Right Energy Transition Is Vital For Azerbaijan To Remain A Local And Global Powerhouse - BCG (Exclusive Interview) (PHOTO/VIDEO)

"The potential for renewable and green energy is very significant here in Azerbaijan. The sun is shining a lot for solar photovoltaics, a meaningful wind is blowing, so there is a good potential for green energies," he said.

Azerbaijan has always been a reliable partner in energy supplies to Europe. Now, amidst geopolitical tensions, energy corridors, demand, and supply balances have changed significantly over the past two and a half years, but Azerbaijan continues to play a crucial role in providing essential energy to Europe. Europe has turned to Azerbaijan, asking for an increase in natural gas production, which could enhance its role as a significant partner in gas supply, Herhold noted.

Azerbaijan's significant oil and gas reserves, combined with its renewable resources, create a pivotal moment for the country's energy strategy. Transitioning to renewable energy will enable the country to increase its exports of natural gas and low-carbon electricity. "Azerbaijan has started to put in place renewable energies to partially replace electricity generation from gas, meaning it can export more gas, which in itself is a good business case. And going forward, it may export more electricity, low-carbon hydrogen and its derivatives along corridors to neighboring countries, and maybe even to Europe. And it helps diversify and greenify the local energy mix," said Herhold.

In some regions, Azerbaijan has a remarkable chance to build a green economy from the ground up, leveraging its abundant natural resources. "There have been good renewable projects announced and already being implemented in Azerbaijan. I think one of the unique and special aspects of Azerbaijan is that some of its territories have significant potential for building a green economy practically from scratch. Unlike many other countries that need to decarbonize their existing industrial structures, these areas in Azerbaijan do not have strong industrial bases yet. It is a very engaging and amazing opportunity to think not only about how to make a dirty place clean, but also about how to build a green economy in a place that does not yet have a solid and broad industrial structure. That is also a very good opportunity for the country itself, given its abundant natural resources," he said.

Hosting COP29 in Azerbaijan is a significant opportunity and obligation for the country, allowing it to show its achievements and potential in climate action. But that opportunity also comes with an obligation.
"The question will be, can Azerbaijan deliver on its own commitment in the next years? A commitment has been made for Azerbaijan to design a 1.5 degree-compatible path, and that is a very ambitious decarbonization pathway for the country. The question will be, what strategy, roadmap, measures and actions does the country need to achieve that?"

To achieve that goals, changes in the energy portfolio are necessary. Azerbaijan should and can modify its energy portfolio, necessitating new approaches and actions in both government regulation and business project financing. The regulatory framework is comparatively stable in Azerbaijan but it will need to evolve, Herhold said. That's the case in every country to manage the transition towards a more sustainable energy future. Azerbaijan has a very strong starting point.

Ensuring global energy security and transitioning to net-zero emissions require the creation of proper regulatory frameworks for safe and sustainable investments. Companies also need to contribute by taking business risks and trying new strategies and technologies. "They will need to take certain business risks. They will need to explore new strategies. They will need to try out new technologies to make sure that step by step, they set themselves up for a world that will hopefully, at some point in time, be a net zero emissions world," Herhold said.

Financing will be a key aspect for low-carbon technologies, he said. "Personally, I would almost always say it's less about the financing as such, but it's about making the business cases work. So far only roughly half of the technologies that we need to decarbonize our economies have a positive business case. We need to make sure that the other technologies do get into the money. The business case is there for renewables, such as solar photovoltaics and wind. It's partially there for heat pumps. We do not yet have a business case in all regions and for all applications in carbon capture and storage. We do not yet have it fully in hydrogen," Herhold said.

According to him, there is a lot of talking about carbon capture and hydrogen, but the business cases will still need to be established more robustly by regulators, governments, industry associations.

"I think a reconfirmation of the direction that has already been discussed at prior COPs would be a good outcome and a substantiation of commitments. I don't think we need more commitments at that stage. It is about delivery, more about action and making real progress. The first step is for regulators to put the frameworks and the business cases in place. And for me, Azerbaijan can play a key role in advancing on that. However, it would be too much burden to expect one country like Azerbaijan to solve the global climate challenge. We had 28 COPs so far and still emissions have increased every single time. What I do think is a meaningful concept is the 'troika', i.e., the combination of COP28 in Dubai, COP29 in Azerbaijan and then COP30 in Brazil to give a more consistent agenda and an evolution across the COPs, which is very much needed instead of one country after another setting a different agenda," he added.

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