The European Bank for Reconstruction and Development (EBRD) has emphasised Azerbaijan’s favourable position to become a leader in low-carbon hydrogen production, citing the country’s abundant renewable energy resources and strategic natural gas reserves.

Azernews reports that, according to the bank, Azerbaijan benefits from promising renewable energy sources in the Caspian Sea and the eastern regions, alongside direct access to key natural gas fields such as Shah Deniz. This advantageous combination lays the groundwork for both green hydrogen—produced using renewable energy—and blue hydrogen, which involves carbon capture and storage in depleted gas fields. These factors contribute to making Azerbaijani hydrogen cost-competitive, especially when wind and solar energy are optimised, enabling prices that rival many European Union countries.

However, the EBRD noted that water availability remains a significant challenge for hydrogen production, although employing recycled water strategies could help mitigate costs.

Azerbaijan’s approach to integrating low-carbon hydrogen into sectors like transportation and district heating aligns with its broader export-focused strategy, leveraging existing gas pipeline infrastructure.

Beyond export opportunities, the domestic consumption of hydrogen represents a strategic advantage. Incorporating hydrogen into local industries can facilitate the decarbonisation of hard-to-abate sectors and support the country’s national climate goals.

The Southern Gas Corridor stands out as a critical route for hydrogen exports to Europe, necessitating cooperation among regional partners. Azerbaijan’s firm commitment to greenhouse gas reduction—highlighted by its Nationally Determined Contributions (NDCs) and draft National Strategy for Low Carbon Development—reflects its ambition to cultivate a robust hydrogen economy.

The EBRD underlined that a comprehensive national roadmap, combined with targeted strategic investments, could position Azerbaijan as a key player in the global hydrogen market.

The bank’s upcoming assignment aims to equip the Azerbaijani government with essential data and recommendations to guide regulatory and policy measures necessary to realise the country’s hydrogen potential and meet the goals outlined in the strategy presented at COP29.