OMM Newsroom
Azerbaijan has so far mainly supplied oil and gas to Europe, but now plans to export electricity. The proposed Green Energy Corridor would carry renewable energy from Azerbaijan through Georgia and under the Black Sea to Romania, and then on to Hungary.
According to AnewZ, the project is estimated to cost €22.1 billion. The corridor could expand Azerbaijan’s energy cooperation with Europe and provide European buyers with an additional source of electricity at a time of rising demand and efforts by countries to diversify supply. However, key questions include who will finance the project and whether it will generate enough revenue to justify the investment.
Project cost and implementation schedule
The estimated cost is set out in an investment presentation by Green Energy Corridor Power Company (GECO). The calculation is based on a feasibility study prepared by Italian consulting firm CESI. According to Interfax, citing the presentation, about €14.3 billion of the €22.1 billion is earmarked for transmission infrastructure and €7.8 billion for renewable electricity generation.
These figures are preliminary estimates and do not mean the funding has already been secured. Azerbaijan’s Ministry of Energy says the feasibility study found the project technically feasible and economically attractive. Its findings were presented to international investors and financial institutions at a forum in Baku on Oct. 22.
The main task now is to turn the estimate into financing agreements and contracts. The four participating countries — Azerbaijan, Georgia, Romania and Hungary — are preparing to make a final investment decision in 2029.
Under the current plan, the corridor is expected to begin operating in stages from 2032 and reach full capacity by 2040. These dates are targets, not guarantees. The Ministry of Energy says the project aims to transmit about 20 billion kilowatt-hours of electricity to Europe annually by 2040. Its planned transmission capacity is about 4 gigawatts.
A gigawatt measures the power the corridor can transmit at a given moment, while a kilowatt-hour measures the amount of electricity delivered over time. The feasibility study also projects that the corridor could support the development of at least 8 gigawatts of renewable energy generation capacity in the region.
Financing and electricity buyers
Given the project’s scale, its financing could involve governments, international financial institutions and private investors. The Ministry of Energy says representatives of development banks and investment companies discussed financing models, risk-sharing and ways to combine public and private funds at the Baku forum. Participation in the discussions does not amount to a commitment to finance the project.
How the costs are shared could affect the project’s prospects. Governments may be willing to support it because of its strategic importance, while private investors and lenders will need assurances that it can generate reliable returns.
According to Interfax, some project calculations assume an EU grant equivalent to 25% of capital costs. However, including such funding in a financial model does not mean a grant has been awarded. The scale and terms of public support could affect the project’s economic performance.
Alongside construction, finding buyers willing to purchase electricity over the long term will be essential. The Ministry of Energy says a business model combining regulated and commercial elements is under consideration. Long-term power purchase agreements, private investment and cross-border trade are central to the model.
A long-term power purchase agreement provides a framework for a buyer and producer to trade electricity over an extended period, making revenue more predictable for investors. However, the price must work for both sides.
Buyers will compare the price of delivered electricity with existing alternatives in Europe. Project sponsors, in turn, must account for generation, transmission infrastructure, financing and maintenance costs, as well as electricity losses along the route.
The positive feasibility assessment is an important milestone. The next commercial test will be whether the corridor can secure buyers and financing on viable terms.
Expanding energy links with Europe
The project’s significance extends beyond its financial figures. Exporting renewable electricity could broaden Azerbaijan’s energy partnership with Europe, traditionally built around oil and gas. For Europe, a new connection could provide an additional source of supply and strengthen ties with the South Caucasus. However, the corridor’s contribution to Europe’s overall electricity demand must be assessed in relation to market size and other available sources.
Delivering the project depends on building a route crossing several jurisdictions, including a technically complex section planned beneath the Black Sea. This will require both renewable energy generation and infrastructure to transmit the electricity.
The route has been proposed and the feasibility study completed. In the next phase, project supporters will need to secure financing, buyers and the necessary agreements to move the plan into construction.
