(MENAFN- Trend News Agency) What you Need to Know
On 2 August 2023 the Rules for selection of an energy producer
from renewable sources were approved by the Decree of the President
(the“ Rules ”). The Rules determine the procedure
for selecting a producer of electric energy from renewable sources,
as well as define specifics and terms of agreements with the
producer and criteria for the formation of electricity tariffs. In
the context of the Rules, this article will cover the
following:
What is considered“an area of renewable energy sources”? Rules for nomination of the electric energy producer in the
area of renewable energy sources; Agreements to be concluded with the electric energy producer in
the area of renewable energy sources.
What is considered“an area of renewable energy
sources”?
The“Use of Renewable Energy Sources in the Generation of
Electricity” Law dated 31 May 2021 (the“ Renewable Energy
Law ”) introduces a mechanism for designation of a land
plot or water basin as an area of renewable energy sources.
The Renewable Energy Law envisages creation of an information
system for the purpose of effective use of renewable energy
potential. The information system includes an atlas of potential of
renewable energy sources in Azerbaijan (the
“ Atlas ”).
The Atlas is designated to contain up to date information about
the land plots (water basins) that can be utilised as potential
renewable energy sources based on the preliminary assessment, area
boundaries as well as any other relevant information.
The Cabinet of Ministers determines whether any particular land
plot or water basin can be regarded as an area of the renewable
source. Such determination is made on the basis of a proposal of
the Ministry of the Energy. When preparing the proposal the
Ministry of Energy includes topographical map with the location,
dimensions and boundaries of the land plot (water basin) and
assessment of renewable energy potential on the land plot (water
basin).
Additionally, the proposal indicates information about interest
(i.e. lease, ownership etc.) in the land (water basin), number of
people settled in the area and construction facilities located on
that land. It also contains information about losses and
deprivations likely to be suffered as a result of the utilisation
of the land plot (water basin) for the purposes of electricity
generation as well as initial agreement(s) with holders of
respective interest in the land plot (water basin) about transfer
of rights.
In the decision on determining the land plot (water basin) as an
area of renewable energy sources, a period of no more than 2 years
is determined for obtaining a permit for the construction of a
power plant in accordance with the Urban Planning and Construction
Code. The specified term can be extended for no longer than 1 year
by the Cabinet of Ministers on the basis of a reasoned application
of the Ministry of Energy. From the date of the decision:
1. the prospective land plot (water basin) is recognized as the
area of renewable energy sources;
2. the Ministry of Energy launches the process of the nomination
of the electric energy producer in the area of renewable energy
sources;
3. the Ministry of Energy put an arrangement in place for the
transfer of rights over the land plot (water basin).
Nomination of an electric energy producer
An electric energy producer for the specified area of renewable
energy sources is selected by the Ministry of Energy through
auction or direct nomination. The Rules explain each method in
detail.
Direct Nomination.
The direct nomination is granted with the consent of the
President where the project is of strategic importance or the
auction for the selection of the electric energy producer
fails.
An example of direct nomination is development of the
230-megawatt Garadagh Solar PV Plant by MASDAR – UAE based global
leader in renewable energy and green hydrogen.
Auction.
The way the auction is conducted can vary based on nomination
criteria. An open auction occurs when the sole criterion for
winning is the electricity tariff. In this case the bidder with the
lowest electricity tariff offer wins the auction. On the other
hand, open competition takes place when multiple criteria,
including financial indicators, workforce, technological solutions,
must be met by bidders.
Agreements to be concluded with the electric energy
producers in the area of renewable energy sources
The following agreements are concluded with the electric energy
producer selected through auction or direct nomination: investment
agreement, electricity purchase agreement and agreement on
connection to the electric network. Every agreement should include
standard provisions outlined in the Civil Code and other relevant
legislation.
The Rules also specify distinct clauses that must be included in
each agreement. Thus, the investment agreement between the electric
energy producer and Ministry of Energy encompasses several key
aspects, such as licences and permits to be obtained by the
electric energy producer, electric energy producer's obligations
for contributing to economic development.
An electricity purchase agreement is signed between the electric
energy producer and“Azerenerji” Open Joint Stock Company. It
outlines the comprehensive terms and conditions governing
electricity purchase between two parties. Finally, agreement on
connection to the electric network is entered into by the state
electric power enterprise (or power supply enterprise) and electric
energy producer. It sets out the rights and responsibilities of
both parties for the physical connection to the power grid.
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