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Ulviyya Shahin

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Following mega oil and gas projects, Azerbaijan was determined to conduct a new energy project. This time, Azerbaijan aims to increase electricity generation, especially from renewable sources, and sell it to European markets. For this purpose, Baku cooperates with different well-known companies, such as bp, Vestas, ACWA Power, MASDAR, and so on.

However, Azerbaijan does not neglect the generation of electricity from traditional sources. Launching the construction of Thermal Electric Power in 2023, in which Azerbaijan President Ilham Aliyev participated in its groundbreaking ceremony, exemplifies it. The power plant, with a capacity of 1280 megawatts, plays a crucial role in balancing the integration of renewable energy sources, conserving natural gas, mitigating climate change effects, and protecting the environment. Upon integration into units 7 and 8, the capacity will increase to 1,880 megawatts, reducing fuel consumption by 225 grams per kilowatt-hour and saving 1.2 billion m³ of natural gas annually.

Azerbaijan also collaborates with well-known companies in this field. One of these companies is Ansaldo Energia.

It is worth noting that the said company has supplied and installed two turbines and two generators at the new power plant being constructed in Mingachevir.

Here poses some questions: What attracts Italian companies to Azerbaijan? What steps should Azerbaijan take to increase cooperation with Italian companies?

To begin with, Valentina Chabert, an Italian expert in green energy, Ph.D. Fellow Sapienza University of Rome, and Member of the Advisory Board – the Hague Research Institute, said in her comment to Azernews that the Azerbaijani government targets increasing the share of the installed capacity of renewable energy to 30% in the country's overall energy balance by 2030.

“All the measures undertaken in the country support Azerbaijan’s sustainable electricity transition, which will decrease the use of natural gas to make electricity as well as support the green economy. By doing so, the country will diversify its energy exports to global energy markets and support the energy security of its partners. The construction of a new power plant is therefore in line with Azerbaijan’s strategic objectives and can offer the country an alternative to its exclusive dependence on oil and gas.”

The Italian expert noted that the Republic of Azerbaijan signed the Paris Agreement on climate change in 1996 and committed to decreasing the level of GHG emissions by 35% in 2030 compared to the base year (1990).

“Moreover, in November 2021, during the 26th UN Climate Change Conference of the Parties (COP26) held in Glasgow, Azerbaijan renewed its voluntary obligations by reducing the amount of GHG emissions by 40% by 2050 and declaring the liberated territories a “net zero emission” zone. For this reason, in recent years, accelerating the use of renewable energy has become a key element of Azerbaijan’s energy policy. The new power plant, therefore, should be interpreted in light of Azerbaijan’s effort to increase the use of renewable energy sources in the production of electricity. Eventually, the Presidential Order to declare 2024 as the "Green World Solidarity Year" in Azerbaijan is an important measure to demonstrate Azerbaijan’s commitment to environmental protection and climate action. Azerbaijan’s role as a reliable energy partner and responsible member of the international community in the fight against global warming was recognised by many countries, and efforts towards greener energy production will certainly reinforce this trend,” V. Chabert said.

Regarding what attracts Italian companies to Azerbaijan, the expert emphasised that Azerbaijan has become well known in Italy and generally in Europe thanks to a series of contracts that have been signed in the energy field.

“However, Italian companies are not only attracted by oil & gas but also by other strategic sectors of Azerbaijan, such as agribusiness, green energy, telecommunications, transportation, logistics, and the textile industry. Indeed, these sectors are continuously expanding, thereby stimulating the demand for Italian and, in general, western companies. Undoubtedly, Azerbaijan’s strategic position from a commercial point of view plays a fundamental role in spurring Italian companies’ investments in the country. Similarly, Azerbaijan’s economic potential for foreign investments also depends on its advantageous fiscal and legal system, which is one of the most important factors in determining Italian companies’ decisions to invest in the country. Finally, the internal stability and reliability of Azerbaijan represent a further attractive factor for Italy," she added.

“At the moment, Italy and Azerbaijan are characterised as strong economic partners in a wide range of economic sectors. In this regard, the Italy-Azerbaijan Chamber of Commerce is playing a crucial role in promoting Azerbaijan as an interesting and dynamic destination for foreign investments among Italian companies that are looking for international possibilities of trade. At the same time, strengthening the infrastructure connecting the two countries would prove beneficial for the increase in cooperation between the two countries. The presence of fiscal incentives and a business-friendly legal environment, moreover, constitute a further stimulus to bilateral collaboration. In this sense, the completion of the Alat Free Economic Zone would represent an added value for Azerbaijan as well as an encouraging factor for Italian companies to invest in the country,” she concluded.

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