News that Azerbaijan's state energy company SOCAR had last week signed an agreement with UAE energy giant Masdar to develop a massive 2 gigawatts (GW) of offshore wind and "green hydrogen" production should have been a cause for celebration.
The more so since the agreement included a vaguer commitment for Masdar to develop a further 1 GW of onshore wind capacity and 1 GW of solar power, and subsequent statements by Azerbaijani officials about plans for yet more renewable power generation, "green hydrogen" production, and plans to export both electricity and hydrogen to Europe.
Baku has ambitious plans for greening its own power sector, reducing CO2 emissions and exporting both power and "green hydrogen" to European markets, which are desperate for new sources of energy in the wake of Moscow's invasion of Ukraine.
However as with most news about Azerbaijan's energy sector in recent years, few details have been released and serious questions remain about what is a confirmed, financed project and what – if not actual "green-washing" – then at least fishing for external investment in projects Baku can't or won't fund itself.
The SOCAR-Masdar deal was announced at the Abu Dhabi Sustainability Week forum, January 16-19, itself an event aimed at boosting the Emirates' green credentials ahead of the UN COP 28 Climate Change Conference scheduled to take place there this November and December.
A keynote address by Azerbaijani President Ilham Aliyev outlined the SOCAR-Masdar agreement, which he said was part of a package of 10 GW of green projects to be completed in the short and medium term.
"This is absolutely doable. We have a roadmap for that," he said.
Meanwhile, a speech by Azerbaijan Energy Minister Parviz Shahbazov announced a "framework agreement" between his ministry and Australia's Fortescue Future Industries (FFI) and collaborations with other companies for a further 22GW of renewables.
Both men said that Azerbaijan has the potential for as much as 200 GW of renewable energy generating capacity, which they said could be developed for exporting power to Europe.
Both also pointed to a "strategic partnership" agreement signed on December 17 between Azerbaijan, Georgia, Romania and Hungary, with the support of the European Union, aimed at laying a power line across the Black Sea from Georgia to Romania, to allow electricity to be exported from Azerbaijan to Europe.
All very admirable, but with few details offered and no funding confirmed and no projected timelines for completion, it's far from clear how much of this potential will or even can be developed.
For example, no explanation was given as to how a major international power line could be laid across the Black Sea while armed conflict rages between two littoral states, Russia and Ukraine.
Speaking at the signing ceremony on December 17, the European Commission President Ursula von der Leyen may have been correct when she said, "We need strong electricity interconnectors. That is why the power line between Romania, Georgia and Azerbaijan from the Black Sea is very important."
But equally she appeared to acknowledge the difficulties when she described the plan as "very ambitious."
A key consideration with all of Baku's energy projects is that Azerbaijan is not a big country. With a population of less than 10.5 million it doesn't have huge power demand. The country's existing power plants have a generating capacity of about 8 GW – sufficient for domestic needs.
Current investments are focused on gradually replacing gas-burning power plants with wind and solar power, in line with Baku's commitment to meet 30 percent of domestic power demand from renewable energy sources by 2030.
Against that, Azerbaijan's first major solar power plant – the 230-megawatt Garadagh facility, developed by Masdar under a previous agreement – is expected to begin operations later this year.
Potential offshore wind power capacity of 200 GW and further potential for onshore wind however, is far more than Azerbaijan could ever use itself and would cost many billions of U.S. dollars to develop.
Baku is correct in its assertions that excess capacity could be developed to produce electricity for export to Europe, and to produce "green hydrogen" to be mixed with the natural gas Azerbaijan already exports.
(Unlike natural gas, which produces CO2 when burned, burning hydrogen produces only water. So mixing hydrogen with natural gas increases the volume of gas Azerbaijan exports, without increasing its carbon footprint.)
Both are technically feasible and similar projects to use electricity from renewable power plants to produce hydrogen to be added to existing gas supplies are underway across Europe.
The question is, who will pay?
Speaking in both Abu Dhabi and at the Davos economic forum a few days later, Aliyev confirmed the need for investment, stressing that Azerbaijan boasts a "positive investment climate."
But attracting investment on this scale required will not be easy.
In July last year, with Russia having shut off most of its gas exports to Europe and Brussels desperate to secure new supplies, Baku signed an agreement with the European Union to double its gas exports by 2027.
The consortia that own the three pipelines carrying Azerbaijani gas exports to Europe include BP, the operator of Azerbaijan's biggest gas field, and Azerbaijani state companies.
Yet even with Baku's direct involvement and a guaranteed market, an agreement has yet to be reached on the several billion dollars required to double the capacity of the three pipelines.
More Top Reads From Oilprice.com:
- Russia: Western Heavy Weapons Take Conflict To “New Level”
- Chevron To Spend $75 Billion On Share Buybacks
- Citi: European Oil Majors Could Become Acquisition Targets