The World Bank''s Board of Executive Directors approved $40 million in support of the Enabling the Energy Transition project for Armenia, which will assist the implementation of the Energy Sector Development Strategy to 2040 of the Republic of Armenia. The investments will focus on the rehabilitation of power transmission substations, the adoption of reforms to allow the transmission company to access private financing, and the promotion of energy sector modernization as well as regional energy cooperation among emerging and developing economies in the Europe and Central Asia region.
Armenia''s power sector is heavily dependent on imported fuels, especially natural gas, which creates significant energy security risks, compounded by the global energy crisis. Attracting private investment is essential to fund the large-scale projects needed in the sector. In 2021, 62 percent of Armenia''s total energy supply came from natural gas, followed by oil (16 percent), nuclear (14 percent), and hydro (5 percent), whereas the share of nontraditional renewable energy sources (wind and solar) was only about 1 percent.
"To ensure affordable, reliable, and clean electricity supply for consumers, Armenia needs continued investments in modernizing the power transmission network and improving the commercial viability of the High-voltage Electric Networks of Armenia JSC, the transmission company. Moreover, we expect this project to help reduce greenhouse gas emissions – crucial for mitigating climate change," said Carolin Geginat, World Bank Country Manager for Armenia.
The project aims to facilitate the integration of an estimated 1.1 GW of renewable energy generation capacity into the transmission grid by 2032, which is enough to power over 690,000 households. This will reduce the annual emissions of net greenhouse gas (GHG) by 540,000 tons. Additionally, it seeks to attract private investment totaling $550 million, upgrade all transmission substations with automated control and digital protection systems, and increase the total capacity of transmission substations from 2,711 megavolt-amperes (MVA) to 3,109 MVA. These efforts are part of a comprehensive strategy to enhance renewable energy adoption, minimize environmental impact, and modernize the grid for increased efficiency and reliability.
The project is part of the Europe and Central Asia Renewable Energy Scale-Up Multiphase Programmatic Approach (ECARES MPA) Program, with an overall financing envelope of $2 billion equivalent, which was approved by the World Bank''s Board of Executive Directors on March 28, 2024. The ECARES MPA is designed to increase renewable energy capacity in participating countries of the Europe and Central Asia region, support the acceleration of their renewable energy transition, and achieve scale and impact through private investment, while also fostering regional knowledge sharing.
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Armenia''s electricity production is heavily reliant on fuel imports and a continued emphasis on energy efficiency and solar deployment would help diversify the country''s energy supply, though further infrastructure investments may be needed to integrate the large planned increase in variable renewable sources, according to a new policy review by the International Energy Agency. While Armenia has a diverse generation mix of gas-fired thermal, hydropower and nuclear, Russia supplies all of its nuclear fuel, and the bulk of its gas, along with some volumes from Iran. As a result, 70% of Armenia''s electricity production is effectively reliant on fuel imports from the two countries.
Since the IEA''s last review in 2014/15, Armenia has developed an Energy Strategy, released in 2021, which calls for up to 1 000 MW of solar PV capacity to be installed by 2030, lifting the share of grid-connected solar to 15% of generation. Armenia is heavily promoting renewables not only to increase energy security, but also to meet greenhouse-gas reduction commitments.
The IEA survey points out that Armenia''s heavy reliance on a single source of natural gas is compounded by its substantial dependence on gas, which accounts for the largest share of the country''s total energy supply. For example, both the residential heating and road-transport sectors rely on natural gas as their main fuel. Armenia has no known oil production or reserves, nor any refineries.
The country is also aiming to enhance energy security by substantially increasing electricity interconnections with neighbouring Georgia and Iran.
Since the late 1990s, the EU and several other international partners have strongly encouraged Armenia to close its Soviet-era WWER-400 nuclear reactor, which typically supplies 30-40% of the country''s electricity. Armenia has improved nuclear safety measures in order to meeting International Atomic Energy Agency goals for existing nuclear power plants. The IEA advises the government to continue close coordination with the International Atomic Energy Agency, EU and other relevant international organisations on nuclear safety issues.
The IEA commends Armenia for avoiding energy subsidies and for its decisive steps to implement a liberalised electricity market, which was launched in February 2022. Exposing investors and consumers to the true costs of energy supply, accompanied by a safety net for the most vulnerable customers, helps ensure efficient energy investment and use.
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Armen Kirakosyan sits at his desk in the small backyard office in the northern outskirts of Yerevan,surrounded by shelves stuffed with books, some hidden behind photographs of — horses.
Kirakosyan is an engineer who, together with a few friends, established the horse farm ''Ayrudzy'' in the town of Ashtarak in 1980 that later developed into a horse riding club. Combining his love for horses and engineering, he turnedAyrudzyinto an NGO in 2007 with the aim to develop energy cooperatives in Armenia.
Since 2013, the club members have been working on the creation of an energy cooperative and, only recently, installed a solar station at Ayrudzy.
When asked about his motivation, the 60-something fills his pipe, lights it and takes a few puffs. He recounts walking through the Ararat valley south-west of Yerevan. He says that the plants he saw on the banks of the Aras river at the bottom of the valley 30 or 40 years ago, now grow 200 metres higher up.
Kirakosyan says:''The climate is changing and now, in Ararat valley, we have a desertification process.'' And he believes that energy cooperatives can be part of the solution to address global warming by reducing Armenia''s dependence on natural gas.
While Armen Kirakosyan has clear ideas about how Armenians can tackle the climate crisis, the issue itself can''t yet count on the awareness of the Armenian population at large. The country does have a long history of environmental mobilisations, but most of them have targeted localised problems that, for instance, affect the country''s rivers, lakes and forests.
Recently, citizens of the spa town Jermuk blocked the road tothe by-now infamous Amulsar gold mine, which threatens topollute the water in Jermuk and potentially even Lake Sevan, Armenia''s freshwater reservoir. This presents only the latest instance in a chain of environmental battles.
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