Armenia Prepares Renewable Roadmap Amid Energy Crisis

Armenia does not have fossil fuel or coal reserves — it is entirely dependent on imported fuel for transportation, electricity generation, and heat production. Armenia has overcome the energy crisis of the 90’s and has built a viable energy system. However, compared to the year 1988, which was the peak of economic output of the Republic of Armenia, energy consumption lags far behind. The generation capacity in 1988 was over 3.5 GW, but the energy use in 2010 was on average below 1.2 GW. This can be explained by the fact that industry in Armenia has yet to recover fully from the economic decline that started with the collapse of the USSR.

A number of thermal power plants have been closed and one of the two reactors at the Metsamor Nuclear Power Plant has been shut down. Power generated from the Hrazdan-Yerevan and Vorotan Hydro Power Plant cascades remain as important a power sources as it was during the energy crisis of the early 90s. At present, electricity generation depends mostly on imported nuclear fuel and natural gas with hydropower being responsible for approximately 1/3 of total power generation. Almost half of the electricity generation capacity and all small hydro power plants (100 MW installed, 9 percent of current operational capacity) are privately owned. The Armenian government is planning to decommission Metsamor Nuclear Power Plant between 2017 and 2021. There is a plan to build a replacement nuclear power plant with capacity of 1000 MW. 

The current cost of the electricity generation is relatively low due to the utilization of fully depreciated infrastructure, but the entire electric power generation and distribution system needs modernization, upgrade, or replacement. One of the main requirements in this process is consideration of the social aspect, which means the prices of power should increase in proportion with the rise of the standard of living.

Thermal energy generation capacity has also changed substantially during the last two decades. During the Soviet era, there were no air conditioning systems installed in most of the residential or commercial buildings except for a very limited number of window units and the district heating systems, powered by heavy oil (mazut) and natural gas, were the main heating source. After the collapse of the USSR most of the urban centralized heating systems were dismantled. Now approximately 1/3 of population has installed individual natural gas powered heating systems and the use of air conditioning has increased noticeably.

The major changes in transportation are related mostly to the slow but steady increase in living standards in Armenia, which in turn has increased the number of privately owned cars. Increases in the use of natural gas as an alternative to gasoline has increased the proportion of natural gas-powered vehicles to approximately 50 percent of the total vehicle fleet. This trend is continuing but it has leveled off.

Currently Armenia can meet only 35 percent of the total current demand for energy with its domestic resources. The following is energy fuel source mix in Armenia by end use application:

  • Electricity — uranium for the nuclear power plant (44 percent), imported natural gas and mazut for dual-fuelled thermal plants (29 percent), large hydro (24 percent), small hydro (3 percent)
  • Heating — imported natural gas (60 percent), electricity (20 percent), firewood and animal waste (20 percent)
  • Transportation — imported gasoline (50 percent), imported compressed natural gas (50 percent)

Governmental Agencies and Laws

The main body for all energy policy matters and issues in Armenia resides with the Ministry of Energy and Natural Resources which is responsible for overseeing and managing all aspects of the energy sector. The main quasi-governmental organization that is heavily involved in renewable energy research and financing is the Renewable Resources and Energy Efficiency Fund (R2E2) of Armenia.

In general, laws and regulations of Armenia are adequately addressing issues related to renewable energy. However, a more favorable regulatory environment is needed for the large-scale development of renewable energy resources in Armenia.

According to the law, private electricity developers must sell all electricity generated to the grid operator and they are prohibited from selling directly to potential customers.

Renewable Energy Options

The findings of a comprehensive review of renewable energy potential in Armenia have ranked small hydro power plants and solar hot water heaters as the most advanced renewable energy and the most economical for Armenia in the short to medium-term, followed by grid connected wind farms and the use of heat pumps. Photovoltaics, geothermal power, and bio-fuels, especially bio-ethanol from cellulosic feedstocks, are ranked as more costly in today’s prices and are not expected to be commercially viable in the short to medium-term, but may play a more important role in the longer term. Biomass for both heat and electricity production for the short term can be considered, under several conditions, including re-planting of harvested trees and bio-fuels using fractionation process. In addition, hydrogen could be a possible fuel for transportation in the longer term. Finally, although not strictly a renewable resource, municipal solid waste in landfills is a practical source for generating methane for power production.

Funding sources are readily available for the construction of new run-of-the river small hydro power generation systems or renovating existing systems. The main limitation is the availability of promising sites within reasonable proximity to good roads and transmission line access where more small hydro power generation systems can be constructed. Cost of installing electric power lines for renewable energy facilities at remote locations to get connected to the grid can be prohibitive from the perspective of overall commercial reliability. It is estimated that in 2020 small hydro power installed capacity will grow to be about 215 MW from the 100 MW level that existed in 2010.

According to a U.S. Department of Energy study, theoretically Armenia has 5,000 MW wind energy capacity. However, this does not mean that if there is capacity then it is equal to economically feasible electricity generation. Most of the areas with high wind are not easily accessible for heavy machinery that is needed for the installation of the wind turbines.

Utility-scale wind farms are still not commercially viable under the existing government established electricity purchasing tariff structure from the perspective of attracting private capital investment without either additional fiscal incentives or subsidies. The attractiveness of these investments would grow in all probability as lighter weight turbines exhibit increased efficiencies and the cost of the turbines decreases over time. However, the main technical barrier is the difficulty in transporting large turbines (1.5 to 3 MW) and composite blades (up to 52 meters in length) from a port of entry to the selected site in a landlocked, mountainous country like Armenia. Therefore, not more than 300 MW of wind-generated capacity in 2020 would be a realistic number, using turbines that do not exceed 1.5 MW per unit. As of early 2013, only 2.6 MW of wind power was operative in the Lori region.

The economic viability of using photovoltaic solar panels for power production in Armenia is more complicated. The most cost-effective approach is currently to import solar cells and to assemble them into modules in Armenia. The second alternative is the development of an industrial base in Armenia for manufacturing silicon-based solar cells, using its abundant quartzite deposits. This alternative is expected to require an investment of approximately $300 million. Presently there are only few small pilot type solar panel installations in Armenia.

Bio-ethanol production is essential for Armenia in order to move in the direction of greater energy security of supply in the motor transport sector and to offset potential future increases in the cost of imported gasoline and compressed natural gas. One hundred percent of motor transport fuels are imported. Even a 5% blend of bio-ethanol with gasoline will replace approximately 14,000 tons of expensive imported fuel per year. However, the cost of production of bio-ethanol using indigenous non-food feedstocks, such as Jerusalem artichoke or animal corn feed, is presently above the wholesale cost of gasoline, which means that voluntary blending of bio-ethanol and gasoline is unfeasible unless mandated by the government.

Recent explorations and test drilling conducted in Armenia have identified a maximum geothermal resource potential of only 75 MW. The economic viability for geothermal power in Armenia seems marginal, from both the perspective of cost (mostly for drilling and field development) and the total potential power output.

The Lusakert Biogas plant in Northern Armenia is the first and only industrial sized, state-of-the-art biogas facility in Armenia based on organic waste from poultry. Several years ago USAID had financed construction of approximately 40 small biogas units in the villages throughout Armenia, but most of these units are not operational because villagers much prefer to use the old style way of dried manure for heating and cooking, instead of using these units to generate biogas.


Use of renewable energy will not only keep hard currency in Armenia, but also create significant benefits through economic development. Use of renewable energy technologies creates jobs using local resources with an important export potential. Banks and construction firms will also benefit from development of renewable energy industries.

Biomass production is relatively labor intensive, which is one of the reasons it is slightly more expensive than fossil fuels. Growing, harvesting, and transporting biomass fuels all require local labor, as does maintaining the equipment, which contribute to the high cost of bio fuel. However, this means that jobs will be created in areas with a depressed agricultural economy.

Approximately 2/3 of current power generation in Armenia is based on nuclear and hydro power, which in turn lowers the per capita GHG emissions for Armenia. While still the reduction of the GHG emissions are among targets to pursue, the energy independence and reducing the cost of energy generation are of higher importance.

Renewable energy may not be the major source of energy development in Armenia but it should be an important component of it. As a result of dropping prices of various renewable energy technologies, in the near future renewable energy production cost could be competitive with more traditional sources. Developing all feasible and economically viable renewable energy resources will create a stable domestic power generation capabilities, which in turn could be a major component of Armenia’s national security.

Danish Energy Management in close consultations with main stakeholder and local experts in Armenia has prepared the Renewable Energy Roadmap for Armenia and its related technical studies which were funded by the Renewable Resources and Energy Efficiency Fund (R2E2) of Armenia under World Bank GEF Grant. 

Lead image: Pins on map via Shutterstock

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Areg Gharabegian is a certified principal project manager with Parsons Corporation. He has a B.S. in Mechanical Engineering and an M.S. in Energy, Resources, and Environment with more than 30 years of experience in the field of project management, environmental studies, and transportation engineering. He is a registered Professional Engineer in California and six other states. Has worked on large public work construction projects involved building highways, metros rails, and tunnels and has prepared environmental studies for various types of projects in US and overseas. In 1990 for the first time visited Armenia by invitation of the Ministry of Environmental Protection as part of an environmental fact finding mission. During this visit, provided assistance in development of Western style management procedures and practices. Has been the project manager of the Armenian Engineers and Scientists of America's (AESA) Fast Growing Tree project in Armenia. This is a joint project between AESA, Institute of Botany of Armenia, and Armenian Forest Service. As part of this project more than 130,000 fast growing hybrid poplars have planted in Armenia. As part of a team, completed a feasibility study for production of bio ethanol in Armenia and developing the Renewable Energy Roadmap for Armenia. Both projects were financed by World Bank. Appointed Member of the Engineering Academy of the Republic of Armenia as a result of engineering contributions to various projects in Armenia.

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