History of development of the electric power system of the Republic of Azerbaijan

The history of the energy system of the Republic of Azerbaijan began in 1883 in Baku with the installation of a 220-volt power plant by the Nobel brothers, consisting of 3 steam turbines with a capacity of 75 horsepower each.

In 1901, the Bibiheybat power plant with a capacity of 2,000 horsepower was put into operation, and in 1902, a power plant with a capacity of 2,000 horsepower was put into operation in the Black City (now the White City). In 1913, 109.8 thousand kW were produced in Baku. hours of electricity was produced, 95% of which was directed to the oil industry, and only 5% to the country's electricity supply.

In the 1940s, the drilling and operation of deep oil wells resulted in increased demand for electricity.

Wider use of alternative energy sources in Azerbaijan began with the construction of Mingachevir HPP. Mingachevir HPP, the lower stage of the chain of power plants on the Kur River, was commissioned in 1954. Three years later, the Varvara HPP, which is part of the water junction complex, was put into operation.

On October 20, 1981, at the initiative of the Great Leader, the commissioning of the first block of the Azerbaijan Thermal Power Plant (now the Azerbaijan Thermal Power Plant), the largest thermal power plant in the South Caucasus, marked a new stage in the development of Azerbaijan's energy sector laid the foundation for energy security.

The history of development of the electric power system of independent Azerbaijan began with the establishment of “Azereenerji” Open Joint-Stock Company on the basis of “Azerenerji” State Company by the Decree of the President of the Republic of Azerbaijan No. 423 dated September 17, 1996. Formation of the legislative framework in the energy sector, improvement of the legal framework in this area in 1996 "On the use of energy resources", in 1998 "On Energy" and "On Electricity", and in 1999 "On Power and Heat Stations" laws have been passed. At the same time, in 2005 the Cabinet of Ministers approved the "Rules for the use of electricity." The decrees signed by President Ilham Aliyev on the State Program for the Development of the Fuel and Energy Complex of the Republic of Azerbaijan (2005-2015) and Additional Measures to Improve Electricity Supply in the Republic of Azerbaijan marked the beginning of a new era in modern energy development.

• Law of the Republic of Azerbaijan "On Energy" dated 24.12.1998 No. 541-IQ;
• Law of the Republic of Azerbaijan “On Electric Power Industry” dated 03.04.1998 No. 459-IQ;
• Law of the Republic of Azerbaijan "On electrical and thermal stations";
• Law of the Republic of Azerbaijan "On the privatization of state property";
• Law of the Republic of Azerbaijan "On the use of energy resources";
• Law of the Republic of Azerbaijan "On protection of foreign investments";
• Decree of the President of the Republic of Azerbaijan "On the privatization of enterprises of the fuel and energy complex";
• Decree of the President of the Republic of Azerbaijan “On the improvement and operation of district and city distribution electrical networks”;
• Decree of the President of the Republic of Azerbaijan “On measures to improve the provision of the population and the economy with energy carriers”;
• "Rules for the use of electricity" 02.02.2005, No. 18, etc.

This legal framework has made it possible to carry out certain reforms in the electric power industry.

Initially, in 2000, the enterprises of central heating were excluded from the subordination of "Azerenergy" JSC as an independent legal entity.

Separation of central heating from the power supply system

In 2001, service enterprises and small hydroelectric power plants specializing in the field of electric power were withdrawn from the subordination of "Azerenergy" OJSC, declared open for privatization and transferred to the Ministry of Economic Development.

In addition, in the same year, two separate legal entities, the Electricity Production Association and the Electricity Transmission Association, were established within "Azerenergy" OJSC, with the legal separation of production and transmission activities.

In 2001-2002, regional and city distribution electric networks were withdrawn from "Azerenergy" OJSC, declared open for long-term management and transferred to the Ministry of Economic Development.

Separation of electrical distribution networks from the power system

District and city distribution electric networks are included in 4 joint-stock companies in the regions and declared open for management on a competitive basis. "Ali-Bayramlielektrikshebeke" JSC and "Ganjaelektrikshebeke" JSC were transferred to the management of "Baku High-Voltage Electrical Equipment" JSC for a period of 25 years.

Of the district and city distribution networks, only organizations located in the territory of the Nakhchivan Autonomous Republic remain subordinate to "Azerenergy" OJSC, on the basis of which the Agency of the Nakhchivan Autonomous Republic is a separate legal entity under the Cabinet of Ministers of the Nakhchivan Autonomous Republic.

Thus, the systems of production, transmission, dispatch control and distribution (including sale) of electricity are legally and functionally separated from each other, and the formation of market relations began in accordance with the requirements of EU legislation at that time. In particular, the activity of the wholesale market was ensured by establishing contractual relations between the fields of activity.

Thanks to these measures, problems with payment were partially eliminated, but management contracts were terminated due to improper fulfillment of obligations, regional and city distribution networks were returned to "Azerenergy" OJSC and "Bakyelektrikshebeke" OJSC was restored.

In 2015, "Bakielektrikshebeke" OJSC was renamed into "Azerishig" OJSC and regional and city distribution electric networks subordinated to "Azerenergy" OJSC were also transferred to its subordination.

The decrees signed by President Ilham Aliyev on the State Program for the Development of the Fuel and Energy Complex of the Republic of Azerbaijan (2005-2015) and additional measures to improve electricity supply in the Republic of Azerbaijan marked the beginning of a new history of development in the electric power industry.

Electricity production for 2015-2023 (billion kWh)

Decree of the President of the Republic of Azerbaijan No. 1138 dated December 6, 2016 approved the “Strategic Roadmap for the Development of Public Services (Electricity and Heat, Water and Gas) in the Republic of Azerbaijan”.

In order to improve the efficiency of the energy sector, the roadmap defined the unbundling of all links in the value chain (production, transportation, distribution and sales) from electricity generation to retail sales and defined a comprehensive action plan. At the same time, the implementation of these measures is monitored every year.

As part of these measures, the Energy Regulatory Agency has been established and comprehensive measures are being taken to develop the regulatory framework to ensure a phased transition to a competitive liberal electricity market.