The renewable energy market in Azerbaijan is expected to register a CAGR of over 5% during the forecast period. Factors, such as diversifying the economy of the country and decreasing the dependence on the oil and gas sector, are some of the key points in the country’s Strategic Road Map on National Economic Perspectives, which is expected to drive the renewable energy market in Azerbaijan. Moreover, diversification of energy mix offers multiple benefits, including job creation and energy security, further promulgating the renewable energy market in the country. However, the lack of international companies’ investments and delay in practical deployment of projects are expected to hinder the growth of the market studied.

  • Solar energy is expected to be the fasted growing market during the forecast period, with continuous growth in solar PV installations in the country in previous years. The government planned several projects, including distributed generation using solar PV and small combined heat and power (CHP) stations, which are further expected to bolster the growth of the solar energy segment during the forecast period.
  • Azerbaijan’s oil sector accounts for one-third of its economy, with exports of crude oil having a significant share. The country plans to generate additional revenue through crude oil exports, demanding a decrease in domestic consumption of oil and gas in upcoming years. Therefore, renewables are expected to increase its share in the energy mix, further creating several opportunities for market players in the near future.
  • Hydropower has the highest installed capacity in the country among the renewables, along with a well-developed small hydropower generation sector. Therefore, the hydropower sector is expected to be the largest segment in Azerbaijan’s renewable energy market.



Key Market Trends

Solar Energy to be the Fastest Growing Segment

  • The Azerbaijani government plans to decrease the heavy reliance of oil in power generation and increase the share of the nation’s electricity from solar. This is expected to drive the demand for solar energy, and in turn, for renewable in the country.
  • According to the IRENA, Azerbaijan has an estimated solar energy potential of 23,040 MW, which is expected to be the highest in comparison to other renewable power segments. As of 2019, the country had 36.30 MW of solar PV installed capacity, with a total target of 50 MW by the end of 2020.
  • The country is proceeding with the deployment of projects, for which tenders of EPC contracts are expected to be signed by the government. Recently, in January 2020, Masdar, a UAE EPC company, signed an agreement with the government to develop a 200 MW utility-scale solar project in the country.
  • The government launched the Open Solar Contracts initiative to provide standardized, opensource legal documentation solutions for facilitating solar power project development. Therefore, the government initiatives, along with upcoming projects, are expected to drive the solar energy market during the forecast period.



Hydropower to Dominate the Market

  • Among renewable energy sources, hydropower has the highest installed capacity of 1,134 MW in 2019, with resources located alongside rivers, such as Kura and its tributaries.
  • Azerbaijan’s small hydropower generation sector has the presence of independent power producers, as well as auto producers generating power for consumption in their own facilities. For example, small-scale hydro-power generation is being added, such as the 1.5 MW in Balakan facility.
  • Hydropower accounts for more than 5% of the electricity generation in the country, second to the thermal power source. Therefore, with several upcoming projects and few under construction, hydropower share is expected to be increased during the forecast period.
  • Therefore, with the diversification of its economy, the government plans to increase the share of non-oil foreign direct investments (FDI) by 2025, in turn, driving the hydropower segment during the forecast period.



Competitive Landscape

The Azerbaijani renewable energy market is moderately consolidated. Some of the key players are ACWA Power International, Tamiz Shahar JSC, Azerenerji JSC, Abu Dhabi Future Energy Company PJSC (Masdar), and EQO-NIXUS Advisory, Management and Training Services S.L.U.

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