Azerbaijan's "green" plans may affect Armenia

Four months have passed since the signing of the ceasefire agreement that ended the Second Karabakh War, on November 9, 2020. Armenia is now embroiled in a political crisis because of the fallout from its decisive defeat in that conflict, while the status of Karabakh remains a topic of political dispute between the hitherto warring parties. Even so, Azerbaijan has already started making plans for the future of its partially regained western region. On March 9, the Azerbaijani government reportedly decided on locations for constructing solar and wind power plants in six districts of Karabakh, The Jamestown Foundation writes.

This is not the first time Baku has taken practical steps regarding its renewable energy plans for the area. Indeed, on February 15, Azerbaijani President Ilham Aliyev inaugurated the first mini-hydropower plant in the Lachin district village of Gulebird. The realization of renewable energy projects across Karabakh fits into the Azerbaijani leadership’s vision to decrease the country’s dependence on fossil fuel-generated electricity. These plans are also compatible with Baku’s plans to radically transform Karabakh’s war-torn territories by building smart cities and villages there—something President Aliyev has repeatedly been vocal about since the signing of the ceasefire agreement last November. Although the Azerbaijani government has not been explicit about the details of these plans, it is now clear that an integral part involves establishing renewable sources of electricity generation in the liberated territories.

Hydroelectric dams are expected to account for most of the renewable power production in the region. Aliyev, in his speech dedicated to the return of Lachin, emphasized the significance of the Kalbajar and Lachin districts (still partially beyond Baku’s full administrative control) as source areas for ten important Azerbaijani rivers. Four of those rivers—Terterchay, Bazarchay, Khachincay and Hakari—are longer than 100 kilometers. For Azerbaijan, regaining full control over these rivers is extremely important as the headwaters of the country’s three largest rivers are all located abroad, either in Turkey (the Kur and Araz rivers) or Russia (Samur).

During the period between the first and second Karabakh wars, hydropower plants played a key role in the separatist region’s electricity supply. Karabakh is renowned for its mountainous geography, especially Kalbajar district. And until major hostilities broke out again last autumn, Karabakh’s annual hydropower capacity reached 187.5 megawatts (MW), while total electricity generation equaled 920,000 megawatt hours (MWh), of which 330,000 MWh was exported to Armenia. Thirty of Karabakh’s hydroelectric power plants, with a total capacity of 112.5 MW, have been transferred to Azerbaijan in accordance with the November 2020 ceasefire agreement.

Smart city concepts, however, involve far more than developing renewable energy sources for urban areas. They importantly also entail the deployment of tools to collect data in real-time about all kinds of phenomena, including inter alia traffic, air and water quality, hospital network occupancy, and levels of solar radiation. Armed with this information, the government can presumably act more quickly and efficiently to address traditional problems plaguing all cities as well as, potentially, come up with more innovative, data-driven solutions.

Azerbaijan has not had any tangible experience yet with building smart cities. Thus, the recently announced projects in Karabakh will serve as a learning curve for the country. Azerbaijan’s experience with integrating renewable sources into its energy portfolio is limited too. According to the World Bank’s Regulatory Indicators for Sustainable Energy (RISE), Azerbaijan is ranked the lowest among the South Caucasus countries when it comes to “green” energy usage. Although better electrified than its regional neighbors, Azerbaijan lacks the necessary legal-technical prerequisites to integrate renewable energy sources into its grid, while its vast renewable energy potential is greatly underused.

Baku is nonetheless interested in increasing the share of renewables in its electricity production portfolio for several connected reasons. Azerbaijan’s electricity production is dependent on fossil fuels, namely natural gas. Eighty-two percent of Azerbaijani electricity comes from plants running on natural gas or fuel oil, while hydropower accounts for 18 percent of the total electricity output.

Besides decreasing its dependence on carbon-intensive electricity production, Azerbaijan is interested in vacating significant natural gas volumes for export purposes. Since the start of operation of the Southern Gas Corridor in late December of last year, Azerbaijan now has ready and scalable infrastructure to reach European markets. And recent investment agreements signed with Saudi ACWA and the United Arab Emirate’s Masdar represent initial steps taken by Baku to increase its domestic solar and wind power capacity for the above-mentioned reasons. Contracts signed with the Gulf companies aim to increase Azerbaijan’s renewable capacity by 440 MW, which would make around 500 million cubic meters of extra natural gas available for export each year.

It is, of course, too early to expect any tangible steps toward joint Azerbaijani-Armenian energy projects in Karabakh anytime soon. That said, regional infrastructure projects with the participation of both parties could serve as a valuable next step toward mutual reconciliation. Armenia and Azerbaijan have already started working on reopening shared transit corridors, as envisioned in the November 2020 ceasefire agreement. Such cooperation may one day bring about additional collaboration in the energy sphere as well.