Azerbaijan power market study – perspectives and challanges

During the past years the Azerbaijan power industry has been engaged in an ambitious restructuring programs aimed at improving generation and distribution infrastructure, developing regulation to develop more fair and competitive power markets, stimulating foreign investment activities and providing customers with a reliable power supply. The purpose of this project was to conduct comprehensive review of Azerbaijan Power Market for private giant European Power Company looking for opportunities to invest in the country.

PRIMA experts provided advice to the client on local power market design and grid regulation. The first step of the study was to conduct an investigation of the national development policy, current status of power development and transmission and distribution maintenance, long-termprojection of power demand-supply balance, and a survey of trends in the private sector and among donors in the power sector. Then we analyzed the implications of power market rules, trading mechanisms, electricity tariffs and ancillary services structures to assess their effect on private and state owned power generators and transmission companies. Our study assisted client to better understand the risks and challenges of investment plan in terms of retaining revenues, recovering costs from operation, and ensuring profitable feed-in tariff level. Also the study included analysis of power market structures to facilitate the integration of renewable energy.