Despite ranking in the top 20 among nations with crude oil proved reserves and the top 25 when it comes to natural gas, Azerbaijan is moving ahead with developing renewable sources of energy.
On 9 April 2019, the German-Azerbaijani Chamber of Commerce (AHK Azerbaijan) released its "Market Analysis Azerbaijan 2019" publication in cooperation with Germany Trade & Invest (GTAI), which describes ways the South Caucasus’ largest economy is working towards modernizing its conventional energy generation and electricity distribution sectors.
"Market Analysis Azerbaijan 2019" publication, which examined 15 sectors of the Azerbaijani economy including oil, gas, and other forms of energy, sees renewable energy as an area ripe for foreign investment.
“Azerbaijan’s energy sector is at a turning point: a law on renewable energy (RE) and an investor-friendly tariff policy are in sight and are soon likely to ensure a significant upswing in the RE industry,” the document reads. “A number of projects represent potential opportunities for foreign suppliers of equipment and electricity industry know-how.”
Azerbaijan teamed up with the Norwegian international consulting company DNV GL for drafting a support system and a legal framework to tap the potential of the alternative energy sector. The draft law will reportedly be completed by May.
Foreign investors from China, Canada, Turkey, the United States and Norway, as well as Arab and EU countries, are supposedly eying opportunities in Azerbaijan with regards to renewable resources, especially wind power generation. According to the market analysis, wind power potential capacity accounts for over 15,000 megawatts (MW). Wind in Azerbaijan blows more than 250 out of 365 days per year and is able to generate over 2.4 billion kilowatt hours (kWh) of electricity per year.
But interest in green energy does not stop with wind. Solar power comes in at number two. Sunshine is present in Azerbaijan for anywhere between 2,400 – 3,200 hours per year.
The development of Azerbaijani’s oil and gas sectors over the last two decades has turned the country into a reliable energy exporter, while at the same time creating potential for investing in and boosting the non-oil sector. The efforts of the government in Baku to attract private investment and cooperate with international energy companies and financial institutions, in order to develop the country’s renewables capabilities and capacity, has been gaining momentum.
The Asian Development Bank (ADB) has allocated between $100,000 to $200,000 for a pilot project that will examine the feasibility, time and cost of a 300 kW floating solar power plant on Boyuk Shor Lake, located on the outskirts of Baku. The launch of the experimental facility is planned for March of 2021. The ADB is also investing in biogas plants, which will convert the waste produced during cotton, cereal and hazelnut cultivation into energy.
For its part, the World Bank is set to help the Ministry of Energy with funding small hydropower plants, with the help of the Canadian consulting company SNC-Lavalin Atkins that is analyzing the small hydropower market within the Caspian country. Azerbaijan currently has twelve big and seven small hydroelectric plants.
The European Bank for Reconstruction and Development is also interested in having its share in financial support campaign for renewable energy projects in Azerbaijan. In February, the French photovoltaic and wind power plant developer and operator Total Eren signed a memorandum of understanding with the energy ministry, which will see Total Eren lead projects that will generate 420 MW of power from wind, solar and bioenergy.
The six wind, 10 solar and six biomass power plants constructed between 2018 and 2020 in Azerbaijan are expected to have an installed capacity of about 420 MW, or an average annual electricity generation of about 1.2 billion kWh. The share of renewable energy in the domestic energy sector is expected to account for about 15 percent by 2020 according to the market analysis, and ultimately reach 40 percent in 2030.
In January-September of 2018 renewable energy sources, including hydropower, wind and solar power plants generated 1.48 billion kWh of energy, comprising almost nine percent of the total production of 17.2 billion kWh.