This June, the Ministry of Energy of Azerbaijan signed the MOU with China Gezhouba Group Overseas Investment on cooperation in the sphere of RES for 2 MW. In the same month, the MOU with French TotalEnergies on evaluation of the project to build solar power plants of 250 MW and wind power plants of 250 MW in Nakhichevan and Eastern Zangezur. In addition, they plan to use foreign capital to build wind and solar power plants of 1.5 thou MW in Nakhichevan, and at least 1 thou MW will be exported to Turkey and Europe.

According to Parviz Shahbazov, the Minister of Economy of Azerbaijan, right now the land plots for building solar power plants in Jabrayil and Fizuli are being allocated. The process of selecting and agreeing the land plots for building solar power plants of 1.150 MW in total by Nobel Energy, TotalEnergies è A-Z Czech Engineering companies is going on in Nakhichevan. On top of that, within the pilot project at the Boyukshor Lake, the first floating solar power plant of 100 KW was installed and soon it will be connected to the grid.

In 2024, British Petroleum is planning to lay the foundation of Shafag solar power plant in the territory of Jabrayil District. The installed capacity of this SPP will be 240 MW, and the total cost of the project is about USD 200 mln.

Notus company from Germany is also planning to implement green energy projects in Nakhichevan. At the initial stage, the pilot project is considered for building 70 MW solar power plant in the North-West of the exclave not far from the border with Turkey.

The green projects cooperation agreements signed by Azerbaijan with Masdar, ACWA Power, BP, Fortescue Future Industries, China Gezhouba Group Overseas Investment, Total Energies, Nobel Energy è A-Z Czech Engineering stipulate for total generation of more than 28 GW.

Energy corridor

Simultaneously with developing the RES generation, Azerbaijan is also working on enhancement of the routes for exporting environmentally clean energy.  The green energy corridor the Caspian Region – the EU will be one of such channels connecting the energy markets of Southern Caucasus and Europe. In December 2022, the governments of Azerbaijan, Georgia, Hungary and Romania signed the strategic partnership agreement in Bucharest. The document stipulates for laying the subsea electric cable Black Sea Energy across the Black Sea with the capacity of 1,000 MW and length of 1,195 km. Azerbaijan will be supplying its green electricity via Georgia and the Black Sea to Romania for the follow-up export to Hungary and other European countries. At the initial stage, the stipulated volume is 4 GW.

Earlier, within the Baku Energy Week the session of the Energy Ministers of four countries reviewed the implementation of this document. Bulgaria also joined the project. At present, the preparation of the Project Feasibility Study is underway, as well as the process of setting up the Joint Venture. The Black Sea Energy Project is supported by the European Commission with a commitment to allocate EUR 2.3 bn for its implementation. The subsea power transmission line is expected to be laid within three or four years. 

Another way to export the green energy from Baku is the corridor Azerbaijan – Turkey – Europe. It assumes the construction of 330 KV overhead power transmission line via Zangezur corridor to Nakhichevan, and from there 1 GW will be exported to Turkey and then to Europe.

In addition to environmentally clean energy, Azerbaijan also intends to export green hydrogen to the European markets. Now Baku is negotiating this issue with its partners in RES sphere.

Conclusions

The launch of Qaradag SPP opens a new page in the story of Azerbaijan’s electricity generation and energy industry in general. Over the recent several years, Baku has been undertaking important steps to facilitate the energy transition. As of today, there is a big portfolio of RES projects in place, and their practical implementation will give a powerful impetus for the development of this industry. The biggest achievement is that Azerbaijan succeeded in attracting attention of many leading players in the global energy market specializing in green energy. Their unique experience, technologies and investment contribute to the effective use of the renewable energy potential of Azerbaijan.

Implementation of major RES projects allows for Azerbaijan to achieve a number of  important strategic goals simultaneously. This will contribute to reducing the dependency on hydrocarbon resources, increasing the share of oil sector in the GDP, modernizing and diversifying the national fuel-and-energy complex, improving the environmental situation and reducing the GHG atmospheric emissions.