Azerbaijan Alternative Energy

Sector outlook

Azerbaijan has good renewable energy resources. The wind, which blows more than 250 days per year and may generate 2.4 billion kWh of electricity annually, is the country’s preferred option because of its lower cost, environmental soundness and unlimited availability. Offering 2,400-3,200 hours of sunshine per year, Azerbaijan has also good potential for solar electricity and heat generation. While its technically feasible potential (16 billion kWh) remains underexploited, hydro power is currently the most developed renewable energy source. In 2011, it accounted for 9.8% of electricity production, against only 0.2% for other renewables. With 2 million tons of solid domestic and production waste annually sent to treatment sites, the country has also good potential for biomass energy. Finally, the exploitation of thermal waters could partially cover heat energy needs.

Representing only 2.3% of total energy consumption, renewable energy (RE) will require additional investment to become competitive with the country’s huge fossil resources. The reduction of energy consumption for heating and cooling, which represents more than 50% of total domestic consumption, is another major challenge that could be resolved partially by the introduction of efficient technology.

Strategic direction/ specific schemes and incentives

Although Azerbaijan is rich in oil and gas, the government is well aware of the need to reduce the country’s dependency on non-renewable resources and launched several initiatives to diversify its energy mix and increase energy efficiency:

  • State Programme on the Use of Alternative and Renewable Energy Sources for 2005-2013, which led to the establishment of the State Agency on Alternative and Renewable Energy (ABEMDA) in 2009;
  • Renewable Energy Strategy under preparation for 2012-2020, targeting 20% of RE in electricity and 9.7% in total energy consumption;
  • Experimental Polygon and Training Centre launched in Gobustan in 2011 including a 5.5 MW hybrid station, a dispatcher centre (connection of local grids with global electricity networks), a RE producers’ database, a RE promotion centre, a training centre for RE specialists, etc.;
  • Priority sector for Azerbaijan Investment Company, which invests in greenfield and brownfield projects along with local and foreign co-investors;
  • Preferential tariffs for wind power and small HPPs (feed-in tariffs under consideration);
  • Active participation in the EU-funded Inogate project supporting the development of energy efficiency, RE and demand side management in Eastern Europe, South Caucasus and Central Asia.


Business opportunities

Azerbaijan offers numerous opportunities for foreign companies interested in investing in alternative energy or penetrating the local market, preferably with a local partner:

  • Wind power plants in Absheron Peninsula, Ganja-Dahskesen, Sharur-Julfa and the Caspian seashore;
  • Production of electricity and heat from solar resources;
  • Construction of small HPPs in the Nakhchevan Autonomous Republic;
  • Recycling of solid waste and development of waste combustion plants around Baku and other large industrial cities such as Sumgayit to supply residential settlements with electricity and heat; 
  • Production of domestic heat energy from thermal waters in the Great and Small Caucasus, Absheron Peninsula, Talish mountain-row zone, Kur lowland and Caspian-Guba area;
  • Production of RE technology (photovoltaic systems, solar collectors, wind turbines, etc.) in Baku or at the Sumgayit Hi-Tech Park (financial incentives, tax exemption and infrastructure offered by the State);
  • Provision of modern technology and expertise for improving energy efficiency in the the industrial and residential sectors.


Some success stories

CNIM (France), a leading provider of turnkey solutions for the energy and environment sectors, won the EUR 346 million public tender for the design, construction and 20-year operation of a waste-to-energy plant with a capacity of 500,000 tons of municipal solid waste per year in Baku. It is considered to be the biggest waste-to-energy plant in Eastern Europe and CIS countries.

Caspian Technology Company (Azerbaijan) is the country’s first company to engage in alternative energy. It launched a Vestas V39-500kW Training Center, several wind and solar power pilot projects and started manufacturing wind turbines and solar panels.


This publication has been produced with the financial assistance of the European Union. The contents of this publication are the sole responsibility of EUROCHAMBRES and can in no way be taken to reflect the views of the European Union.

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