Trans-Caspian Energy Corridor to enhance competitiveness of Silk Road region energy architecture

The green energy cable that will connect Kazakhstan and Uzbekistan with Azerbaijan will significantly increase the sustainability and competitiveness of the energy architecture of the Silk Road region, reads the analytical update on the prospects for deepening economic cooperation between Azerbaijan and Kazakhstan, prepared by the Astana International Financial Center (AIFC) and the Institute for Development and Diplomacy (IDD) at ADA University, Report informs.

It is noted that this submarine high-voltage cable is designed to connect the power systems of Kazakhstan and Azerbaijan and will become part of a larger initiative - the submarine green energy cable project across the Black Sea, linking the South Caucasus with Europe. According to the document, this infrastructure, once commissioned, will allow the export of clean electricity (primarily solar and wind) produced in Central Asia to the European Union, contributing to the diversification of energy sources in the region and the achievement of the EU's decarbonization goals.

"The construction of the Trans-Caspian cable will provide a stable external sales channel and improve the investment attractiveness of large-scale renewable energy projects," the update says.

According to its authors, given the project's alignment with the EU's energy security and climate agenda, the Global Gateway initiative could become an important mechanism for strategic financing.

"In a macroeconomic context, the project reflects the transition in cooperation between Kazakhstan and Azerbaijan from hydrocarbons to electricity as a trade resource, which provides both countries with the opportunity to position themselves as low-carbon energy exporters, while stimulating the modernization of regional power grids and economic diversification. If implemented, this energy corridor will significantly increase the sustainability and competitiveness of the Silk Road region's energy architecture," the document notes.

The authors of the update believe that a combination of concessional financing, state guarantees and mixed financing structures is needed to create the Trans-Caspian and Black Sea green energy corridors. “Institutions such as the European Investment Bank, the EBRD and dedicated climate funds can play a key role in providing financing. In addition, public-private partnerships and green bonds issued by state-owned energy companies can further mobilize capital,” the update says.