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Introduction
The modern global economy is evolving amidst high uncertainty, with energy markets simultaneously affected by geopolitical conflicts, price volatility, shifting trade flows, and an accelerated transition to low-carbon technologies. In its April 2026 review, the International Monetary Fund notes that the global economy is under pressure from rising commodity prices, inflationary risks, and tightening financial conditions. Under the baseline scenario, global growth in 2026 is projected at 3.1%, though it could fall to 2.5% in the event of a more severe energy shock. [1] This demonstrates that energy security and the sustainability of the economic model are becoming not only an environmental issue but also a strategic economic one.
Against this backdrop, green energy is emerging as a key arena of new global economic competition. According to the International Energy Agency, renewable energy capacity in more than 80% of countries worldwide will grow faster between 2025 and 2030 than it did over the preceding five years. However, this growth is accompanied by significant constraints: the need to modernize power grids, supply chain vulnerabilities, and the requirement for sustainable financing. Therefore, the energy transition can no longer be viewed merely as the technological replacement of oil, gas, or coal with solar and wind energy. In the current context, this entails the formulation of a new industrial, investment, and infrastructure policy. [2]
Figure 1. Global renewable energy capacity additions by technology, 2013–2030 (GW)
Source: [2]
Figure 1 presents a chart showing a rapid acceleration in the deployment of renewable energy capacity in the global energy sector. While the overall increase was relatively moderate between 2013 and 2018, the period from 2019 to 2024... It has increased significantly, and further substantial expansion is projected for the 2025–2030 period. The most important trend is the growing role of solar photovoltaics. Solar capacity accounts for the bulk of the overall growth, and its share—as indicated by the trend line on the chart—is steadily increasing. This confirms that the modern energy transition relies heavily on the rapid scaling up of solar generation, although wind power, hydropower, and other renewable sources also remain significant within the overall growth structure.
This topic holds special significance for Azerbaijan. Our country traditionally plays a key role in the regional and international energy architecture, primarily due to its oil and gas sector. However, the long-term sustainability of the national economy requires expanding non-oil sources of growth, attracting new investments, developing modern technologies, and strengthening export potential. In this regard, green energy represents not only an important environmental agenda for Azerbaijan but also a key economic tool for diversification. The country’s official goal is to raise the share of renewable energy sources in its installed capacity to 30% by 2030, underscoring the strategic importance of this sector. [3] The relevance of the topic is further underscored by the fact that Azerbaijan aims not only to develop its domestic renewable energy sector but also to become a participant in a new cross-border green energy export system. The inclusion of projects for the Caspian-Black Sea-European Green Energy Corridor in the TYNDP 2026 portfolio of the European Network of Transmission System Operators for Electricity demonstrates that Azerbaijan’s energy transition is gradually taking on an international infrastructure dimension. This opens up opportunities to strengthen the country's role as an energy bridge between the Caspian region and Europe. [4]
Figure 2. Cross-border electricity interconnections and energy corridors of Europe, the Mediterranean, North Africa, the Middle East, and the South Caucasus.
Source: [4]
Figure 2 shows a map demonstrating that the development of green energy is impossible without interregional energy corridors and grid interconnections. In this context, Azerbaijan can be viewed not only as a producer of renewable energy but also as a vital link in the future infrastructure for transmitting green electricity between the Caspian region, the South Caucasus, and Europe.
The aim of this article is to analyze how the development of green energy can contribute to Azerbaijan's economic diversification amidst global uncertainty. The central research question is as follows: can the energy transition become for Azerbaijan not only an environmental commitment but also a new source of economic growth, investment, and external economic influence? Our hypothesis is that, given consistent state policy, the modernization of grid infrastructure, the adoption of international technologies, and the development of human capital, green energy can become a key factor in the long-term sustainability and diversification of Azerbaijan’s economy.
Literature Review
In contemporary economic literature and applied analytical reports, the energy transition is viewed not merely as an environmental policy, but as a major process of technological and industrial restructuring. The International Energy Agency notes that global renewable power capacity could double by 2030, with solar photovoltaics accounting for nearly 80% of the growth. At the same time, it points out that the development of renewable energy faces constraints related to power grids, supply chains, and financing. This is a crucial point for our analysis, as it demonstrates that green energy requires not only the construction of power plants but also the creation of new economic infrastructure. [2]
American studies and practical reports place special emphasis on energy storage, clean hydrogen, grid resilience, and the commercialization of new technologies. Reports from the U.S. Department of Energy’s "Pathways to Commercial Liftoff" series emphasize that developing long-duration energy storage requires transparent data on technology costs and performance, modeling tools to assess grid needs, and financial support for research and demonstration projects. Regarding clean hydrogen, the US approach is also based on transitioning from research and development to industrial-scale deployment and establishing a shared factual foundation for investors, the government, and the business sector. [5] For Azerbaijan, this experience is particularly relevant in terms of storage technologies, grid flexibility management, and the phased implementation of hydrogen solutions.
In academic literature and government practice, the United Kingdom is most often cited as a key example of the development of offshore wind energy and support mechanisms for low-carbon power generation. The British Contracts for Difference system is the primary mechanism for supporting new low-carbon electricity projects: it reduces producers' reliance on volatile wholesale prices and increases revenue predictability. In the 2025 update, the UK government provided for 20-year, inflation-indexed contracts for fixed-bottom and floating offshore wind power, as well as a separate budget for floating wind power. In addition, the UK’s Offshore Wind Industrial Growth Plan links the development of offshore wind energy to industrial growth and supply chains supply chains, employment, and innovation. For Azerbaijan, this experience is particularly valuable in the context of the future development of the Caspian Sea’s wind energy potential. [6]
The Dutch experience demonstrates that the energy transition can unfold through the interconnection of offshore wind power, hydrogen infrastructure, the port economy, and industrial energy consumption. Materials on Dutch innovations in offshore wind energy examine solutions for hydrogen production on offshore platforms, including the PosHYdon project, which aims to integrate offshore wind energy, gas infrastructure, and hydrogen technologies. The Port of Rotterdam is also emerging as a hydrogen hub, bringing together hydrogen production, industrial use, import, and transit to Northwest Europe. [7] This experience is important for Azerbaijan because the country possesses both offshore energy resources in the Caspian and a strategic logistical location that enables it to link green energy production with export infrastructure in the future.
Chinese literature and the practice of energy transition are distinguished by the scale of solar and wind power deployment, the declining cost of technologies, and active industrial policy. According to China’s National Energy Administration, China added 373 million kilowatts of new renewable energy capacity in 2024, with solar power accounting for 278 million kilowatts and wind power for 79.82 million kilowatts. The International Energy Agency characterizes China as a "clean energy powerhouse" and notes that a strong manufacturing base, a large domestic market, and government support have secured the country a leading position in clean technology manufacturing. [8] For Azerbaijan, the Chinese experience is particularly valuable not as a model for simple replication, but as an example of how scaling up technologies can reduce capital expenditures and accelerate the development of a new industrial sector.
A comparison of these four areas leads to an important conclusion. The United States offers the most valuable experience in the fields of energy storage, hydrogen, grid resilience, and the commercialization of innovations. The UK and the Netherlands are particularly strong in offshore wind energy, maritime infrastructure, and institutional mechanisms for supporting new energy sectors. China demonstrates the advantages of large-scale production, the rapid deployment of solar and wind capacity, and the state's systemic role in shaping the clean energy industry. In the context of Azerbaijan, these approaches are of practical significance, as the country aims to raise the share of renewable energy sources in its installed capacity to 30% by 2030—as previously noted—while developing green energy zones and viewing offshore wind power as a promising area. [9]
At the same time, the review indicates that existing sources examine technologies, national energy transition models, and state support mechanisms in considerable detail, whereas the issue of adapting them to Azerbaijan’s economy has received comparatively less attention. It is precisely here that the main objective of this article arises: alongside describing international experience, to determine which elements of the American, British, Dutch, and Chinese approaches can be applied in Azerbaijan, taking into account its energy structure, Caspian potential, export orientation, and the Caspian-Black Sea-European Green Energy Corridor project included in the TYNDP 2026 portfolio.
Research methodology
This article is analytical and comparative in nature and is written in the format of an academic paper. The primary objective of the study is to examine green energy from an economic perspective as a factor in the diversification of Azerbaijan's economy. Therefore, the focus is not on the technical specifications of individual technologies, but rather on their potential impact on investment, employment, export potential, the development of the non-oil sector, and the resilience of the national economy.
The methodological basis of the article is a comparative analysis of international experience. The study examines the approaches of the USA, the UK, the Netherlands, and China, as these countries have achieved significant progress in various aspects of the energy transition. The USA is of interest from the perspective of energy storage, hydrogen technologies, and grid resilience; the UK—in terms of offshore and floating wind power development; the Netherlands—as an example of integrating the port economy, hydrogen infrastructure, and marine energy; and China—as a country that has achieved large-scale growth in solar and wind power generation.
The second important method is adaptation analysis. This means that foreign experience is viewed not as a ready-made model for direct imitation, but as a source of individual technological, institutional, and economic solutions, that may be applicable in Azerbaijan given its national conditions. These conditions include the country's energy structure, the availability of renewable energy potential, Azerbaijan's role in international energy corridors, investment opportunities, the state of infrastructure, and the need to develop non-oil sectors.
The study’s source base comprises official documents from Azerbaijan, materials from international organizations, analytical reports from specialized energy institutes, and scholarly publications and data from government agencies of the countries under review. This approach makes it possible to combine a theoretical understanding of the energy transition with a practical analysis of its economic significance for Azerbaijan.
A limitation of the study should also be noted. The article does not claim to provide a comprehensive technical and engineering assessment of solar, wind, hydrogen, or grid-based projects. Its goal is more specific and economic in nature: to demonstrate how the development of green energy and the application of international experience can help diversify Azerbaijan’s economy, attract investment, and strengthen the country’s long-term resilience amidst global turbulence.
Study
In the current context, the energy transition should be understood as more than just the replacement of traditional energy sources with renewables. Its economic significance is far broader: it alters the investment landscape, drives demand for new technologies, necessitates infrastructure modernization, and gives rise to new industrial sectors. According to International Energy Agency estimates, global energy investment is projected to reach $3.3 trillion in 2025, with approximately $2.2 trillion allocated to renewable energy, nuclear power, electricity grids, storage, low-emission fuels, energy efficiency, and electrification. This demonstrates that green energy has become one of the central directions of global capital flows. [10]
Table 1. Trends in global investment in clean energy and fossil fuels, 2015–2025.
| Year / period | Investments in fossil fuels | Investments in clean energy | Key conclusion |
| 2015 | Exceeding clean energy investments | Below fossil fuel investments | At the beginning of the period, the traditional energy sector still retained an investment advantage |
| 2016-2019 | Relatively stable, without significant growth | Investments in fossil fuels are gradually being surpassed | A structural shift in global energy investment toward clean energy is underway |
| 2020 | Decline amidst crisis conditions | A more stable trend is being maintained | Clean energy demonstrates greater investment resilience compared to traditional sources |
| 2021-2023 | Moderate recovery | Rapid growth | The gap between clean energy and fossil fuels is widening noticeably |
| 2024 | About $1.2 trillion | Over $2 trillion | Clean energy is becoming the primary focus of global energy investment |
| 2025 | Approximately US$1.1 trillion | Approximately US$2.2 trillion | Investments in clean energy are approximately double those in fossil fuels |
Source: compiled by the author based on [10]
Table 1 illustrates a profound structural shift in the global energy economy. While investments in fossil fuels still exceeded those in clean energy in 2015, the situation had reversed by 2025.According to the International Energy Agency, approximately $2.2 trillion is being directed toward clean energy in 2025—including renewables, electricity grids, storage, low-emission fuels, energy efficiency, and electrification—while about $1.1 trillion is allocated to oil, gas, and coal. This confirms that the energy transition is becoming not only an environmental process but also a key driver of global capital flows. For Azerbaijan, this trend is significant because the development of green energy offers a way to attract investment, diversify the economy, and strengthen the country's role in the new energy architecture. [10]
From a theoretical standpoint, green energy can serve as a driver of economic diversification in several areas. First, it attracts investment not only into electricity generation but also into related sectors: power grids, energy storage, digital energy system management, maintenance services, and workforce training. Secondly, it facilitates technology transfer, as the implementation of large-scale projects often requires international partnerships, engineering solutions, modern management standards, and new competencies. Thirdly, it lays the foundation for the gradual development of new domestic production chains.
Employment is a key area. Renewable energy creates jobs not only during the power plant construction phase but also in design, operation, maintenance, logistics, equipment manufacturing, and energy system management. According to data from IRENA and the International Labour Organization, the global renewable energy sector employed at least 16.2 million people in 2023. Consequently, green energy is significant not only as a source of electricity but also as a sector capable of fostering new professional skills and creating new jobs. [11]
Figure 3. Global employment in the renewable energy sector by technology in 2023, thousand jobs
Source: [11]
Figure 3 shows that renewable energy is not only a source of clean electricity but also a significant employment sector. In 2023, the largest number of jobs was associated with solar photovoltaics—approximately 7.1 million. Next come liquid biofuels (2.8 million jobs), hydropower (2.3 million), and, finally, wind energy (1.46 million). This confirms that the energy transition is creating new economic opportunities—jobs in engineering, manufacturing, services, logistics, and research.
This approach is particularly important for Azerbaijan, as the country traditionally possesses a strong oil and gas base while simultaneously seeking to expand non-oil sources of growth. The development of green energy may not replace the oil and gas sector in the short term, but rather complement it by serving as a new economic pillar. [12]
Export potential is of particular importance. If a country develops solar, wind, and—in the future—hydrogen projects, it gains the opportunity not only to meet domestic demand but also to participate in new regional energy connections. This is particularly relevant for Azerbaijan, given its green energy corridor projects and its geographical location between the Caspian region, the South Caucasus, and Europe. In this context, green energy can strengthen both the country's internal diversification and its role in foreign economic relations.
International experience demonstrates that there is no single, universal model for the energy transition. Each country pursues pathways that align with its resources, industrial base, and economic interests. It is particularly valuable for Azerbaijan to examine the experiences of the United States, the United Kingdom, the Netherlands, and China, as these nations showcase diverse yet complementary approaches to green energy development—ranging from innovation and grid resilience to offshore wind power, hydrogen infrastructure, and the mass production of clean technologies.
The American experience is significant primarily because the United States views the energy transition as a technological and infrastructural challenge.
The U.S. Department of Energy’s report on long-duration energy storage highlights the need for transparent data on technology costs, new valuation models for storage systems, financial support for research and demonstration projects, and market mechanisms that enable private capital investment in such solutions. [13] This is of practical importance for Azerbaijan, as the growth of solar and wind generation inevitably necessitates energy storage and a more flexible power system.
A second key area of focus is clean hydrogen. The U.S. Department of Energy views it as a tool for decarbonizing sectors where the direct use of electricity is challenging, including ammonia production, petrochemicals, and heavy transport. [14] For Azerbaijan, this experience could prove valuable in the long term: while hydrogen energy should not be seen as an immediate replacement for traditional energy sources, it could become part of a future export and industrial strategy, provided there are economically viable projects.
U.S. policy regarding smart grids warrants particular attention. The Grid Resilience and Innovation Partnerships program aims to enhance the flexibility and resilience of the power system, while Smart Grid Grants provide for investments in expanding grid capacity, integrating renewable energy, and deploying technologies that can subsequently achieve broader market adoption. [15] This is especially relevant for Azerbaijan, as the development of green energy would be constrained by technical bottlenecks without a modernized grid.
The United Kingdom is of interest as a country that has succeeded in creating a developed institutional model for supporting low-carbon energy.
The primary instrument used was the Contracts for Difference (CfD) system, which mitigates price risks for investors and enhances project predictability. In the seventh round of this scheme, particular emphasis was placed on offshore and floating offshore wind energy: the round's total budget was revised to £1.97 billion, with £1.79 billion allocated to offshore wind and £180 million to floating offshore wind. [16] Economic example the value of the UK’s contribution to Azerbaijan lies not only in the wind technologies themselves but also in the creation of a market. Offshore wind energy requires substantial capital investment, a long-term investment horizon, transparent grid connection rules, and a clear mechanism for selling electricity. Therefore, British experience could prove valuable to Azerbaijan in developing support mechanisms for future Caspian wind projects—particularly if those projects are aimed not only at domestic consumption but also at the export of green electricity.
The Netherlands is important for analysis as an example of a country that links the energy transition with the maritime economy, port infrastructure, and industrial energy consumption.
The Netherlands Enterprise Agency notes that the country had already reached 4.7 GW of offshore wind capacity by the end of 2023 and aims to achieve 21 GW of installed capacity under its current roadmap. At the same time, the Netherlands explicitly acknowledges that offshore energy development faces rising costs and insufficient demand, prompting a shift toward more complex support mechanisms, including future bilateral contracts for difference. [17]
The experience of Rotterdam is particularly relevant for Azerbaijan. The Port of Rotterdam is developing a large-scale hydrogen network designed to link hydrogen production, imports, end-use, and transport to Northwest Europe. [18] This demonstrates that green energy is becoming an integral part not only of the power sector but also of logistics, industry, and foreign trade. For Azerbaijan, given its location on the Caspian and its role as a transit hub, the Dutch model offers a valuable example of how to integrate the energy sector, port infrastructure, and future export supply chains.
The Chinese experience is distinguished above all by its scale.
As previously noted, in 2024 China added 373 GW of new renewable energy capacity, including 278 GW of solar and 79.82 GW of wind power. By the end of 2024, total installed renewable energy capacity had reached 1,889 GW, representing 56% of the country's total installed capacity. These figures demonstrate that China's energy transition has evolved from a mere component of environmental policy into part of a major industrial and infrastructure strategy. [19] From an economic standpoint, China’s experience in reducing technology costs through economies of scale, industrial coordination, and the development of production chains is particularly important for Azerbaijan. The International Energy Agency notes that China is the lowest-cost location for manufacturing key clean energy technologies, whereas producing solar modules, wind turbines, and batteries in the US and the EU is significantly more expensive. For our country, this means that cooperation with Chinese companies can be beneficial in terms of equipment availability, accelerated construction, and reduced capital costs; however, it must be accompanied by requirements regarding quality, the localization of specific tasks, workforce training, and technology transfer.
Our country is among those where the energy transition has distinct economic characteristics. On the one hand, the republic possesses a strong traditional energy base: oil and gas have historically played a key role in exports and in fiscal and economic stability. Oil and gas account for over 90% of Azerbaijan’s exports, and this heavy reliance on the extractive industries makes the economy vulnerable to fluctuations in global oil prices. [20] Therefore, for the republic, green energy is important not so much as an immediate replacement for the oil and gas sector, but rather as a new avenue for expanding the economic model. On the other hand, Azerbaijan has already established the political foundations for the development of renewable energy. One of the primary goals is to increase the share of renewable energy sources and transform the liberated territories into a "green energy zone." Once again, we see that the energy transition in Azerbaijan is viewed not merely as a standalone environmental project, but as an integral part of the state's development strategy. The economic potential of this sector is bolstered by a substantial resource base. According to the Azerbaijan Energy Regulatory Agency, the technical potential for renewable energy is estimated at 135 GW onshore and 157 GW offshore. [21]
Even if the practical realization of such potential requires time, investment, and infrastructure, the sheer scale of the resources demonstrates that renewable energy can become a distinct area of investment-driven development for the country.
The modernization of power grids is of particular importance. Without robust grid infrastructure, it is impossible to effectively integrate large-scale solar and wind power plants, ensure the stability of the energy system, or prepare export routes. In 2025, the World Bank approved the AZURE project, aimed at strengthening Azerbaijan’s transmission network, diversifying the energy mix, and creating a more resilient energy system. [22] This confirms that the energy transition in Azerbaijan is gradually shifting from policy objectives to infrastructure implementation.
Another important element concerns the export of green electricity. The inclusion of the first and second phases of the Caspian-Black Sea-European Green Energy Corridor in the TYNDP 2026 portfolio of the European Network of Transmission System Operators demonstrates that Azerbaijan can participate not only in domestic renewable energy production but also in the development of cross-border energy infrastructure. [4] This is particularly significant for strengthening the country's role as an energy bridge between the Caspian region and Europe.
The foregoing indicates that Azerbaijan’s energy transition agenda combines three elements: a traditional oil and gas foundation, growing renewable energy potential, and the development of new infrastructure for both domestic consumption and export. Consequently, green energy should be viewed not as an abandonment of the existing energy model in the short term, but rather as its gradual expansion. Economically, it can foster diversification, attract investment, build new capabilities, and reduce the country’s vulnerability to commodity price volatility.
Analysis
The key takeaway from international experience is that Azerbaijan should not mechanically adopt foreign energy transition models. A more appropriate approach is to select elements from the experiences of various countries that align with national circumstances—such as the Caspian region's resource potential, the country's role in energy corridors, the need for economic diversification, and the task of modernizing power grids. In this regard, the experiences of the US, the UK, the Netherlands, and China can serve as a useful toolkit of practical measures.
Azerbaijan could learn from the US primarily in its approach to energy storage, grid resilience, and innovative financing. For a country planning to expand solar and wind generation, the issue of storage becomes crucial a fundamental point: renewable energy depends on weather conditions, so the power system must be flexible. Reports from the U.S. Department of Energy on long-term energy storage indicate that commercializing such technologies requires not only scientific development but also demonstration projects, transparent cost calculations, clear market rules, and private capital participation. For Azerbaijan, this means a need to develop not only the power plants themselves but also systems for storage and load management, as well as mechanisms for financing pilot projects. American experience is also relevant to the issue of grid modernization. Azerbaijan is already moving in this direction: in 2025, the World Bank approved the AZURE project, aimed at strengthening the transmission network, diversifying the energy mix, and enhancing the reliability of the power system. This confirms that the transition to green energy is impossible without first reinforcing the infrastructure. Therefore, the most rational sequence for our country is as follows: first, the grid and system management; then, the large-scale integration of new solar and wind capacity; and finally, the export of green electricity.
The UK’s experience is valuable to Azerbaijan, particularly regarding the development of offshore wind energy and the establishment of clear rules for investors. The British "Contracts for Difference" system demonstrates that state support can do more than simply subsidize an industry; it can reduce investment risks and help launch new markets. This is especially important for Azerbaijan, as developing the Caspian Sea’s wind potential will require long-term investment, clear grid-connection rules, power purchase mechanisms, and guarantees of revenue predictability. According to estimates by the Ministry of Energy of Azerbaijan, the World Bank, and the IFC, with a long-term vision, infrastructure, investment, and the right policies in place, the country could install up to 7 GW of offshore wind capacity by 2040. [23] At the same time, the UK experience highlights a key limitation: offshore wind development is not driven solely by natural potential. What is needed are institutions, auctions, the preparation of offshore sites, network planning, qualified contractors, and a risk-sharing mechanism between the state and the investor. Therefore, the most sensible model for Azerbaijan might not be the immediate launch of large-scale offshore projects, but rather a phased approach: a feasibility study, pilot projects, workforce training, and only then, industrial-scale deployment. Official UK government materials regarding the results of Allocation Round 7 demonstrate that, even in the mature offshore energy market, the state continues to employ specific support mechanisms for low-carbon projects. [24]
The Dutch experience is particularly valuable because it integrates the energy sector, port infrastructure, hydrogen, and industrial logistics. This is significant for Azerbaijan, as the country possesses not only energy potential but also a strategic transit location. In the future, green energy could be linked not just to electricity generation, but also to export logistics, industrial zones, port facilities, and potential hydrogen supply chains. As previously noted, hydrogen infrastructure is already taking shape in Rotterdam; the first section of the national hydrogen network is under construction in the port area, intended to serve as the foundation for future interconnections with the Netherlands, Germany, and Belgium. For Azerbaijan, the Dutch model offers a valuable framework for integration: the wind energy sector cannot and should not be viewed in isolation from ports, logistics, industrial consumption, and exports. However, a cautious and attentive approach is also required here. Green hydrogen remains a capital-intensive and complex undertaking; therefore, for Azerbaijan, it should be viewed as a long-term opportunity rather than an immediate commercial project. At the initial stage, it is more important to assess demand, production costs, infrastructure requirements, and potential export markets.
China’s experience offers Azerbaijan another important example, highlighting the significance of scale, industrial organization, and the cost reduction of technologies. China’s scale demonstrates that the energy transition can be part of industrial policy, rather than merely an environmental strategy. For our country, this experience could prove valuable in the construction of solar and wind power plants, equipment procurement, the reduction of capital costs, and the acceleration of project implementation. At the same time, cooperation with China must be grounded in sound economic judgment. After all, China is the lowest-cost location for manufacturing key clean energy technologies; producing solar modules, wind turbines, and batteries in the United States and the European Union is significantly more expensive. For Azerbaijan, this creates an opportunity to reduce project costs; however, it is important that such cooperation is not limited to the mere import of equipment. It should encompass specialist training, maintenance services, the transfer of practical expertise, and, where possible, the localization of specific operations.
The constraints associated with the energy transition must also be taken into account. Even developed nations face grid bottlenecks, rising project costs, labor shortages, and shifts in government policy. In its renewable energy forecast for 2025–2030, the International Energy Agency lowered its global growth estimate by 5% compared to the previous year due to changes in policy, regulation, and market conditions. In our view, this is a significant signal for Azerbaijan: green energy holds great potential, but its development requires realistic planning, sustainable financing, and effective risk management. [26]
For Azerbaijan, the practical conclusion can be formulated as follows: it is advisable to adopt the US approach to energy storage, smart grids, and innovative financing; the UK’s mechanisms for launching offshore wind power and mitigating investment risks; the Dutch concept of integrating ports, hydrogen, wind energy, and export logistics; and China’s strategies for scaling up solar and wind technologies and reducing capital costs. At the same time, all these elements must be adapted to Azerbaijan’s specific conditions: the state of the grid infrastructure, investment capacity, workforce capabilities, the role of the Caspian region, and the prospects of the Caspian-Black Sea-Europe green energy corridor. For Azerbaijan, the energy transition must be a coherent economic strategy. Its logic should encompass four stages: strengthening the grid, launching pilot projects, attracting technology and capital, and finally, transitioning to a green energy export model. In our view, it is precisely this phased approach that can transform green energy from a niche environmental initiative into a genuine driver of the country's economic diversification.
Conclusions and proposals
The analysis indicates that for Azerbaijan, green energy should be viewed not as a short-term replacement for the oil and gas sector, but as a new avenue for economic diversification. We have previously noted the emergence of a sustained shift in global investment patterns: according to International Energy Agency estimates, global energy investment is projected to reach $3.3 trillion in 2025, with approximately $2.2 trillion of that amount dollars are being directed toward clean energy, grids, storage, energy efficiency, and electrification—roughly twice the amount going into oil, gas, and coal. This means that the energy transition is becoming not only an environmental process but also a major driver of global capital flows. This process holds particular significance for Azerbaijan. The country has already set a goal to increase the share of renewable energy sources in its installed power generation capacity to 30% by 2030 and to develop the liberated territories as a "green energy zone." Consequently, green energy can serve as a tool for Azerbaijan to attract investment, build new capabilities, develop the non-oil sector, and strengthen the country's role in foreign economic relations.
Our first proposal is that the development of green energy should begin not only with the construction of new solar and wind power plants but also with the strengthening of the power grid infrastructure. Without a reliable grid, it is impossible to stably integrate renewable energy sources, manage loads, and prepare for the export of green electricity.
A second proposal is to develop energy storage systems and digital management for the power grid. Solar and wind generation depend on natural conditions; therefore, their expansion must be accompanied by technologies for energy storage, generation forecasting, load balancing, and smart grid management. This will enable Azerbaijan not merely to increase its installed capacity, but to build a more flexible and resilient energy system.
A third proposal is to develop Caspian wind energy in stages. In the initial phase, it is advisable to focus on feasibility studies, pilot projects, an assessment of grid capabilities, workforce training, and the engagement of reliable international partners. This approach will mitigate investment and technical risks and prevent the premature launch of large-scale projects without adequate infrastructure readiness.
The fourth proposal is to build international cooperation selectively. We believe it is important for our country to leverage American expertise in energy storage, grid resilience, and innovative financing; British experience in offshore wind development and market support; Dutch know-how in integrating ports, hydrogen, wind power, and logistics; and Chinese experience in scaling up solar and wind technologies and reducing capital costs. However, these models should not be mechanically replicated but rather adapted to Azerbaijan’s specific national conditions.
The fifth proposal is to link green energy initiatives with workforce training and the localization of expertise. If new projects rely solely on imported equipment and external contractors, their long-term economic impact will be limited. Therefore, it is essential to develop engineering, technical, managerial, and research skills domestically, involving universities, vocational training centers, and specialized research and applied science institutions.
The sixth proposal is to view green energy as part of Azerbaijan’s export strategy. The inclusion of the first and second phases of the Caspian-Black Sea-European Green Energy Corridor in the TYNDP 2026 portfolio demonstrates the country's potential to participate in shaping new cross-border energy infrastructure. This opens up opportunities not only to generate renewable energy for the domestic market but also to strengthen Azerbaijan’s role as an energy bridge between the Caspian region and Europe.
Thus, the energy transition for Azerbaijan should be a consistent economic strategy. Its core logic could comprise four stages: strengthening grids, launching pilot projects, attracting technology and investment, and subsequently developing a green energy export model. With this approach, green energy can evolve from a supplementary sector into a key driver of long-term diversification, investment appeal, and economic resilience for Azerbaijan amidst global uncertainty.
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15. https://www.energy.gov/oe/grid-resilience-and-innovation-partnerships-grip-program-projects
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