Renewable Dependence as an Institutional Transition Risk in Hydrocarbon Economies: Insights from Azerbaijan

Transition to renewable energy leads to assumed economic diversification; however, the institutional risks for hydrocarbon-dependent economies remain high. This paper identifies the conditions under which transitioning economies enter a novel dependency during the renewable transition. Our analysis combines the Multi-Level Perspective with Historical Institutionalism to explore Azerbaijan’s 30-year trajectory across the oil, gas, and emerging renewable phases, serving as an illustrative case. Evidence from the literature and expert interviews illustrates that renewable investments are channelled through hydrocarbon-era institutional practices, enclave-style contracting, centralised decision-making, and reliance on foreign technology providers. These conditions constrain domestic niche formation and limit opportunities for local capability development. As a result, renewables become embedded within the existing institutional architecture rather than displacing it, serving primarily to substitute hydrocarbons as an export commodity rather than to catalyse diversification. The paper conceptualises this trajectory as a possible renewable dependence: a pathway in which renewable energy is integrated into an export-oriented, state-dominated political economy without altering its core institutional logic. The identified configurations are common across hydrocarbon economies in Central Asia and MENA, offering transferable insights into when and why renewable transitions risk reproducing, rather than transforming, established development models.