Interim narrative report

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  1. This report must be completed and signed by the Contact person.

  2. The information provided below must correspond to the financial information that appears in the financial report.

  3. Please complete the report using a typewriter or computer (you can find this form at the following address).

  4. Please expand the paragraphs as necessary.

  5. Please refer to the Special Conditions of your grant contract and send one copy of the report to each address mentioned.

  6. The Contracting Authority will reject any incomplete or badly completed reports.

  7. The answer to all questions must cover the reporting period as specified in point 1.6.

  1. Description

    1. Name of beneficiary of grant contract: State Company AREA (State Company on Alternative and Renewable Energy of Azerbaijan Republic)

    2. Name and title of the Contact person: Rasul Efendiyev, Project Manager

    3. Name of partners in the Action: Government of Norway/Government of Azerbaijan/UNDP

    4. Title of the Action: Promoting Development of Sustainable Energy in Azerbaijan

    5. Contract number: DCI-ENV/2010/254-973

    6. Start date and end date of the reporting period: 25.11.2011 – 24.11.2012

    7. Target country(ies) or region(s): Azerbaijan

    8. Final beneficiaries and/or target groups1 (if different) (including numbers of women and men): State Company AREA , rural population of Azerbaijan

    9. Country(ies) in which the activities take place (if different from 1.7): N/A

  2. Assessment of implementation of Action activities

    1. Executive summary of the Action

The overall objective of the action is to promote the development of sustainable energy in Azerbaijan. The specific objectives of the project are as follows:
(a) To undertake studies with the aim to identify a suitable site for a small hydro-power station and to carry out its construction leading to successful commercial operation.
(b) Conduct a training program in sustainable energy across a large cross-section of various interest groups viz. energy managers, students, media, community support organizations, etc.
(c) Assess the economic/financial aspects of installing renewable energy projects to demonstrate their potential as a viable mode of delivering energy, especially to the small towns and villages
(d) To develop new legislation for the promotion of renewable energy for approval by the Cabinet of Ministers.
(e) Prepare detailed feasibility reports of three pilot projects, using wind, solar and biomass/biogas technologies.

    1. Activities and results

  1. Project Management

Progress at beginning of reporting period

Achieved at end of reporting period

  • Actual time elapsed since project start: 11 months (37%)

  • Project team deployed and functioning in the office space provided by State Company AREA * since 9 months (30% of project duration).

  • EUR 224,853 (US$ 290,061) (or 29%) out of the total project amount was disbursed.

  • Actual time elapsed since project start: 23 months (77%)

  • Project team continued to perform its functions effectively over the last 21 months (70% of project duration) and has been successfully managing all project activities.

  • EUR 567,225 (US$ 737,393) (or 56.7%) out of the total project amount has been disbursed.

Note: This relatively low financial delivery figure does not reflect overall progress in the Project. Out of total EUR 1 mln, EUR 300,000 (or 30% of total) are allocated for the purchase of a turbine for small hydropower. As soon as construction starts, the financial delivery will increase fast. As it is seen from the reports under each component below, out of 5 project components 4 are close to completion.

Expected result at the end of reporting period

  • Indicator 1: All the activities on the project continue to remain on track and agreed upon outputs are delivered by external experts

  • Indicator 2: Budgeted expenditures continue to disburse according to plan.

* State Agency for Alternate and Renewable Energy Sources (AREA) was renamed as State Company AREA (Alternate and Renewable Energy Azerbaijan)
Two steering committee meetings took place during the reporting period on December 8 2011 and July 6 2012, which were attended by the management of the State Company AREA as well as representatives of EU, Norway and UNDP.  The decisions taken in these meetings helped in the timely completion of most of the activities under the project.
2.2.1 The Project Manager (Rasul Efendiyev) and Project Assistant (Narmin Mirzayeva) have been performing in their respective positions since 1st March 2011 (70% of the elapsed time to date). However, the Hydropower Technical Expert (Ayten Poladova) left the project in February2012 on her own accord and was replaced by a Project Consultant (Ilgar Gurbanov). Besides coordinating the activities of external experts, the project team has been monitoring the project budget, maintaining project accounts, processing the consultants’ Daily Subsistence Allowances (DSAs) and Requests for Direct Payments (RDPs), etc.
2.2.2 The Lead Project Advisor (international expert) successfully completed all assignments given to him and his contract was concluded in August 2012. However, he continues to provide useful advice on the project from time to time on “as needed” basis. More recently, in September-October 2012, he assisted the project team in the formulation of an international training program on renewable energy for the AREA team members.
2.2.3. During the period10-21September 2012, the Project has been monitored by the EU monitor Mr. Evgeny Vodichev who submitted his report on 31 October 2012. All related information was provided to him by the Project Team to facilitate his work. Mr. Vodichev held meetings with the UNDP Deputy Resident Representative Mrs. Nato Alhazishvili, as well as with the UNDP Project Coordinator, Mr. Chingiz Mammadov and the Project Manager Mr. Rasul Efendiyev. In addition, he met with AREA officials including the Project Director Mr. Jamil Melikov. The monitoring positively assessed the results of work with grading “B” in all categories.
2.2.4 Most of the tasks assigned to international and local consultants for the various project components were completed and the hired experts were released from their assignments. As mentioned above, the Lead Project Advisor successfully completed his assigned tasks, the international hydropower expert completed his detailed feasibility report and the international training expert also submitted her final report during the last 12 months.

Component 1: Support the building of one small hydro-power plant as a demonstration of its viability in Azerbaijan.

Progress at beginning of reporting period

Achieved at end of reporting period

  • The site selection for the hydropower station was finalized.

  • Preliminary feasibility report of the project was completed.

  • The feasibility report was completed in early 2012 and accepted by both UNDP and AREA

  • The firm (M/s Khazar) was selected and D&S contract was awarded in July 2012.

  • Detailed design of the station and preliminary budget for the construction works were prepared

  • Tendering of equipment has not been launched yet.

  • Preparatory works completed (100%) including design of the station, and tendering documents

  • The construction and investment arrangements are still under discussion.

  • As construction has not started the overall progress on this component is estimated at 40%.

Expected result at the end of reporting period

  • The feasibility report including the preliminary technical design to be completed by January 2012.

  • Selection of a D&S (design and supervision) firm to be finalized by July 2012.

  • Tendering of the turbine and other equipment to be completed and contract awarded in September 2012.

  • Selection of a C&I (construction and investment) firm to be finalized.

  • 50% of the construction works to be completed and an overall progress of 70% to be achieved.

2.2.5 The team of international and local consultants (Hans Sandkuhler and Nazim Garayev) completed the feasibility report of the small hydropower station in Sheki on Deyirmanarxi River in the town of Sheki. A strong factor in favour of this site is that a new upstream reservoir is currently being built on Kish River to meet the future water needs of Sheki’s residents. After this facility is built, it is expected that the amount of water in Deyirmanarxi River will double and, therefore, the output capacity of the planned SHPS can also be made two-fold – from the presently planned 817 KW to an ultimate installed capacity of 1.634 MW.

2.2.6 It was expected that the detailed information and preliminary design of the project included in the feasibility report will be sufficient to attract private investor(s) to the project. However, AREA is still studying whether it should undertake the project construction itself or through a C&I firm to be selected for this purpose. This has delayed the actual construction works as well as procurement of equipment for the station. It may be noted that the total estimated cost of the power station is US$ 2.24 million, however more precise figures will be available when tenders for turbine, generator and other equipment are conducted.
2.2.7 Due to the above reasons, the actual construction of the hydropower station has been delayed by about 6 months. This may require respective no-cost extension.
2.2.8 The request for proposal for design and supervision (D&S) services was sent to all three Azerbaijani firms that are registered and licensed by the State Committee on Urban Planning and Architecture companies. In response to the request for proposals one company refused to take part in the tender, and two other submitted their proposals. The firms are M/s Khazar Scientific-Technical Creativity Center of Youth and M/s S&Q Mart Azeri LLC. Based on the technical and financial evaluation of the two proposals, M/s Khazar was selected and awarded the contract. As the feasibility report of the hydropower station at Sheki was completed in the reporting period and the D&S firm’ selection and contract award process has been finalized, the overall progress on this component during the reporting period is estimated to stand at approximately 40% of the target that was planned at the start of the reporting period.
Component 2: Acceptance of sustainable energy as a suitable energy option by energy managers and municipal authorities

Progress at beginning of reporting period

Achieved at end of reporting period

  • The main seminar in Baku (of 3 days duration) and 5 regional seminars on raising awareness were attended by over 250 key persons, including trainers under TOT program.

  • Workshops for policy makers and stakeholders, were conducted in five locations.

  • The reports on the Project activities were disseminated by 5 TV companies, 6 information agencies and 3 newspapers.

  • The Educational Roadmap document has been finalized.

  • Three publications, the book on sustainable energy, teacher’s manual and album for children were prepared and will be published before end of 2012.

  • Current implementation could be assessed as close to 100%; full implementation will be achieved by December 2012.

Expected results the end of reporting period

  • Wide dissemination of information about the key seminars and activities conducted under the project.

  • Preparation of a manual to act as an “Educational Roadmap” for the continued training in the field of renewable energy and to raise awareness and acceptability throughout Azerbaijan.

2.2.9 Through the holding of seminars led by a local consultant (Ayten Aliyeva) and an international expert (Svetlana Frenova, a Russian citizen who is currently working in the UK), a large body of experts from media, industry, academia, etc. have been made aware of the benefits of renewable energy. The events arranged under the project have attracted the attention of journalists from the print and electronic media and they were widely reported.

2.2.10 A database of over 250 national level as well regional stakeholders has been developed who will act as the opinion leaders for bringing about changes in public perception regarding renewable energy throughout the country.
2.2.11 An Education Roadmap document has been developed which provides program-based guidance on achieving a systemic development and implementation of 4 different types of training packages targeted to the specific needs of: (a) policy-makers and energy-managers;
(b) mixed audience, including businesses, government and public sector; (c) regional population of Azerbaijan; and (d) students. Special attention was given in the Roadmap to making education on renewable energy a more central part within the overall educational system to help improve the knowledge and perception of Azerbaijan society on renewable energy sources in the coming months and years.
2.2.12 The only remaining activity is the publication (preparation is already done) of a book, a teacher’s manual and children album on sustainable energy, which will be finalized in 2012
Component 3: Evaluation of the economics of wind, solar and biomass sources of energy in Azerbaijan

Progress at beginning of reporting period

Achieved at end of reporting period

  • Draft economic and financial analysis report and model submitted to AREA, which reviewed and provided its comments to the team of experts.

  • The final narrative report and economic/financial models were completed and submitted.

  • Clarifications were provided in response to the questions relating to FIT setting process.

  • Based on the Steering Committee’s request, the lead project advisor submitted a proposal of a study tour of AREA experts to UK or/and Canada and/or Turkey to learn more about regulations and FIT practices there.

  • All activities under this component were completed successfully. With the study tour to U.K. (and Turkey) expected to be done before the end of 2012, a progress of 100% will be reached.

Expected result at the end of reporting period

  • To incorporate the comments of UNDP and AREA in the economic/financial model and to provide any needed clarifications asked by AREA experts.

  • Provide a greater insight into the feed-in tariff (FIT) setting process in other similar countries.

2.2.12 The team comprised of a local expert (Nazim Mamedov) and an international consultant (Arvid Kruze) finalized their report on the economic and financial analysis of the 3 selected renewable energy (RE) technologies, namely, wind power, solar PV power and biomass power from animal waste. Their report basically covers the following areas: (i) International costs and benefits; (ii) Environmental, social and training costs of implementing the selected RE technologies; (iii) Azerbaijan specific costs and benefits; (iv) Experience of other countries similar to Azerbaijan in implementing RE technologies; (v) Economic analyses of particular wind power, solar PV and biomass projects; and (vi) Financial analyses of these projects.

2.2.13 At the request of AREA, the international expert was asked to submit a proposal for arranging and conducting a study tour by a team of up to 2 AREA professionals with the following objectives: (i) Learning in detail through practical models the methodology for assessing the viability of renewable energy projects and comparing different models for the design of Feed-in-Tariffs (FIT); (ii) Visit to a regulatory agency responsible for enacting the legal framework for renewable energy to gain an understanding of the methodology used in arriving at the FIT;  (iii) Visit to a functioning solar PV facility; (iv) Visit to an operational wind farm; and (v) Visit to a biomass-to-energy plant. 
2.2.14 Arvid Kruze submitted a proposal of a study tour to Canada. A similar proposal was requested from the international consultant on Component 5 (Rod Hacker) for a study tour of U.K. Both the submitted proposals were accepted, however, due to visa constraints and time consideration, it was decided not to undertake the Canadian part of the study tour during this year. In addition, UNDP office discussed and agreed with UNDP-Turkey office to organize tour to Turkey to get acquainted with the regulation of renewable energy industry there. It’s currently planned that this study tour will take place in December 2012.
Component 4: Enactment of a set of coherent regulatory and institutional documents for wind, solar and biomass sources of energy

Progress at beginning of reporting period

Achieved at end of reporting period

  • The various relevant laws, both Azerbaijani legislation, as well as those of a select list of countries were studied and useful lessons drawn from them for incorporation in a new renewable energy law.

  • A set of recommendations developed on the required regulatory and institutional changes to facilitate sustainable energy development and leveraging of increased private sector financing for the sector.

  • The laws of EU, South Korea and Kazakhstan were reviewed and the gap analysis has been concluded.

  • Final version of the draft legislation was cleared by the working group for its onward submission to the Cabinet of Ministers.

  • The final report which includes the recommendations on institutional improvements that are necessary for promotion of renewable energy was submitted and accepted by AREA.

  • All activities under this component were completed successfully thus attaining a progress of 100%.

Expected result at the end of reporting period

  • To finalize the renewable energy law after its clearance by the working group and submit it to the Cabinet of Ministers for adoption.

  • Prepare a detailed plan for the institutional improvements necessary for the successful adoption of renewable energy technologies based projects in Azerbaijan.

2.2.15 The draft law on renewable energy, which was prepared during the previous reporting period, was further reviewed by the local lawyer (Asya Chalabova) with the help of a newly hired international expert (Chad Laurent). The focus of the review was on how the draft law interacts with related laws and legislation along with international best practices and lessons learned. A gap analysis of Azerbaijan’s final draft law with that of South Korea was carried out. In the result the draft of the more complete law “On the Use of Alternative and Renewable Energy Sources” was prepared and submitted to the State Company AREA in September 2012 both in English and in Azeri.

2.2.16 The international expert (Chad Laurent) prepared and submitted an institutional roadmap for the continued promotion of renewable and alternate energies in Azerbaijan. His report covered the role of AREA as a Regulator, balancing of the roles of AREA and MIE (Ministry of Industry and Energy), grid management and interconnection regime, generation and power supply management and recommendations on how to induct the private sector in the development of renewable energy projects in Azerbaijan.
2.2.17 Since by the Decree of the President on June 1 2012 the State Agency has been transformed into the State Company AREA, there is a need to evaluate the needs of the newly-created Company and assist AREA in successful transition to the Company. Therefore, the Project Team intends to provide necessary support to the State Company AREA in this transition process.

Component 5: Prepare a pilot project for wind, solar and biomass sources of energy

Progress at beginning of reporting period

Achieved at end of reporting period

  • The site for the development of renewable energy pilot projects was selected.

  • Preliminary feasibility reports of the three pilot projects – one each for wind, solar and biomass/biogas technologies – were submitted.

  • Data for the pilot plants preparations was collected and the detailed feasibility reports of all three projects have been finalized and presented to UNDP and AREA.

  • Based on the Steering Committee’s request, the international expert for this component submitted a proposal of a study tour of AREA experts to U.K to gain insight to regulating the industry and on FIT practices there.

  • All activities under this component were completed successfully. With the study tour expected to be done before the end of 2012, a progress of 100% will be reached.

Expected result at the end of reporting period

  • To complete the detailed feasibility reports of the three pilot projects.

2.2.17 After the selection of a single site (Siyezen broiler farm in Guba area) for all three types of project, three separate detailed feasibility reports of wind, solar and biomass/biogas projects were prepared by the international expert (Rod Hacker) with the assistance of local consultant (Faig Mammadov). Subsequently, the 3 reports were integrated as a single comprehensive report which is being translated into Azeri language.

2.2.18 As mentioned above, upon request, Rod Hacker has submitted a proposal of a study tour for AREA staff to the United Kingdom. As the proposal has been accepted and details of a combined study tour of U.K. and Turkey are under finalization, the study tours are expected to take place in December 2012. As mentioned above, the Canada part of the study tour has been postponed for the time being.

    1. Please list activities that were planned and that you were not able to implement, explaining the reasons for these.

      1. For Component 1 (small hydropower project development and construction), substantial delay in the start of construction of the power station has been encountered. Unless the financing and implementation arrangements are finalized at the earliest, further delays in the completion of this component appear to be highly likely. (Also see para 2.2.6 and 2.2.7 above.)

    1. What is your assessment of the results of the Action so far? Include observations on the performance and the achievement of outputs, outcomes and impact in relation to specific and overall objectives, and whether the Action has had any unforeseen positive or negative results (please quantify where possible; refer to Logframe Indicators).

      1. Most of the objectives of the project have been achieved while the remaining ones are expected to be achieved by the completion date of the project – with the exception of component 1, which will need additional 6 months for completion at a minimum.

    1. Please list all contracts (works, supplies, services) above 10.000€ awarded for the implementation of the action during the reporting period, giving for each contract the amount, the award procedure followed and the name of the contractor.

  1. Khazar Scientific-Technical Youth Creativity Center (Design&Supervision Company) - 75,954 EUR (98,740 USD)

  2. Rasul Efendiyev, Project Manager – 17,469EUR (22,536 USD) gross

  3. Farrukh Mahmood Mian, Lead Project Advisor (International Consultant) – 30,232 EUR (39,000 USD) gross

  4. Hans Sandkuhler, Hydropower Expert (International Consultant) -15,116 EUR (19,500 USD)gross

  5. Chad Laurent , Legal & Regulatory Expert (International Consultant) -19,651 EUR(25,350 USD) gross

  6. Rodney Hacker, Renewable Energy Expert (International Consultant) - 22,170 EUR (28,600 USD) gross

  7. Asya Chalabova, Legal & Regulatory Expert (Local Consultant) – 13,255 EUR (17,100 USD) gross

  8. Faig Mammadov, Renewable Energy Expert (Local Consultant) – 13,255 EUR (17,100 USD) gross

As mentioned in section 2.2. Activities and Results, Project Management part, all positions were filled through the open and competitive process in accordance to UNDP rules and regulations.

  1. Partners and other Co-operation

    1. How do you assess the relationship between the formal partners of this Action (i.e. those partners which have signed a partnership statement)? Please provide specific information for each partner organisation.

Relationship between UNDP and EU

3.1.1 The UNDP and EU enjoy an outstanding working relationship as they carry out regular consultations at key stages of the project implementation actions both formally and on an informal basis. The EU representatives have been invited and participated in all activities of the Project, including site visits, workshops, steering committee meetings, etc. The EU Project Coordinator, Mr. Amaury Hoste, made a field trip to the small hydropower construction site in September 2012.The EU monitors are provided all data and information to facilitate their work in the highest spirit of intra-institutional cooperation. This close collaboration is expected to continue during the remaining duration of the project.

Relationship between UNDP and Norway Government

      1. UNDP enjoys a close and good working relationship with the Government of Norway through its Ministry of Foreign Relations and the Embassy in Azerbaijan. Norway has funded in the past and currently funds two UNDP projects in the sphere of Environment and Renewable energy including this Project. Norway has an expertise in the setting up of small hydropower energy production, and the Government of Norway makes its best to promote small hydropower in Azerbaijan as well.

    1. How would you assess the relationship between your organisation and State authorities in the Action countries? How has this relationship affected the Action?

3.2.1 AREA provides organizational and administrative support to project team and assists in the development of project activities. It is fully engaged in the project and is given regular briefings about the progress of the project. The project team carries out regular consultations with AREA, especially at key stages of the project. The leadership of AREA is keen about receiving regular progress reports and all visiting international consultants call upon its officials to provide updates on their respective components.
3.2.2 The relations with AREA are satisfactory, however, to speed-up the processes and avoid delays, the Project Team is in need of a more substantial support from AREA. For example, a timely identification and introduction to the prospective investors of the hydropower project by AREA would have helped to avoid delays on Component 1.
3.2.3 The project associate is the Ministry of Industry and Energy which is the main entity responsible for the energy policy in the country and, as part of this, for developing new legislation and regulatory acts to support the development of local renewable energy resources. With the creation of an independent State Company AREA, which previously with the status of a state agency was under the Ministry of Industry and Energy, requires clear delineation and separation of authority and responsibility between newly-created State Company AREA and the Ministry of Industry and Energy, and other ministries as well. To the extent possible, the Project Team intends providing necessary consultation to the State Company AREA during remaining period on this transition.

    1. Where applicable, describe your relationship with any other organisations involved in implementing the Action:

  • Associate(s) (if any) - NONE

  • Sub-contractor(s) (if any) - NONE

  • Final Beneficiaries and Target groups – State Company AREA and Ministry of Industry and Energy

  • Other third parties involved(including other donors, other government agencies or local government units, NGOs, etc) – Government of Norway

    1. Where applicable, outline any links and synergies you have developed with other actions. – NOT APPLICABLE

    2. If your organisation has received previous EU grants in view of strengthening the same target group, in how far has this Action been able to build upon/complement the previous one(s)? (List all previous relevant EU grants). – NOT APPLICABLE

  1. Visibility

How is the visibility of the EU contribution being ensured in the Action?

4.1 The project team created a website for the project ( which carries the EU logo. The EU contribution to the project receives regular mention in the media. It is planned to continuously inform the general public about the progress on the project as it undergoes the various implementation steps. The books, manuals and brochures for children being prepared under the project and planned to be published before end of 2012 carry the EU logo, contain the EU disclaimer note and mention that the project and publications became possible due to generous contribution of the EU.

4.2 All the materials of the seminars carry EU logo.

The European Commission may wish to publicise the results of Actions. Do you have any objection to this report being published on the EuropeAid website? If so, please state your objections here. - NO OBJECTION
Name of the contact person for the Action: Rasul Efendiyev, Project Manager
Signature: ………………………………………
Location: Baku, Azerbaijan, Government House, 5th entrance, 3rd floor
Date report due: 25 November 2012
Date report sent: 23 November, 2012

1 “Target groups” are the groups/entities who will be directly positively affected by the project at the Project Purpose level, and “final beneficiaries” are those who will benefit from the project in the long term at the level of the society or sector at large.

November 2012 Page of

Narrative yearly report periodending 24 Nov 2012

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