Azerbaijan
With a cumulative score of 0.93, Azerbaijan ranks number 91 among emerging markets and number 120 in the global ranking.
- Emerging markets
- Asia-Pacific
1.16 / 5
Power score
0.75 / 5
Transport score
0.40 / 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, which is primarily through auctions, or through bilateral agreements.
Nationally Determined Contributions (NDC)
Azerbaijan’s NDC is not legally binding. By 2030, the Republic of Azerbaijan aims to reduce greenhouse gas emissions by 35% compared to 1990 levels.
Fossil fuel phase-out policy
Azerbaijan does not have a legally mandated fossil fuel phase-out policy.
Power
Power policy
Azerbaijan’s government passed the Renewable Energy Law in May 2021. A national renewable energy target was adopted and worked into law, but is non-binding. It has a clean energy generation target of 20%. 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, which is primarily through auctions, or by way of bilateral agreements. There is no standardized pathway to bring more large-scale renewables onto the grid, and no projects have been awarded contracts under this new mechanism.
Power policies
Power prices and costs
There is only one retailer, and power prices are centrally determined. Residential electricity prices are stable at AZN 70/MWh ($41).
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.
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. The pace of decarbonization is set by the government, with limited private sector participation.
Currency of PPAs
Are PPAs 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?
Bilateral power contracts
Can a C&I (Commercial and Industrial) customer sign a long-term contract (PPA) for clean energy?
Fossil fuel taxes
Does the government influence the wholesale price of fossil fuel (used by thermal power plants) up through taxes?
Bilateral power contracts
Can a C&I (Commercial and Industrial) customer sign a long-term contract (PPA) for clean energy?
Fossil fuel subsidies
Does the government influence the wholesale price of fossil fuel (used by thermal power plants) down through subsidies?
Transport
EV market
An estimated 5,247 electric cars (mostly estimated to be hybrids) were imported in 2020. These accounted for 9% of the country’s total vehicle sales that year.
EV policy
The government has yet to implement any substantial policy support in the sector and the EV heat market remains at an early stage. While electric vehicles have been exempt from VAT since 2019, hybrid cars are still subject to the same customs duties as 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 performance standards
Are there minimum energy performance standards for buildings?
Energy efficiency plan
Does the country have a national energy efficiency plan?
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.
