Energy capacity for growth: Masdar to expand Azerbaijan’s green generation Caliber.Az forecast

Azerbaijan is making every effort to participate in the global processes of the “great energy transition of 2030”. Projects being implemented in this area are aimed at multiplying generation in the alternative energy sector. Plans are to build solar and wind power stations in the Karabakh region and the Nakhchivan Autonomous Republic, and in the future, the construction of offshore wind generators, the production of green hydrogen, etc.

One of the most important steps in this direction was the construction of the largest solar power plant in the region - the Garadagh SPP. This large-scale project was implemented by UAE’s Masdar in the shortest possible time, and on October 26, with the participation of Azerbaijani President Ilham Aliyev, the opening ceremony of a new solar generation facility took place.

The expansion of the use of renewable energy sources (RES), taking into account the inevitable global energy transition and the gradual abandonment of hydrocarbon fuels in the near future, is today becoming a non-alternative trend. The energy transition planned for 2030-2035 will be based on the use of low-emission industrial technologies, multiple expansions of the use of renewable energy generation, massive use of “green” hydrogen as fuel, transfer of about half of the road transport to electric engines, etc.

According to calculations published last year by the International Energy Agency (IEA), in the next 10 years, up to $440 billion will be invested annually in the renewable energy sector worldwide. According to IEA forecasts, the growth rate of generation in the field of alternative energy will increase by an average of 50 per cent per year over the next five years, and approximately by 2027, almost a third of all global electricity production will be provided by “green” generation.

Over the past three years, work has also been intensified in Azerbaijan aimed at expanding the renewable energy sector, the share of which in the domestic energy system is planned to increase to at least 30% by 2030. In the coming years, about 1,500 MW of generating capacity will be commissioned in the republic, and this task will have to be solved mainly by attracting private investors.

Foreign capital was also involved in the implementation of the largest project in recent years - the construction by Masdar from the UAE of the Garadagh solar power plant with a capacity of 230 MW. Founded in 2006, this company is one of the world leaders in the renewable energy sector and over the past 17 years has implemented projects with a total investment capacity of more than 20 GW in more than 40 countries around the world.

Masdar specialists acted just as effectively in our country. The Garadagh SPP was built in record time: in March last year, Azerbaijani President Ilham Aliyev took part in the foundation-laying ceremony for the facility, and after 19 months, the new SPP was commissioned with the participation of the president.

“Today we are very proud that in a relatively short period of time - a little over a year and a half - this empty part of the Absheron Peninsula has become a source of green energy. This is an outstanding achievement,” Ilham Aliyev said at the opening ceremony of the Garadagh solar power plant. The president congratulated Masdar on this significant contribution to the development of green energy in Azerbaijan, emphasizing that this is a good example of partnership and friendship with the UAE.

The partnership between Baku and Abu Dhabi in the field of renewable energy sources is truly a breakthrough: today the Garadagh solar station is the largest generating facility in the solar power plant segment in the South Caucasus, and its main contribution to the country’s economy will be the annual production of 500 million kWh of electricity. The operation of this solar power plant will make it possible to increase the share of installed renewable energy capacity in the energy system of Azerbaijan from 16.5 to 21.2 per cent.

In keeping with forecasts, the commissioning of a solar station will provide electricity to 110,000 apartments and save 110 million cubic meters of gas annually. Reducing dependence on the production of thermal energy will allow Azerbaijan to export the volumes of blue fuel released as a result of the commissioning of solar power plants to the high-margin markets of Turkey and the European Union.

The location of the Garadagh SPP was not chosen by chance - sunny days on the plains of the Absheron Peninsula reach a maximum in comparison with the average for the republic. Accordingly, more than 570,000 solar panels located on 550 hectares of the SPP territory will operate at the peak of installed capacity, which will increase the profitability of production and significantly shorten the payback period of the project.

This is a very important point, since this project is a purely commercial endeavour with the participation of international private capital, and our country does not participate in its financing. In particular, $250 million from Masdar itself, as well as loans taken from international donors, were invested in the project for the construction of the Garadagh SPP.

As previously reported, last year Masdar Azerbaijan Energy Limited Liability Company was registered in Azerbaijan, which, in order to capitalize the solar power plant project, attracted funds totaling $114.2 million, and among the creditors are the European Bank for Reconstruction and Development (EBRD), the Asian Bank Development Bank (ADB), Japan International Cooperation Agency (JICA) and Abu Dhabi Fund for Development (ADFD).

It is also important that the work of the Garadagh SPP will prevent emissions of 265,000 tons of carbon dioxide into the atmosphere - that is, this project will contribute to solving one of the main objectives of the UN Sustainable Development Goals (SDGs) - decarbonization of energy and industry. Let us recall that according to the obligations of Azerbaijan, which signed the Paris Climate Agreement, together with other countries, a number of projects are to be implemented to reduce greenhouse gas emissions by 40% by 2030.

“Today, despite the fact that Azerbaijan is still rich in fossil resources, we are moving towards a green agenda. This is a conscious choice, this is our contribution not only to the future development of Azerbaijan, but also to resolving issues related to climate change,” President Ilham Aliyev noted.

As part of the events dedicated to the opening of the Garadagh SPP, the president received a delegation led by UAE Minister of Industry and Advanced Technologies Sultan Ahmed al-Jaber.

“Azerbaijan has big plans for cooperation with the UAE in the field of renewable energy sources, and I am convinced that there will be even more projects. Today we witnessed another ceremony - the signing of three investment agreements, as a result of which, in a very short period of time, it will be possible to produce electricity in the renewable energy sector with a volume of 1 GW. However, our plans are much broader: we plan, through joint efforts, to gradually increase the production of renewable energy resources to 10 GW,” the president said.

In accordance with three investment agreements, signed by Masdar on projects for the construction of generating capacities in the field of renewable energy sources with a total capacity of 1 GW, a solar power plant with a capacity of 315 MW will be created in the village of Banka, Neftchala District, and another solar power plant with a capacity of 445 MW in Gunash village of Bilasuvar District. It is also planned to commission wind power plants (WPPs) with a capacity of 240 MW in the Absheron and Garadagh districts.

According to the Azerbaijani Energy Ministry, the investment agreements cover the first stage of the Implementation Agreements, signed with Masdar in June 2022, which provide for the development and implementation of renewable energy projects with a total capacity of 4 GW. Energy Minister Parviz Shahbazov noted that during the signing ceremony that all these projects will allow increasing the share of renewable energy sources in the country’s energy system to 33 per cent by 2030.