Unlocking Central Asia’s Gas Transit Potential via the Caspian-EU Green Corridor
The increasing energy demand within the European Union, a major global consumer, has been driving new projects, and especially as the EU looks for new energy suppliers. As a result of this, Azerbaijan’s importance to the for EU has risen, and specifically, Azerbaijan’s distinctive role in developing cutting-edge technologies for energy transmission.
In December 2022, a fresh project was endorsed in Bucharest under the Global Gateway Initiative. Named the Black Sea Energy Submarine Cable, this project aims to establish secure energy sources for Europe. To support the project, a Strategic Partnership Agreement was inked in Bucharest involving the European Commission, Azerbaijan, Romania, Hungary, and Georgia.
The main priority of the project is to deliver renewable energy to Romania through underwater electrical cable passing through Azerbaijan and Georgia. It is anticipated that the project, with an initial budget of US$2.3 billion, will be operational by 2029.
Ursula von der Leyen, the President of the European Commission stated that this project will bring the EU countries closer to the South Caucasus. The two South Caucasus countries, Azerbaijan and Georgia, have already that they are essential partners for the EU by implementing several energy and transit initiatives, including the Baku-Tbilisi-Ceyhan project. The possibility of Armenia later joining the project has not been ruled out.
As all three countries possess substantial potential in alternative energy, this makes them crucial strategic partners for Europe. This project signifies the transmission of next-generation energy to the West, with Azerbaijan playing a key role in it.
Overall, Azerbaijan’s renewable energy potential amounts to 27 gigawatts on land and 157 gigawatts offshore. By 2027, 4 gigawatts of this potential will be realized, with 80% earmarked for export, a figure expected to increase to 25 gigawatts shortly afterwards. Azerbaijan plans to establish an additional transmission capacity of 6 gigawatts by 2027. In a few months, a comprehensive technical-economic justification for a new underwater cable project ensuring energy security will be ready. Currently, the technical-economic rationale is being prepared for 4 gigawatts of renewable energy sources.
Julian Bowden, a Senior Visiting Research Fellow at Oxford Institute for Energy Studies (OIES) has stated that the Black Sea cable project will cement Azerbaijan’s role as a reliable energy supplier. He noted that Azerbaijani gas has already played a crucial role in European decarbonization path, even though it is a fossil fuel; however, it is way better than coal.
Ariel Cohen, a Senior Fellow at the Atlantic Council Eurasia Center and the Managing Director of Energy, Growth and Security Program at the International Tax and Investment Center, pointed out that Azerbaijan is set to become major green electricity exporter to Europe.
“Azerbaijan has signed 10-gigawatt worth of Memoranda of Understanding deals, and even if 1/3 or one half of those is materialized, this will be a major source of energy for Europe. The idea is to export such electricity by cable to the Georgian coast and then across the Black Sea to Romania. Some of it will go to Türkiye via a grid. This would boost the amount of gas available for exports and would make Azerbaijan a major electricity exporter,” he explained.
This project could also extend beyond the countries that have already signed this agreement because the interconnection to power grids throughout Europe is well-developed. When integrated into the European energy system, electricity generated in Azerbaijan can reach any part of Europe, with its source being Azerbaijan’s renewable energy.
Considering the increasing demand for diverse energy resources, particularly renewables, Turkmenistan and Kazakhstan, alongside Azerbaijan, may join the green corridor initiative to export their substantial green energy resources to Europe. Turkmenistan has expressed its readiness to supply electricity to Azerbaijan and Turkiye across the Caspian Sea. Currently, Turkmenistan provides electricity to neighboring nations such as Uzbekistan and Kyrgyzstan. Recently, the foundation stone for a new 1,574 MW power plant was laid on the Turkmen coast near Turkmenbashi Port.
As of the end of 2022, Kazakhstan operates 130 renewable energy facilities with a combined capacity of 2,400 MW. In the previous year, the country’s renewable energy production reached 5.11 billion kWh, constituting 4.53% of its total electrical energy production. This figure is expected to reach 5% in 2023. Additionally, in 2022, 12 renewable energy facilities with a total capacity of 385 MW and an investment of 180 billion tenge (US$374 million) were commissioned. This year, 15 facilities with a total capacity of 276 MW are expected to become operational.
Azerbaijan and Kazakhstan are actively engaged in working on laying a fiber-optic connection line on the Caspian seabed. This initiative alone holds the potential to significantly contribute to the development of digital infrastructure for connectivity services, establishing a digital telecommunication corridor between Europe and Asia.
Azerbaijan’s current efforts for Europe are demonstrating the most efficient approach to alleviate the escalating energy crisis in the region. The consensus supporting this notion and the interest in collaboration with Azerbaijan continue to rise. In this regard, prospects for Central Asian economies to join any initiatives carried out between the EU and Azerbaijan are positive.