The energy transition in Azerbaijan:what are the challenges for the future

The Caucasus country is focusing on wind, solar and hydroelectric power.But the link with oil is still strong.What projects are in the drawer and what role does Europe play.

At the end of the last century, theAzerbaijan it produced more than half of the world's oil.After independence from the USSR, in 1991, it discovered new things deposits in the Caspian Sea and exploited these resources also thanks to the help of international companies, thus closely linking its economy to the production of hydrocarbons.Today this Caucasian state is one of the most self-sufficient countries in the world from an energy point of view, with a production that surpasses the question by almost four times.

However, we must consider that its reserves are not infinite:Baku is estimated to possess 7 billion barrels of oil still extractable.Much smaller fields than those of other countries such as Russia (80 billion barrels) and Kazakhstan (30 billion).

At the beginning of the 2000s, yes predicted that these resources would be exhausted by 2025.A time horizon that was then extended thanks to new extraction technologies and discovery of new deposits.But the supplies will not be infinite anyway:the International Energy Agency (IEA) believes that the country's oil reserves will last another twenty-five years.A countdown which, combined with the possible future contraction of fossil fuel markets and the need to accelerate the energy transition, inevitably pushes Baku to reconsider its economic strategy.

But if on the one hand theAzerbaijan started to diversify its economy, investing for example in the development of renewables, on the other hand does not seem willing to abandon the production of hydrocarbons.For the moment, in fact, the government seems to want to develop these two paths in parallel, without showing a clear desire to definitively leave fossil fuels behind.

But what attempts is the country making to start the green transition?

What are Azerbaijan's green objectives

Baku began considering reducing its dependence on fossil fuels in the early 2000s.But the first concrete proposals were approved only in 2016 and updated in the following years.Now the country led by the president Ilham Aliyev has declared as its objectives the increase in renewable energy production by 30 percent by 2030, and the reduction of greenhouse gas emissions by 40 percent by 2050.

To achieve these ambitious results, in 2020 it was established an agency to develop sustainable energy sources under the direction of the Ministry of Energy, and a program has been launched to increase the use of renewables.

Renewable energy projects

In autumn 2023, in the area of Garadagh, near Baku, the first came into operation photovoltaic system on a large scale, created in collaboration with the Emirati company Masdar:an expanse of 570,000 solar panels capable of satisfying the energy needs of 110 thousand homes, cutting 200 thousand tons of emissions per year.

According to the authority Azerbaijanis, Azerbaijan's potential forsolar energy is 23 GW:the climate of the region, characterized by more than three thousand hours of sunshine per year, offers the country great potential for producing solar energy.

The wind potential is also quite promising:the country boasts an economic potential of 3 GW forwind energy onshore and a technical capacity of 157 GW for offshore wind energy.To develop this potential, the wind farm of Khizi-Absheron:40 wind turbines capable of generating approximately 1 billion kWh of electricity per year.

On the hydroelectric energy front, which represents approximately 10 percent of the country's annual electricity production, the Mingachevir hydroelectric power plant stands out, with a capacity of 424 MW.

The government's position

However, although the government has presented these projects as proof of its green transition, at the moment it seems completely unlikely that similar initiatives can entirely replace the country's hydrocarbon production.

In fact, despite having declared his support for the green transition, Azerbaijani President Ilham Aliyev defended fossil fuels, criticizing among other things thehypocrisy of Western countries who buy the Azerbaijani gas but then they point the finger at its oil and gas dependent economy.

“Oil and gas are a gift from God, just like the sun, wind and minerals — ha said Aliyev in his opening speech of the Cop29, the United Nations climate summit currently taking place in Baku.As president of COP29, I will of course be a strong supporter of green transition and we are doing it.But at the same time we have to be realistic."

And speaking of Western countries, the researcherInspi Fabio Indeo highlights an interesting fact:Despite calls to promote the development of renewable energy, major investments in wind, solar and hydropower projects in Azerbaijan have instead been made by non-European energy companies.

Green cooperation with the European Union

Among the main "green" initiatives that bring Azerbaijan closer to the European Union is the Green Corridor, a strategic project that aims to create a energy connection between the Caucasus and the EU, transporting electricity produced from renewable sources.A milestone for the European energy diversification strategy, which opens up new possibilities for cooperation with Azerbaijan based no longer on hydrocarbons but on renewables.

It is essentially a submarine power line over 1,100 kilometers long that will cross the Black Sea, connecting Azerbaijan, via Georgia, to the European energy markets.This line is expected to carry 1,000 MW, estimated to be enough to cover 15 percent of Romania's annual electricity consumption.The strategic partnership agreement for the creation of the Green Corridor was signed in December 2022 in the presence of the President of the European Commission Ursula von der Leyen.

The Green Corridor apparently opened the doors to a new type of energy cooperation, and also led to the birth of Caspian Sea Electricity Project, a complementary infrastructure to the Green Energy Corridor aimed at further connecting the two banks of the Caspian.The project, whose declaration of intent was signed last May, involves Azerbaijan, Kazakhstan and Uzbekistan, which are committed to increasing the production of wind and solar energy and then exporting it, through Azerbaijan, to European markets.

There is obviously no shortage of difficulties in the implementation of these projects.The main challenges concern the technical complexities of the infrastructures and their vulnerability in a context of global conflicts such as the one we are experiencing (the sabotage of the gas pipeline Nord Stream in September 2022 could represent a disturbing precedent).

What to expect from the future

In short, there are promising foundations for redesigning the country's energy future.A future which, however, will only be possible after a series of reforms and a change in governance in the country.A change which, according to many analysts, seems unlikely under the current government, where power is concentrated in the hands of a few and the economy is aimed at serve the interests of the elite.

“Azerbaijan is forced to deal with the energy transition:Like it or not, times are changing and revenues from oil and gas will not be infinite — commented a LifeGate Laurence Broers, one of the leading experts on Caucasus politics, director of the 'Caucasus' program of the independent peacebuilding organization Conciliation Resources -.But the energy transition necessarily requires the involvement of society, and it is precisely here that the great dilemma arises for a Authoritarian country like Azerbaijan.In the coming decades, it will be essential to give space and listening to the voice of society, since every real change starts from there. And when I hear European policy makers say that Azerbaijan must adapt to our regulations, I have to remind them that we are no longer in 2006:the world has changed, and these regulatory requests today appear decidedly weak".

According to the analyst Jody LaPorte of the Carnegie Endowment for International Peace think tank, Azerbaijan "needs Western partnerships to respect its climate commitments", and Europe could use this leverage to influence the development of the energy sector, "offering in exchange technical assistance, collaborations long-term and greater access to EU markets".