WB names five conditions for Azerbaijan's transformation into major 'green energy' and electricity exporter

New projects in the sphere of renewables can enable Azerbaijan to become a major green electricity and energy exporter.

Report informs, citing the World Bank, that the SBM (Single Buyer Model) can play a central role in this by the following:

- Through the efficient use of generation resources, the SBM will promote flexible dispatch allowing more VRE (Variable Renewable Energy) to be accommodated into the system. This will help in maximizing VRE potential of the country.

- A more effective usage of thermal capacities to meet domestic demand, will allow more green electricity to be exported. This can be as electrons or as green hydrogen or ammonia.

- The proposed SBM model will lower overall system costs and cross-subsidy requirements. This means reduced administrative measures that necessarily favor incumbents to effectively keep competition out. By lowering the barriers to entry, public fund requirements for the sector are reduced.

- A more transparent and cost reflective pricing regime as envisaged in the SBM will give confidence to independent investors in VRE and conventional generation assets. This will attract private investments to Azerbaijan and further reducing the need for subsidies. However, this does not address the concern that new investors may not be able to compete against plants with gas prices well below the full opportunity cost.

- The SBM will allow for a greater variety of contracting options. Generators will be able to sell bilaterally once any guaranteed price offered ceases to apply – including for export. This will make the sector attractive for foreign direct investment.