5 Apr 2023 18:38

Azerbaijan's revenues from export of green hydrogen to EU may total $500 mln per year - BCG

BAKU. April 5 (Interfax) - Azerbaijan can become an important regional supplier of low-carbon hydrogen to the EU, and the country's income from its supply could potentially reach $230-500 million a year, Boston Consulting Group said.

"Due to the presence of all the factors necessary for the development of the green hydrogen industry, Azerbaijan can become a regional leader and a reliable supplier to the EU. Support for green energy projects under the European concessional financing program REPowerEU and growing interest from investors are creating favorable conditions for the rapid development of the renewable energy sector and the hydrogen sector of the country's economy," the BCG study notes.

According to Vladimir Rogov, managing director and partner in BCG, Azerbaijan's renewable energy potential is extremely high, which makes it possible to provide an important competitive advantage, namely, the low cost of producing green hydrogen, the study cites him as saying.

Rogov specifies that according to the Global Solar Atlas, the potential for solar generation in Azerbaijan is comparable to the south of Italy and is almost 1.5 times higher than Germany; the potential for wind energy on the Absheron Peninsula is comparable to the shelf areas of the North Sea.

"In Azerbaijan, we see a unique combination of all the components necessary for the development of the hydrogen sector. There are natural resources, there is infrastructure, and there is a consumer. And all this is in a compact region," he said.

Azerbaijan can receive revenues of about $230-500 million per year, taking icount the expected price of hydrogen in Europe, which is about $5.8/kg., Rogov said.

"Thus, the full cost of green hydrogen delivered through a pipeline can be highly competitive and guarantee a significant margin," he notes.

Azerbaijan will be able to cost-effectively transport hydrogen (up to 10%-15% of the total volume of gas pumped) along the existing gas pipeline routes to Europe, taking into account the planned expansion of their throughput, Rogov said. Moreover, in terms of profitability, supplies from Azerbaijan to the European market will contrast favorably with exports from sub-Saharan Africa or the highly inefficient transportation of liquefied hydrogen from abroad.

"It makes sense to build new pipelines immediately with the expectation of future demand for hydrogen. For example, with a volume of 11 bcm of gas per year through the Trans Adriatic Gas Pipeline, the potential for hydrogen exports from Azerbaijan is 40,000-85,000 tonnes per year, which will be only 2%-4% of the projected demand for hydrogen in Italy in 2030," Rogov noted.

As previously reported, Azerbaijan is currently planning and implementing projects to create 25 GW in capacity based on renewable energy sources with the expectation of exporting the electricity and using it to produce green hydrogen. An exchange of experience in green hydrogen production is underway with foreign companies, specifically Masdar, ACWA Power, BP, and Fortescue Future Industries.

Azerbaijan's Energy Ministry and the European Bank for Reconstruction and Development signed a memorandum of understanding on technical support for the development of the electricity sector in Azerbaijan in December 2022. The memorandum will support the use of renewable energy sources, encourage the improvement of the network, increase energy efficiency, and reduce methane emissions. In addition, the memorandum envisages cooperation in the phased research and application of innovative technologies, including in the field of green hydrogen. The parties agreed to prepare a roadmap with recommendations on policies and technologies for the decarbonization of the energy sector.