S H E A R M A N & S T E R L I N G L L P | 1 9
Azerbaijan is rapidly following on the
heels of Uzbekistan. Masdar and ACWA
Power recently signed contracts with
Azerenerji OJSC, the national electrical
power company, and the Government of
Azerbaijan ("GoA") to develop a
230 MW solar PV plant and a 240 MW
wind project, respectively. The GoA has
a long-term target to increase the share
of renewable energy in power generation
to 30% by 2030. The key next steps for
Azerbaijan to enable it to scale up its
renewable energy capacity are (a) the
roll-out of a renewable energy law
providing a bankable framework for future
projects (similar to Uzbekistan) and (b)
transitioning to an auction-based system
for awarding capacity for projects to
developers.
Kazakhstan's renewable energy sector
is comparatively more mature. It has had
a renewable energy law to support the
sector since 2013 and several projects
have already developed, although these
have been of a much smaller scale, and
very few have been project-financed. The
standard form of PPA under renewable
energy law lacks some of the basic pre-
requisites for a bankable PPA, and the
offtaker (the Financial Settlement Centre
(FSC)) is seen as inflexible in agreeing
to any deviations. Specific protections
missing from the PPA include the
allocation of costs during the currency of
a force majeure event, a compensation
on early termination regime and offshore
arbitration for disputes. Kazakhstan has
the more modest plan of increasing its
share of renewable energy generation to
10% by 2030 and 50% by 2050.
1. As of December 2020, combined installed
capacity from wind and solar sources in Azerbaijan
and Uzbekistan was less than 1% of total
generation.
2. World Bank – Technical Potential for Offshore Wind
in Azerbaijan
3. https://pressroom.ifc.org/all/pages/PressDetail.
aspx?ID=26302
Iain Elder
Partner
London
T +44 20 7655 5125
iain.elder@shearman.com
Colm Ó Huiginn
Senior Associate
London
T +44 20 7655 5683
colm.ohuiginn@shearman.com
Saloni Patel
Trainee
London
T +44 20 7655 5741
saloni.patel@shearman.com
OFFSHORE WIND IN THE CASPIAN SEA
The advancement of onshore renewable
energy in Azerbaijan also opens up
the opportunity to unlock the Caspian
Sea's vast renewable energy potential,
estimated to contain some 157 GW2 of
fixed-bottom and floating wind capacity
within Azeri waters. Technological
improvements, maturation of supply
chains and higher load factors have
reduced fixed-bottom offshore wind costs,
making it competitive with onshore wind
in Western Europe.
IFC and the Ministry of Energy of
Azerbaijan signed a memorandum
of understanding on April 14, 2021 to
"create a comprehensive roadmap
for the development of the country's
offshore wind energy sector."3 Successful
implementation of a renewable energy
law and of the onshore renewable energy
auctions (described above) could provide
a platform for Azerbaijan to utilize the
potential of the Caspian Sea and quickly
scale-up renewable energy in its energy
mix.
