Azerbaijan’s Green Energy Development Serves the Hydrocarbon Industry

Azerbaijan heavily depends on revenue from oil and gas exports, which accounts for 92% of its total exports. That dependence is set to increase with promises to double the country’s natural gas exports to Europe, fulfilling growing demand. Azerbaijan also committed to reducing greenhouse gas emissions in 2017, cutting them by 35% by 2030 and 40% by 2050, compared to 1990s levels, and to create a zero-net emissions zone. To achieve this, Azerbaijan is targeting renewables to comprise 30% of its energy sector. Domestic green energy opens the way for increasing fossil fuel exports; thus, if Azerbaijan ultimately achieves its goal, it will do so by exporting its emissions. 

In today’s blog, we’ll be examining “greenwashing” through renewable energy in Azerbaijan and how it serves the fossil fuel industry. Greenwashing is a form of deceptive marketing in which a company, product, or business falsely or excessively promotes itself as being environmentally friendly.

By Yulia Genin, Crude Accountability Research Assistant

The Green Push

Azerbaijan is actively seeking investments in its renewable energy sector, promoting finance through international financial institutions (IFIs), and arranging deals with countries and numerous foreign companies.

To kick start this agenda, the Azerbaijani government signed an order establishing a Green Energy Zone in Nagorno Karabakh in 2021. In 2022,  the Nakhchivan exclave was included in the Green Energy Zone, and an Action Plan for 2022-2026 was developed. 

To export green energy, Azerbaijan is pushing for the construction of the Azerbaijan-Turkey-Europe Energy Corridor (including the Jabrayil Energy Junction Project), connecting Nakchivan with mainland Azerbaijan, Turkey, and further to Europe. It also plans to install submarine electric cables with other countries in the Black Sea to export “green” energy.

The “Green” Projects

The recently inaugurated Garadagh solar power plant (sometimes called Alat) was carried out by the Azerbaijani government together with renewable energy company Masdar (UAE). The project is co-financed by the Abu Dhabi Fund for Development, the Asian Development Bank (ADB), the European Bank for Reconstruction and Development (EBRD), and the Japan International Cooperation Agency. This solar power plant is expected to reduce carbon emissions by 200,000 tons per year, provide electricity to 110,000 residential homes, and save 110 million cubic meters of natural gas annually, “reducing [Azerbaijan’s’] current high reliance [30%] on a thermal power generator.”  However, the positive impact of this shift is questionable as the solar power plant will supply the Janub thermal power plant. Janub’s director discussed expanding the current plant’s capacity “by establishing the Garadagh Solar Power Plant to produce more electricity.” Official ADB project documentation includes a description of a 330 kilovolt Alat SPP – Janub PP overhead transmission line. The Janub PP’s primary energy source is natural gas, but will the replaced gas be kept in the ground or exported to other countries? If we believe Zaur Mammadov, the office head of Azerbaijan’s Energy Ministry, the displaced natural gas will be exported, which is in alignment with Aliyev’s view on renewable energy projects as an “increase [of] our [Azerbaijani] export potential through the saved natural gas.” 

The Alat project is officially aligned “with the EBRD’s Green Economy Transition approach (GET) and its commitments towards climate change.” The EBRD fulfills its 2.7 Commitment to recognize the importance of addressing climate change. For the ABD, the project is “tackling climate change, building climate and disaster resilience, and enhancing environmental sustainability.” According to the bank, the project is categorized as green energy and falls under Priority 3. This project, however, will merely relocate the emissions to countries of export.

The Khizhi-Absheron Wind Power Plant project, implemented by ACWA Power (Saudi Arabia), is financed by the EBRD and the OPEC Fund. This project embraces  Azerbaijan’s agenda to replace natural gas with renewable energy and export it. Chief power engineer of Azalternativenerji LLC, a subordinate of Azerbaijan Renewable Energy Agency, believes that constructing renewables in the Absheron region will bring financial benefits to the country by increasing the export of gas that alternative energy facilities have replaced. Meanwhile, the OPEC Fund is proud to be the project’s partner and is committed to continuing and increasing climate financing. Despite corporate claims, this will not reduce the emissions as the exported gas will simply shift emissions to countries receiving Azerbaijani gas exports. 

Much attention goes to BP Azerbaijan, the largest country’s foreign investor, accounting for 88% of the country’s exports. At Baku Energy Week 22,  BP’s Azerbaijan CEO expressed excitement about the company’s transition to renewable energy resources. BP plans to power its facilities with renewable energy and “replace the Sangachal gas turbines with grid access… [and this] would allow us to export the displaced gas through SGS.” The Shafag (Sunrise) Solar Power Plant project in Jabrayil confirms the CEO’s statement. The country signed an agreement on this project soon after the government recaptured territories during the Nagorno-Karabakh War in 2020. SOCAR and AIC (government-owned Azerbaijan Investment Company) recently joined the project. According to Azerbaijan’s Deputy Energy Minister, Elnur Soltanov, Shafag SPP will supply the Sangachal terminal, which aligns with the President Aliyev’s agenda to expand the country’s energy export.

We find it problematic to call the Azerbaijani government’s green initiatives a transition into a sustainable future: Azerbaijan plans to invest in renewable energy sources to power its natural gas production facilities and to export the displaced gas. Investors who finance the projects, intentionally or not, partake in this implementation. 

Emissions that will happen in the future outside the country are, according to the EBRD and ADB protocols, outside the project boundary. In this case, the IFIs did not consider statements by Azerbaijani government officials on the export of displaced natural gas; this discussion was not included in the official ESIA by stakeholders. “Greening” the energy sector, in this case, will merely allow emissions to move from Azerbaijan to the country of export and will not effectively tackle climate change or enhance environmental sustainability.  

Despite the EBRD and ADB having embraced a green economy approach to tackle climate change, their regulations are short-sighted when it comes to reducing GHG emissions in the long term. IFIs must ensure borrowers provide guarantees regarding the sustainability of their projects, including impacts beyond the project’s immediate surroundings. Azerbaijan might meet its forecasted increased energy needs with renewable energy, but it also persists in expanding the export of hydrocarbons, exacerbating the climate crisis.