Energy · Diversification

Azerbaijan Pivots Towards Clean Energy Amidst Continued Oil Dominance

Azerbaijan, a long-standing oil producer, is making significant investments in renewable energy sources like wind and solar, aiming to diversify its economy and energy mix while maintaining its crucial role in global oil markets.

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A wind turbine stands against a backdrop of oil infrastructure in Azerbaijan.

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Oil-Rich Azerbaijan Bets Big on a Clean Energy Boom

By Felicity Bradstock - Aug 29, 2026, 10:00 AM CDT

Azerbaijan is investing heavily in wind, solar, grid infrastructure, and energy storage while remaining a major oil and gas producer.
New projects include the Khizi-Absheron wind farm, Shafag solar plant, and a newly designated 711.4-square-kilometre Caspian offshore wind zone.
Three planned green-energy corridors could make Azerbaijan an important link for renewable electricity moving between the Caspian, Central Asia, Türkiye, and Europe.

Energy grid against a sunset.

Azerbaijan is one of the world’s oldest oil producers and exporters, having pumped crude since the mid-19th century, and remains a major global oil producer. It has long relied on oil and gas to meet its energy needs and as a major economic contributor. However, the host of the 29th UN Climate Change Conference (COP29) in 2024 is now looking to diversify its energy mix by deploying more renewable energy capacity.

Natural gas contributed 67 per cent of Azerbaijan’s energy supply in 2023, while oil and oil products accounted for 31.1% and hydropower and other renewable energy sources contributed less than 2 per cent of the energy mix. Despite its longstanding reliance on oil and gas – hydrocarbons still account for almost half of Azerbaijan’s GDP – the government has major plans to expand its renewable energy capacity to support greater diversification and strengthen energy security.

In March 2025, the World Bank approved the Azerbaijan Scaling-Up Renewable Energy Project (AZURE), which aims to strengthen Azerbaijan’s power transmission network, support energy diversification, and meet the country’s growing energy demand.

The $173.5 million loan from the International Bank for Reconstruction and Development (IBRD) is expected to help expand and modernise Azerbaijan’s energy infrastructure and encourage private investment in its renewable energy sector, particularly in onshore wind. The initiative, which is part of the World Bank’s Europe and Central Asia Renewable Energy Scale-up (ECARES) multi-year programme, is expected to help attract an initial $384 million in private investments.

In November 2025, the government updated its national climate action plan to include ambitious renewable energy targets. Azerbaijan now aims to reduce its greenhouse gas emissions by 40 per cent, from 1990 levels. It also aims to boost the share of energy that comes from renewables to 30 per cent by 2030. Significant progress in renewable energy expansion in recent years means that Azerbaijan may surpass this target, generating up to 38 per cent of its power from clean sources.

The government has introduced favourable policies in recent years to encourage greater investment in renewable energy development, including tax breaks for projects valued at up to $17.7 million and for renewable energy facilities with installed capacity of over 100 MW. This has already helped the country to attract investors, with the commissioning of the 240-megawatt Khizi-Absheron Wind Farm in January 2026 and the approval of the Garadagh Solar Power Plant in the Caspian region in 2023, which generates enough electricity to power 110,000 homes.

The government is also focusing on developing “green energy corridors”, including plans for a high-voltage transmission line, which will run under the Black Sea and into Georgia. The development of these routes is expected to help Azerbaijan become a major renewable energy exporter to Central Asia and Europe, thereby diversifying energy trade routes in the region.

Amin Mammadov, Deputy Chairman of the Public Council under the Ministry of Ecology and Natural Resources, explained, “Azerbaijan has been an energy hub for a very long time… We want to also do that for green energy.” The three main routes of focus are the Caspian-Black Sea-Europe Corridor, the Azerbaijan-Türkiye-Europe Corridor, and the Central Asia-Azerbaijan-Europe Corridor. Together, the three corridors are expected to be capable of transporting 10 GW of renewable electricity once complete.

In 2022, Azerbaijan signed a Strategic Partnership Agreement on Green Energy Development and Transmission with Georgia, Romania, and Hungary, supporting the development of a green energy corridor to Europe.

In July, Azerbaijan announced major plans for offshore wind by designating 711.4 km2 of Caspian Sea waters as a renewable energy zone for offshore wind development. This followed a recent agreement between Azerbaijan’s Energy Ministry and Clean Energy Capital, a subsidiary of Azerbaijan Green Energy Company, for the firm to conduct research on an offshore wind project in a designated area of the Caspian Sea.

In June 2025, Azerbaijan’s Energy Ministry also signed a deal with China Energy Engineering Corporation to explore the development of a 200 MW offshore wind project. The Ministry had signed two other agreements with Chinese firms for offshore wind development earlier that year.

Azerbaijan also signed agreements with BP to develop a $200 million, 240 MW solar power plant in Karabakh in June 2025, which BP aims to complete by mid-2027. Meanwhile, ACWA Power’s 240 MW Khizi-Absheron Wind Farm, the country’s first large-scale, independently developed wind project, became fully operational last year. It is expected to provide clean power to over 300,000 Azerbaijani households.

While Azerbaijan intends to continue producing oil and gas, the government also has major plans for the country’s renewable energy sector. Expanding its clean energy capacity by developing wind, solar, hydropower, and battery storage projects will help diversify the electricity mix and enhance energy security. Meanwhile, the creation of green corridors connecting Asia and Europe will help establish Azerbaijan as a clean energy and trade hub.

By Felicity Bradstock for Oilprice.com

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Felicity Bradstock

Felicity Bradstock is a writer and journalist based in Mexico City. She writes for energy websites and covers several other industries, as well as writing…

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