The Energy Regulatory Agency (AERA) provides for the development of incentives to increase the investment climate in electricity and heat, as well as gas supply, as well as to attract investment in these areas, taking into account international experience.

Measures taken

• Identification of sources of financing for investments;
• Diversification of investments by new production facilities to be created;
• Selection of the form of operation and financing of power plants requiring investment;
• Announcement of tenders to select an investor.

Measures to be implemented requiring investment

• Increase in the reserve volume of the national production portfolio;
• Diversification of the national production portfolio;
• Consider exporting clean electricity in the short term due to oversupply;
• Increasing the efficiency of power plants and efficient use of existing potential;
• Reducing electricity losses, improving the quality of transmission and distribution of electricity;
• Use of optimal mechanisms for increasing the efficiency of consumption;
• Minimize all types of losses associated with the distribution of natural gas;
• Expansion of the optimal system of heat energy and hot water supply of the country, taking into account geographical, social and economic features.

Diversification of production

In addition to attracting investment in electricity and heat, as well as gas supply, the Agency is taking measures to diversify the national production portfolio (selection of the form of operation and financing of power plants that require investment). Privatization of non-strategic production facilities is planned, and agreed proposals have been prepared for the implementation of this measure. Initially, it is planned to attract private investment in order to increase the efficiency of the country's electricity system by proposing the privatization of modular power plants.

Targets in attracting private investment

• Ensuring efficiency by creating a competitive environment in the regulated area;
• Involvement of innovations and advanced technologies;
• Formation of selection practice based on economic criteria among regulated enterprises;
• Ensuring flexibility in system management by increasing the number of independent stations;
• Taking steps to implement advanced management systems;
• Strengthening human resources;
• Entrepreneurship development.

Implementation of privatization

Privatization in the field of electricity generation not only supports the efficiency of the country's electricity system, but also contributes to the formation of a favorable investment climate. Privatization of small hydropower plants in the regulated area was carried out in accordance with the "II State Program of Privatization of State Property in the Republic of Azerbaijan." Five of the eight small hydropower plants declared open for privatization have been privatized under the state program. Four of these stations are being reconstructed and operated at the expense of private investment.

Small hydropower plants privatized within the "II State Program of Privatization of State Property in the Republic of Azerbaijan"