IEA (2022), Implementing a Long-Term Energy Policy Planning Process for Azerbaijan: A Roadmap, IEA, Paris https://www.iea.org/reports/implementing-a-long-term-energy-policy-planning-process-for-azerbaijan-a-roadmap, License: CC BY 4.0
Long-term energy planning is central to a country’s strategic direction. Without it, governments may end up relying on a patchwork of policies and legislation that can be incoherent and ill-suited for the complex challenges countries are increasingly faced with. Good long-term energy planning encompasses domestic and foreign policy, while touching on many key areas of the economy including industry, natural resources and trade. The process involves multiple stakeholders across the government, but also brings in the private sector as well as citizens, as it aims to set out a strategic path towards a clear goal.
At a time when most countries have signed on to the Paris Agreement and are working towards their nationally determined contributions (NDCs), developing an energy strategy with a long-term view is all the more important. Many governments have developed or are in the process of developing energy strategies via long-term energy planning. The energy transition is at the core for many of these countries, but other goals, such as energy security, energy access and trade, must also remain central. Each country will have a combination of priorities that drives its strategic goals and informs the policy planning process.
As the world works to recover from the Covid-19 pandemic and looks towards a net zero future, long-term energy planning is becoming a necessity, rather than a choice. While each country has its own path to energy policy planning that reflects its unique situation, it is clear that countries must take ownership of this process. While some aspects can be externalised or developed in concert with other organisations, energy policy planning and the eventual development of an energy strategy must come from within governments, stemming from a clear assessment of the current context, as well as the country’s needs and goals.
Azerbaijan, like many of its peers, is looking to understand how best to meet the opportunities and complexities of the global clean energy transition. The 2014-2015 oil shock prompted the government to consider and draft a slate of new laws and reform packages, and at present efforts are being made to finalise and pass an energy strategy. The price volatility seen in global markets over 2020-2022 is making it even clearer that energy planning using scenario analysis and modelling will help countries successfully respond to new and unexpected challenges in a resilient fashion.
The energy policy planning process and the process of creating an energy strategy are inextricably linked. An energy strategy is an evolving collection of targets and policies that sets out a country’s goals for a defined period of time. The overall policy planning process both feeds into an energy strategy and is also based on it. The process of long-term energy planning is one of strengthening a country’s ability to take on unexpected challenges and emergencies. This circular process means that a country’s energy strategy is constantly evolving.
Energy statistics play a key role in policy making and the process of putting together an energy strategy. However, that role is not always well defined. While this roadmap sets out one approach to the long-term energy planning process, and others are indeed possible, all good energy policy planning involves statisticians and energy statistics, as well as modelling.
A long-term strategy will start from a political or economic goal. In order to reach that goal and to understand the consequences and potential trade-offs, modelling of scenarios or pathways will likely be necessary. However, such modelling can be achieved only if there are comprehensive energy statistics that properly measure and thus quantify the energy system from both the supply and demand perspectives.
Achieving a long-term plan requires strong political thought leadership, but that alone will not be enough. This is why long-term energy planning is a process that needs to be embedded in government policy making, from both structural and procedural levels.
This roadmap details the necessary steps in building that process and exploring relevant policy options that producer economies have pursued, which may be relevant to Azerbaijan. It then discusses data collection and survey design, which are key to establishing the base for energy modelling. The roadmap then looks at energy modelling and its role in policy making.
Successful policy development needs good communication across government, integrating statistics into the policy-making process and investing in data collection where information gaps exist. Those topics are explored as well as the importance of monitoring and evaluation policies and creating meaningful indicators to help understand the impacts of these policies.
Many countries have embarked on long-term energy planning, increasingly so in the lead-up to the 26th Conference of the Parties (COP26), as governments worked to define their net zero timelines and pledges. However, energy planning can take its lead from other priorities. India, while still prioritising pollution and energy access, has put energy security at the heart of its planning. Meanwhile energy producers such as Egypt and the United Arab Emirates (UAE) have examined ways to diversify their energy use and mitigate vulnerabilities, often through the development of renewables, to seek to maximise export volumes and thus the value of their energy resources.
This roadmap aims to help Azerbaijan reconsider the policy planning process as it looks to connect key laws and reforms into a greater energy strategy. It also sets out a path for Azerbaijan to make this process sustainable and iterative, connecting its policymakers with its statisticians, and investing in in-house modelling capacity. Every country must choose its own energy path, based on its specific needs and resources, but having a long-term plan can smooth out that path significantly.