Azerbaijan, Europe bet on green future Review by Caliber.Az

Azerbaijan is making every effort to diversify the economy in the context of the global processes of the "Great Energy Transition 2030". In the next few years, the republic plans to multiply the generation of alternative energy, including in the Karabakh region, to develop offshore wind energy and the production of "green" hydrogen. Equally promising are energy efficiency projects in the municipal sector, digitalisation of industry, agriculture, and the trend towards decarbonisation of production processes.

The country's achievements and prospects in the field of the green economy were discussed on May 22 in Baku at a conference organised by the OSCE Parliamentary Assembly (PA) and the Milli Majlis of Azerbaijan.

"With the transition to a green economy we will ensure the future of the next generations and for this, we all need to cooperate for a safer life by sharing our progressive experience," said Margareta Söderfelt, President of the OSCE PA, speaking at the "Role of National Parliaments in Promoting Security and Stability through Green Economy, Transport Coordination and Sustainable Development" conference in Baku.

"The green agenda is crucial in implementing joint initiatives related to the UN Sustainable Development Goals (SDGs), as sustainable development encompasses environmental policies that ensure resilience to future crises," she added.

The two-day conference organised in Baku was a landmark event, once again not only confirming the strong relationship between Azerbaijan and the European Union in the field of energy security and transportation of hydrocarbons but also demonstrating a sustainable partnership in renewable energy sources (RES) as well as in joint projects on energy efficiency and other components of the "green" economy.

The conference included panel discussions on "The Role of Green Concepts and Technologies in Sustainable Development and Economic Recovery", and "Strengthening Supply Chain Sustainability through International Transport and Trade Promotion for Sustainable Development", in which the OSCE PA Secretary General Roberto Montella, the President of the Parliament of Montenegro Daniela Djurovic and other EU representatives participated together with the OSCE PA President.

"Thanks to its rich resources, Azerbaijan will play a special role in the energy security of Europe - relevant projects in this direction are already being implemented together with a number of international partners. Implemented transport projects, making the country one of the largest international transport hubs, are equally important," noted Sahiba Gafarova, speaker of the Azerbaijani parliament (Milli Majlis), speaking at the conference.

She emphasised that the transition to green technologies will open new horizons for environmental protection measures, solving a number of other problems, and innovative economy and environmental security have been defined as one of the five important priorities of the new state strategy of Azerbaijan.

In recent years the "green agenda" has indeed been given a significant role in Azerbaijan's strategic plans for socio-economic development, and the country plans to increase the share of green energy from the current 17% to 30% of total generating capacity over the next decade.

Cooperation with the EU should facilitate Azerbaijan's efforts to meet these targets by 2030 and will help the country to meet its commitments under the Paris Agreement on Climate Change (to reduce greenhouse gas emissions by 40% by 2030) and thereby be integrated into numerous international projects of great economic importance for our country.

In partnership with Europe, Azerbaijan will be able to move confidently towards achieving the objectives of the SDGs, including the fifteen-year UN international programme on green transformation adopted in 2015.

Despite the fact that the country is a leading exporter of hydrocarbons and will remain so for many decades to come, state programmes to increase renewable energy capacity and develop green technologies in socio-economic projects will remain a priority in the context of the long-term national strategy beyond 2030.

Here it is appropriate to mention the most important projects in the "green" economy and RES sector implemented in Azerbaijan at the initiative of the EU and its financial institutions, as well as joint undertakings in this area with a number of European states. In particular, the new European Bank for Reconstruction and Development (EBRD) country strategy provides ample opportunities for financing energy efficiency and renewable energy generation capacity projects in Azerbaijan.

One of the important undertakings in this area was a 10 million euros loan for a project to improve street lighting in Ganja: energy-efficient light sources and automated control and monitoring systems are being introduced, which will save energy and reduce network maintenance costs. All this is being implemented as part of the European Union's Green Cities Programme (GCAP), and the EBRD has provided a further 10 million euros loan to upgrade the solid waste collection infrastructure in Ganja.

It is expected that GCAP components could eventually be introduced in other cities in the country, including the Karabakh region. However, last year the EBRD signed a loan agreement for a solar power project in Azerbaijan (implemented by Masdar of the UAE), and this year the EBRD plans to support a wind farm in the Absheron peninsula.

However, Azerbaijan and its European partners are preparing to implement even more ambitious undertakings in the green economy segment as part of the agreements signed last December with Georgia, Romania and Hungary to lay an underwater electric cable Black Sea Energy on the Black Sea bed from the Caspian wind farms to Europe: the 1,000 MW, 1,195 km power line is intended to supply Azerbaijan-produced green electricity to Romania, Hungary and other parts of Europe.

In the first stage, the volume of power supply through the Black Sea is planned at 4 GW, and in the future, as the capacity of the transmission system in Georgia is expanded, it can be multiplied.

"Azerbaijan has a large renewable energy potential, with sufficient volumes not only for domestic consumption but also for export to European countries. Recently Bulgaria has expressed interest in participation in this project, and soon we expect the official joining of the country to initiative Black Sea Energy," Elnur Soltanov, Deputy Energy Minister of Azerbaijan, said at the conference.

According to the Deputy Minister, the European Union and its financial institutions welcome these initiatives and are ready to finance them. At the same time another route for export of electric energy, including that produced from RES facilities, is being developed.

To this end, an energy corridor with high voltage transmission lines and high capacity substations is being created from the Nakhchivan Autonomous Republic (NAR) to Türkiye, and in the future the generation capacity of Karabakh and neighbouring western regions of the country will be connected to this route through the Zangazur corridor, providing green energy supplies to the Turkish market and to the EU.

Another important undertaking in the "green" economy sector, implemented within the government strategy for 2022-2026, is the declared production and export of "green" hydrogen from Azerbaijan. Currently, an interagency working group on hydrogen has been established in the country to conduct research and prepare proposals for its production, use and export.

The working group together with EBRD specialists is already conducting research on the programme "Assessment of the potential of low-carbon hydrogen economy in Azerbaijan" and is developing a strategy for the production of environmentally friendly hydrogen in our country, where along with this the feasibility studies (feasibility studies) of the project are already being developed.

The Boston Consulting Group (BCG) estimates that Azerbaijan could earn $230 to $500 million per year from green hydrogen exports to the EU: given support for renewable energy projects under the European REPowerEU soft finance programme and growing investor interest, Azerbaijan could become a regional leader and a reliable supplier of environmentally friendly hydrogen to the EU.