Energy Charter Protocol on Energy Efficiency and Related Environmental Aspects PEEREA In-Depth Review of the Energy Efficiency Policy of the Republic of Azerbaijan Energy Charter Protocol on Energy Efficiency and Related Environmental Aspects PEEREA In-Depth Review of the Energy Efficiency Policy of the Republic of Azerbaijan 2019 2019 DISCLAIMER Information contained in this work has been obtained from sources believed to be reliable. However, neither the Energy Charter Secretariat nor the work’s author guarantees the accuracy or completeness of any information published herein and neither the Energy Charter Secretariat nor the work’s author shall be responsible for any losses or damages arising from the use of this information or from any errors or omissions therein. This work is published on the understanding that the Energy Charter Secretariat and the work’s author supply the information but do not attempt to render legal or other professional services. This study is published without prejudice to the position of Contracting Parties/Signatories of the Energy Charter Treaty or to their rights or obligations under the Energy Charter Treaty or any other international investment agreement. This review report has been prepared by the Energy Charter Secretariat in cooperation with the Ministry of Energy of the Republic of Azerbaijan. The peer review team was composed of officials from countries that are parties to the Protocol on Energy Efficiency and Related Environmental Aspects (PEEREA). © Energy Charter Secretariat, 2019 Boulevard de la Woluwe, 46 B-1200 Brussels, Belgium ISBN 978-905948-217-3 (PDF, English) ISBN 978-905948-216-6 (Paperback, English) Depot Number: D/2019/7850/4 The reproduction of this work, save where otherwise stated, is authorised, provided the source is acknowledged. All rights are otherwise reserved. Layout Design and Prepress: Diana Spotinova for Spotinov Print Ltd. Printed by Spotinov Print Ltd. Photos: https://president.az/ List of Peer Review Team Members Nikola Tsankov, Secretary General, Sustainable Energy Development Agency (SEDA), Bulgaria (Chair of the Peer Review team) Roman Podolets, Head of Department of the Energy Sector Development and Projections, Institute for Economics and Forecasting, National Academy of Sciences of Ukraine Korkmaz Gül, Monitoring & Evaluation Group Coordinator, Department of Energy Efficiency and Environment, Ministry of Energy and Natural Resources of Turkey Bilyana Chobanova, Project Manager, EU4Energy Oleksandr Antonenko, Energy Efficiency Unit, Energy Charter Secretariat List of Contributors Elshan Abdulazimov, Ministry of Foreign Affairs Jahangir Afandiyev, independent energy expert Vagif Nasibov, independent energy expert Javid Abdullayev, Ministry of Energy Alasgar Hasanov, Ministry of Energy Nargiz Bagirli, Ministry of Energy Nurangiz Farajullayeva, Ministry of Energy Vusal Gambarov, "Azerishig" JSC 3 In-Depth Review of the Energy Efficiency Policy of the Republic of Azerbaijan | 2019 Table of Contents Acronyms ...........................................................................................................................................................................................................11 Executive Summary .................................................................................................................................................................................15 Recommendations ....................................................................................................................................................................................22 İcmal ........................................................................................................................................................................................................................28 Ümumi Tövsiyələr ......................................................................................................................................................................................34 1. Background ...............................................................................................................................................................................................40 1.1. Country Overview ........................................................................................................................................................................... 40 1.2. Economic Background ................................................................................................................................................................. 41 2. Energy Supply and Demand ...................................................................................................................................................51 2.1. Electricity .................................................................................................................................................................................................53 2.2. Coal ..........................................................................................................................................................................................................55 2.3.Oil Products ..........................................................................................................................................................................................55 2.4. Natural Gas ..........................................................................................................................................................................................57 2.5. Heat ...........................................................................................................................................................................................................58 3. Market Structure for Electricity, Natural Gas and Heat .............................................................................62 3.1. Electricity ...............................................................................................................................................................................................62 3.2. Natural Gas ........................................................................................................................................................................................65 3.3. Heat .........................................................................................................................................................................................................67 4. Energy Pricing Policy .....................................................................................................................................................................70 4.1. Electricity tariffs ...................................................................................................................................................................................71 4.2. Natural Gas Tariffs ...........................................................................................................................................................................74 4.3. Heat Tariffs ............................................................................................................................................................................................77 4.4. Subsidies for Vulnerable Consumers ...............................................................................................................................79 4.5. Taxes and Other Charges ..........................................................................................................................................................79 4.6. Emissions Trading ............................................................................................................................................................................80 4 Table of Contents 5. Energy and Energy Efficiency Policy ................................................................................................................................83 5.1. Strategic Framework ....................................................................................................................................................................83 5.2. Legal Framework for Energy Efficiency ..........................................................................................................................85 5.3. National Targets and Action Plans......................................................................................................................................88 5.4. Institutional Framework ............................................................................................................................................................90 6. Renewable Energy Policy .............................................................................................................................................................96 6.1. Potential of Renewable Energy Sources ........................................................................................................................96 6.2. Existing RES Legislative Framework .................................................................................................................................97 6.3. Planned RES Policies and Measures ................................................................................................................................97