Who is the Black Sea Submarine Cable Project Targeting?

[wpdm_package id=’6587′]

The foundation of the project was laid in December 2022 in Bucharest, when Azerbaijan, Hungary, Georgia, and Romania signed an agreement on strategic partnership for the development and supply of “green energy.” Under this agreement, an underwater cable will be laid across the Black Sea to transmit 1 GW of electricity. Initially, the cable, with a length of 1,195 km, was planned to transport 1 GW of electricity generated in Azerbaijan, through Georgia and the Black Sea to Romania, and then to Hungary and other parts of Europe. However, it was later announced that the cable would be designed to transmit not 1 GW, but 3 GW of energy. According to Azerbaijani President Ilham Aliyev, this change in the project was proposed by him.

The Black Sea Submarine Cable Project project is fully supported by global financial institutions such as the European Union and the World Bank. The feasibility study (FS) of the project was prepared with the financial support of the World Bank, which provided Georgia with a $75 million loan for this purpose, $35 million of which was approved in May of this year. The World Bank’s Executive Board approved a $35 million loan to finance the first phase of the Enhancing Energy Security through Power Interconnection and Renewable Energy Program (ESPIRE).

The ESPIRE program consists of three stages and envisages a potential funding package of $500 million to improve Georgia’s institutional capacity in developing the underwater cable project through the Black Sea, strengthening the local power transmission system, and creating a direct energy link between the South Caucasus and Southeast Europe.

The goals of the ESPIRE program include the development of the Black Sea Submarine Cable Project (BSSC) with parallel laying of power transmission lines and fiber-optic cable along the Black Sea with terminal points in Georgia and Romania. Initially, the feasibility study, which was scheduled to be completed by the end of 2023, was completed at the end of July 2024. According to the Ministry of Economy and Sustainable Development of Georgia, the international FS confirmed the economic and technical feasibility of the project to build the underwater “green energy” cable through the Black Sea. It is reported that since 2022, the FS has been carried out by the state company “Georgian State Electrosystem” with the support of the World Bank and the Ministry of Economy and Sustainable Development of Georgia by the Italian consulting company CESI. According to this study, the project of an underwater cable through the Black Sea is not only promising but also technically and economically feasible.

The study identified the optimal characteristics of the power cable, calculated the construction costs, and conducted an economic analysis of the project. The cable routes on land and sea were also mapped out, a project implementation plan and procurement strategy were developed, and technical specifications for the tender and descriptions of the work required for geotechnical, geophysical, environmental, and archaeological surveys of the seabed were prepared.

In 2025-2026, environmental and social impact studies, as well as an assessment of the project’s impact on the seabed, are planned.

Thus, the feasibility study, which had been expected for two years, has been completed. According to preliminary data, the European Union intends to allocate 2.3 billion euros to finance the project, which indicates full support for the project from Brussels. This support and significant regional interest in the project have prompted Armenia to seek participation as well. Prime Minister Nikol Pashinyan, during his visit to Georgia, expressed hope for Tbilisi’s support in joining the project. However, it is clear that Georgia is not the key country in this project, but merely one of the participants. Another key country is Azerbaijan, and without Baku’s official consent, Armenia’s participation in the project is impossible.

The energy export potential of the project participants varies significantly. For instance, Georgia cannot fully meet its own energy needs. According to the Georgian Electricity Market Operator (ESCO), in 2023, the country consumed 13.7 billion kWh of electricity, which is 7.4% less than in the previous year. Experts predict that by 2030, electricity demand will increase by 70% and reach 22 billion kWh. In 2023, Georgia produced 14.4 billion kWh of electricity, 1% more than in 2022. Throughout the year, official Tbilisi exported 1.5 billion kWh of electricity and imported about 900 million kWh.

According to Prime Minister Irakli Kobakhidze, the country will be able to increase electricity production to a level exceeding consumption only by 2030. The head of government reported that 284 contracts have been signed for the construction of new power plants: 214 hydroelectric plants, 26 wind farms, and 44 solar power plants. He expressed confidence that all relevant projects would be successfully implemented.

Despite the Prime Minister’s confidence, experience shows that Georgia faces serious challenges in building power plants. For example, the construction projects of the Namakhvani HPP (433 MW, $850 million), Khidoni HPP (702 MW, $1.1 billion), and Nenskra HPP (280 MW, $1 billion) on the Inguri River, completed in the 2010s, faced repeated protests from “greens” and local populations, leading to work stoppages and investors pulling out of projects. In this context, the government’s plans to increase production by 2030 will not be easy to implement.

According to official data, Azerbaijan’s production capacity is about 8,400 MW. Currently, a 1,200 MW thermal power plant is under construction in the country. According to plans, by 2030, Azerbaijan will implement 7 GW of renewable energy projects. As noted by Jabrail Aliyev, Acting Head of the State Agency for Renewable Energy Sources under the Ministry of Energy of Azerbaijan (AREA), 2 GW of the energy generated from these projects will be for domestic consumption, 4 GW will be transmitted from the Caspian Sea to the European Union, and 1 GW will be directed from Azerbaijan to Turkey and Europe.

According to Energy Minister Parviz Shahbazov, by 2027, the share of renewable energy will increase to 33% of installed capacity through the construction of wind and solar power plants with a total capacity of up to 2 GW, costing more than $2 billion.

In addition, the wind energy potential in the Azerbaijani sector of the Caspian Sea is estimated at 157 GW. Work has already begun in Azerbaijan to measure the wind potential in the corresponding sea area. According to the Renewable Energy Agency under the Ministry of Energy of the Republic of Azerbaijan, the “Strategy for Socio-Economic Development for 2022–2026” provides for measures to study the potential of wind energy at sea and prepare for its utilization. The measurement work will be completed using LIDAR (Light Detection and Ranging) equipment provided by the Finnish company Vaisala.

It should be noted that while the wind energy potential in the Azerbaijani sector of the Caspian Sea is stated to be 157 GW, not all of this potential can be utilized. Experts point out that the possibilities for installing wind farms depend on many factors, such as sea routes, fishing, oil and gas extraction, depth, and shallow waters. However, even if 10% of this potential can be realized, it would be a significant achievement.

To ensure continuous energy transmission to Europe, Azerbaijan aims to involve Central Asian countries such as Kazakhstan and Uzbekistan in the project. In May of this year, the three countries signed important documents envisaging the laying of an energy cable through the Caspian Sea. Azerbaijan claims that Central Asia has high potential for wind energy production, and the implementation of such a project would be of great significance to all its participants.

At present, neither of these two countries can fully meet its energy needs. As of January 1, 2023, electricity production in Kazakhstan is carried out by 204 power plants (74 traditional and 130 renewable energy plants). The total installed capacity of power plants in Kazakhstan is 24,523.7 MW, of which the available capacity is 19,024.3 MW. The total installed capacity of renewable energy sources is 2,388 MW, of which 957 MW is from wind farms, 1,149 MW from solar, 280 MW from hydroelectric plants, and 2 MW from biogas plants.

In Kazakhstan, over 70% of electricity is produced from coal, 15% from water resources, 10% from gas, and about 5% from petroleum products. Kazakhstan is among the leading CIS countries in creating a legal framework for the development of renewable energy sources. The country aims to increase the share of wind and solar energy to 15% of total production by 2030. This is planned to be achieved through the implementation of several large projects with a capacity of 1 GW. European companies have already signed an agreement with the government of Kazakhstan to implement a major project in the west of the country, which envisages the creation of wind and solar power plants with a total capacity of about 40 GW, which is three times more than the current capacity of Kazakhstan’s entire power sector.

As for Uzbekistan, over the past four years, the country has signed contracts for the construction of 25 modern power plants worth a total of $10.1 billion, which will be put into operation by the end of 2026. Of the 25 power plants with a total capacity of 11.9 thousand MW, nine will be thermal, nine solar, and seven wind. Their launch will lead to a 60% increase in Uzbekistan’s energy system capacity.

According to Uzbekistan’s development strategy, by 2030, total generation capacity will increase 2.4 times and reach 44.9 GW. At the same time, the share of renewable energy sources will increase to 40%, for which projects to produce solar and wind energy with a total capacity of 18.8 GW (8.6 GW of solar and 10.2 GW of wind) will be implemented.

As for Azerbaijan’s domestic energy supply, in 2018 the country produced 25,229.2 million kWh of electricity, and in 2023 – 29,276.6 million kWh. This represents a 16% increase in electricity production, or more than 4 billion kWh in six years. During this period, the capacity of power plants increased from 7,828.9 MW in 2018 to nearly 8,400 MW by April 2024.

Taking into account losses (an average of 2.1–2.2 billion kWh per year) and the self-consumption of energy enterprises (an average of 3.0–3.8 billion kWh per year), final consumption increased from 17,811.5 million kWh in 2018 to 22,500 million kWh in 2023. This represents a 26.3% increase in consumption or about 4.7 billion kWh. The producer forecasts that by 2030, consumption will reach 34 billion kWh.

Energy Consumption by Consumer Groups in Azerbaijan (million kWh)*

*Table prepared based on data from the State Statistics Committee.

The table clearly shows that in the major consumer groups of the country, except for agriculture, forestry, and fishing, there has been no consistent growth in energy consumption. This indicates that the main portion of the projected increase in consumption will occur in the territories liberated from occupation.

It is worth noting that in Europe, the countries most interested in receiving energy from Azerbaijan include Romania, Hungary, Bulgaria, Serbia, and others. Agreements have already been reached with the first two.

However, there are also risks associated with the implementation of the project, which have intensified recently. The first risk is related to the war in the Black Sea region: the likelihood of the aggressive war by Russia in Ukraine ending in the foreseeable future is decreasing. Laying the cable under conditions of ongoing military actions in the Black Sea presents significant risks. The second significant risk is related to the sharp deterioration in relations between Georgia and the European Union. Brussels has consistently been suspending aid programs directed toward Tbilisi. If the crisis is not resolved, EU support for the “Black Sea Energy” project could also be jeopardized.