The energy sector is one of the main pillars for Armenia to achieve its national development plans and meet its sustainability targets. Reliable access to energy allows businesses and the industrial sector to operate safely and efficiently.
Since the early 1990s, landlocked Armenia has been under blockade by Turkey and Azerbaijan, with Georgia and Iran its only conduits to world markets. The notorious cold and dark years of the early 1990s taught Armenians a difficult lesson about the importance of a reliable energy supply.
Guaranteeing that reliable supply, however, is no small feat. As Armenia does not have its own commercial-scale fuel resources, the demand for fossil fuels is met entirely through imports. Natural gas is the main fuel consumed in the country, playing a crucial role in all three of the electricity, transportation and heating subsectors. In 2016, 84.2% of fossil fuel consumption was for natural gas. Imports of natural gas are mainly from the Russian Federation, accounting for 84% of total consumption. The rest is sourced from Iran through a Russian-owned pipeline. Moreover, the Russian government also owns Armenia’s domestic natural gas distribution network. Gazprom Armenia holds a monopoly over the import and distribution of natural gas in the country. It’s only stockholder is Russia’s Gazprom, which is majority-controlled by the Russian government. The gas pipeline to Iran was originally planned for a larger capacity that could have even allowed Armenia to become a conduit for Iranian gas to third countries. However, the project was acquired by Gazprom Armenia and the diameter of the pipeline was reduced such that it would not compete with Russian gas in the market. Consequently, Armenia is left in a disadvantaged position when negotiating the price of natural gas supplies.
On January 14, 2021, natural gas deliveries from Russia to Armenia across Georgia were halted for 24 hours due to emergency repairs. During that time, the demand for gas was met using domestic storage facilities. Consumers were asked to reduce their usage to the extent possible. In addition, the Yerevan Thermal Power Plant was taken offline and natural gas fillup stations for cars were closed for a period between 24 to 36 hours. It was a stark reminder that heat and light cannot be taken for granted under the existing setup.
Diversifying Armenia’s energy sources is a strategic need of national importance. In this respect, reducing Armenia’s energy sector dependency on Russia should become a long-term goal.
Armenia’s electricity comes from its nuclear power plant, natural gas-fired thermal power plants (including small cogeneration units), large hydropower plants, smaller hydro projects, as well as nominal contributions from solar and wind․
Most of the significant electricity generator units in Armenia are owned or operated by Russian-owned companies, too. The 407.5 MW Metsamor nuclear power plant is owned by the Armenian government. However it is operated under license by a Russian company called Inter-RAO, which counts the Russian government as a significant shareholder. All nuclear fuel is also supplied from Russia. The Hrazdan Thermal Power Plant was first established in 1966. It is now 100% owned by Inter-RAO. Because the efficiency of the power plant is very low, it is planned to be decommissioned soon. In 2013, a new fifth unit was added to the Hrazdan complex, consisting of a 440 MW Combined Cycle Natural Gas Turbine. This fifth Hrazdan unit was transferred to Gazprom Armenia at the same time as the Iran-Armenia pipeline.
The Yerevan Combined Cycle Gas Turbine power plant was constructed in 2010 and belongs to the Armenian government. The plant has a capacity of 228.6 MW. There is a swap agreement between Iran and Armenia where Armenia receives natural gas from Iran and, using the Yerevan plant, exports electricity back to Iran.
Armenia’s large hydropower plants consist of two “cascades” (a series of plants on the same river system); both have been privatized. The Vorotan Cascade, with a 404.2 MW capacity, is owned by ContourGlobal, a multinational company headquartered in the UK. The Sevan-Hrazdan Cascade has a capacity of 559.4 MW. It used to be owned by Inter-RAO but was sold in 2019 to Samvel Karapetyan’s Tashir Group of companies. The Tashir Group also purchased Electric Networks of Armenia, which operates the domestic electricity distribution system, from Inter-RAO in 2015, following the Electric Yerevan protests.
Small renewables in the country consist of small hydro, biogas, solar and wind․ A total of 407 MW in small hydropower plants have been installed. The contribution from other sources is negligible.
Armenia’s annual electricity generation is about 7.7 TWh. 33.7% of total production is from nuclear, 37.0% from natural gas, 18.1% from large hydro and 11.1% from small hydro power plants.
Although electricity from wind and solar sources is not currently a significant segment in Armenia, there are hopes that might change. Most regions of Armenia are sunny for approximately 300 days in a calendar year. Similarly, some regions of Armenia, for example the Shirak region, have consistently high winds. Hence, Armenia has extremely good weather conditions for the expansion of solar and wind power production.
Small solar stations with a total capacity of 49.5 MW are currently installed in Armenia. The installations of the solar water heating panels have increased throughout the country, too. In this regard, the role of the Renewable Resources and Energy Efficiency (R2E2) Fund has been vital. Shtigen and Eco Step are two companies promoting and installing solar water heating panels in Armenia.
A new wind power plant with a capacity of 4 MW is planned by the Ministry of Territorial Administration and Infrastructure to come online in 2021. In addition, the Masrik-1 Solar Photovoltaic Power Plant, with a 55 MW capacity, and smaller solar plants with a total capacity of 197 MW are expected for 2022. Moreover, 23 small hydro power plants with a total capacity of 55 MW are due in 2023.
Apart from these projects, the Ministry of Territorial Administration and Infrastructure is planning to issue new tenders in the near future for seven more solar photovoltaic power plants with a total capacity of 520 MW. To summarize, the government of Armenia is aiming at increase the share of solar power generation to at least to 15% by 2030.
Another possible way to reduce the dependency on natural gas in the electricity sector is the development of reliable transmission infrastructure in the country and stronger interconnections with neighboring countries like Iran and Georgia. The existence of strong interconnections will increase cross-border exchanges between countries and allow the dispatch of the most efficient plants at any given time. Some work has been done in Armenia to reconstruct and expand the transmission and distribution network. The reconstruction of some substations in the transmission and distribution network, as well as the construction new interconnections with Iran (planned capacity 1000-1200 MW) and Georgia (planned capacity 350 MW) are scheduled for the near future.
The transportation subsector includes railways, road and air transportation. The road network is essential for the sustainable economic development of Armenia as a landlocked country with limited transportation routes. Since 2000, there has been rapid growth in natural gas consumption for road transport, as many vehicles have been converted to accept natural gas as fuel instead of gasoline/petroleum. The approximate fuel distribution in the transportation sector is as follows: 48% petroleum, 26% diesel; 25% compressed natural gas, 1% electricity.
Obviously, the electrification of the transportation subsector through the adoption of new technologies, for example electric vehicles (EVs), would significantly reduce fossil fuel imports. To promote electric mobility and make EV usage more widespread in Armenia, some barriers need to be tackled. First, the country would have to build out the infrastructure of charging stations. Second, greater consumer awareness needs to be fostered. Finally, appropriate regulations should be adopted to incentivize consumers. Some work has already been done in this direction through the implementation of the “Promotion of electric vehicles in Armenia” project. The project is financed by Global Environment Facility, United Nations Development Programme (GEF/UNDP). The project aims at developing infrastructure for electric car charging stations and promoting market growth in Armenia. As a result, 23 charging stations have been installed both in Yerevan and other regions of Armenia. Moreover, the project will have a second phase, which aims at further tackling the barriers mentioned above.
In 2015, the housing stock in Armenia comprised 19,053 multi-apartment residential buildings and 427,959 single-family houses. 64% of multi-apartment buildings are in urban communities, and 36% of buildings are in rural communities. Natural gas, liquid petroleum gas (LPG), wood and biofuel (manure) are the main types of fuel consumed for heating in the residential sector. Natural gas accounts for 70% of total fuel consumption in this regard. Developing central heating systems, promoting energy efficiency and conservation are key pathways to bring down natural gas consumption in the heating subsector. In 2018, Armenian regulations and legislation in the construction sector went through some changes, which defined new mandatory energy saving and energy efficiency technical requirements for new residential multi-apartment buildings. They also apply to state-budgeted facilities under construction, reconstruction and renovation. An excellent example of the use of central heating systems is the recently built Yeraz district in northern Yerevan. The district has a central heating system powered by solar energy, a great example of substituting natural gas demand with green energy.
Promoting renewable energy, reinforcing the transmission system, electrifying the transportation system, as well as increasing energy efficiency are not only responsible decisions for the planet, they are key components of energy security in Armenia. These measures are possible pathways to reducing fossil fuel imports and decreasing dependency on Russia.
The COVID-19 pandemic and the 2020 Artsakh War might delay plans toward these goals, however. In addition, the aftermath of the war presents a new challenge for the Armenian electricity sector as 30 out of 36 of Artsakh’s hydropower plants (which used to export electricity to Armenia) are now under Azerbaijan’s control. In addition, two 110 kV transmission lines connecting Armenia and Artsakh and transformer substations in the Shahumyan and Kashatagh regions have also been handed over.
Armenia’s current energy security situation is not an enviable one. The coming decade presents an opportunity to turn direction and tackle the considerable obstacles facing the country. Strong political commitments and a focused approach are needed to make real progress.