Azerbaijan’s Renewable Energy Boom Is Transforming Its Power Sector

Azerbaijan, long known as a major oil and gas power, has ventured into renewable energy in recent years and is rapidly ramping up its capacity. As host of COP29, Azerbaijan’s government announced an ambitious climate target and encouraged other governments to do the same. Renewable energy contributed 20 per cent of Azerbaijan’s total electricity production in the first nine months of the year, an increase from 13.4 per cent in 2025, marking a significant achievement in capacity growth. Azerbaijan produced 21.2 billion kilowatt-hours of electricity between January and September 2026, compared with 28.7 billion kilowatt-hours for the whole of 2025, according to official figures. The government plans to increase the share of renewables in its total installed electricity generation capacity to 33.3 per cent by 2027. Azerbaijan has an estimated technical renewable energy potential of 135 GW onshore and 157 GW of offshore wind capacity in the Caspian Sea, providing substantial opportunities for solar and wind development. The government aims to develop 8 GW of renewable energy generation capacity by 2032, with 2 GW expected to be completed by 2027.Some regions of the country are transitioning to green energy far more quickly than others, with the Nakhchivan Autonomous Republic meeting 100 per cent of its electricity demand from renewable sources between 21st April and 2nd July, according to Azerbaijan’s Energy Minister Parviz Shahbazov.The growth of the country’s renewable energy capacity, mainly driven by the expansion of solar and wind projects, enabled Azerbaijan to avoid using an estimated 840 million cubic meters of natural gas during the first nine months of the year, thereby helping reduce the country’s carbon emissions from fossil fuels.Azerbaijan is accelerating the development of solar and wind farms to meet its ambitious clean energy targets, with plans to commission 11 solar and wind power plants totalling 2 gigawatts of capacity. Three facilities, with a combined capacity of 570 MW, have already come online. The government expects to commission the 445-MW Bilasuvar solar power plant and the 25-megawatt Shams 1 solar power plant by the end of the year.Work is already well underway on UAE-based Masdar’s 200-MW wind power project. Meanwhile, several more renewable energy projects are expected to be completed next year, including the 315-MW Neftchala, 240-MW Shafag, 50-MW Shams, 50-MW Ufug, and 25-MW Western Ufug solar power plants. The planned projects are expected to produce a combined 5 billion kilowatt-hours of electricity a year, which could reduce gas use by more than 1.1 billion cubic meters a year and cut carbon emissions by 2.4 million metric tonnes.The accelerated deployment of renewable energy in Azerbaijan has been largely driven by high levels of foreign direct investment, which have surpassed $500 million. Companies from the UAE, Saudi Arabia, and China all have large-scale green energy projects in Azerbaijan. The country’s Energy Minister, Parviz Shahbazov, said that renewable energy auctions are expected to commence in 2028 to spur further development.In October, the European Union’s Business Climate Report Azerbaijan 2025/26 highlighted the progress that the country has made in expanding its renewable energy sector in recent years. It states, “According to European companies participating in the survey, Azerbaijan has made significant progress in developing its renewable energy sector and is actively engaging international project developers to implement large-scale projects.”The government is also supporting significant investment in Azerbaijan’s battery energy storage systems and electricity grid upgrades, including the AZURE project, the Navoi substation and new 500-kilovolt transmission lines. Azerbaijan plans to invest around $2.6 billion in renewable energy projects and power grid development by 2027, including $600 million to strengthen the grid infrastructure, according to Shahbazov.These projects will help improve the flexibility of Azerbaijan’s power system, according to the report. The government also plans to develop domestic manufacturing capabilities in green energy, with a solar panel manufacturing project underway and plans for wind turbine blade and tower manufacturing projects in the Alat Free Economic Zone.While Azerbaijan does not currently have a nuclear power programme, the government is also considering eventually developing the sector. In April, Shahbazov announced, “We are moving to a new model and will ensure energy security not only through hydrocarbons, but also through electricity, including renewable sources. In addition, we have decided to include nuclear energy in our energy balance, as we consider it a clean energy source and an important component of the future energy balance,” during an energy panel session at the Antalya Diplomacy Forum.To support these efforts, the International Atomic Energy Agency conducted a legislative assistance mission to Azerbaijan in late 2025, in cooperation with the State Agency for Regulation of Nuclear and Radiological Activity. The aim was to raise awareness of the importance of adhering to the relevant international legal instruments and the elements of comprehensive national nuclear legislation.Azerbaijan is accelerating the deployment of new renewable energy capacity and strengthening supporting infrastructure to ensure its energy system is both flexible and reliable. This is expected to help the country decrease dependence on oil and gas in the coming years. Meanwhile, the government is considering developing a nuclear power programme to further diversify the energy mix. By Felicity Bradstock for Oilprice.comMore Top Reads From Oilprice.comOil Prices Head for Fourth Monthly Gain as Middle East Tensions EscalateInvestors From 119 Countries Pile Into Dangote’s Record Refinery IPOU.S. Lawmakers Warn Banks Against Trump's Russian Diesel Deal