Page 75 - Azerbaijan State University of Economics

E.Ahmadov: Azerbaijan from innovative governance to green economy

demands. It is stated that full payment of the cost of the electricity and natural gas
consumed is one of the factors that would ensure the efficient use of these resources.
The State Programme on the Use of Alternative and Renewable Sources (2004) also
envisages more efficient utilisation of hydrocarbon energy sources as one of the
objectives. Although the government sets the targets for an energy efficient
economy, there is no law or secondary legislation specific to EE activities.
Since 2009, Azerbaijan has been signatory to the International Renewable
Energy Agency (IRENA) and has created the State Agency on Alternative and
Renewable Energy Sources (SAARES). A national strategy on the use of alternative
sources of energy and RES for the period 2012–2020 is being prepared by SAARES
and by the Ministry of Industry and Energy (MIE), including an RES Law, which is
expected to be published by the end of 2012. As of June 2012, SAARES has become
the State Company on Alternative and Renewable Energy Sources. This will provide
a mandate to develop RES projects. A state budget of $60 million has been
committed to the development of RES.
Hydropower is for now the most important renewable energy (RE) resource in
Azerbaijan and in 2010 hydropower satisfied about 18% of the need for electricity
generation. Azerbaijan has about 1000 MW of operating hydropower capacity and
an additional 62 MW of planned hydropower capacity. Although there has been little
implementation of wind energy in Azerbaijan until the present day, interest has been
growing. Its use has huge prospects in some regions of Azerbaijan. Calculations
suggest that the Republic of Azerbaijan has the economically feasible potential to
produce about 800 MW of wind power. The main potential is in the southeast
around the Caspian coast. There is also competition with tourism development. The
estimates of the solar, biomass and geothermal potential are more uncertain. Even
though there is sufficient space to install solar panels, the estimated potential of
5000 MW can only be a long-term goal due to the relatively high upfront investment
cost. Biomass utilization is equally unlikely without an incentive system in place.
There exists only the potential of geothermal energy for heat supply, due to the
relatively low temperatures of the wells. The main barrier to RES development is the
low tariffs that were set in 2007 and are still valid for 2012, with 3.2 US$/kWh for
small hydropower plants (HPPs) and 5.7 US$/kWh for wind. Another barrier is the
lack of a legal basis for connection rules. In order to overcome the barriers to
developing RES in Azerbaijan two projects are relevant.
The project for preparation and implementation of an action plan for RE and
EE will be undertaken by the Khazar Consulting Agency. This project is ongoing on
the part of SAARES in co-operation with the International Academy of Ecoenergy.
Azerbaijan is interested in finding solutions to the problems regarding

75