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Qabil Ashirov

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Azerbaijan is entering an important phase of its economic transformation as renewable energy increasingly connects the country’s traditional energy expertise with new opportunities in manufacturing, technology and international trade. The expansion of solar and wind power, supported by international investment and infrastructure development, creates a foundation for a broader industrial strategy that can generate economic value across multiple sectors.

The eighth edition of the EU Business Climate Report Azerbaijan 2025/26, prepared by the VM Europe consortium with European Union funding, highlights the progress achieved in the country’s renewable energy sector. European businesses view the market as a promising destination for large-scale projects, with opportunities spanning engineering, infrastructure, logistics and consulting. These assessments underline the growing importance of renewable energy within Azerbaijan’s economic development agenda.

The figures illustrate the scale of the opportunity. Azerbaijan’s estimated technical renewable energy potential reaches 135 gigawatts onshore and 157 gigawatts offshore, while its estimated economically viable potential stands at approximately 27 GW. Solar power accounts for the largest share of this economically viable potential, followed by wind energy. These resources offer considerable scope for investment, industrial development and long-term energy production.

Azerbaijan aims to develop 8 GW of renewable energy capacity by 2032, while plans envisage integrating 2 GW into the national electricity system by 2027. The country also targets a 30% share for renewable sources in installed electricity generation capacity by 2030 and a 40% reduction in greenhouse gas emissions by 2035 compared with 1990 levels. Together, these objectives establish measurable milestones for the energy transition and provide investors with a clearer picture of the market’s direction.

International partnerships form a central part of this strategy. Projects involving Masdar, ACWA Power, BP, China Gezhouba Group Overseas Investment and SOCAR Green demonstrate the range of expertise and capital entering Azerbaijan’s renewable energy industry. Such cooperation can accelerate project delivery, strengthen technical capabilities and expand the participation of Azerbaijani companies in international energy value chains.

The next stage of development offers an opportunity to deepen the domestic economic benefits of these investments. Solar and wind farms require equipment, engineering services, electrical components, construction materials, maintenance and specialised technical expertise. Expanding local participation across these activities can create additional business opportunities for Azerbaijani manufacturers, small and medium-sized enterprises, technology providers and professional service companies.

The localisation of renewable energy supply chains therefore deserves particular attention. Azerbaijan is advancing a solar panel manufacturing project and exploring local production of wind turbine blades, towers and equipment for energy storage systems in the Alat Free Economic Zone. These initiatives can help connect renewable energy investment with the development of domestic manufacturing capabilities.

Industrial localisation also creates opportunities for workforce development. Engineers, electricians, automation specialists, software developers and maintenance technicians will play increasingly important roles as renewable energy capacity expands. Cooperation between universities, vocational education institutions and international project developers can help prepare specialists for these emerging occupations. A stronger technical workforce can improve productivity and support the growth of local companies across the wider energy ecosystem.

Grid modernisation represents another essential component of this transformation. Battery energy storage systems, new 500-kilovolt transmission lines and infrastructure initiatives such as AZURE can strengthen the electricity system’s flexibility. Efficient transmission and storage infrastructure will support the integration of additional renewable capacity while improving the system’s ability to balance changing electricity generation and demand.

Regional connectivity offers a further dimension to Azerbaijan’s ambitions. Its geographical position between the Caspian region, Türkiye and European markets creates opportunities for cross-border electricity cooperation. As transmission infrastructure develops, renewable energy can complement Azerbaijan’s established role in international energy markets and strengthen its participation in emerging regional electricity networks.

The economic significance of this strategy extends across investment, exports, employment and technological development. Renewable energy projects can attract foreign capital, stimulate demand for local services, encourage industrial investment and create opportunities for Azerbaijani companies to develop export-oriented capabilities. These effects can support economic diversification while drawing on the country’s established energy infrastructure and international partnerships.

Azerbaijan’s renewable energy potential provides a substantial foundation for this transition. The strategic priority is to connect new generation capacity with domestic production, specialised skills, modern infrastructure and competitive local enterprises. By advancing these areas together, Azerbaijan can transform its green energy ambitions into a wider programme of industrial development and strengthen its position as an emerging renewable energy hub in the wider Caspian region.