Wind Energy Potential Of Azerbaijan – Analysis

By Shahana Bilalova*

Background

In January 2020, the Ministry of Energy of the Republic of Azerbaijan signed contracts with two foreign companies – ACWA Power (the Kingdom of Saudi Arabia) and Masdar (the United Arab Emirates) – for the implementation of renewable energy pilot projects in Azerbaijan. While Masdar undertook the development of a 200 MW solar power plant, ACWA Power partnered in the construction of a 240 MW wind farm (The Ministry of Energy, 2020).

However, these two are not only foreign companies interested in the renewable energy market of Azerbaijan since in recent years this field has experienced extensive foreign investment interest from countries such as China, Canada, Turkey, the United States as well as EU countries including Norway and Denmark (Mehdiyev, 2019). The attractiveness of the renewable energy market of Azerbaijan to foreign investors coupled with the government’s aim to expand the share of renewables in energy supply opens new doors for further opportunities.

Analysis

Wind Energy

Wind energy is one of the most preferred renewable sources. Considering its availability, environmental-friendliness and growing cost-effectiveness, it has experienced massive growth over the years, being placed as the second most- produced renewable energy source after hydropower energy (Figure 1). For the period of 2009-2017, wind energy production globally grew approximately four times and accounted for 18.3% of total global renewable energy production in 2017 (IRENA, 2019). The increasing trend in wind energy also followed in global wind energy capacity as it experienced a steep rise from 17.30 GW to 564.35 GW for the period of 2000-2018 (Ritchie and Rose, 2020).

Possible Negative and Positive Sides

Similar to any other sources of energy, wind energy also has both positive and negative characteristics, thus it is in the responsibility of decision-makers to minimize its the negative impacts. Based on the previous studies (Saidur et al, 2011; Mann and Teilmann 2013; Henningsson et al, 2013; Mikulićet al, 2018), the main positive and negative impacts that might occur as a result of the wind power deployment were identified and illustrated in Table 1.

Starting with the positive impacts, lower carbon emission, contribution to the diversification of energy supply, consequently energy security, job creation as well as increasing spending on supporting industries and services are among the main positive impacts identified. Especially, under a growing threat of climate change and the need for urgent action, wind energy as a mean of renewable sources is treated as a savior as well as a vehicle for sustainable economic development. Thus, with the deployment of renewables including wind energy, countries can make a smooth transition from fossil fuels (or reduce tremendously) in order to achieve lower emission.

On the contrary, wind energy also comes with certain negative externalities especially concerning environmental and social issues. Wind turbines, if not planned well, might adversely affect wildlife species, especially migratory birds. To overcome this problem, there is a practice of building wind turbines away from migration routes as well as installing special sensors for bird detection. Furthermore, wind farms also bring issues of noise and aesthetic pollution which need to be dealt carefully. Another issue is concerned with land use, so even wind farms are not as land intensive as solar panels, they still require a large area to be installed. Finally, wind energy also has uncertainties concerning temporal availability. This feature is certainly different from traditional fossil fuel since power generation from wind requires suitable natural circumstances and the situation might change from time to time resulted in variations in power generated.

Wind Energy in Azerbaijan

Expansion of the share of renewable energy in the total energy production is clearly indicated in the Strategic Roadmap for Development of Utility Services under target 2 on ensuring diversified and eco-friendly electrical energy (Strategic Roadmap for Development of Utilities Services, 2016). Thus, the document (2016) indicates the allocation of investment into the production of 350 MW wind energy along with 50 MW solar and 20 MW bioenergy. Despite the current efforts, wind energy has comparatively a lower share in the total energy production accounting for only 0.05% in the 2018 national energy portfolio (The State Statistical Committee, 2019).

Meanwhile, concerning the electricity generation, in 2018 wind energy contributed only 0.33% to the total electricity production, which is significantly lower than another key renewable energy source in the country, hydropower (Figure 3).

Currently, there are seven operating wind farms (i.e. the information is collected from various sources including official documents from various years, thus the certainty is at stake) and some projects are pending implementation.

It is significant to note that all of the current wind plants operating in Azerbaijan are onshore. Even though the capacity of offshore wind turbines is greater than onshore, due to the cost (i.e. offshore is more expensive taking into account foundations, transmission cables and transformer station (EWEA, 2009)), offshore accounts for a relatively smaller share in wind energy generation.

Whereas, among the planned projects, one offshore wind energy farm is also expected with a capacity of 1914 MW.

Overall, current wind farms are mainly located in the regions of Absheron, Khizi and Gobustan, whereas based on the wind power density, other regions of Azerbaijan also have the potential to contribute to the wind energy generation with its high wind density such as Sharur-Julfa.

Main Challenges

The main challenges encountered in the growth of the renewable energy sector in Azerbaijan can be categorized into four categories which are legal, technical, financial challenges and low awareness (Aydin, 2019). The legal barrier is mainly linked to the legal basis concerning the production and usage of renewable sources coupled with unsatisfactory technical, legal, and regulatory infrastructure. This handicap further creates serious obstacles for the business environment and operation of private sectors in the field concerned. Another hurdle is related to the technical challenge in the light of technological transfer as there is a need for Azerbaijan to import them from other countries. Taking into account higher costs of renewable energy sources (RES) related technologies comparing to already installed traditional energy technologies, facilitation and simplification of technical procedures are necessity for overcoming the above-mentioned challenge.

Main Challenges

The main challenges encountered in the growth of the renewable energy sector in Azerbaijan can be categorized into four categories which are legal, technical, financial challenges and low awareness (Aydin, 2019). The legal barrier is mainly linked to the legal basis concerning the production and usage of renewable sources coupled with unsatisfactory technical, legal, and regulatory infrastructure. This handicap further creates serious obstacles for the business environment and operation of private sectors in the field concerned. Another hurdle is related to the technical challenge in the light of technological transfer as there is a need for Azerbaijan to import them from other countries. Taking into account higher costs of renewable energy sources (RES) related technologies comparing to already installed traditional energy technologies, facilitation and simplification of technical procedures are necessity for overcoming the above-mentioned challenge.

As the third problem, the lack of financial resources and high interest in the renewable sector can be stated. Based on the information on installed renewable energy plants in Azerbaijan, most of them belong to the period before the oil crisis of 2015 (Aydin, 2019). Meanwhile, in a current stage, government’s efforts to involve foreign investments also support the idea of Azerbaijan’s RES dependence on financial resources.

Finally, awareness-raising among the public also needs to be addressed in order to expand the deployment of RES in the country.

Recommendations 2

Taking into account both existing trends in Azerbaijan as well as the main challenges several recommendations can be presented. First and foremost, the step should be towards setting up a well-defined regulation and legislative framework as well as clear-cut targets on wind energy, generally renewable energy sources. Within the first step, enforcement, monitoring and regular update of these legislative and regulatory frameworks are also significant to ensure the effectiveness. The second recommendation is concerned with incentivizing renewable energy production through financing tools (e.g. state guarantees, international financial institutions, public funding) and remunerations, support to Research & Development (R&D), data collection and public dissemination as well as creating enabling business environment for both local and foreign investors. Another issue is regarding the competition with fossil fuel so the government should set a level playing field for renewable energy pricing. In this regard, ending fossil fuel related subsidies, transparent energy pricing and tariff setting, as well as carbon pricing are among the recommended steps to increase renewable sources share in local energy market.

Finally, considering the potential negative social and environmental impacts mentioned previously, it is always quite essential to run proper environmental and social assessments to ensure overall sustainability. Through this step, it is also possible to minimize the negative impacts both in short and long periods.

*About the author: Shahana Bilalova, Research Associate, Caspian Center for Energy and Environment at ADA University

Source: This article was published by Caspian Center for Energy and Environment as February 2020 Policy Brief No. 34 (PDF)

Notes:

1 Wind data obtained from the “Global Wind Atlas 2.0, a free, web-based application developed, owned and operated by the Technical University of Denmark (DTU) in partnership with the World Bank Group, utilizing data provided by Vortex, with funding provided by the Energy Sector Management Assistance Program (ESMAP). https://globalsolaratlas.info. Accessed online 2019-03-05.

2 Recommendations are formulated based on the suggestions presented by IAE (2018) adjusted to the Azerbaijani context.

References:

Aydin, U. 2019. Energy Insecurity and Renewable Energy Sources: Prospects and Challenges for Azerbaijan. ADBI Working Paper 992. Tokyo: Asian Development Bank Institute. Available: https://www.adb.org/ publications/energy-insecurity-renewable- energy- sources-challenges-azerbaijan

Henningsson, M.; Jonsson, S.; Ryberg, J.; Bluhm, G.; Bolin, K.; Bodén, B.; Ek, K.; Hallarlund, K.; Hannukka, I.; Johansson, C.; Mels, S.; Mels, T.; Nilsson, M.; Skärbäck, E.; Söderholm, P.; Waldo, Å.; Widerström, I.; Åkerman, N. 2013. The Effects of Wind Power on Human Interests – A

International Energy Agency (IEA). 2018. 20 Renewable Energy Policy Recommendations. IEA: Paris. Retrieved from https://www.iea.org/reports/20- renewable-energy-policy-recommendations.

IRENA. 2019. Renewable Energy Statistics 2019, The International Renewable Energy Agency, Abu Dhabi.

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Mann, J. and Teilmann, J. 2013. Environmental impact of wind energy. Environmental Research Letters 8 (035001). Mehdiyev, M. 2019. Renewable energy could be the next big thing for Azerbaijan. Caspian News. Retrieved from https:// caspiannews.com/news-detail/renewable-energy-could-be- the-next-big-thing-for-azerbaijan-2019-4-11-36/.

Mikulić, D., Lovrinčević, Ž., and Keček, D. 2018. Economic Effects of Wind Power Plant Deployment on the Croatian Economy. Energies, MDPI 11(7): 1-20.

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The Ministry of Energy of the Republic of Azerbaijan. 2020. Implementation agreements of pilot projects on renewable energy were signed with “ACWA Power” and “Masdar”. Retrieved from http://minenergy.gov.az/index.php/en/news- archive/618-implementation-agreements-of-pilot-projects-on- renewable-energy-were-signed-with-acwa-power-and-masdar.

The Ministry of Energy of the Republic of Azerbaijan. n.d. An overview of alternative and renewable energy use across the world and Azerbaijan. Retrieved from http:// minenergy.gov.az/docs/energetika/es/1.pdf

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The State Statistical Committee of the Republic of Azerbaijan. 2019. Energy: Main macroeconomic by sector of energy and energy efficiency indicators. Official Website.

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