Moody's: Renewables to help Azerbaijan reduce energy transition risks

Increasing the regional flow of renewable energy can help Azerbaijan mitigate the risks associated with the energy transition, Report informs referring to the international rating agency Moody's.

"Rising regional trade, improved interconnectivity and ongoing energy sector reforms are also likely to attract investment in renewable energy, primarily solar and wind, which will enhance energy security and reduce social risks. For hydrocarbon-producing countries such as Azerbaijan, Kazakhstan and Uzbekistan, a greater regional flow of renewable energy will help mitigate carbon transition risks by accelerating the adoption of cleaner energy sources," reads the message.

The constraints of existing power generation capabilities are putting focus on greater regional interconnectedness and the need to develop vast renewable energy potential, particularly the opportunity for wind power in the north and solar power in the south.

Intergovernmental plans are underway to establish a Caspian Green Energy Corridor to facilitate cross-border electricity trade in Azerbaijan, Kazakhstan and Uzbekistan. At the same time, many countries in the region have initiated energy sector reforms aimed at creating competitive power sectors and attracting private investment. Azerbaijan and Uzbekistan are emerging as regional leaders in renewable energy development.

"Limited regional interconnection and insufficient energy diversification further constrain the region"s ability to meet growing power demand. Armenia, for instance, has had to accelerate domestic energy reforms and diversification efforts amid deteriorating relations with Russia, its primary gas supplier," Moody's noted.

The Asian Development Bank and government sources estimate that by 2030, energy demand in the Central Asian and Caucasus countries – Armenia, Azerbaijan, Georgia, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan – will grow by 43% to about 134 million tons of oil equivalent (compared to 94 million tons in 2020).

Despite the rapid growth in consumption, the region remains dependent on fossil fuels, with hydrocarbons accounting for about 75% of its electricity generation.