Contents

• General State of the Economy
• Energy Resources
• Energy Balance
• Energy Infrastructure
• Education and Innovation
• Ecology and Environment Protection
• References

Azerbaijan, officially the Republic of Azerbaijan, is a landlocked country located in the South Caucasus region of Eurasia, between Western Asia and Eastern Europe. It borders Russia to the north, Iran to the south, Armenia to the west and Georgia to the north-west. Azerbaijan is bounded on the east by the Caspian Sea with a coastline of 713 km.
According to 2022 statistics, Azerbaijan, which in terms of the size of its territory is 113^th in the world, is home to around 10,5 million people. In terms of population density, the country is 76^th in the world. Azerbaijan is a presidential republic, Baku is the capital and largest city lying on the western shore of the Caspian Sea [1,2,3].

Source: [1,2,3,4,5]
 

Of the indices presented, Azerbaijan has the highest values for the 2021 Index of Economic Freedom (0.79), GDP growth dynamics (0.66), and The Global Competitiveness Index (0.59). The weakest spots in Azerbaijani economic indicators are High-technology exports (0.34) and the Annual average GDP growth in %, for the period from 2011 to 2020 (0.20). Data concerning the Use of intellectual property is unavailable, leaving this position in the chart blank.

Azerbaijan has distinct proven reserves of fossil fuels in the form of natural gas and crude oil. The share of natural gas is 0.82% of the world’s total, the share of oil is 0.42% [6]. The share of Azerbaijan's population makes up about 0.13% of the world's population. However, at the same time, gas and oil reserves in Azerbaijan are significantly lower than those of the world leaders. For instance, gas reserves are about 14 times less than in Qatar, while oil reserves are more than 22 times less than in Iran [6].
In terms of tons of oil equivalent, according to 2024 data, conventional proved reserves by fuel type were: 61.6% – natural gas and 38.4% – oil (Fig.5).

Table 1. Fossil energy resources of Azerbaijan

* share of the country’s reserves in world total is provided in brackets

The geographical location with a diverse landscape of plains and mountains, as well as favorable climatic conditions, give Azerbaijan significant renewable energy potential. According to estimates by the Azerbaijan Renewable Energy Agency, the economically viable and technically feasible renewable energy potential of the country  is 27,000 MW, including 3,000 MW of wind energy, 23,000 MW of solar energy, 380 MW of bioenergy potential, and 520 MW of mountain rivers [7].
The largest technical potential belongs to solar energy, with solar GHI intensity of 4.6-4.9 kWh/m² in areas of high activity, e.g. in the south-west of the country, in the Nakhchivan region. Azerbaijan also has excellent potential to utilise its wind resources, especially in coastal areas along the Caspian Sea, where wind speed reaches 7.5-8.5 m/s at 50 m.

Table 2. Renewable energy resources of Azerbaijan

*for the majority of the territory of the country

In addition, the country also has good potential for small-scale hydropower. According to [14] , the estimated technical potential of small hydropower plants in Azerbaijan is 520 MW. However, only 5% of it is currently being utilised.
In addition to the mentioned renewable energy development areas, Azerbaijan also has a technical potential of 300 MW of biomass and waste to produce energy. Currently, bioenergy is mainly used in the form of conventional biomass, mainly for cooking and heating in remote areas. A solid waste incineration plant in Baku with an installed capacity of 37 MW is working to realise this potential [14].

According to [6], in 2022 in Azerbaijan, the total production of primary energy was 2.703 quadrillion Btu, while consumption was at the level of 0.637 quadrillion Btu. Thus, the share of domestic consumption in primary energy production was 23,6%. This makes Azerbaijan a country independent of energy imports (without taking into account the structure of energy consumption).
According to the Statistical Review of World Energy 2022, primary energy consumption in Azerbaijan in 2021 amounted to 0.66 exajoules and was dominated by natural gas – 69.7.5%, ahead of oil – 28.8% and hydro – 1.52% [15]. 

Source: U.S. Energy Information Administration (Mar 2024) / www.eia.gov

Figure 2. The Production and Consumption of fossil fuels in Azerbaijan (left — coal, in the center — gas, right — oil)

As can be seen from the diagram above, natural gas output in Azerbaijan has gradually increased over the past ten years, and production is more than twice as high as domestic consumption. In contrast, oil production began a small and gradual decline in 2010 after reaching record highs driven by the discovery of the Shah Deniz field in the South Caspian in 1999. It should be noted, that oil production is about seven times higher than domestic consumption. In 2015, coal consumption in Azerbaijan dropped to practically zero, but then began to grow sharply again and within five years, from 2016 to 2022, increased approximately 140 times.

Over the past ten years, total electricity production in Azerbaijan has increased by almost 20%. In 2022, about 94% of electricity was generated by natural gas-fired power plants. The country has a number of hydroelectric power plants, which contribute about 5,5% to the overall balance of electricity production. The amount of renewable power plants is insignificant in Azerbaijan reaching about 0.9% of the total production.
The volume of electricity generation in Azerbaijan slightly exceeds the volume of consumption, allowing the country to export the remaining production.

The core oil and gas infrastructure of Azerbaijan has developed in the eastern part of the country within the Baku oil- and gas-bearing district located on the Apsheron Peninsula and the adjacent Caspian Sea, where most of the country's oil and gas production takes place. The largest gas production areas – the Shah Deniz and Umid fields – are located offshore.
Azerbaijan is a net exporter of energy resources and an important supplier of oil and natural gas, especially for European markets. There are 2446 km of oil pipelines in the country, with the Baku-Tbilisi-Ceyhan pipeline providing the main export capacity, transporting oil from the Sangachal terminal through Georgia and Turkey to world markets. Conventional natural gas infrastructure includes 3890 km of natural gas and 89 km of condensate pipelines.

Figure 5. Basic infrastructural facilities of the fossil fuel sector in Azerbaijan

As already mentioned, according to the U.S. Energy Information Administration data, in 2021, 93.9% of electricity in Azerbaijan was generated by fossil fuels power plants, mainly driven by gas. Almost all of them are concentrated in the eastern part of the country.
However, based on data from the Azerbaijan Renewable Energy Agency [16], by 2023 the share of renewable energy sources in the total installed capacity is already about 17%, dominated by hydropower (88.5%), ahead of wind (5%), solar (3.5%) and bioenergy (3%). The installed capacity of hydroelectric power plants is about 1,110 MW, 70% of which comes from the two largest HPPs located on the Kura River – 402 MW Mingachevir HPP and 380 MW Shamkir HPP.
The installed capacity of wind and solar power plants together comprise 112 MV. The largest wind power project is 50 MW Yeni Yashma Wind Park in Khizi District in the north-east of Azerbaijan. The 22 MW Naxçıvan Solar Power Plant is the largest operating solar farm in the country located in the south-western Babek District [16].

Figure 6. Electricity production and Renewable energy in Azerbaijan

Due to the dominance of the oil and gas sector, the share of renewable energy sources in Azerbaijan is significantly lower than the world average. Over the last few years, the government of the country has made a lot of efforts to create cooperations and attract investments in the renewable energy market, so this area is expected to grow rapidly in the medium term. According to the Azerbaijan Renewable Energy Agency [16], among the main renewable energy projects, the construction of which started in 2022, are the 240 MW Khizi-Absheron Wind Power Plant and the 230 MW Garadagh Solar Power Plant. The total investment in these two projects is $500 million. In addition, it should be mentioned that two hydropower plants are underway on the Aras River in the Jabrayil district with a total capacity of 140 MW.

[1] List of sovereign states and dependencies by area / Wikipedia / en.wikipedia.org/wiki/List_of_sovereign_states_and_dependencies_by_area
[2] List of countries and dependencies by population density / Wikipedia / en.wikipedia.org/wiki/List_of_countries_and_dependencies_by_population_density
[3] Azerbaijan / The world factbook / Library / Central Intelligence Agency / www.cia.gov
[4] GDP, PPP (constant 2011 international $) / World Bank, International Comparison Program database. License: CC BY-4.0 / Data / The World Bank / www.worldbank.org
[5] GDP per capita, PPP (current international $) / World Bank, International Comparison Program database. License: CC BY-4.0 / Data / The World Bank / www.worldbank.org
[6] International Energy Statistic / Geography  / U.S. Energy Information Administration (Dec 2022) / www.eia.gov/beta/international/
[7] Azerbaijan Renewable Energy Agency / Potential of RE / area.gov.az/en/page/yasil-texnologiyalar/boem-potensiali
[8] Solar resource data obtained from the Global Solar Atlas, owned by the World Bank Group and provided by Solargis / Global Solar Atlas / globalsolaratlas.info
[9] Wind Map / Global Wind Atlas 2.0, a free, web-based application developed, owned and operated by the Technical University of Denmark (DTU) in partnership with the World Bank Group, utilizing data provided by Vortex, with funding provided by the Energy Sector Management Assistance Program (ESMAP). For additional information: globalwindatlas.info
[10] Agricultural land (% of land area) /Food and Agriculture Organization, electronic files and web site. License: CC BY-4.0 / Data / The World Bank / www.worldbank.org
[11] Forest area (% of land area) /Food and Agriculture Organization, electronic files and web site. License: CC BY-4.0 / Data / The World Bank / www.worldbank.org
[12] 2016 Annual U.S. & Global Geothermal Power Production Report (PDF) / Geothermal Energy Association / http://geo-energy.org/
[13] What a Waste 2.0 (PDF) / Resources / The World Bank / www.worldbank.org
[14] In-Depth Review of the Energy Efficiency Policy of the Republic of Azerbaijan / www.energycharter.org/fileadmin/DocumentsMedia/IDEER/IDEER-Azerbaijan_2020.pdf
[15] BP Statistical Review of World Energy 2020-2022 (PDF) / BP / www.bp.com
[16] Azerbaijan Renewable Energy Agency / Projects / area.gov.az/en/page/layiheler

The sources of charts and curves are specified under the images.

For more information about the energy industry in Azerbaijan see here