At a meeting in Bucharest, Azerbaijan, Georgia, Romania and Hungary reached milestone agreements on the establishment of a Green Energy Corridor, aiming at bringing more renewable energy into the European Union from the Caspian Sea.
Following a meeting of Azerbaijan’s Energy Minister Parviz Shahbazov, Georgia’s Economy Minister Levan Davitashvili, Romania’s Energy Minister Sebastian Burduja and Hungarian Foreign Minister Peter Szijjarto, Azerbaijan’s AzerEnerji, Georgian State Electrosystem, Romania’s Transelectrica and Hungary’s MVM established their new joint venture on September 3 to install a power line under the Black Sea.
The four ministers noted that the project would help strengthen energy security, boost diversification and drive down electricity prices for consumers. The four countries had signed a strategic partnership agreement in Bucharest in December 2022, which includes the construction of an Energy Corridor from the Caucasus to Europe. Bulgaria signed on the project in June 2023.
The ministers also expressed support for hosting a high-level event dedicated to the project during the COP29 Climate Leaders Summit in November in Baku where, according to the Romanian minister, the first results of the feasibility study would be presented. Georgia expects the link to become operational by late 2029, but no planned start date for construction has been revealed at this point.
“With the signing of the Shareholders’ Agreement, we achieved the establishment of a Joint Venture in Bucharest. We agreed that the leadership of JV-Green Energy Corridor energy company, as the body responsible for the implementation of the Feasibility Study, should be based on rotation, and also agree to draft an Action Plan, to speed up the processes up to the next meeting. We also agreed that the Feasibility Study includes the tasks related to the fiber optic cable line and issues on the integration of Bulgaria,” Shahbazov said at the meeting on September 3, which was also joined by Bulgaria’s deputy energy minister.
Experts express concern over project funding and enough power supply
Tatiana Mitrova, a research fellow at Columbia University’s Center on Global Energy Policy, told NE Global that the Black Sea cable is an ambitious project that could indeed enhance Europe’s green energy supply. “But there are some concerns, first of all, regarding the project funding,” she added.
The EU will cover much of the cable’s cost – 2.3 billion euros out of 3.5 billion. But she noted to fully utilize the 1 GW capacity, Azerbaijan would also need to significantly expand its current renewable energy infrastructure, which includes 1,687.8 MW, largely from hydropower (1,301.8 MW), and only around 340 MW from wind and solar, according to the Azeri Energy Ministry.
“So, the real challenge lies in Azerbaijan’s need to multiply its renewable energy capacity to meet the cable’s demands. The country already has a foundation in place, particularly with hydropower, and its solar and wind capacity show promise. However, achieving the multifold increase in renewable capacity over the next few years is an enormous challenge,” Mitrova said.
Chris Weafer, CEO of Macro-Advisory, the leading independent strategic business consultancy in the Eurasia region, told NE Global on September 7 the project is clearly timely and strongly supported in Brussels. “But there is a flaw: there is a major question mark over whether there will be enough power to send to Europe or by when?”
“Azerbaijan is relying on Kazakhstan and Uzbekistan to supply most of the electricity for the Green Corridor project, via the Caspian to Azerbaijan and then via Georgia and the Black Sea to Eastern Europe,” Weafer said.
But it is not at all clear whether either Kazakhstan or Uzbekistan can generate enough power to support their respective ambitious development plans at home as both are facing significant power shortages already and will need to generate significantly more electricity by end decade to satisfy their domestic needs and then also have a surplus to send via the Green Corridor to Europe, Weafer explained.
“The ironic fact is that both countries have turned to Russia for significant new supplies of natural gas to boost green electricity generation,” he noted. Uzbekistan has just signed a deal with the Russian gas monopoly Gazprom to increase gas imports from 3 billion cubic meters (bcm) per annum to 12 bcm, Weafer said, adding that Kazakhstan is also expected to agree too a deal to boost imports from Gazprom to allow it switch from existing coal power plants and to build new green electricity plants.
“So, Brussels efforts to diversify from Russian energy means that the gas will go to the Central Asian states, which will then convert it to electricity and sell it expensively to European customers. Gazprom does not lose much long-term, Kazakhstan, Uzbekistan and Azerbaijan make a lot of money, and the European consumers pay for it,” he underlined.
According to Weafer, it is expected that Turkmenistan will join the supply side of the Green Corridor before too long. “That would make a lot of sense for Ashgabat and for the project as Turkmenistan has an abundance of gas and is just across the Caspian from Azerbaijan. The problem is that Turkmenistan needs a lot of investment to build new power plants to convert that gas to green electricity. But it is also currently the most difficult country in Central Asia for investors to gain access to,” he said.
Green corridor faces geopolitical challenges
Mitrova said that the Green Energy Corridor, which gained momentum after Russian President Vladimir Putin launched its full-scale invasion of Ukraine and highlighted the EU’s over-reliance on Russian energy, is also facing geopolitical challenges. “Another concern is more of geopolitical nature: Putin’s recent visit to Baku stressed Russia-Azerbaijan’s strategic convergence, which might have significant implication for the European security,” she said.
Francesco Sassi, research fellow in energy geopolitics and markets at RIE in Bologna, Italy, told NE Global that the Green Energy Corridor project is as bold and ambitious as it seems. “Yet, the security scenario in the Black Sea remains rather complex in the face of the ongoing conflict between Russia and Ukraine. One issue above all is who’s is going to finance and insure such an infrastructure as long as the conflict continues?”
“Moreover, the announcement works perfectly as a red carpet to introduce Azeri’s green credentials to Europe. This just a few months before the beginning of COP29 in Baku. A soft power play to lure new investments in the country’s nascent renewable sector,” Sassi added.
For Weafer, Azerbaijan’s President Ilham Aliyev is the main driver of the Green Corridor project, wanting the country to have a more important role as a diversified energy supplier and especially as a major source of green energy. “He wants to present a completed feasibility study for the project at COP29 in November,” he said, adding, “He wants this to be the main headline from the event – especially as there is unlikely to be much new elsewhere other than a restatement by western nations of the climate goals they talked about in Dubai and in Glasgow before that.”
