World Bank Group aims to boost private investment in Azerbaijan’s renewable energy

The International Bank for Reconstruction and Development (IBRD) and the International Finance Corporation (IFC), both members of the World Bank Group, are working to attract private investment into Azerbaijan's renewable energy and battery energy storage systems (BESS) sectors.

This initiative aims to accelerate the country’s transition to a cleaner, more sustainable energy future, Caliber.Az reports via local media.

The Multilateral Investment Guarantee Agency (MIGA) is also considering providing credit guarantees to international investors, ensuring financial security for projects in Azerbaijan. Furthermore, financial intermediaries in the country will be supported to simplify financing processes and mitigate risks related to climate investments. One of the primary areas of focus will be the development of offshore wind energy. To support this effort, a seminar will be organized based on the "Azerbaijan Offshore Wind Energy Roadmap," developed by IBRD and IFC.

However, attracting private capital for these initiatives will require conducting open competitive tenders. The World Bank Group is aiming to foster collaboration between Azerbaijan's government and the private sector to help the country become an exporter of green energy, while also integrating into the regional energy system as part of the broader goal of establishing a green energy corridor with neighbouring countries.

The bank is also prepared to support initiatives to reduce methane emissions, particularly in the area of gas flaring, should the government express interest in such projects. "The energy programme will focus on increasing the share of renewable energy in the country’s energy mix and expanding the capacity of transmission lines to integrate renewable energy. 

To coordinate these efforts, IBRD, IFC, and MIGA have already developed a working business plan that outlines how various support tools and mechanisms will be applied at different stages of the initiative implementation," the bank stated. Despite the significant strides made in renewable energy development, Azerbaijan's economy continues to rely heavily on hydrocarbons. However, the government has recognised the need for economic diversification and reducing dependence on traditional energy sources. 

"It is crucial to invest in renewable energy and environmentally friendly technologies across various sectors, including industry, transportation, construction, and utilities. Additionally, there is a need to accelerate climate change adaptation by enhancing the resilience of water supply systems, urban infrastructure, and agriculture to climate-related risks. This approach will not only help the country meet its global emissions reduction commitments but will also create new markets and job opportunities," the bank emphasised.

Progress in these areas will be assessed based on Azerbaijan's national targets for reducing greenhouse gas emissions relative to 1990 levels. 

The World Bank will adopt a phased approach, with an emphasis on reforms in electricity transmission, infrastructure development, and renewable energy investments. The IBRD will continue providing technical support to optimize tariff methodologies, calculate cost recovery, and develop policies for integrating electric vehicle charging stations into the energy system. 

Meanwhile, the IFC will participate in discussions surrounding strategies and regulatory reforms, taking into account the private sector’s interests. The World Bank Group will also conduct analytical work, evaluating priority investments and exploring the potential of geothermal energy, hydrogen, and distributed renewable energy, in addition to developing measures to improve energy efficiency. 

These initiatives aim to not only attract investors but also provide protections for socially vulnerable groups, such as through subsidies for low-income households' electricity tariffs. As part of its large-scale renewable energy initiatives, the IBRD is implementing the "Azerbaijan Scaling Up Renewable Energy" (AZURE) project. 

This project involves investments in infrastructure to integrate 240 MW of wind energy and optimize the energy system to manage 1.8 GW of variable renewable energy. It will be part of a broader programme aimed at scaling up renewable energy across Europe and Central Asia, allowing Azerbaijan to learn from international best practices and contribute to the development of the green energy corridor. 

Through reforms in institutional, political, and infrastructure sectors, the World Bank Group (IBRD, IFC, and MIGA) will help mobilise private capital for renewable energy projects, supporting Azerbaijan's efforts to accelerate its transition to a clean and sustainable economy.

By Naila Huseynova