The European Bank for Reconstruction and Development (EBRD) has highlighted Azerbaijan’s significant potential to emerge as a leader in the low-carbon hydrogen sector. The bank points to the country’s rich renewable energy resources and substantial natural gas reserves as key advantages.
According to EBRD, Azerbaijan is well-positioned to harness promising renewable energy sources from the Caspian Sea and its eastern regions, while also having direct access to critical natural gas fields such as Shah Deniz. This unique combination sets the stage for both green hydrogen—produced using renewable energy—and blue hydrogen, which incorporates carbon capture and storage techniques in depleted gas fields. These elements contribute to making Azerbaijani hydrogen competitively priced, particularly when wind and solar energy are effectively utilized, allowing it to compete with prices in various European Union countries.
However, the EBRD has identified water availability as a major challenge for hydrogen production. Nevertheless, implementing strategies to recycle water could help alleviate some of these costs. Azerbaijan’s strategy for integrating low-carbon hydrogen into industries like transportation and district heating aligns with its broader focus on exports, making use of the existing gas pipeline infrastructure.
Beyond opportunities for export, the domestic use of hydrogen offers a strategic advantage. Incorporating hydrogen into local industries could facilitate the decarbonization of hard-to-abate sectors, further supporting the country’s national climate objectives.
The Southern Gas Corridor is a crucial route for exporting hydrogen to Europe, highlighting the need for collaboration among regional partners. Azerbaijan’s commitment to reducing greenhouse gas emissions is evident in its Nationally Determined Contributions (NDCs) and the draft National Strategy for Low Carbon Development, showcasing its ambition to develop a robust hydrogen economy.
The EBRD emphasizes that a comprehensive national roadmap, along with targeted strategic investments, could position Azerbaijan as a significant player in the global hydrogen market. The bank’s upcoming project aims to provide the Azerbaijani government with essential data and recommendations to inform regulatory and policy measures necessary for realizing the country’s hydrogen potential and achieving the objectives set forth in the strategy presented at COP29.
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