Azerbaijan working to attract investments into its renewable energy industry

Azerbaijan working to attract investments into its renewable energy industry

BAKU, Azerbaijan, Feb. 27

By Nargiz Ismayilova - Trend:

Azerbaijan is a country with high potential for the development of renewable energy, Director of the Energy Efficiency and Ecology Department of Azerbaijan’s Energy Ministry Alasgar Hasanov told Trend.

Thus, the potential capacity of renewable energy sources, which are economically viable and technically available in Azerbaijan, is estimated at 26,940 megawatts, including 3,000 megawatts of wind energy, 23,040 megawatts of solar energy, 380 megawatts of bioenergy and 520 megawatts of mountain river hydropower, the department director added.

Hasanov said that the total production capacity of power plants in terms of renewable energy sources in Azerbaijan is 7,556 megawatts, including 1,276 megawatts of major hydropower plants, which is equivalent to 17 percent of the total capacity.

“Electricity generated in Azerbaijan last year amounted to 26.1 billion kilowatt hours, 1.9 billion kilowatt hours of which accounted for renewable energy sources,” the department director noted.

Some 105.4 million kilowatt hours of electricity were generated for 2019 by wind power plants, and 44.2 million kilowatt hours at solar power plants, while 195.9 million kilowatt hours were generated at the solid domestic waste incineration plant, Hasanov added.

“Electricity generated from renewable sources amounted to 7.3 percent of the total production volume,” said the department director. “Some 53.6 million kilowatt hours were generated at small hydropower plants (with total capacity of 25.3 megawatts). Electricity generated from renewable sources, excluding major hydropower plants, last year amounted to 1.5 percent of the total electricity production in the amount of 399.1 million kilowatt hours. The figures show that although Azerbaijan has rich wind and solar energy potential, the results achieved in this area are insufficient.”

At the same time, Hasanov noted that most of the work done was carried out through public investment.

“The main goal is to create favorable investment environment for attracting business entities into the development of the renewable energy industry,” the department director added. “To this end, the first steps are being taken to improve the legislative framework. Azerbaijan’s draft law “On the use of renewable energy sources in the production of electricity” has been developed, which is currently at the consideration stage. At the same time, close cooperation was established with foreign companies, and negotiations began on the implementation of projects in Azerbaijan.”

“As a result of negotiations and deliberate selection from the proposals of the companies on Jan. 9 this year, Azerbaijan’s Cabinet of Ministers signed executive agreements between the Energy Ministry and the companies of ACWA Power of Saudi Arabia and Masdar of the UAE with the aim of implementing test projects for the construction of power plants based on wind and solar energy,” said Hasanov.

“The agreement signed with ACWA Power company includes the construction of a 240 megawatt wind farm and a 200 megawatt solar power plant,” Hasanov added.

“Within these two projects, it is planned to generate about 1.4 billion kilowatt-hours of electricity during the year,” director of the department said. “The investments on these projects are estimated at $400 million.”

“In accordance with Azerbaijani President Ilham Aliyev’s order dated December 5, 2019 #1673 "On measures for the implementation of pilot projects in the field of the use of renewable energy", Azerbaijan continues to carry out legal and technical activity within the Commission established to coordinate and implement pilot projects related to the construction of wind and solar power plants,” Hasanov said.

While giving forecasts on the development of nuclear energy sources in Azerbaijan, Hasanov pointed to ensuring of production of clean electricity, as well as commissioning of new generating capacities, namely, 350 megawatts of wind energy, 50 megawatts of solar energy and 420 megawatts of renewable energy, 20 megawatts of bioenergy as strategic goals.

“At the same time, the goal is to bring the share of renewable energy sources in power production up to 30 percent by 2030,” the director of the department added. “The president has reiterated this in his speeches.”

Hasanov stressed that renewable energy holds an important place in supplying the Azerbaijani population and economy with electricity for a long time.

“Despite that a major share of renewable energy sources is held by water resources, major power plants that operate using other sources of energy also generate electricity,” said Hasanov. “Projects being implemented in the field of alternative and renewable energy sources have allowed Azerbaijan to effectively use the country’s renewable energy potential and increase energy production. The commissioning of power plants in accordance with modern requirements indicates the beginning of a new stage in the development of the energy sector.”

These power plants, including the Baku plant for solid waste incineration with capacity of 37 megawatts (operating since Dec. 19, 2012), the solar power plant with capacity of 20 megawatts in Azerbaijan's Nakhchivan Autonomous Republic (operating since Dec. 1, 2015), the wind power fleet with capacity of 50 megawatts (commissioned by Azerishiq OJSC in 2018) are designed for fully ensuring the population with electricity and energy security of the country, noted the director of the department.

“At the same time, as a result of operation of these power plants, use of natural gas and other resources in the electricity generation decreases,” Hasanov added. “In addition, Azerbaijan has a great number of low-power solar and wind power plants.”

“The population also showed interest in this area, as a result of the installation of solar panels and collectors, the use of renewable energy sources and hot water was expanded,” said the department director. “Along with large-scale projects, there are plans to introduce a mechanism to support active consumers in order to attract their interest in using renewable energy sources for own consumption. The reduction in the use of natural gas as a result of these projects will also have a positive impact on the fulfilment of Azerbaijan’s commitments to reduce greenhouse gas emissions.”

“The use of other renewable energy sources, including wind energy, bioenergy, geothermy, energy of waves and sea bubbles is widely used throughout the world,” the director of the department said. “In some cases, energy is simply replaced depending on the reporting period; in other cases, consumers sell energy back to the network at guaranteed tariffs.”

“The tariff is planned to be replaced during a certain reporting period in Azerbaijan,” Hasanov said. “At the end of the reporting period, the difference is planned to be paid for energy received from the network upon the retail tariff while the difference for energy which is supplied to the network - at the wholesale tariff.”

“The ministry, together with international companies, conducts relevant research in the field of the use of wind energy at sea,” the director of the department added. “In case of economic efficiency, such projects can be implemented in the Caspian Sea."

At the same time, Hasanov emphasizes that although solid waste is processed in Azerbaijan, other options are being considered.

“The research is being conducted to use the energy of the resources (waste) of agriculture, forestry and other industries,” director of the department said. “Despite the economically inappropriate consumption of energy from geothermal sources of the country is not considered economically efficient, the research in this sphere is also underway with the relevant institutions.”

“The use of the energy of waves and sea bubbles is a pilot project that will serve the practical purposes throughout the world and requires technological development for this energy to become cost-effective and widely used on an industrial scale," Hasanov said.

Regarding the development of renewable energy sources for small and medium-sized enterprises, the director of the department said that upon the president’s order, there was a good start to stimulate the use of renewable energy sources, create a favorable investment environment in this sphere and support the private entrepreneurship.

“The incentive mechanisms for the aforementioned purposes were proposed to be made in legislative drafts prepared and presented by the ministry,” the director of the department added.

“Along with the large-scale projects, it is planned to introduce a mechanism to support active consumers to attract their interest in using renewable energy sources for own consumption,” Hasanov said. “The mechanism of support for active consumers in Azerbaijan can be applied not only to the population, but also by entrepreneurs working in small and medium-sized enterprises."

Hasanov emphasizes the benefits of this sphere for ordinary citizens.

"The main goal here is to provide consumers with access to the renewable energy network by using a dual meter and a mechanism for supplying or receiving energy in the network depending on demand,” the director of the department added.

“The mechanism does not pursue an entrepreneurial goal, but implies the elimination of the need to install devices and equipment that require additional storage costs,” Hasanov said. “These costs are quite high and are currently the factors preventing the use of renewable energy sources among consumers in Azerbaijan.”

In conclusion, Hasanov said that the ministry intends to create the territories of renewable energy sources in the areas with high potential and to provide entrepreneurs with them through an auction in the future.

“In these territories, the proposals on the exemption of activity from taxes and duties were prepared and submitted,” the director of the department added.

"Moreover, other incentive mechanisms are envisaged to be made in the prepared legislative acts, which ultimately will make it possible to effectively use the potential of renewable energy sources in Azerbaijan and ensure the development of the sector," Hasanov added.


Follow the author on Twitter:@IsmailovaNargis

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