Smart construction and housing reform Azerbaijan adopts new energy-efficiency standards

Expanding the use of energy-efficient technologies in major cities is becoming a key direction in the development of civilisation in the 21st century. Over the past decade, Azerbaijan has implemented a number of pilot projects aimed at introducing energy-saving systems in the industrial, residential and utilities sectors. This work is currently being carried out under the direct oversight of the head of state, including in the Karabakh region, with a focus on strengthening the legislative framework and adopting international best practices. New trends in this area were discussed at a roundtable on “Energy-Efficiency Certification of Buildings”, organised by the Azerbaijani Ministry of Energy during Baku Climate Action Week 2026 (BCAW 2026).

According to UN estimates, by 2050, 67% of the world’s population — more than 6.3 billion people — will live in cities. Today, many major cities are overcrowded, while city authorities and municipalities operating within the paradigm of the analogue era are increasingly struggling to ensure security and address environmental challenges, as well as to effectively manage public transport, utilities and, importantly, energy and energy efficiency. According to the British analytical agency IHS Markit, just under 90 cities worldwide last year — predominantly in highly developed countries — could be classified as “smart cities”, where integrated information and communications technologies and other technological solutions have been introduced, including in the field of energy efficiency.

In the United States and Europe, efforts to address the low energy efficiency of major cities date back to the global energy crisis of 1974. However, in recent years, amid growing global demand for energy and rising energy prices, the need to change the energy paradigm and transition toward more economical and efficient use of resources has become an urgent task for all countries.

According to studies conducted a decade ago, the untapped energy-efficiency potential across the CIS countries was estimated at approximately 450 million tonnes of oil equivalent (toe), of which 10 million tonnes were attributed to Azerbaijan. It is highly likely that this figure has increased significantly in the country, given population growth, urban expansion, and the implementation of urban development projects in the liberated territories.

Ministry of Energy unveils BEEIS

The key potential for improving energy efficiency is concentrated primarily in the housing and utilities sector. It is therefore unsurprising that the development of this sector became a subject of discussion and experience-sharing on the fourth day of the BCAW 2026 forum, during a roundtable organised by the Ministry of Energy on the topic of “Energy Efficiency Certification of Buildings.”

During the forum, Jahid Mikayilov, Head of the Energy Efficiency Department at the Ministry of Energy, emphasised the importance of improving energy efficiency in newly constructed buildings, as well as in buildings undergoing reconstruction or major renovations, in terms of ensuring the rational use of energy resources and optimising energy consumption.

“In October of this year, the development of an electronic building energy-efficiency certification system will be completed in the country. The designer will enter project data into the Building Energy Efficiency Information System (BEEIS), and the system itself will calculate the facility’s annual energy consumption per square meter of floor area, assign it a class — A, B, or C — and generate an energy-efficiency certificate,” Mikayilov said. He emphasised that, in developing the BEEIS digital system, the ministry is actively cooperating with Septem.

Azerbaijan is also actively cooperating with Türkiye on the implementation of regulatory solutions and the introduction of international experience and know-how in the field of energy efficiency.

“Improving the energy efficiency of buildings is one of the most immediate and practical opportunities to reduce energy demand and cut emissions, while simultaneously contributing to greater resilience, affordability, and quality of life,” said Tuğba Dinçbaş, Head of the Climate Change Directorate at Türkiye’s Ministry of Environment, Urbanisation and Climate Change, who participated in BCAW 2026.

According to her, the global ambition is to reduce the energy intensity of buildings by at least 20% by 2035 compared with the 2020 baseline. This has been identified as one of the key priorities of the UN climate conference COP31, which will take place in Antalya, Türkiye, from November 9 to 20, 2026.

It should be recalled that over the past several years, Türkiye has tightened its legislation in this area. The country has introduced the National Green Certification System (SDR) for the construction sector, developed new approaches to building climate-resilient cities — including improving the energy efficiency of buildings — and optimised access to financing for relevant initiatives.

Notably, ahead of COP31, a new edition of the Guide on Energy Efficiency Standards for Buildings is set to be presented. The guide was developed at the initiative of the United Nations Economic Commission for Europe (UNECE) and is used in at least 56 countries worldwide.

“Reducing operational emissions associated with the use of buildings remains a critically important challenge, as buildings account for approximately one-third, and possibly as much as 40%, of global energy consumption and emissions,” said Dmitry Mariyasin, Deputy Executive Secretary of UNECE, in Baku. “The new standards will accelerate the transition toward energy-efficient, low-carbon, resilient, and economically viable buildings.”

In particular, the initiative involves the broader use of Building Information Modelling (BIM), digital building passports, the assessment of lifecycle emissions using artificial intelligence (AI) tools, smart meters, and integrated information platforms.

Azerbaijan needs to step up energy-saving efforts

The experience of Türkiye and Europe in designing, constructing, and managing energy-efficient buildings is also highly relevant to Azerbaijan. The country needs to scale up its efforts in this area, particularly in the Greater Baku region.

According to the Baku Master Plan through 2040, heat consumption in the capital is expected to reach nearly 6.5 MW, which, according to the document, is 4.4 times higher than the 2020 level.

Clearly, without major reforms in this area, the strain on Baku’s energy and heating capacities will increase many times over the next 14 years, creating additional risks.

Therefore, breakthrough solutions are needed to improve the energy efficiency of residential and public utilities in Baku and other major cities across the country. This task is not as straightforward as it may seem. In Azerbaijan, with its relatively moderate climate, electricity, gas, and district heating costs were for many years comparatively lower than in Europe or Russia, and this factor did not encourage citizens or businesses to initiate reforms.

At the same time, a significant share of the housing stock in the country’s major cities still dates back to the 1950s–1980s. Broken windows and entrance doors that fail to close properly, uninsulated attics and basements, gaps at the joints of prefabricated buildings, as well as the limited use of airtight double-glazed windows in block construction, undermine the efforts of municipal authorities to address heating and cooling issues and improve building energy efficiency.

In older buildings, energy-saving lighting systems with motion sensors are still uncommon, solar panels are even rarer, and thermal insulation using composite materials remains extremely limited. Moreover, standards governing thermal insulation, proper solar exposure, and natural ventilation of apartments were violated even relatively recently in the construction of modern high-rise buildings.

Nevertheless, some progress has been made in the field of energy efficiency in recent years. In 2019, at the initiative of President Ilham Aliyev, a decision was made to roll out a comprehensive Smart City system in Baku and subsequently in other cities across the republic.

As part of the initiative, inefficient equipment has begun to be replaced with energy-saving technologies, LED lighting has been introduced for streets and residential areas in Baku, Sumgayit, and Shamakhi, and pilot projects are being implemented to reduce heat and cooling losses in municipal utilities.

Similar efforts are underway in Ganja under the EU’s Green Cities Action Plan (GCAP), with financial support from the European Bank for Reconstruction and Development (EBRD), aimed at improving energy efficiency in municipal services.

More than four and a half years ago, the European Union and the World Bank (WB) signed an agreement with the government of the republic on the Azerbaijan Rapid Technical Assistance Facility (AZTAF), a grant-funded program. Under the program’s “Energy Efficiency and Climate” component, the World Bank supported a project aimed at strengthening the Energy Efficiency Fund and developing a Roadmap for a National Renovation Program in Azerbaijan.

As part of the AZTAF initiatives, data were also collected on dozens of public buildings in the cities of Ganja, Sheki, and Gakh. These facilities were classified by building typology and climate zone and subjected to energy audits. The World Bank is also prepared to support Azerbaijan in improving the efficiency of heating systems in the municipal sector, where significant problems persist today.

Meanwhile, under the Law “On the Efficient Use of Energy Resources and Energy Efficiency,” adopted approximately five years ago, Azerbaijan’s Ministry of Energy accelerated the appointment of energy managers responsible for the efficient use of energy at economic entities with annual energy consumption exceeding 1,000 tonnes of oil equivalent, as well as in non-residential buildings with a floor area of at least 10,000 square meters. In addition, a system of fines for violations of the legislation was introduced.

However, the most widespread adoption of energy-efficiency systems is currently taking place in the projects aimed at revitalising Karabakh and East Zangezur, where the “green city” model is being applied.

For example, modern insulation materials are used to the greatest extent possible in the construction of homes, while solar water collectors and heat pumps are used for heating, cooling, and supplying apartments with hot water. Smart electricity management systems are also being developed, solar panels are being installed on building rooftops, and solar-powered LED lamps are being prioritised for street lighting, among other measures.

Overall, the Karabakh region plans to prohibit the construction of homes with low energy-efficiency ratings. More recently, drawing on the experience of European countries, the State Committee for Urban Planning and Architecture of the Republic of Azerbaijan approved energy-efficiency categories A, B, C, D, and E. Azerbaijan has also introduced a ban on the operation of newly built homes with an energy-efficiency rating below “C.”

It remains to be hoped that, against the backdrop of the global energy crisis and rising utility and energy costs, efforts to improve the energy efficiency of both newly constructed and existing buildings in Azerbaijan will move beyond the realm of pilot projects and develop into large-scale initiatives.