Europe turns to the Caspian for green energy solutions Baku’s vision for a hydrogen future

This week, the annual meeting of the European Bank for Reconstruction and Development (EBRD) was held in London, centring on the efficient use of economic resources, the advancement of new “green” infrastructure amid global climate challenges, digital transformation, and related topics. The Azerbaijani delegation, led by Minister of Economy Mikayil Jabbarov, participated actively in the forum.

During the sessions, Azerbaijan’s increasing role in developing alternative energy and associated infrastructure was emphasised. Particular attention was given to the country’s potential to produce “green” hydrogen powered by Caspian wind energy, with promising prospects for export to European Union markets.

In recent years, Azerbaijan has been actively commercialising its rich natural potential in renewable energy sources (RES), focusing on attracting foreign investors. To support this, the government has developed a dedicated policy framework and adopted new legislation, including fiscal and other incentives for investors. Cooperation has also been established with specialised international companies and donor organisations. 

According to the Ministry of Energy, as of last year, the capacity of renewable energy generation facilities in Azerbaijan’s power system was estimated at around 1,700 MW, with their share in total generation reaching 20.9%. It is expected that, through the construction of new large-scale hydro, solar, and wind power plants, the share of renewable energy will increase to 32% of the country’s total generation by the end of 2028.

“Azerbaijan is implementing an ambitious strategy aimed at positioning the country as a regional hub for green energy and sustainable infrastructure connectivity. While a significant portion of the country’s revenues still comes from traditional energy sources, for Azerbaijan the transition to clean energy is driven not by ideology but by economic feasibility,” said Minister of Economy Mikayil Jabbarov during a panel discussion at the EBRD meeting in London on the topic “Azerbaijan: Emerging Gateway to Green Growth and Connectivity.”

He added, “All renewable energy projects in our country are carried out by private companies, mostly foreign investors. However, when necessary, the state, represented by the state-owned oil company SOCAR, is ready to participate in these projects as a minority partner.”

The minister emphasised that this is a clear signal of Azerbaijan’s commitment to the global energy transition.

As an example, the Minister of Economy recalled ongoing initiatives aimed at exporting renewable energy from Azerbaijan and Georgia to Europe: “This cooperation involves Hungary, Romania, and Bulgaria, and we are also actively working with regions east of Azerbaijan, particularly Kazakhstan and Uzbekistan, to integrate energy systems.”

He referred to the agreement signed on December 17, 2022, between Azerbaijan, Georgia, Romania, and Hungary on a strategic partnership to jointly lay the Black Sea Energy underwater electric cable. The cable will be 1,195 km long and have a capacity of 1 GW along the bottom of the Black Sea. Preliminary estimates suggest that the cable’s capacity will enable the annual supply of up to four gigawatts of green electricity to the European region.

Notably, during the EBRD meeting, prospects for developing the hydrogen fuel market and establishing production capacities were also discussed. This trend is gaining increasing attention not only in Europe but also in Asia, Africa, and, of course, the post-Soviet region. In the future, Azerbaijan plans to use offshore wind power generation to produce “green” hydrogen and establish its export to EU countries.

It is worth recalling that the wind power potential in the Azerbaijani sector of the Caspian Sea is estimated at 157 GW, making it the second largest in the world after the North Sea. Actual projects in this field are expected to cover only a small portion of the country’s offshore potential, which is estimated at around 7.2 GW of capacity.

Overall, these are quite capital-intensive initiatives, as the installation of offshore turbines in the Caspian will require complex engineering solutions, including the construction of 90-meter-high supports for the wind generators. At the same time, it is planned that, based on relatively inexpensive offshore wind power, seawater electrolysis can be developed to produce “green” hydrogen in the future.

“At this stage, we should not expect Azerbaijan to be at the forefront of the global hydrogen agenda. However, projects to create large-scale offshore wind farms have made us seriously consider ‘green’ hydrogen,” said Azerbaijan’s Deputy Minister of Energy, Elnur Soltanov, during the panel discussion “Azerbaijan: Emerging Gateway to Green Growth and Connectivity” at the EBRD meeting in London.

He explained, “The fact is that energy storage systems are still quite expensive. In contrast, ‘green’ hydrogen can serve both as a form of storage and as a commodity: when there is excess renewable electricity production, especially during periods of low demand, the surplus can be redirected to hydrogen production, which helps avoid curtailment losses. The produced hydrogen can then be used for electricity generation during peak hours or exported — in the form of ammonia or liquefied hydrogen.”

The Deputy Minister emphasised that, together with the EBRD, studies on hydrogen energy have already been conducted in Azerbaijan, and a long-term national strategy is being developed. Among other things, Azerbaijan holds strong positions in the production of “blue” hydrogen (steam methane reforming combined with carbon capture, storage, and utilisation systems) thanks to its access to natural gas and the presence of depleted oil and gas fields suitable for carbon capture and storage (CCS) technology.

“The potential of the Caspian Sea, our wind power capabilities, and the existing pipeline and port infrastructure give us hope for creating a symbiotic energy ecosystem where electrons and molecules complement each other. We believe this is the key to Azerbaijan’s sustainable energy future,” Soltanov stressed.

The feasibility of these plans is demonstrated by recent tests conducted by the TAP AG consortium on the Trans Adriatic Pipeline (TAP) system regarding hydrogen supply. Beginning in 2021, these studies evaluated the technical possibilities of transporting a blend of natural gas and hydrogen through the TAP pipeline. The experience confirmed the feasibility of such combined deliveries, of course, contingent on strong demand and the development of the hydrogen market in Europe.

Another significant step toward realising Azerbaijan’s hydrogen ambitions was the signing of a memorandum in January 2024 between the Ministry of Energy and the UAE Ministry of Investment. The memorandum outlines plans to build wind power plants with a capacity of 6 GW in the Azerbaijani sector of the Caspian Sea, along with joint projects to produce “green” hydrogen, ammonia, and synthetic methane. The UAE-based company Masdar is expected to be the lead partner in these projects.

“Azerbaijan has substantial untapped potential, especially in wind energy — both onshore and offshore. We see opportunities here for the application of smart technologies and the scaling up of projects,” said Masdar’s Chief Financial Officer, Mazin Khan, during a panel discussion at the EBRD meeting.