From fossil fuels to renewables: Azerbaijan's achievements in energy with milestones

Azerbaijan is nearing to celebrate the 30th anniversary of signing the Contract of the Century which played an important role in the history of the country. The Contract of the Century could be called a milestone in the independent Azerbaijan.

As is known, with the collapse of the USSR, like other Soviet Republics, Azerbaijan regained its independence. However, it is worth noting that it was one of the most painful periods in history as Azerbaijan like other post-soviet states had to endure an ordeal by transitioning from one era to another. More precisely, the epoch of socialism was over, and people who used to live under one umbrella had to adopt a free market economy. It was an arduous task for many and that is why most big enterprises could not survive, the unemployment rate hiked and it triggered hyperinflation in many former socialist republics.

The period in question was much more painful in Azerbaijan because the country encountered aggression from the Armenian side in the first years of its independence. As a result of the aggression 20 percent of Azerbaijan's strategically important territories which play a vital role in agriculture especially animal husbandry, went under occupation. Roughly one million people or every 7th person in the country turned either a refugee or IDP. At that time, Azerbaijan had one of the biggest numbers of refugees or IDPs per capita. The above-mentioned issues paved the road to chaos within political government. Inflation skyrocketed and GDP downfell from $9bn to $0.4bn. Azerbaijan became the poorest country in the South Caucasus with $60 GDP per capita back in 1992. In comparison, GDP per capita in Armenia in the same year was 6 times more than in Azerbaijan.

However, in 1993 when Heydar Aliyev came to power everything started to change. A new chapter was opened in the history of Independent Azerbaijan. Under his rule, large-scale economic reforms were conducted, a new democratic constitution was adopted, and censorship was abolished. All of these attracted foreign investors to the country, and of course, the energy sector got the lion's share. In 1994 the first Caspian Oil and Gas Exhibition was organised and after several months the Contract of the Century was signed. Following the Contract, the biggest international oil companies invested in Azerbaijan. Besides, Baku strengthened its position by commissioning pipelines. As a result, the GDP of Azerbaijan increased by 179 times in 30 years which is considered one of the biggest achievements in the world. In addition, poverty dropped from 50 percent to 5 percent and foreign debt decreased from 100 percent to 7.7 percent.

Following the oil contracts, Azerbaijan signed gas contracts. Commissioning the Shah Deniz field not only put an end to the gas shortage in the country, but turned Azerbaijan from a gas-importing country to a gas-exporting country. It is expected that Azerbaijan’s gas exports will exceed 24 billion cubic meters this year. Today, Azerbaijan is considered one of the reliable gas suppliers of Europe, since six out of eight countries in which Azerbaijan exports gas are European countries. Besides, gas export makes up over 40 percent of Azerbaijan’s exports.

And here is the result - after mega oil and gas projects, Azerbaijan is launching the third mega energy project - renewable energy. Azerbaijan has 200 GW of green energy production potential. Azerbaijan intends to realize some of these potential for domestic purposes and export.

As Azerbaijan prepares to host the United Nations COP29 climate change conference in Baku in November 2024, the country has committed to increasing the renewable energy share of its installed electricity-generation capacity to at least 30 percent by 2030, and to unlocking its green energy potential through private investment in utility-scale renewables.

In recent years, the government has undertaken reforms, developed strategies, and implemented legislation to attract green private-sector finance.

Azerbaijan has already inaugurated a 230-megawatt solar power station in October 2023 and now one gigawatt. Besides, two more projects are in the pipeline. With the completion of the said projects, the renewable potential of Azerbaijan will reach two gigawatts.

Besides, Azerbaijan has a huge renewable energy potential in the liberated territories, Garabagh and East Zangazur. Within four years, Azerbaijan commissioned hydropower stations with a total capacity of 270 megawatts, and in the following years, the figure is expected to reach 500 megawatts.

All these projects will enable Azerbaijan to export electricity generated from renewable sources to the global markets. In addition, renewable energy will enable to saving of natural gas which is being used in electricity generation, and export the saved natural gas as well.

Azerbaijan has proved to be a reliable partner to the world with the implemented oil and gas project. There is no doubt that Azerbaijan will implement the renewable energy project as well. With completion of the renewable energy Azerbaijan will be an important energy supplier of the world and this factor will ensure the stability and prosperity of the region.