Electricity in Azerbaijan
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Mingechaur hydroelectric power station - NW Azerbaijan

Power cuts are frequent, even in Baku, where people usually stock a few candles at home. The production facilities consist of eight thermal plants supplying 85% of generating capacity, and 6 hydroelectric plants. Two-thirds of the country's thermal capacity is powered by Mazut (residual fuel oil), with natural gas as the secondary fuel (2400MWt). The second largest thermal plant is in Ali Bayramly (1050MWt).

Azerbaijan's power infrastructure, built in the Soviet Period, is generally in poor condition. Since independence there has been scarce public investment or maintenance of public infrastructure. Difficult economic conditions, high taxes and non-payment by customers left the power sector without sufficient working capital and investment funds. Over half the country's turbo-generators and boilers and large sections of the distribution network have been in use for more than 40 years. Most energy generating and distribution equipment and parts are imported from Russia and the Ukraine, since they were originally part of the same system the parts are compatible and very price-competitive.

Although domestic production surpasses consuption, because of the country's inefficient distribution network, energy losses amounted to around 20% of the electricity that was generated. In order to supply electricity to all parts of the country, Azerbaijan imports power from Russia, Turkey, Iran, and Georgia, and the country participates in energy exchanges as well.

Nakhchivan City: Momina Khatum Mausoleum, also known as Atabek Gumbezi (photo by ANS)Electricity supplies to the Azerbaijani exclave of Nakhchivan have been a  recurring problem. Iran, which supplies nearly 60% of the exclave's electricity needs, cut power supplies from October 2000 to February 2001 until Azerbaijan paid the first installment on its $45 million debt for supplies already delivered. In addition, Azerbaijan has run up a multi-million dollar debt to Turkey for electricity supplied to Nakhchivan. Azerbaijan is participating in an EU programme (TACIS) to create a unified energy system for Azerbaijan, Georgia, and Turkey, and in April 2000, an agreement was signed to restore the power grids between Azerbaijan, Georgia, Russia, and Armenia. Azerbaijan and Turkey agreed that Azerbaijan would repay its debt by transmitting Russian and Azeri electricity back to Turkey via Georgia.

President Aliyev issued a decree in 1996 to transform the state power company, Azerenergy (they are on 10 Academician Abdulkerim Alizade street - tel. 982911), into a state-owned, closed, joint-stock company, and issued a five-year program for privatization after the company's outstanding debts were paid. After a failed privatization of 16 distribution networks in 2000 (bids were received for only 4 networks), Azerbaijan decided to divide the national grid into five zones (Baku, Nakhchivan, North (Sumqayit), South (Ali Bayramli) and West (Ganja)), then form joint-stock companies at these regional grids and give them to foreign investors to manage. Power stations are to remain state-owned initially. In November 2000, the Ministry of State Property opened the tender packages for the privatization of Bakuelectricshebeke (Baku electric network).

Several projects are underway to restore and add new capacity to Azerbaijan's power sector. In May 2000, the country's 4,000-MW Yenikand hydroelectric station was finally completed, significantly boosting capacity. Construction originally began in 1985, but was suspended two years later and only resumed in 1996 with the aid of a $53 million loan from the World Bank. Reconstruction of the $41 million, 360-MW Mingechaur hydroelectric station on the Kura River was finished in 2001.

In December 2000, construction began on the $201 million Severnaya power plant, to be built with the help of Japanese companies Mitsui and Mitsubishi. Construction of the 400-MW power unit was 70% complete in April 2002, with a planned launch date in July 2002. In addition, in October 2000 the German KFW bank allocated the second credit tranche of $15 million for the construction of substations and acquisition of technical equipment for Azerbaijan's power sector. Overall, analysts have estimated that the large-scale upgrades needed by Azerbaijan's power sector could cost $2.5 billion.

Apart from hydroelectric power, renewable energies have no tradition in Azerbaijan but recently and agreement between Azerenerji and Sumitomo has been signed for a project for wind energy.

source: EIA, BISNIS
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