Azerbaijan Entrusts Debut Renewable Pilot Projects to Arab Companies

The Azerbaijani government has entrusted ACWA Power (Saudi Arabia) and Masdar (UAE) companies to implement the first pilot projects in the field of renewable energy sources (RES) in the country, but promises to involve other international companies in the implementation of this strategy from 2020.

According to Advisor to the Minister of Energy of Azerbaijan Zamin Aliyev (ASTNA), ACWA Power and Masdar were selected through a three-stage selection process, in which 7 foreign companies took part. The selection was completed on October 31, 2019, and on January 9, 2020, executive contracts totaling $ 300 million were signed with ACWA Power and Masdar.

Under the terms of the agreements, within the framework of the pilot project, ACWA Power will build a 240 MW wind power station in Azerbaijan (investments are estimated at $ 200 million), and Masdar - a 200 MW solar power station for $ 100 million.

Due to the activities of these two stations, annual electricity production is projected at 1.4 billion kW / h.

“Direct work will begin at the end of this year, before this time the parties should agree on a number of administrative, technical and other issues,” Z. Aliyev told ASTNA.

Note that the total production portfolio of ACWA Power in the energy sphere around the world is estimated at 30.2 thousand MW, including 8 thousand MW in the field of renewable energy. The company's investment portfolio is $ 45 billion. This wealthy investor, in fact, managed to reach an agreement on joining Azerbaijan in just one 2019.

Already in April 2020, this company plans to open an office in Azerbaijan, as reported by its chairman Mohammad Abunayan at a meeting with President of Azerbaijan Ilham Aliyev.

As for Masdar (UAE), this company began to “knock on the doors of Azerbaijan” 10 years ago and finally convinced of its professionalism.

Masdar is a large international company operating in the field of renewable energy and sustainable urban development. The company operates in the UAE, Jordan, Mauritania, Egypt, Morocco, the UK, Serbia and Spain.

The Masdar production portfolio in the field of renewable energy is estimated at 4 thousand MW of installed capacity, and the volume of investments in different countries reached $ 8.5 billion.

It should be noted that the Minister of Energy set the task to increase the share of renewable energy sources in electricity production by 3030 to 30% (3461 MW) from the current 17%.

It should be emphasized that in these 17% less than 1% comes from the energy of the sun and wind, and over 16% come from hydroelectric power plants. The lion's share of electricity is generated by gas-fired power plants.

According to the calculations of Azerbaijani experts, the production of 1 billion kW / h of electricity from renewable energy sources saves 200 million cubic meters of natural gas, which can be exported.

But for this, Azerbaijan needs to reduce the cost of electricity production from renewable energy sources, which is not an easy task. In particular, it requires the creation of an appropriate legislative framework and its own production capacities for the production of solar panels and components for wind farms.

In early December 2019, the President of Azerbaijan created a commission for the implementation of pilot projects for the construction of power plants in the field of renewable energy, the first result of which became contracts with ACWA Power and Masdar.

Until April 2020, this commission should prepare proposals on what will be the agreement on the sale of electricity, the agreement on the connection of renewable energy plants to the electricity network, state guarantees for the implementation of projects, etc.

By May-June 2020, it is expected to prepare a "Long-Term Development Strategy" for the energy sector, for which the Cabinet of Ministers of Azerbaijan needs to prepare draft laws "On the use of renewable energy sources in electricity production", "On regulators in the energy and utilities sector", "On energy" and "On Gas Supply".

As previously reported by the chairman of the Board of the Agency for Regulation of Energy Issues (AREI, subordinate to the Ministry of Energy as a legal entity of public law) Samir Akhundov (ASTNA), different well-known models of the liberal market in the electricity sector in the world will be used.

Moreover, the production of electricity will be partially regulated by the state, and partially by the private sector (through partial privatization of a number of generating capacities), and the transmission of electricity will be supervised by the state.

“The goal is for power plants to compete among themselves, trying to provide cheap, but high-quality electricity to the network. Such a market approach is the best management method. The process will first affect small power plants that are not backbone. I am sure that with a competent approach, with the costs of production and distribution of electricity saved. I do not exclude that the tariffs will change, but in this regard, subsidies are expected, the addresses of which will be determined," S. Akhundov noted.

After preparing a specific legislative framework in the spring of 2020, Azerbaijan may host the first international auction for the implementation of renewable energy projects in which foreign companies are expected to participate.

We are talking about providing 8 sites in different regions of Azerbaijan to create 5 generations in wind energy and three in the use of solar energy.

Interested legal entities will receive tax and customs benefits.

In Azerbaijan, the potential of wind electricity is estimated at 3,000 megawatts, and solar electricity - 20,000 megawatts.

Almost all of the world's oil and gas companies operating in Azerbaijan submitted their proposals for renewable energy to Azerbaijan.

In particular, BP, the manager of the most important oil and gas projects, proposed organizing the supply of solar panels for about $ 1 billion to Azerbaijan from its plant in Europe.

Total, Equinor and Gazprom also came up with their ideas. Time will tell if it will be interesting for them to invest in renewable energy in Azerbaijan.

EU experts are closely watching the changes in the electric power industry in Azerbaijan, because in 2018 Azerbaijan joined the II Hague document of the Energy Charter and is preparing a number of bills in accordance with EU standards.

Thus, the EU Ambassador to Azerbaijan, Kestutis Jankauskas, noted positive changes in the development of renewable energy sources, due to which the cost of energy production from renewable energy sources in Azerbaijan in recent years has decreased by 22-25%.

"The road is overcome by the walking one."

The main thing is that Azerbaijan does not turn off this road, bearing in mind that oil and gas are non-renewable energy sources, the era of which may soon end.