Azerbaijan positioning itself as green energy exporter

Azerbaijan, Georgia, Hungary and Romania have reached an agreement to push ahead with a project to generate green energy from renewable sources in Azerbaijan and to export the power to Europe via a subsea cable under the Black Sea.

The project is called the Caspian Sea-European Union Green Energy Corridor, Eurasianet reports.

Meeting in the Romanian capital, Bucharest, on July 25, officials from the four countries signed a memorandum of understanding to establish a joint venture between their national electricity grid operators in order to coordinate activities and to push ahead with the project.

The meeting was also attended by representatives of Bulgaria and the European Commission, both of which have expressed support for the venture. 

The rationale for the project is that Azerbaijan has significant untapped potential for generating power from onshore and offshore wind farms along its Caspian Sea coast as well as potential for solar generation.

Power generated could be transited across the Black Sea to countries in eastern and central Europe, which now have low renewable power potential and are heavily reliant on natural gas and coal. 

The concept has been under discussion for some years, and was the subject of a World Bank methodology report in June 2020, which concluded that a subsea cable across the Black Sea would generate sufficient economic benefit to warrant further consideration. The bank has yet to conduct a full feasibility study, however.

In 2021, USAID and the United States Energy Association completed a technical assessment and concluded that with minimal upgrades to the existing power transit grids of Georgia and Romania, the four countries are sufficiently robust to transfer up to 1,000 megawatts. 

The project took on a more formal structure when on December 17 last year when President Ilham Aliyev of Azerbaijan, and prime ministers Irakli Garibashvili of Georgia, Nicolae Chuke of Romania and Viktor Orban of Hungary signed a Strategic Partnership Agreement committing them all to work together on the project.

The agreement was signed in the presence of Ursula von der Leyen, President of the European Commission, representing the European Union, which in July 2022 signed a memorandum of understanding with Azerbaijan to provide assistance with Azerbaijan's renewable energy plan in return for Baku agreeing to double gas exports to Europe by 2027. 

The project agreed between the four states envisages the laying of a 1,200-kilometer cable with a capacity to carry 1,000 megawatts across the Black sea between Georgia and Romania, as well as expanding the onshore capacities of existing transmission cables in the four countries involved. 

Italy's CESI was commissioned by Georgia to conduct a feasibility study for the subsea cable with an integral digital interconnection aimed to boost broadband speeds in Georgia.

Delegates at the meeting in Bucharest were told that the feasibility study is expected to be completed in October, with further coordination of feasibility work entrusted to Azerbaijan's State Agency for Renewable Energy Sources.

There seems to be widespread agreement that such a cable would help boost European security and benefit the economies of Azerbaijan, and Georgia and those countries in central and southeastern Europe through which new or expanded transit lines pass.

But a number of serious challenges lie ahead.

To begin with, the studies conducted so far were completed before Russia's invasion of Ukraine.

While that war has increased efforts by the EU to find additional sources of oil, gas and electricity, it has also had a significant impact on the safety of shipping in the Black Sea, including from free floating mines. 

Azerbaijan's Baku-Supsa oil pipeline has been shut down due to the added risk to tankers lifting cargoes of crude oil from the Georgian port. 

A similar risk would be faced by any vessel laying a cable across the Black Sea. The cable itself would present a comparatively simple target for would-be saboteurs.

The war in Ukraine has greatly increased the urgency of the European Union's interest in securing any new sources of energy it can, and it seems certain that Brussels would accept any "green" power that Azerbaijan can deliver.

It remains to be seen whether the EU itself or any other international funding agencies would be prepared to put up money or guarantee loans for a project in such a high-risk location.

And without guarantees that there will be a cable to carry power to European markets, it's difficult to see how Baku will be able to persuade international investors to fund its ambitious plans for generating green energy for export.

Azerbaijan has its own pressing need to diversify into renewables for power generation in order to free up more gas for export. But up to now, Baku has been more focused on touting its plan to meet 30 per cent of the country's power demand from renewables rather than actually delivering on it. 

It was only in June that work began on the country's first grid-scale solar power plant, which is expected to come online by the end of this year. 

As such it's still far from clear whether Baku will be able to meet its own 2030 deadline, never mind whether it can also develop sufficient renewables capacity to make a Black Sea transmission cable feasible.