Azerbaijan’s first steps in energy efficiency: motivations, difficulties and prospects

Azerbaijan’s first steps in energy efficiency: motivations, difficulties and prospects

January 17, 2019

Azerbaijan does not have any problem with energy resources; the country fully satisfies domestic demand through the production of oil and gas.

Azerbaijan is a country with one of the highest indicators of energy self-sufficiency, as its energy production is four times higher than the domestic demand.

However, energy use inside the country is much higher than in European countries, which means that the available resources are not used effectively. To put it simply, huge amounts of energy are being wasted.

In 2015 alone, the country consumed a total of 14.3 Mtoe (million tonnes of oil equivalent). Based on calculations of energy consumption per person per year, 1.4 toe (tonnes of oil equivalent) is consumed by one person. To compare, this amount would be enough to fly a Boeing 737-800 from Baku to Tehran. Such figures are provided by the International Energy Agency, based on data from the State Statistics Committee of Azerbaijan.

Lately, an understanding of the need for rational use of natural resources to ensure stable economic development has developed in Azerbaijan.

In the last two years, work has been carried out in this area in the framework of the EU4Energy programme, which is aimed at supporting the country in reforming the energy sector and developing a sustainable energy policy. The programme, with a budget of €21 million, is funded by the European Union and will run until 2020.

At present, a new draft law of Azerbaijan on energy efficiency has been developed and is under consideration by the country’s Cabinet of Ministers. This document prescribes the preparation of a national action plan and is meant to introduce a clear functioning mechanism in this multifaceted area.

At the same time, Azerbaijani specialists are getting acquainted with the nuances of introducing energy efficiency standards in the country. Energy efficiency experts visited Baku within the framework of the Technical Assistance and Information Exchange Instrument of the European Commission (TAIEX) and a two-day seminar for specialists of Azerbaijani agencies related to energy sector was held in cooperation with the Ministry of Energy of Azerbaijan.

Residential sector is the largest energy consumer

The residential sector is the key consumer of heat – which is provided with the help of natural gas – making this the area with the greatest potential in terms of cutting down energy consumption.

TAIEX experts Gerard Lipinski (Poland) and Suada Mustajbegović (Croatia) shared their countries’ experiences of the introduction of energy-efficient principles in the residential sector. According to them, 15 to 20 years ago, the notion of energy efficiency was as distant for countries of Central and south-eastern Europe as it is in Azerbaijan today. People did not understand its importance and many did not give it any thought at all.

“We carried out a major information campaign,” says Mustajbegović, a specialist at the Energy Efficiency and Environmental Protection Fund in Zagreb. “The results were obvious. After showing on television just one home after it was renovated and how much cosier and warmer it became, we started receiving many phone calls from people. Everyone was interested in having the same opportunity to renovate their own homes and in the financial support for the process.

For example, you can save a lot of energy by replacing an old television set with a modern, energy-efficient one. A Soviet-era “Rubin” uses 270 W, while current models with an A++ energy rating use around 40 – 70 W. “People should understand how important the savings can be. Without this understanding, measures will not have the full effect,” she says, adding that today almost everyone in Croatia wants to be energy efficient, because they understand how it benefits them personally.

As well as making their home warm, a substantial decrease in utility bills is another motivating factor. According to Mustajbegović, Croatia managed to reduce energy losses in the residential sector by 50-80%.

  • Azerbaijan's first steps in energy efficiency: motivations, difficulties and prospects
    Baku, Azerbaijan
  • Azerbaijan's first steps in energy efficiency: motivations, difficulties and prospects
    Baku, Azerbaijan

Creation of energy efficiency funds

Polish expert Lipinski, from the National Research and Development Centre, says that the creation of energy efficiency funds like the Thermal Modernisation and Refurbishment Fund, which has been working in Poland for around 20 years, are an effective measure. Good practice example is also the National Fund of Environmental Protection and Water Management in Poland however it scope of interest wider than energy efficiency.

“The fund is not a burden on the country’s state budget and is replenished with the payments from all entrepreneur and legal entities due to non-compliance of their buildings or houses, cars and other objects with the established standards in the field of energy efficiency. Then, the fund’s money is used on projects supporting energy-efficient initiatives,” the expert says.

“The higher the level of non-compliance with the standards, the higher the payment. Everything is simple,” he explains, adding that after the country transitioned to a market economy in 1989, energy consumption in the residential sector decreased by 30 to 40%.

A similar fund has been available in Croatia since 2003: the Environmental Protection and Energy Efficiency Fund. Changes to legislation have also been made in order to facilitate the process of thermal modernisation of housing. Whereas earlier, thermo-modernisation measures for a residential building could be carried out only with the consent of 100% of residents, now the figure has been reduced to 51%, meaning only a majority have to agree.

Mustajbegović explains that citizens and state associations received money for thermal modernisation from the fund as grants, while private companies received loans for a five year period at a zero interest rate. The main document necessary to receive a subsidy is the confirmation of the completion of the relevant building’s energy audit.

The TAIEX experts say that the details of the functioning of such funds may differ in every country, depending on their realities and needs.

For instance, taking into account that Azerbaijan already has the State Oil Fund, which accumulates revenues from the oil industry, it is possible not to create a new fund but to allot a portion of the revenues of the acting fund to energy efficiency.

The experts emphasise that an integrated and thought-through approach is important in this process, since the measures for the thermal modernisation of individual apartments will have no effect and may even damage the building in the long term.

Lipinski notes that the main difficulty for the country, which is in the initial stage of transitioning to energy-efficient measures in the residential sector, is securing financial support for the work that needs to be done and harmonising the work of the scheme as a whole.

“The issue can arise while trying to correctly distribute new functions and responsibilities between different agencies and companies. Since nobody was involved in such activities before, the country does not have the respective connections and partnerships. They need to be created from scratch,” he says.

  • Azerbaijan's first steps in energy efficiency: motivations, difficulties and prospects
  • Azerbaijan's first steps in energy efficiency: motivations, difficulties and prospects
    Baku, Azerbaijan

The situation in Azerbaijan’s housing sector

In Azerbaijan, the housing stock, including old buildings and most new ones too, is entirely energy-inefficient.

“There are practically no buildings that would fully or [even] partially meet international standards in the field of energy saving,” says Nazim Mamedov, an expert in the field of energy efficiency who works on an energy efficiency project of the United Nations Development Programme (UNDP).

Within the framework of one of the EU-funded pilot projects, an energy audit of two types of residential buildings was conducted in Baku in 2013-2014, showing that high-quality thermal insulation could save between 50 and 70% of the energy consumed by the building. For one such building – the Soviet “nine-storey building” – this meant a reduction in annual energy consumption from 208-210 kW/h to 102-105 kW/h per square metre.

Today, there are only separate pilot projects for the thermo-modernisation of residential and public buildings in Azerbaijan. For instance, within the framework of the UNDP project, six office buildings of the state oil company SOCAR were upgraded in Sumgayit and two settlements near Baku in 2017. Their energy consumption was reduced by 30%. Another pilot project, carried out by the Embassy of the Czech Republic, was recently completed in a rural school near Shamakhi. There, the reduction in energy consumption was 50%.

According to Mamedov, in the past two years, some private companies have attempted to use energy-saving technologies during the construction, but the number of such buildings is insignificant, and all measures ultimately affect the cost of housing.

A professor at the State Institute of Architecture and Construction of Azerbaijan, Nurmamed Mamedov, says that only by increasing the thermal protection of the external enclosing structures of residential buildings in Baku can 45 to 55% savings in thermal energy be achieved. Up to 35% of energy-saving potential is also concentrated in heating, ventilation, air conditioning and hot water supply systems.

  • Azerbaijan's first steps in energy efficiency: motivations, difficulties and prospects
  • Azerbaijan's first steps in energy efficiency: motivations, difficulties and prospects

There are also some specific architectural solutions. Thus, the construction of integrated buildings instead of detached ones would increase energy efficiency by 10-12%, an increase in the width of the body of the building from 12 to 18 metres would increase it by 10%, and decreasing the number of floors with high-density housing development would increase energy efficiency by up to 5%.

It is clear there are a lot of things to work on and the TAIEX facility is there to support. Both the state and citizens of Azerbaijan are interested in energy efficiency measures: the state’s interest lies in the fact that the energy saved can be exported, which is more profitable, and the people are interested because everyone wants to live in a warm house and pay less to do so.

Author: Yelena Ostapenko

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