Alternative Energy Strategy: How to Move Towards the Light?
27 October 2023
The first article in the 'Green Strategy' and 'Pink Economy' series.
Sergey Barsukov, a 45-year-old resident of Baku, has not been paying for electricity for six months, but his TV, washing machine, and vacuum cleaner are still working. He can turn on all the lights in his house whenever he wants. 'Azerishiq' cannot say anything to him, because he owes nothing to the state.
Sergey has installed solar panels in his yard and now meets his home's energy needs himself. Of course, his education at the Faculty of Energy at the Oil and Industry University and his current job as an engineer have been beneficial.
Barsukov talks about how he came up with the idea of using alternative energy:
Sergey lists the advantages of the system he built himself:
"First of all, my house gets its energy from a completely independent source. That is, my dependence on 'Azerishiq' is almost gone. When everyone else's lights go out, mine stay on. Everything in my house, and even outside, operates on solar energy. Of course, I have batteries for storing energy and using it at night. Not only do I not experience any shortage, but I also have surplus energy. I use some of it to heat a 500-liter water boiler. And there's still some left over. I could even sell the excess to 'Azerishiq' or my neighbors. I would like to do that, but it's not possible; individual energy supply is not permitted. There are so many legal and bureaucratic obstacles that need to be removed in this area!"
Sergey says he does not pay any taxes for using the panels, noting that in Azerbaijan, the use of alternative energy is exempt from state duties.
"The price of solar panels is decreasing, while the cost of electricity is increasing. This means that green energy is more efficient and environmentally friendly. The use of alternative energy is a step towards the future; we need to follow this path and do it quickly." Barsukov believes.
Sergey's experience shows that an ordinary citizen can switch to alternative energy on an individual basis, not only reducing expenses but even generating income. However, the most notable point in Barsukov's interview is his inability to become an energy supplier. That is, in Azerbaijan, a citizen is not allowed to sell the surplus energy they produce to the state or neighbors at a lower price. They could even be held accountable for this. This fact alone indicates significant gaps in Azerbaijan's alternative energy strategy.
Jeyhun Khalilov, the chairman of the Public Union for Support to the Development of New Technologies and an expert in the study of alternative energy sources, also says this.
"The practice of consumers selling surplus energy back to the state exists in many countries. In post-Soviet countries, such as Georgia and Ukraine, this system is regulated by legislation. In Azerbaijan, the legal and bureaucratic obstacles in this area should also be removed. Citizens who use alternative energy sources on an individual basis should have bidirectional meters, and the excess energy should be bought by 'Azerishiq'. Unfortunately, the importation of such meters is being blocked due to the interests of some officials. In my opinion, the artificial obstruction of the use of these types of meters is intended to make the investment in solar stations more expensive. Currently, consumers are forced to buy additional accumulators, which are quite expensive and not cost-effective."
According to the expert, in fact, the transformation of individuals into energy suppliers in Azerbaijan is supported by law:
"The mechanism for supporting active consumers is specified in Article 10 of the 'Law on the Use of Renewable Energy Sources in Electricity Generation' of the Republic of Azerbaijan. It states that consumers can install stations to fully or partially meet their electricity use and can transfer the surplus electricity they produce to the supply network for compensation. When consumption exceeds production, they can take additional electricity from the network. The same law also specifies how the value of the excess electricity will be calculated. It says that when the electricity taken from the network is less than the electricity transferred to the network, the supplier pays the consumer the difference in value at the existing wholesale prices. Thus, the law in Azerbaijan allows individuals producing alternative energy through panels to sell their surplus energy to the state."
Then why isn't the law working? Jeyhun Khalilov explains this as well:
"On July 12, 2021, the President issued Decree No. 1387 regarding the implementation of this law. Five days later, Prime Minister Ali Asadov signed a decree to ensure the execution of this Presidential Decree. The decree stated that proposals related to the power limit of the produced electric energy and the application rules of the mechanism for supporting active consumers, in accordance with Articles 1.1.12 and 10.4 of the law, should be prepared within eight months and submitted to the Cabinet of Ministers. Despite more than two years passing, the proposals have not been presented. Only after they are approved will it be possible for individuals to sell energy to the state."
The fact that individuals and institutions directly subordinate to senior state leaders do not implement their decrees and orders undoubtedly does not stem from forgetfulness. So, what is the reason for the years-long delay in implementing the requirements of the law?
Traditional energy resources are depleting, but alternative energy is a renewable wealth, inexhaustible, and its production does not harm the environment. Therefore, the government should support ordinary citizens' shift towards alternative energy, apply preferential tariffs in this area, and take incentivizing steps.
If bureaucratic obstacles are removed and a new legal framework related to alternative energy is put into action, it will lead to an increase in the country's energy potential and an improvement in the social welfare of the population. For instance, if a citizen can sell the surplus energy they produce to 'Azerishiq', representing the state in the market, they could recover the annual depreciation costs of the installed panels, and perhaps even more. As a result, not only will the country's energy supply issues be resolved, but Azerbaijan will also increase the export of electric energy. Thus, it will benefit both the citizen's and the state's budget.
However, a specialist, who has been involved in the implementation of the alternative energy strategy in the country for many years and wishes to remain anonymous, points out that there will be 'losers' in this benefit:
"Because the increase in energy suppliers will significantly reduce the steadily rising price of electricity in the country. If the law regulates the ability of citizens to sell energy not only to the state but also to their neighbors, it will end the monopoly of 'Azerishiq' in the market..."
Azerbaijan is expanding its action plan for the transition to alternative energy, setting new goals, and signing major projects. However, such projects and high-ambition state programs have not been scarce even in the 20th century. Unfortunately, like the law clause we are discussing, many of them have been diverted from their goals due to conflicts and official interests among the participating institutions. It is enough to say that the state institution established to ensure the implementation of programs related to renewable energy sources has been in the whirlwind of these conflicts since its establishment in 2009: it has been abolished and re-established several times, its status and subordination have changed, and the process is still not concluded. While preparing this article, we could not determine from whom to get permission to film at the stations.
So what does the next green energy strategy of official Baku entail? Has previous experience and mistakes been considered in its development?
In general, why has official Baku, which has made the development in the renewable energy sector one of the priority directions of its domestic policy strategy for 19 years, not yet eliminated the factors hindering serious progress in this direction?
Azerbaijan is the first country in the post-Soviet space to develop a state program for the use of renewable energy sources. It was approved by President Ilham Aliyev on October 21, 2004. The program, taking foreign experience as an example, includes tasks related to the accurate calculation and utilization of Azerbaijan's alternative energy resources.
The parts of the tasks related to large expenses – planning, constructing, reconstructing, purchasing equipment, creating organizations, and centers – have been overly fulfilled. As we mentioned, just the State Agency, the main organization in this field, has been created and abolished four times. However, tasks like 'preparing proposals for improving the normative legal base to accelerate the use of alternative energy sources' and 'implementing measures aimed at stimulating the use of renewable energy sources' are reflected in the real situation as shown in the story of Baku resident Sergey Barsukov.
Calculating the potential of alternative energy in Azerbaijan is also among the accomplished tasks. According to the Ministry of Energy, the technical potential of renewable energy sources in the country is 135 GW on land and 157 GW at sea. These are colossal figures, and based on them, the government has formulated another theoretically successful development program – the green energy strategy. New, ambitious goals have been set.
As early as 2015, it was announced that in 5 years, at least 20% of the electricity produced in Azerbaijan would be generated from alternative sources. However, in June 2023, the Ministry of Energy, while listing the achievements in this field, officially stated that the electricity produced from renewable energy sources constitutes about 7% of the total production. Some experts believe this figure is inflated, but our primary concern is to investigate where, why, and how the missing 13% disappeared. The '20 percent' promise was presumably not made out of thin air; it was based on concrete steps and real expenses. We have seen countries in Europe, with less favorable climatic conditions and green energy resources than Azerbaijan, surpass the 30% mark. So now, have the missed errors been recognized and rectified? Have experts who truly understand the field been involved in the next strategic plan? Have mechanisms been created to stimulate public participation in its implementation? Or will new programs follow the old ones, leaving us, not even as passive consumers (how can you consume what doesn't exist?), but as bystanders without a ticket?
Press Club
Sergey Barsukov, a 45-year-old resident of Baku, has not been paying for electricity for six months, but his TV, washing machine, and vacuum cleaner are still working. He can turn on all the lights in his house whenever he wants. 'Azerishiq' cannot say anything to him, because he owes nothing to the state.
Sergey has installed solar panels in his yard and now meets his home's energy needs himself. Of course, his education at the Faculty of Energy at the Oil and Industry University and his current job as an engineer have been beneficial.
Barsukov talks about how he came up with the idea of using alternative energy:
Sergey lists the advantages of the system he built himself:
"First of all, my house gets its energy from a completely independent source. That is, my dependence on 'Azerishiq' is almost gone. When everyone else's lights go out, mine stay on. Everything in my house, and even outside, operates on solar energy. Of course, I have batteries for storing energy and using it at night. Not only do I not experience any shortage, but I also have surplus energy. I use some of it to heat a 500-liter water boiler. And there's still some left over. I could even sell the excess to 'Azerishiq' or my neighbors. I would like to do that, but it's not possible; individual energy supply is not permitted. There are so many legal and bureaucratic obstacles that need to be removed in this area!"
Sergey says he does not pay any taxes for using the panels, noting that in Azerbaijan, the use of alternative energy is exempt from state duties.
"The price of solar panels is decreasing, while the cost of electricity is increasing. This means that green energy is more efficient and environmentally friendly. The use of alternative energy is a step towards the future; we need to follow this path and do it quickly." Barsukov believes.
Sergey's experience shows that an ordinary citizen can switch to alternative energy on an individual basis, not only reducing expenses but even generating income. However, the most notable point in Barsukov's interview is his inability to become an energy supplier. That is, in Azerbaijan, a citizen is not allowed to sell the surplus energy they produce to the state or neighbors at a lower price. They could even be held accountable for this. This fact alone indicates significant gaps in Azerbaijan's alternative energy strategy.
Jeyhun Khalilov, the chairman of the Public Union for Support to the Development of New Technologies and an expert in the study of alternative energy sources, also says this.
"The practice of consumers selling surplus energy back to the state exists in many countries. In post-Soviet countries, such as Georgia and Ukraine, this system is regulated by legislation. In Azerbaijan, the legal and bureaucratic obstacles in this area should also be removed. Citizens who use alternative energy sources on an individual basis should have bidirectional meters, and the excess energy should be bought by 'Azerishiq'. Unfortunately, the importation of such meters is being blocked due to the interests of some officials. In my opinion, the artificial obstruction of the use of these types of meters is intended to make the investment in solar stations more expensive. Currently, consumers are forced to buy additional accumulators, which are quite expensive and not cost-effective."
According to the expert, in fact, the transformation of individuals into energy suppliers in Azerbaijan is supported by law:
"The mechanism for supporting active consumers is specified in Article 10 of the 'Law on the Use of Renewable Energy Sources in Electricity Generation' of the Republic of Azerbaijan. It states that consumers can install stations to fully or partially meet their electricity use and can transfer the surplus electricity they produce to the supply network for compensation. When consumption exceeds production, they can take additional electricity from the network. The same law also specifies how the value of the excess electricity will be calculated. It says that when the electricity taken from the network is less than the electricity transferred to the network, the supplier pays the consumer the difference in value at the existing wholesale prices. Thus, the law in Azerbaijan allows individuals producing alternative energy through panels to sell their surplus energy to the state."
Then why isn't the law working? Jeyhun Khalilov explains this as well:
"On July 12, 2021, the President issued Decree No. 1387 regarding the implementation of this law. Five days later, Prime Minister Ali Asadov signed a decree to ensure the execution of this Presidential Decree. The decree stated that proposals related to the power limit of the produced electric energy and the application rules of the mechanism for supporting active consumers, in accordance with Articles 1.1.12 and 10.4 of the law, should be prepared within eight months and submitted to the Cabinet of Ministers. Despite more than two years passing, the proposals have not been presented. Only after they are approved will it be possible for individuals to sell energy to the state."
The fact that individuals and institutions directly subordinate to senior state leaders do not implement their decrees and orders undoubtedly does not stem from forgetfulness. So, what is the reason for the years-long delay in implementing the requirements of the law?
Traditional energy resources are depleting, but alternative energy is a renewable wealth, inexhaustible, and its production does not harm the environment. Therefore, the government should support ordinary citizens' shift towards alternative energy, apply preferential tariffs in this area, and take incentivizing steps.
If bureaucratic obstacles are removed and a new legal framework related to alternative energy is put into action, it will lead to an increase in the country's energy potential and an improvement in the social welfare of the population. For instance, if a citizen can sell the surplus energy they produce to 'Azerishiq', representing the state in the market, they could recover the annual depreciation costs of the installed panels, and perhaps even more. As a result, not only will the country's energy supply issues be resolved, but Azerbaijan will also increase the export of electric energy. Thus, it will benefit both the citizen's and the state's budget.
However, a specialist, who has been involved in the implementation of the alternative energy strategy in the country for many years and wishes to remain anonymous, points out that there will be 'losers' in this benefit:
"Because the increase in energy suppliers will significantly reduce the steadily rising price of electricity in the country. If the law regulates the ability of citizens to sell energy not only to the state but also to their neighbors, it will end the monopoly of 'Azerishiq' in the market..."
Azerbaijan is expanding its action plan for the transition to alternative energy, setting new goals, and signing major projects. However, such projects and high-ambition state programs have not been scarce even in the 20th century. Unfortunately, like the law clause we are discussing, many of them have been diverted from their goals due to conflicts and official interests among the participating institutions. It is enough to say that the state institution established to ensure the implementation of programs related to renewable energy sources has been in the whirlwind of these conflicts since its establishment in 2009: it has been abolished and re-established several times, its status and subordination have changed, and the process is still not concluded. While preparing this article, we could not determine from whom to get permission to film at the stations.
So what does the next green energy strategy of official Baku entail? Has previous experience and mistakes been considered in its development?
In general, why has official Baku, which has made the development in the renewable energy sector one of the priority directions of its domestic policy strategy for 19 years, not yet eliminated the factors hindering serious progress in this direction?
Azerbaijan is the first country in the post-Soviet space to develop a state program for the use of renewable energy sources. It was approved by President Ilham Aliyev on October 21, 2004. The program, taking foreign experience as an example, includes tasks related to the accurate calculation and utilization of Azerbaijan's alternative energy resources.
The parts of the tasks related to large expenses – planning, constructing, reconstructing, purchasing equipment, creating organizations, and centers – have been overly fulfilled. As we mentioned, just the State Agency, the main organization in this field, has been created and abolished four times. However, tasks like 'preparing proposals for improving the normative legal base to accelerate the use of alternative energy sources' and 'implementing measures aimed at stimulating the use of renewable energy sources' are reflected in the real situation as shown in the story of Baku resident Sergey Barsukov.
Calculating the potential of alternative energy in Azerbaijan is also among the accomplished tasks. According to the Ministry of Energy, the technical potential of renewable energy sources in the country is 135 GW on land and 157 GW at sea. These are colossal figures, and based on them, the government has formulated another theoretically successful development program – the green energy strategy. New, ambitious goals have been set.
As early as 2015, it was announced that in 5 years, at least 20% of the electricity produced in Azerbaijan would be generated from alternative sources. However, in June 2023, the Ministry of Energy, while listing the achievements in this field, officially stated that the electricity produced from renewable energy sources constitutes about 7% of the total production. Some experts believe this figure is inflated, but our primary concern is to investigate where, why, and how the missing 13% disappeared. The '20 percent' promise was presumably not made out of thin air; it was based on concrete steps and real expenses. We have seen countries in Europe, with less favorable climatic conditions and green energy resources than Azerbaijan, surpass the 30% mark. So now, have the missed errors been recognized and rectified? Have experts who truly understand the field been involved in the next strategic plan? Have mechanisms been created to stimulate public participation in its implementation? Or will new programs follow the old ones, leaving us, not even as passive consumers (how can you consume what doesn't exist?), but as bystanders without a ticket?
Press Club
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