Azerbaijan
With a cumulative score of 1.01, Azerbaijan ranks number 88 among emerging markets and number 117 in the global ranking.
- Emerging markets
- Asia-Pacific
1.28 / 5
Power score
0.66 / 5
Transport score
0.55 / 5
Buildings score
Low-carbon strategy
Net-zero goal and strategy
Azerbaijan has a clean energy generation target of 20%. In order to achieve it, the country awarded contracts in January 2020 and passed a Renewable Energy Law in May 2021. The law creates a geoinformatics database to track projects and locations, and also formalizes the two ways in which renewable energy projects can secure revenue – primarily through auctions, or through bilateral agreements.
Nationally Determined Contributions (NDC)
Azerbaijan’s Nationally Determined Contribution (NDC) – its plan to achieve the goals set out in the Paris Agreement – is not legally binding. By 2030 the Republic of Azerbaijan targets 35% reduction in the level of greenhouse gas emissions compared to the base year of 1990. In Glasgow (November 2021), a voluntary commitment of 40% by 2050 was made. However, this is not enforceable.
Fossil fuel phase-out policy
Azerbaijan is rich in natural gas. It exports and consumes the resource to power its economy. Fossil fuel phase-outs are not being considered.
Power
Power policy
Azerbaijan’s government passed the Renewable Energy Law in May 2021. A national renewable energy target was adopted and worked into the law, but is non-binding. It has a clean energy generation target of 20%. The law formalizes the two ways in which renewable energy projects can secure revenue – through auctions or bilateral agreements. Before the law was passed, contracts had been signed with international developers through bilateral agreements to build wind and solar in the country. Those projects are under way, but no standardized pathway for smaller players to bring more large-scale renewables onto the grid exists yet, as there are neither dates nor details for auctions.
Power policies
Power prices and costs
There is only one retailer, and power prices are centrally determined. Residential electricity prices had long been stable at 70 manats per MWh, but were raised to 90 manats per MWh in October 2021.
Power market
Azerbaijan’s vertically integrated power sector is dominated by natural gas generation, as the region is flush with gas. There is no liberalized power market. There is only one retailer that pays generators centrally determined prices for energy produced. All thermal generation (80% of total) is provided by Azerenerji. Although its role is not made explicit, the state-controlled power company is the buyer of all power generated.
Installed Capacity (in MW)
Electricity Generation (in GWh)
Utility privatisation
Which segments of the power sector are open to private participation?
Wholesale power market
Does the country have a wholesale power market?
Doing business and barriers
Doing business in Azerbaijan requires a strong local presence, or a large international brand in order to speak to the government from a position of strength. Not too many local companies can achieve the latter. The pace of decarbonization is set by the government, with limited private sector say in the matter.
Currency of PPAs
Are PPAs (eg. corporate PPAs and all other types) signed in or indexed to U.S. Dollars or Euro?
Bilateral power contracts
Can a C&I (Commercial and Industrial) customer sign a long-term contract (PPA) for clean energy?
Fossil fuel price distortions - Subsidies
Does the government influence the wholesale price of fossil fuel (used by thermal power plants) down through subsidies?
Fossil fuel price distortions - Taxes
Does the government influence the wholesale price of fossil fuel (used by thermal power plants) up through taxes or carbon prices?
Transport
EV market
An estimated 5,247 electric cars (mostly assumed to be hybrids) were imported in 2020. These accounted for 9% of the country’s total vehicle sales that year. Data for 2021 is not available.
EV policy
The government has yet to implement any substantial policy support in the sector. While electric vehicles have been exempt from VAT since 2019, hybrid cars are still subject to the same customs duties as conventional internal combustion engine (ICE) vehicles. Fully electric vehicles are subject to a slightly lower duty of 15%. Overall, this does not substantially improve the economics of a hybrid vehicle.
Transport policies
Fuel economy standards
Does the country have a fuel economy standard in place?
Buildings
Buildings market
Most heating in Azerbaijan is fueled by natural gas, given how cheap and plentiful it is. Gas accounts for almost 95% of the heating fuel in the country, while the market for low-carbon heating and cooling options is minimal.
Energy efficiency policy
Does the country have a national energy efficiency plan?
Energy efficiency policy
Are there minimum energy performance standards for buildings?
Energy efficiency incentives
Is there access to loans or grants for energy efficiency measures (i.e. Wall or loft insulation or double glazing)?
Buildings policy
The government has yet to implement any substantial policy support for buildings and the low-carbon heat market remains at an early stage.
Buildings policies
Additional insights
from BNEF
Explore more detailed information on global commodity markets and the disruptive technologies driving the transition to a low-carbon economy.
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