Azerbaijan

The power sector, along with the oil and gas sector, has a leading role in the economy of Azerbaijan and is important to the development of the social infrastructure. Azerbaijan is fully electrified, and electrical power is the most utilized energy source for domestic and industrial use. The development of the power sector is considered a policy priority, and the State has always provided sufficient funds to maintain and construct the energy infrastructure.

After political stabilization in Azerbaijan, investment opportunities in the power sector appeared, and foreign debts are now being repaid.

During 2001 and 2002, a total of almost US$ 224 million was invested in the Azerbaijan energy sector for developing further generating capacity and reconstructing existing infrastructure.

Power system components

Azerbaijan power plants

The Azerbaijan Power System is the oldest and most developed in southern Caucasus. It has an installed generating capacity of about 5,500 MW, to which thermal power stations contribute 4,700 MW and hydropower stations make up the rest.

Before the collapse of the Soviet Union, the Azerbaijan Power System was an integral part of the United Power System of Transcaucasia, which was connected with the United Power System of the Soviet Union. After the collapse, the Azerbaijan Power System was consequently separate from the other Transcaucasian republics, linked only with the northern Caucasus of the Russian Federation.

Currently, 80 per cent of Azerbaijan’s generating power is located in its western part. However, 70 per cent of the power consumption is massed in the east, north-east and south-east. Therefore, fuel is transported hundreds of kilometres from the Absheron Peninsula to the basic thermal power stations, Azerbaijan GRES and Ali Bayramli GRES. The energy produced is then transmitted to the Absheron Peninsula and from there is distributed to the northern and southern regions. As the west and east of Azerbaijan are connected by two transmission lines of 500 kV (one of which is energized at 330 kV), huge transmission losses take place.

Though the installed design capacity of Azerbaijan Power System is approximately 5,500 MW, only about 4,300 MW is available. The main reason for the decrease is the ageing of the infrastructure, the deficiency of spare parts and the lack of scheduled maintenance. More than 35 per cent of Azerenerji power stations have been operating for more than 30 years.

Electrical networks

The power system incorporates electric transmission and distribution networks with a voltage of 0.4-500 kV. The total extent of transmission lines is more than 110,000 kilometres. The substations of step-down transformers have a total capacity of more than 13,500 MVA.

The Azerbaijan Power System has transmission lines with a voltage of 330 kV for linking with the United Power System of the Russian Federation and the Power System of Georgia. Transmission lines of 230 kV are used for the link with the Islamic Republic of Iran, through which the import and export of electricity is carried out.

Sector management

The management of electrical power in Azerbaijan is now implemented by a single agency - the Azerenerji JSC. The management of the distribution of electrical power is divided between two large privatized companies: Electric System of Barmek-Azerbaijan and Management Center - Bayva.

All power stations are operated under the authority of the Azerenerji JSC, except for several small hydropower stations, and the transmission lines and nodal substations that are the components of the transmission system.

The components of the transmission systems owned by the Azerenerji JSC include all transmission lines and substations with a voltage of 500, 330 and 220 kV, and 119 lines and 28 substations with a voltage of 110 kV (the total length of the lines is about 2,300 km).

The matched operation of the power system is ensured by a dispatching centre that is managed by the Azerenerji JSC.

Generation and consumption of electrical energy

The establishment of a high-capacity energy system enables economic development and the improvement of people’s living standards. The total industrial production in Azerbaijan during the 1970s and 1980s has steadily increased. The total volume of industrial output had increased by 220 per cent by 1980 and 314 per cent by 1990, compared with the 1970 industrial output.

In response to this growing demand for electrical and heat energy, electrical generation was increased by 139 per cent by 1980 and 193 per cent by 1990. Heat energy generation was also increased by 177 per cent and 180 per cent by 1980 and 1990, respectively.

Oil extraction and oil processing industries were the main electricity consumers in Azerbaijan for a long period of time. However, consumption by other industries, such as metallurgy, engineering and metal processing, chemical, electrical engineering, light, food and building material industries, started to increase significantly during the 1970s. At the same time, an increase in the generation of electricity in the country was required due to the electrification of the rail system, extensive implementation of electrical transport facilities in the cities of Baku, Ganja, Soumgayit and Mingechevir and the electrification of villages and rural communities.

Reforms in Azerbaijan’s energy sector

Intensive reforms have been carried out, the purpose of which is to improve the efficiency of the energy sector, to decrease the number of receivables and to intensify the attraction of investment in the sector. Two new companies, Barmek-Azerbaijan Network LLC and Bayva-Enerji Management Centre LLC, were established in the Azerbaijan Energy Sector along with the Azerenerji JSC.

Reforms have strongly affected the composition of electricity customers. Electricity sold directly to individual customers by the Azerenerji JSC totalled 66 per cent of the energy generated in 2000. This figure increased by 4.5 per cent in 2001 and 4.6 per cent in 2003. Currently Azerenerji JSC sells electric energy directly to customers only in the Nakhchivan Autonomous Republic.