Azerbaijan and People’s Republic of China Strengthen Renewable Energy Partnership

Executive Summary:

• Azerbaijan and the People’s Republic of China (PRC) signed a series of new agreements on renewable energy cooperation, including solar and wind, reinforcing mutual goals of carbon reduction and green energy development.
• The PRC’s low-cost renewable technologies can help Azerbaijan affordably expand its clean energy sector, freeing up natural gas for European export and boosting national revenues while creating domestic jobs and reducing emissions.
• These projects align with Azerbaijan’s 2030 energy goals and ambitions to become a regional green energy hub, alongside prospects for expanding cooperation on domestic manufacturing and technical capacity.

During Azerbaijani President Ilham Aliyev’s visit to the People’s Republic of China (PRC), a series of new agreements were signed, symbolizing the deepening ties between the two countries (President of Azerbaijan, April 23; PRC State Council Information Office, April 24). The focus on renewable energy cooperation in several of the agreements marks a step forward in Azerbaijan’s efforts to increase clean energy production while strengthening its ties with the PRC (see EDM, May 1, 7).

One of the agreements related to renewable energy cooperation included an investment partnership between the Azerbaijani Ministry of Energy and Universal Solar Azerbaijan LLC for the construction of a 100 megawatt (MW) solar power plant in Gobustan, set to be commissioned in 2026 (The Ministry of Energy of the Republic of Azerbaijan, April 23). Further implementation agreements were signed for a 100 MW floating solar plant with 30 MW battery storage on Lake Boyukshor with China Datang Overseas Investment Co. Ltd., and a 160 MW solar plant with SOCAR Green LLC and PowerChina Resources Limited, projected to launch in 2028. A memorandum of understanding was signed between the Azerbaijani Ministry of Energy, SOCAR Green LLC, China Datang, and PowerChina for a separate two gigawatt (GW) offshore wind project, while another memorandum of understanding with the PRC’s Electric Power Planning & Engineering Institute focused on electric power system planning and integrating renewables into the grid beyond 2028. These agreements highlight a strong bilateral commitment to long-term green energy development and carbon reduction (Ministry of Energy of the Republic of Azerbaijan, April 23).

Azerbaijan’s cooperation with the PRC on renewable energy offers both economic and strategic benefits for Baku. Economically, collaboration with the PRC enables the cost-effective implementation of renewable energy projects. The PRC’s rapid expansion in clean energy manufacturing has led to a 50 percent reduction in photovoltaic solar module costs, while its onshore and offshore wind technologies are 40–70 percent cheaper compared to other Asia-Pacific markets. These lower costs make the acceleration of Azerbaijan’s green transition more financially feasible, allowing for the rapid expansion of solar and wind capacity with a reduced capital outlay (UNDP, August 2024).

The implementation of these agreements will help Azerbaijan boost its domestic renewable energy production while freeing up natural gas for export. For instance, the solar power project in Gobustan, developed in partnership with Universal Energy, is expected to generate approximately 180 million kilowatt-hours (kWh) of electricity annually and save 39 million cubic meters of natural gas (Universal Energy, April 22; Ministry of Energy of the Republic of Azerbaijan, April 23). 

This natural gas reserve can be redirected to European markets, enhancing Azerbaijan’s export revenues and contributing to sustainable economic growth. Additionally, the realization of these agreements will create new employment opportunities within Azerbaijan. Beyond the economic dimension, these projects will also reduce carbon emissions, mitigate environmental degradation, and promote long-term public health improvements (The Ministry of Energy of the Republic of Azerbaijan, April 23).

Regarding strategic benefits, Azerbaijan’s cooperation with the PRC aligns closely with its national renewable energy goals. Azerbaijan aims to nearly double its installed power generation capacity by 2030, targeting 6.5 GW of combined solar, wind, and hydropower, with renewables making up at least 30 percent of the country’s energy mix (President of Azerbaijan, April 4). The implementation of agreements with the PRC is expected to substantially contribute toward achieving these targets and advancing Azerbaijan’s green energy transition (Caspian News, April 8).

In addition to supporting the achievement of national energy targets, deepening relations with the PRC also contribute to Azerbaijan’s broader efforts to reposition itself from a traditional hydrocarbon exporter to an emerging state committed to green transition. This is particularly relevant in light of Azerbaijan’s role as host of COP29 in 2024, which provided a valuable platform to enhance its international standing as a forward-looking, clean energy-oriented country (Aze.Media, December 3, 2024). In this context, expanding energy cooperation with the PRC also reinforces Azerbaijan’s ambition to present itself as a proactive and sustainability-focused actor in the global energy transition.

Azerbaijan aspires to strengthen its position as a green energy hub in the South Caucasus by increasing renewable energy production and exporting green electricity to European markets (Report Information Agency, March 8, 2023; Interfax, May 29, 2024). Agreements on the development of solar and wind farms and collaboration with the PRC on grid integration and transmission system planning are essential to ensure that increased renewable generation can be efficiently transmitted to both domestic and export markets (Caspian News, April 30).

The expansion of Azerbaijan’s renewable energy infrastructure is aligned with its trilateral and multilateral agreements with Kazakhstan and Uzbekistan to jointly export green electricity to Europe. These initiatives not only support electricity exports but also provide Azerbaijan with a strategic opportunity to enhance its role as a key transit country in realizing the Green Energy Corridor connecting Central Asia, the South Caucasus, and Europe (The Ministry of Energy of the Republic of Azerbaijan, December 27, 2024).

While cooperation with the PRC brings valuable economic and strategic advantages, it also presents considerations for Azerbaijan’s renewable energy strategy. As Azerbaijan pursues its goal of increasing renewable energy capacity, the import of solar and wind technologies from the PRC might affect opportunities for local industry participation if Azerbaijan also wants to develop domestic manufacturing capabilities and maximize economic benefits from renewable energy development.

As these advanced solar, wind, and storage systems become operational, Azerbaijan may need to develop strategies to manage long-term maintenance relationships and technical expertise requirements throughout these assets’ multi-decade lifespans. This consideration is especially relevant for innovative technologies such as floating solar installations and offshore wind in the Caspian Sea, where specialized knowledge and equipment will be important for ongoing operations (The Ministry of Energy of the Republic of Azerbaijan, April 23).

In this context, while the current agreements already provide Azerbaijan with substantial economic and strategic gains, additional opportunities remain to deepen and broaden the benefits of cooperation with the PRC. Initiatives such as organizing comprehensive training programs, facilitating skills transfer, and establishing joint research centers to adapt technologies to local conditions could significantly enhance long-term.

Expanding collaboration beyond project implementation to include component manufacturing and local supply chain development may generate important multiplier effects. These measures would not only create new employment opportunities and strengthen local expertise but also support broader economic diversification, ensuring that renewable energy development contributes meaningfully to Azerbaijan’s long-term national development goals. Seemingly absent from the discussion, however, is an appreciation of the risks of the PRC’s further involvement in the South Caucasus in a time when the region is looking beyond Russia for international partnerships (see EDM, May 29, 2019, July 16, 2024, February 6; see China Brief, May 14).