OREANDA-NEWS. April 30, 2010. Despite fiasco of plans on an investment project on the basis of its technical assistance realized by N-Tech’s consultants to a project on renewable energy sources in Azerbaijan, the Asian Development Bank (ADB) did not lost an interest to this sector.

The Baku-based ADB representative office reports that they keep on observing progress in the area of alternative energy in Azerbaijan.

“Currently only efforts of the government and attempts of institutionalization of this sector management are obvious. We as well as ADB keep interest to development of alternative energy in Azerbaijan and ready to support private investment projects in this sector if they appear in the country,” the ADB office said.

According to the Bank, a total of 43 potential small hydropower sites all over Azerbaijan were identified, analyzed, and crosschecked, and 21 sites were considered as technically feasible. Among them, 4 projects were extraordinarily attractive and recommended to be included in the proposed investment project.

“The proposed investment project includes the construction and operation of 4 small hydropower plants with a total installed capacity of 10 megawatts (MW) and estimated costs on the infrastructure part at around USD 25 million,” it was reported.

The estimates were made in 2006, but no investment project has been realized so far.

“The Government wished to see renewable energy development by the private sector, without public budget support. However, with a financial rate of return in the magnitude of 14% and the lending terms prevailing among commercial banks of 12-20%, made it difficult to attract the private sector to invest into small hydropower. Furthermore, the institutional, regulatory, and tariff environment did not provide enough incentive for private sector investment in the short-term. In the absence of a clear preferential and published tariff policy for renewable energy projects of around 6 cents/kWh, private capital will hardly make any investments in renewable energy development,” it was informed.

The ADB consultants also indicated that development of renewable sources including hydropower, wind, solar, and biomass is expensive compared with conventional energy sources. That is why it is necessary for the Government to create favorable promotion policies in this sector such as tariff subsidies and tax exemption. The consultant’s feasibility study identified that investment in small hydropower projects will be financially viable.