Alternative and Renewable Energy Outlook for Azerbaijan 2014

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Alternative and Renewable Energy Outlook for Azerbaijan 2014

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Title: Alternative and Renewable Energy Outlook for Azerbaijan 2014
Author: Huseynova, Hajar
Abstract: As a net oil and gas exporter, Azerbaijan’s energy revenues have driven significant economic growth, including in the non-hydrocarbon sectors of the economy. In particular, 2004 marked the beginning of a period of sustained rapid growth. For 2014, for instance, GDP growth was 4.5 per cent, and is forecasted at 4.3 per cent for 2015. A key development in the power sector took place in the 2000’s: the switch from oil to gas in thermal generation. At the same time, domestic energy consumption dropped below production rates. This trend has continued, with a widening gap between supply and demand. With its current levels of exports and reserves, Azerbaijan does not have pressing energy security concerns. However, the government is aware of the need to reduce the country’s dependency on non-renewable resources, and accordingly has launched several initiatives to diversify its energy mix and increase energy efficiency. The momentum for harnessing the potential of renewable energy sources (RES) has increased alongside the growing instability of the global energy market. The foundations for the development of Azerbaijan’s RE sector are well-established, especially following the enactment of the State Program on the Use of Alternative and Renewable Energy Sources in 2004. The goal of this program is to promote energy production from renewable and environmentally sound sources and to utilize hydrocarbon resources more efficiently. The creation of the State Agency on Alternative and Renewable Energy Sources (SAARES; in Azerbaijani ABEMDA) is responsible for the development and implementation of RE projects. In 2009, the Agency created additional incentives for investors by introducing regulations and preferential tariffs. Along with SAARES, various stakeholders are contributing to the development of RE in Azerbaijan, including the State Oil Company of Azerbaijan Republic (SOCAR) – a state owned oil and natural gas company, AzerEnerji JSC – a state owned electricity company, and local private companies. Notably, international financial institutions (IFI) and development organizations are also supporting RE and EE projects in the country. Given that the development of this sector is relatively recent, the projects being implemented are mainly pilot ones. Briefly, Azerbaijan has strong potential in terms of realizing RES, though there remains significant work to be done in terms of establishing sound RE capacity and achieving energy efficiency. The improvement of Azerbaijan’s energy production and efficiency constitute essential steps towards more sustainable energy consumption. In regard to the 7 improvement of RE capacity, a National Strategy on the use of alternative and renewable energy sources for the period 2012-2020 is being prepared by SAARES and by the Ministry of Industry and Energy (MIE).The country’s target for 2020 is to share of renewable energy in electricity 9,7 per cent and share of renewable energy in all energy consumption. National energy efficiency targets, including increased use of RE, are set forth by the “Azerbaijan in 2020: Look into Future” state strategy. The goal of this program is to accelerate the development of alternative (renewable) energy sources, strengthen the institutional environment, increase scientific-technical potential, continue training specialists, and raise awareness among consumers. Alongside state initiatives, private sector involvement will be promoted, and the reforms for alternative energy tariffs will be ensured. As demonstrated by the 2020 strategy, the country offers numerous opportunities for foreign companies interested in investing in alternative energy or penetrating the local market. However, there are still challenges, among them economic and technical barriers, poor public awareness, and counter-lobbying, all common barriers to developing an RE sector. Azerbaijan already applies preferential tariffs for electricity generated by WPPs and small HPPs, and there are ongoing discussions on creating a smart grid system in Azerbaijan. Existing preferential tariffs and the establishment of a special governmental agency focused on utilizing the potential of RE demonstrates that there is political will for the development of the RE sector. Once political will is in place, other barriers are much easier to overcome. For instance, economic barriers such as high costs of infrastructure construction can be mitigated through loans, grants or preferential tariffs targeting the specific sectors. The absence of community support can be addressed though nationwide awareness programs on the benefits of RES, and by providing incentives for switching to RE. The current report consists of two parts, followed by a concluding section and a list of recommendations. The first section addresses climate change as it pertains to Azerbaijan, providing a descriptive analysis of the energy sector and energy efficiency at the national level. Given that so far the country’s main focus has been on establishing RE generating power plants, the second part focuses on Azerbaijan’s renewable energy potential, its achievements to date, previous projects implemented in the RE sector, and upcoming and prospective projects. The conclusion provides an overall summary of the report, and focuses on the strength and weaknesses of the current situation in Azerbaijan regarding 8 the implementation of RE and EE projects. Finally, the report puts forth recommendations on how Azerbaijan can boost both RE and EE potential.
URI: http://hdl.handle.net/123456789/1077
Date: 2015


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