RENEWABLE ENERGY AND INVESTMENT POLICY

ABSTRACT

In the report, the energy security of the Nakhchivan Autonomous Republic, which is a part of the Republic of Azerbaijan, and the use of renewable energy in its provision were studied. In the study, theoretical-calculation, observation and comparative analysis methods were used in the assessment of renewable energy resources.

When evaluating the solar energy potential of the Autonomous Republic, as the main source - the experimental and observational materials of the Azerbaijan Republic and USSR Hydrometerological Committee on NAR for the years 1960-1980, the results of the researches of the Institute of Geography of the Azerbaijan National Academy of Sciences for the years 1936-1950, the experiment-observation materials of the hydrometeorological center of Nakhchivan AR for the years 1995-2021, static indicators of the Nakhchivan Solar Power Station for the years 2016-2021, as well as the results of theoretical and calculation studies were used. As a result of the analysis, it was determined that the renewable energy resources in the Republic of Azerbaijan, including the Autonomous Republic of Nakhchivan, are quite high. Today, mainly hydropower resources are used in Azerbaijan. Solar and wind energy resources are underutilized compared to hydropower resources. In the Autonomous Republic of Nakhchivan, the use of renewable energy resources is quite high and exceeds the world average (43%). The reasons for the low interest in using RE were analyzed. So, there is a need to improve the state's investment and tariff policies in this area. Improvement of this policy can stimulate the use of RE resources in Azerbaijan and Turkey.

АННОТАЦИЯ

В докладе изучена энергетическая безопасность Нахчыванской Автономной Республики, входящей в состав Азербайджанской Республики, и использование возобновляемых источников энергии в ее обеспечении. В исследовании использовались теоретико-расчетный, наблюдательный и сравнительный методы анализа при оценке возобновляемых источников энергии. При оценке потенциала солнечной энергетики Автономной Республики в качестве основного источника - экспериментальные и наблюдательные материалы Гидрометкомитета Азербайджанской Республики и СССР по НАР за 1960-1980 годы, результаты исследований Института географии АН СССР. Национальной академии наук Азербайджана за 1936-1950 годы, материалы опытов-наблюдений Гидрометцентра Нахчыванской АР за 1995-2021 годы, статические показатели Нахчыванской солнечной электростанции за 2016-2021 годы, а также использованы результаты теоретических и расчетных исследований. В результате анализа было установлено, что ресурсы возобновляемой энергии в Азербайджанской Республике, в том числе в Нахчыванской Автономной Республике, достаточно высоки. Сегодня в Азербайджане используются в основном гидроэнергетические ресурсы. Ресурсы солнечной и ветровой энергии используются недостаточно по сравнению с гидроэнергетическими ресурсами. В Нахчыванской Автономной Республике использование возобновляемых источников энергии достаточно высокое и превышает среднемировой уровень (43%). Проанализированы причины низкого интереса к использованию РЭ. Значит, есть необходимость в совершенствовании государственной инвестиционной и тарифной политики в этой сфере. Улучшение этой политики может стимулировать использование ресурсов ВИЭ в Азербайджане и Турции.

Keywords: Nakhchivan Autonomous Republic, energy security, renewable energy, leasing policy, investment, green tariff.

Ключевые слова: Нахчыванская Автономная Республика, энергетическая безопасность, возобновляемая энергия, лизинговая политика, инвестиции, зеленый тариф.

Setting the problem. The problem of energy security is an urgent issue for many countries of the world, including the Nakhchivan Autonomous Republic. The use of renewable energy in Nakhchivan is very relevant due to both energy security and the requirements of the following two international conventions [1-7]:

• United Nations (UN) Framework Convention on Climate Change (UNFCCC) adopted in Rio de Janeiro in 1992 (on 09.05.1992) with the participation of representatives of 161 countries;
• «Kyoto Protocol» signed in Kyoto, Japan in December 1997.

The Milli Mejlis of the Republic of Azerbaijan ratified the ICCPR in 1995, and the Kyoto Protocol in 2000.

The use of renewable energy is an urgent problem in Azerbaijan, and one of the main tasks in carrying out construction works in the liberated regions of Azerbaijan in 2020 was the use of renewable energy.

According to the static data until the end of 2021, in the electrical energy system of Nakhchivan Autonomous Republic, the generation capacity for renewable energy is approximately 42.9% (total generation capacity - 250,500 KW, generation capacity with renewable energy - 107,500 KW).

According to the information approved by the International Renewable Energy Agency (IRENA) on April 22, 2022, the generation capacity of renewable energy (RE) in 2021 was 3063926 MW worldwide, 1308 MW in Azerbaijan (0.043% of the world's RE), in Turkey 53233 MW (1.74% of RE worldwide).

The installed capacity of renewable energy worldwide has increased 2,122 times in the last 10 years (2012-2021) (in 2012 - 1443923 MW, and in 2021 - 3063926 MW). According to the data of 2021, China (33.98%), USA (10.62%), Germany (4.51%) etc. are leaders in this field [1].

One of the main problems in the use of renewable energy is its cost and the profitability of power plants (PP). In this regard, the implementation of the "Green tariff" policy is relevant [2].

According to the experts of the International Energy Agency (IEA), in 2030, the role of renewable energy in the production of electricity will reach 30-35% in the field of application of new innovative technologies. This increase can be explained by several factors:

• first, the production of organic fuels gradually decreases and its price increases;
• reduction of the cost and payback period of electricity in the field of RE application as a result of the application of new innovative technologies (according to the calculations of the US Department of Energy, the cost of electricity will not exceed 2-4 cents by 2025-2030);
• increasing requirements for social efficiency (global warming and environmental safety requirements).

In this study, theoretical-calculation, experimental-observation and comparative analysis methods were used in the assessment of solar energy resource as a renewable energy resource of NAR.

When evaluating the renewable energy potential of NAR, the following main sources were used:

• Experience-observation materials of the Republic of Azerbaijan and USSR Hydrometerological Committee on NAR for the years 1960-1980;
• The results of the researches of the Institute of Geography of the Azerbaijan National Academy of Sciences for the years 1936-1950;
• Experience-observation materials of the hydrometeorological center of Nakhchivan AR for the years 1995-2021;
• Data of the Energy State Service of Nakhchivan Autonomous Republic for the years 2016-2021.

The result of the study. According to the information approved by the International Renewable Energy Agency (IRENA) on April 22, 2022, the generation capacity of renewable energy (RE) in 2021 was 1308 MW in Azerbaijan (0.043% of the world RE), and 107,50 MW in the Nakhchivan Autonomous Republic (8.22% of RE for Azerbaijan). The renewable energy generation capacity (107,500 KW) in NAR is 42.9% of the total generation capacity, and this indicator is higher than for both the Republic of Azerbaijan and the world. 33,100 KW of the renewable energy generation capacity belongs to the solar power plant (30.79%), and 74,400 KW to hydropower (69.21%) (Table 1). The production of electric energy produced in NAR in 2016-2021 shows that the production of electric energy in RE ranges from 40-55%. In 2021, the amount of electricity produced in hydroelectric power stations in NAR decreased by about 10% compared to previous years (table 2). The main reason for this is the instability of water resources in the NAR in 2021.   

Table1.

 Generation powers in the energy system of the Nakhchivan Autonomous Republic

Table 2.

Main indicators of power plants of Nakhchivan Autonomous Republic

Assessment of hydropower resources and preparation of hydropower cadastre is a very complex and practically necessary task. Taking into account environmental and social constraints in a market economy creates additional difficulties in calculating the region's HER, especially the small HER. The "linear method" and "generalized accounting" methods are used in the evaluation of HER. A "generalized account" is considered more acceptable for estimating the HER of small rivers.

In the guidelines for the preparation of the "Hydroenergy cadastre", the use of the "Method of the USSR Academy of Sciences Division for Scientific Processing of Water Management Problems", the method of generalized coefficients of S.V. Grigoriev and the method of basic basins of S.V. Kolopov is recommended in the general accounting of the potential power of water energy. At the same time, there are other methods (for example: N.A. Grigorovich, P.S. Kalachev, S.T. Daidbeyov and S.G. Rustamov, etc.).

For the purpose of applying generalized accounting, the criterion refers to the quantities of long-term average flow, watershed area and the scale of the map used.

The total energy potential of the water bodies in the given region can be calculated as follows.

Here: Q p is the average annual flow over the entire area of the given accounting district,  

∆H_ab – is the average fall in the given gradation area (m), determined according to the average curve F = f (H) from the dependence between the water basin area (F) and the fall (H).

In the general case, Qp can be calculated as follows.

Here:      – is the sum of the average annual flow from the given accounting district, ;

    –  is the sum of the average annual streamflow within a given catchment area,  .

According to S. V. Grigoriev's method of generalized coefficients, the final potential strength of «average» rivers can be calculated as follows.

Here:  –  consumption of water in the course of the river, ;

    –   is full fall in the river, m.

According to S.V. Kolopov's base basins method, the potential power can be calculated as follows.

Here:  –  is the average annual consumption of water in each area,

 –   is the height difference at the beginning and end of each area of the river, m.

The potential power of the river can be calculated with the following formula based on its perennial indicators.

Based on the potential power of rivers, their energy potential can be calculated. The potential power of the river can be calculated with the following formula based on its perennial indicators.

The aggregate power of KSES can be calculated by the following formula.

Here:  – is the consumption of water entering the water turbine, ;

  –    is static (gross) pressure, m;

    –  are the local losses of water pressure (local loss in the pipe that transmits water to the turbine (h_y) and local loss at the outlet of the pressure reservoir  ()), m;

–   F.I.E. of energy equipment.

Table 3 shows the hydropower potential of rivers based on the average consumption of water in small rivers controlled by the Hydrometrology Department of the Ministry of Ecology and Natural Resources of the Nakhchivan Autonomous Republic for the years 2002-2021.

Table 3.

Hydropower potential of small rivers of Nakhchivan Autonomous Republic

Solar energy resources are widely used in the production of electricity in the Nakhchivan Autonomous Republic. Thus, the share of solar energy resources in the production of electricity was 6.8% in 2016, and 11.4% in 2021. Solar energy resources of the Autonomous Republic have been examined in various studies. For comparison, the use of renewable energy resources in the Republic of Azerbaijan is not at a high level, and the installed power on RE resources is 8.22%, and the use of solar energy resources is even less. There are several reasons for this:

• first of all, one of the main factors affecting the development of innovation is the right choice of investment policy and its main forms.
• secondly, the "GREEN TARIFF" policy for electricity in Azerbaijan is not applied;

Therefore, the use of RE is not attractive for these reasons. In this field, projects were implemented only with the help of state investments.

Investment is a relatively new economic concept for the economy of Azerbaijan. In connection with the transition of Azerbaijan to a market economy, the concept of investment began to be used more widely.

The term "investment" comes from the Latin word (invest), which means to put out. In the broadest sense of the word, the phrase "to invest" means "to part with money today in order to earn more in the future."

In practice, four main forms of investment have been formed:

• Credit (line of credit);
• Leasing;
• Promissory note loan;
• Forfeiting.

One of the main forms of investment in the market economy is a bank loan. This form of investment is widely used in all countries, including Azerbaijan. Thus, all production capacities put into operation in the last 10 years in the energy system of Azerbaijan (North DRES - 400 MW, Baku IEM-1 - 106 MW, Nakhchivan, Astara, Sheki and Khachmaz modular power plants - 87 MW each, Baku IEM-2, Astara and Guba modular power stations - 105 MW each, Sumgayit thermal power station - 525 MW, Nakhchivan HPP, etc.) were built at the expense of bank loans.

Leasing is medium and long-term leasing of production equipment to user enterprises. Leasing is a type of rental activity, in which the elements of a debt obligation are observed, which gives it the identity of credit relations.

Currently, there is no unified interpretation of the term "leasing" in the scientific literature. This is mainly determined by two factors:

• Lack of uniform terminology in conducting leasing transactions (for example, in France, the terms "credit-ball", "credit-lease", in Belgium"location-financing", "financial lease" are used);
• The existence of legal and economic differences in the legislative acts of the countries.

Leasing operations in Azerbaijan were regulated by the "Leasing Service" law. In 2003, with the adoption of the Civil Code of the new Republic of Azerbaijan, the law "On Leasing Service" lost its force. Chapter 38, which is called "Leasing" in the Civil Code, and other matters not regulated in this chapter are regulated by Chapters 33 (renting of property) and 34 (lease) of this code. Leasing is widely used in Azerbaijan. Leasing operations are widely applied in sectors, like transportation, agriculture, medicine, etc.

In leasing transactions, the following three parties are involved:

• Seller (supplier) who manufactures technological equipment;
• Leasing provider, paying the cost of technological equipment and renting it out;
• The lessee is the lessee who buys and uses technological equipment for a certain period of time.

In world practice, two types of leasing are distinguished:

• Operational leasing;
• Financial leasing.

If we compare these types of leasing with the legislation of Azerbaijan, we will see that according to the leasing legislation, the term "Operational leasing" corresponds to the term "lease", and the term "Financial leasing" corresponds to the term "leasing".

The main reason why the international leasing operation (scheme) partially differs from the leasing operation scheme in the countries of the world, including the Republic of Azerbaijan, is not linguistics, but the main problem here is theoretical and legal aspects. The study of this issue is not the object of our research. Our main goal is to analyze the possibilities of applying leasing operations in the energy sector and to reveal its main features.

The analysis of the leasing market of Azerbaijan shows that the main reason for the development of this field is the accession of our country to the Ottawa Convention on International Financial Leasing (UNIDRUA) and the formation of a legal base in this field in the country.

The experience of using leasing operations in the world market shows that it has a number of positive aspects for the lessee:

• The lessee is not required to obtain initial financial resources;
• The lessee is not required to take bank and other loans;
• A new form of crediting is obtained in the form of goods with beneficial (profitable) conditions;
• Achieves flexible and prompt application of innovation in production;
• Gets the opportunity to reject equipment that is physically obsolete and has a low security risk;
• Maintains self-financing capabilities, stable financial condition and profitability of production;
• Since the leasing payments are included in the cost of the manufactured product, it is obtained with a discount;
• Since the leasing contract is very flexible, the lessee can take into account the characteristics of the production process (break in work, periodicity, seasonality, etc.) in the contract.
• Since the party providing the technological equipment (seller) leases the equipment, it is freed from the problem of payment of its cost, which affects stability of its financial status, creditworthiness, etc.

From the leasing operation, at the same time, the leasing and financing banks also get enough income. World experience shows that even in conditions of high bank rates, the bank's income from the leasing operation of technical equipment and technologies is more than the income from bank loans.

The above-mentioned positive aspects of leasing operations have encouraged its wide spread in the world. Leasing becomes more efficient, especially in the field of applying new technological equipment to production. This practice is more commonly used in the United States and Western European countries (Great Britain, France, Germany, Italy, Sweden, Spain, etc.). In Eastern European countries, with the exception of the Czech Republic, leasing is not widespread, but its development dynamics is on the rise. Leasing operations are also developing rapidly in the Russian Federation. Legislation and leasing companies operate in this area. Leasing operations are not widely used only in the field of energy, there are only a few companies that provide leasing activities. One of them is "Turbakon" Scientific-Production Application Enterprise (Научно-Производственное Внедренческое Предприятие "Турбакон") and "Saturn" Scientific-Production Union (Научно-Производственное Предприятие «Сатурн), which produces energy-saving, small and medium-power turbines based on combined heat and electric energy production. Such enterprises also operate in the Ukraine.

In Azerbaijan, in general, leasing is not applied in the energy industry, including the use of RE resources. This ultimately kills business interest in this area.

A comparative analysis of the possibilities of investment forms shows that each of them can be applied in practice, depending on the current economic conditions of the countries. In the experience of Azerbaijan, the first two - credit and leasing forms of investment are mostly applied, but they are not applied in the energy industry.

The application of leasing can also be effective in the development of entrepreneurship in the energy sector, in terms of the use of alternative energy sources and the development of small energy. From this point of view, it would be more appropriate to establish the state company "Energyleasing" in our Republic for the development of small power generation based on renewable energy.

At the same time, there is a need to create an institution capable of implementing the technological transfer channel in the creation of innovation technologies and the application of these technologies. The main task of the Technology Transfer Channel (TTC) is to create a connection between the creators of technologies and their consumers through the transfer channel, in addition to implementing the development of new technologies. As creators of technologies, higher education institutions, research institutes, various design bureaus, etc. can be.

In the Autonomous Republic of Nakhchivan and the Republic of Turkey, Universities can play the role of TTC in this field. For this purpose, it would be appropriate to establish the department of "Energy and renewable energy sources" in Nakhchivan and Igdir Universities and develop recommendations for the purpose of extensive research and practical use of RE resources in these departments.

At the same time, the creation of the "ENERGYLEASING" company for the purpose of designing, purchasing and installing equipment for individual (special) micro and small power plants based on renewable energy can also be effective. This organization can also perform the function of Technology Transfer Channel in the field of innovation technologies. "Energy Leasing" companies are widely used in the USA, Western Europe and other countries for the use of energy equipment, especially renewable energy in the production of electricity. Azerbaijan and Turkey do not pay attention to this area. The main reason for this is that private business is not interested in using renewable energy. So, in this field, the relevant legislative framework and the motivational policy of the state are insufficient in Azerbaijan.

In conclusion, it should be said that any scientific and technical works (projects), even the most brilliant and innovative ones, are not of interest to the real market, and these projects can be considered semi-finished products as they are not sold in the business market. The final result of any scientific and technical work or project should be the income obtained as a result of its application to production. In this regard, there is a need to improve the tariff policy and apply the "Green tariff".

References:

1. Novruzova S.Y   Solar Energy Resources of Nakhchivan . Bulletin of Science and Practice Scientific Journal 2021, Volume, 7 Issue 9.
2. Yusibeyli N.A., Novruzova S.Y., Rzayev M.A., Nasirov Sh.N. Renewable energy and green tariff policy. News of Azerbaijan Higher Technical Schools. Proceedings of the international scientific conference "Energy of the Future". ADNSU., 2019.., No. 2. Pg. 95-101.
3. https://www.developmentaid.org/api/frontend/cms/file/2022/04/IRENA_RE_Capacity_Statistics_2022.pdf.