The European Bank for Reconstruction and Development (EBRD) has significantly deepened its engagement with Azerbaijan, directing nearly 80% of its $200mn investment in 2024 into green economy projects. Speaking during the EBRD’s Annual Meeting in London, the bank’s head for Azerbaijan, Natali Muravidze, confirmed that the lender’s total investment in the country now exceeds $4bn across almost 200 projects spanning energy, infrastructure, finance and SME development.

Muravidze stressed that EBRD support extends beyond finance, also encompassing technical and policy assistance. The bank has contributed to major national initiatives such as Azerbaijan’s first renewable energy auction, a strategic paper on hydrogen, legislation on public-private partnerships (PPPs), and the Green City action plan for Ganja.

At a panel titled “Azerbaijan: Gateway to Green Growth and Connectivity”, Deputy Energy Minister Elnur Soltanov identified green hydrogen as a cornerstone of Azerbaijan’s energy future. He noted that the wind potential in the Caspian Sea could be used to generate hydrogen, which would serve as a means to store surplus renewable electricity, later reconverted into power or exported.

Soltanov said Azerbaijan also has competitive advantages in blue hydrogen thanks to its natural gas reserves and depleted oil fields, which could be used for carbon capture and storage. Still, the government’s priority remains on green hydrogen development, despite global investor sentiment having become more cautious compared to five years ago.

Soltanov noted that Azerbaijan has adopted four major laws in the past two years on energy, renewables, and energy efficiency, with three new laws under development, covering heat supply, gas regulation, and the creation of a national regulator. He highlighted upcoming reforms that will enable market-based tariffs and promote transparent sector governance.

The country is targeting a 30% share for renewables in electricity production by 2028, and is expanding decentralised solar installations for individual consumers. A newly created Energy Efficiency Fund will be supported by taxes on fossil fuels, as the government pushes energy-saving retrofits in Soviet-era buildings.

To secure system resilience, Azerbaijan is prioritising regional energy connectivity and grid modernisation. Soltanov noted that while the country has an installed capacity of 8 GW, average annual consumption is around 3 GW. “Grid integration is not only a technical issue—it is a question of survival,” he said, pointing to integration challenges with intermittent renewables.

He revealed that more than $2bn in domestic and foreign investment is expected to be mobilised for over 2 GW of planned renewable energy capacity. However, the social cost of transitioning to a more market-based energy model remains politically sensitive. “Soviet-era expectations still persist. It’s not easy to tell people they have to pay more,” Soltanov acknowledged.

At the EBRD’s investment outlook session, participants, including Economy Minister Mikayil Jabbarov and representatives of Masdar and McKinsey, spoke of Azerbaijan’s growing role as a regional green energy hub. The country’s strategic location along the Middle Corridor between Asia and Europe and its hosting of COP29 were cited as key enablers for investment and visibility.

Speakers highlighted the synergy between industrial zones and green energy infrastructure, especially in the Alat Free Economic Zone. Azerbaijan’s efforts to localise energy production and attract foreign capital for renewables were commended.

On the sidelines of the event, Economy Minister Mikayil Jabbarov held bilateral meetings with EBRD President Odile Renaud-Basso and other international partners. He stressed Azerbaijan’s commitment to green and digital development, including the application of best practices and innovation across sectors.

Jabbarov also met with officials from Egypt, Moldova and the European Investment Bank, discussing trade diversification, infrastructure financing and the importance of institutional mechanisms to support business-to-business collaboration.

The country’s increased visibility on the global stage comes at a time of heightened scrutiny. Recent UK sanctions on Azerbaijani-linked companies for allegedly helping Russia evade oil restrictions underscore the geopolitical sensitivities of Azerbaijan’s energy trade. However, hosting COP29 has strengthened Azerbaijan’s image as a key player in the global green transition. Yermolai Solzhenitsyn, a senior partner at McKinsey & Company, called COP29 “a major win” for Azerbaijan, stating it would not only help advance climate dialogue but also enhance the country’s attractiveness for tourism and investment.