Transitioning the energy sector to achieve the 2030 Agenda for Sustainable Development and the objectives of the Paris Agreement presents a complex and difficult task for policymakers. It needs to ensure sustained economic growth as well as respond to increasing energy demand, reduce emissions, and consider and capitalize on the interlinkages between SDG 7 (Affordable and Clean Energy) and the other SDGs. To address this challenge, ESCAP has developed the National Expert SDG Tool for Energy Planning (NEXSTEP). This tool enables policymakers to make informed policy decisions to support the achievement of the SDG 7 targets as well as the Nationally Determined Contributions (NDCs). The initiative has been undertaken in response to the Ministerial Declaration of the Second Asian and Pacific Energy Forum (held in April 2018, in Bangkok) and the Commission Resolution 74/9, which endorsed its outcome. NEXSTEP also garnered the support of the Committee on Energy in its Second Session, with recommendations to expand the number of countries being supported by this tool.
The key objective of this SDG 7 Road Map is to assist the Government of Azerbaijan in assessing whether the existing policies and strategies are well aligned to achieving the SDG 7 and NDCs targets by 2030. This Road Map presents three scenarios – the Nationally Determined Contributions (NDC 3.0) pathway, the Sustainable Development Goal (SDG) scenario and the Green Energy Corridor (GEC) scenario – developed using national data, considering existing energy policies and strategies, and reflecting on other development plans.
- ^ The NEXSTEP tool has been specially designed to perform analyses of the energy sector in the context of SDG 7 and the NDCs, with the aim that the output will provide a set of policy recommendations to achieve the SDG 7 and NDC targets.
- ^ This Road Map examines the current status of the national energy sector and existing policies, compares them with the SDG 7 targets, and presents different scenarios highlighting technological options and enabling policy measures for the Government to consider.
With the presence of multiple enabling frameworks, the progress that Azerbaijan has made towards achieving the SDG 7 and NDC targets is promising. In terms of access to modern energy, the country has achieved universal electricity access in recent years and the current pace is likely sufficient to close remaining gaps in access to clean cooking by 2030. Natural gas and LPG are serving as the bridging fuels to achieve this access. However, Azerbaijan can strengthen its measures to achieve universal access to clean cooking technology by 2030 by accelerating the adoption of highly energy-efficient induction cookstoves, particularly in areas with sufficient electric supply.
Azerbaijan depends heavily on natural gas in its energy system, resulting in a low share of renewable energy. Renewable energy capacity is expected to reach 49.2 per cent by 2030 in the SDG scenario, meeting the 30 per cent target, as significant solar and wind generation will be operational. The country’s energy efficiency plans could significantly reduce energy intensity. In line with the SDG 7.3 energy efficiency definition, energy intensity in the country is expected to be 2.8 MJ/US$2017 in 2030 under the current policy scenario or NDC 3.0 pathway. NEXSTEP analysis indicates that Azerbaijan can further lower its energy intensity to 2.4 MJ/US$2017 to align with the global energy efficiency improvement rate of 4 per cent annually.
In addition to a highly efficient energy system, accelerating the transition to cleaner energy sources, especially renewables in both electricity and heat generation, will help Azerbaijan become a regional green energy exporter. This, however, requires an ambitious effort to transition from fossil fuel-based energy systems to renewables. A deeper analysis indicates that the lifecycle cost of renewable-based power generation is already lower than that of fossil fuel energy.
1. Universal access to electricity
Azerbaijan achieved universal electricity access in 2024. The country can continue to improve system reliability to meet rising demand and support the increasing penetration of renewable energy in the future.
2. Universal access to clean cooking technology
Under current policy settings or NDC 3.0 pathway, clean cooking access is projected to reach 100 per cent by 2027, up from 99.4 per cent in 2024. Natural gas is expected to help close the remaining gap in this scenario, as it plays a significant role in Azerbaijani households, including for heating. The current electricity tariff also makes natural gas stoves more competitive than electric stoves. Natural gas and LPG stoves are expected to account for 98.6 per cent of the clean cooking share, while electric cookstoves will account for a 1.4 per cent share.
NEXSTEP analysis suggests that the adoption of electric cookstoves may be the most appropriate solution for Azerbaijan, given their reliability and environmental benefits. This technology is already widely used in the country. In the SDG scenario, at least 20 per cent of the population, or around half a million households, is expected to adopt electric cookstoves by 2030. Alternatively, an energy-efficient stove standard can be introduced to avoid the costly transition to electric stoves.
3. Renewable energy
In 2024, the share of modern renewable energy (excluding traditional biomass for residential cooking) in total final energy consumption (TFEC, including non-energy use) was 2.1 per cent. Based on current policies, the share of renewable energy is projected to increase to 4.2 per cent by 2030. The increase is due to the projected increase in renewable electricity as per the current expansion plan. In the SDG scenario, the share of renewable energy is projected to increase to 9.6 per cent of TFEC in 2030. The additional increase can be attributed to the further addition of renewable energy capacity from 2028 onwards, compared to the NDC 3.0 pathway. Although the share of renewable energy will increase, natural gas will still dominate the energy system in Azerbaijan.
In terms of renewable energy in power generation, Azerbaijan aims to reach at least 30 per cent renewable capacity by 2030. The country is on track to achieve 49.2 per cent of its renewable capacity (including hydropower) if planned expansions are implemented. The Government must ensure that funding is secured, to ensure that projects become operational over the remaining five years until 2030.
4. Energy efficiency
Under the SDG 7.3 targets, energy intensity is defined as the total primary energy supply (TPES) in MJ/US$2017. Energy intensity in Azerbaijan declined at an average annual rate of 7.2 per cent between 1990 and 2010. A doubling of the 1990-2010 improvement rate is required to achieve the SDG 7.3 target, which requires an average annual rate increase of 14.4 per cent between 2010 and 2030. However, between 2010 and 2021, the annual improvement rate was only around 0.7 per cent. To reach the expected 2030 intensity, the annual improvement rate between 2021 and 2030 must be around 39.5 per cent, which is challenging. Therefore, NEXSTEP analysis suggests that the energy intensity target must be aligned with the global target of 4 per cent annual improvement (IEA and others, 2023). This corresponds to an energy intensity target of 2.7 MJ/US$2017 by 2030.
Figure I. Energy intensity improvement in Azerbaijan
Source: ESCAP.
Under the NDC 3.0 scenario, energy intensity in Azerbaijan is projected to decline to 2.8 MJ/US$2017, corresponding to an annual improvement rate of 3.4 per cent. This reduction reflects the implementation of significant energy efficiency measures as outlined in the updated NDC 3.0. With more ambitious and accelerated implementation, energy intensity can further decline to 2.4 MJ/US$2017, aligning with the global energy efficiency improvement rate of 4 per cent per annum.
5. Nationally Determined Contributions (NDCs)
The updated Nationally Determined Contribution (NDC) sets ambitious targets to reduce greenhouse gas (GHG) emissions by 40 per cent compared to the 1990 emissions by 2035 (Azerbaijan, 2025), and Azerbaijan is expected to meet this target. GHG emissions in the energy sector are projected to reach 28.7 MtCO2-e in 2035, driven by the increasing share of renewables in electricity supply under existing renewable energy capacity expansion plans. Further reductions can be achieved by accelerating implementation of energy efficiency measures that are aligned with the global improvement target of 4 per cent. In the SDG scenario, total emissions will reach 25.1 MtCO2-e by 2035, consistent with achieving the NDC target.
This Road Map sets out the following four key policy recommendations to help Azerbaijan achieve the SDG 7 targets as well as reduce reliance on imported energy sources:
Accelerate energy efficiency across all economic sectors. Azerbaijan needs to accelerate energy efficiency measures to align with the global improvement pathway of 4 per cent. This can be achieved by implementing best practices, such as energy management standards, building energy codes, modal shifts in transport and fuel economy improvement through 2030. Additional efforts are required to eliminate inefficient and unclean heating technology while simultaneously improving thermal insulation. Given that these targets are more ambitious compared to existing plans, international assistance will be essential.
- Implement strong policy measures to address the gap in clean cooking by 2030. Increasing the adoption of electric cookstoves will significantly help improve access to clean cooking. The cumulative deployment cost of both technologies would require US$ 57.1 million by 2030. The deployment of electric cookstoves will also help Azerbaijan enhance energy efficiency and reduce emissions.
- Adopt fuel switching strategies, including electrification, to accelerate SDG 7 progress and provide multiple benefits in the long run. Electrification of end uses would be critical to decarbonizing the economy. Since electrical equipment is more efficient than fossil fuel-based equipment, this shift will significantly reduce fossil fuel demand. Rapid adoption of electric vehicles, for instance, reduces the demand for oil products, thereby reducing the country’s reliance on petroleum fuels.
Decarbonize the power and heating sector by investing in renewable energy to help establish Azerbaijan as a clean energy hub. Under ambitious scenarios, a projected decrease in grid emissions can lead to substantial reductions in GHG emissions. Azerbaijan should accelerate its transition towards establishing itself as a major regional clean energy supply hub, leveraging initiatives such as the Green Energy Corridor (GEC).
Strengthen the position of Azerbaijan as a green energy exporter in the region and increase electricity exports toward Europe is strategically important, particularly within the framework of the Green Energy Corridor scenario. However, this also requires the integration of large-scale renewable energy capacities and the expansion of transmission infrastructure. NEXSTEP analysis suggests that the lifecycle costs of renewables, such as hydropower, solar and wind, are lower than those of fossil fuel-based technologies.
Decarbonize the heating sector by pursuing and investing in modern low-carbon heating solutions. The role of the heating sector requires stronger attention in the energy transition. In the urban areas in Azerbaijan, centralized and other collective heat supply solutions can play an important role in improving efficiency, reducing local emissions, and enabling the gradual integration of low-carbon technologies. Modernization of existing district heating systems, improvement of heat network efficiency, deployment of digital monitoring and control systems, and assessment of cleaner heat generation options should therefore be treated as an important part of the country’s decarbonization pathway.
In addition, smaller-scale cogeneration technologies can be an efficient solution for the country’s urban context, especially where large-scale expansion of conventional district heating infrastructure is not technically or economically optimal. Small and medium-sized CHP or modular cogeneration units can simultaneously provide heat and electricity with high fuel efficiency, support the modernization of existing boiler houses, and help balance the increasing electrification of end uses.
Digitalize energy systems and improve transmission and distribution infrastructure. To accelerate the electrification of end use, substantial investments should be made in transmission and distribution grids, including storage. The expansion of the electricity grid, as well as improvements in transmission losses, will help Azerbaijan transition to electricity. Energy storage is critical to ensuring a reliable power system as renewable energy penetration increases in the future.
Digitalization is a critical enabler for expanding both power and heat system modernization. It can enhance system efficiency, balance supply and demand, and enable more flexible integration of renewable and distributed energy resources. Key technologies such as artificial intelligence (AI), the Internet of Things (IoT), blockchain, and advanced monitoring and control systems can optimize operations across electricity and heat networks, improve the management of distributed energy resources (DERs), and enhance grid flexibility to support the transition to cleaner energy systems. To enhance the effectiveness of power and heat system planning and modernisation, there is a need to establish or ensure access to advanced digital platforms and analytical tools for energy system modelling, data management, and scenario-based assessments. Furthermore, for effective management of the energy transition, the development of cross-sectoral environmental, social and governance (ESG) data systems and digital solutions, alongside strengthened data collection and analysis, and integration into decision-making processes. A comprehensive assessment of potential impacts of regulatory initiatives on business entities should also be undertaken.