An analysis of the main aspects of Armenia’s energy sector: hydropower, atomic and thermal electricity, with problems and perspectives of regional cooperation" />

Energy security in Armenia: accomplishments, dangers and risks

An analysis of the main aspects of Armenia’s energy sector: hydropower, atomic and thermal electricity, with problems and perspectives of regional cooperation

Arguments continue in Armenia around one of the most important elements of Armenia’s energy infrastructure – the Metsamor atomic energy station. This is due to a discussion on the ‘Agreement on a comprehensive and expanded partnership between Armenia and the European Union’. According to the chapter on energy cooperation and atomic safety, Armenia must shut down its atomic energy station and replace it with a new means of producing energy.

However, definitive time limits aren’t laid out in the document. The signing of the agreement will take place at the end of November. The President of Armenia says that the atomic energy station will work for another ten years as the operating terms have been extended to 2027. Moreover, in 2008, Serzh Sargsyan said that he intended to build a new atomic energy station. However, specialists believe that the project is too costly and Yerevan will not be able to implement it independently.

The energy security of the country is formed by all the links of the system as a whole. For that reason, we will look not only at its main components but the rest of its links as well. But we’ll start with the most important.

Atomic energy

The Metsamor atomic energy station has been a key link for more than 20 years in the energy security of the republic. It provides about 40 percent of the energy produced in Armenia.

The plant was put into use in 1977. However, after a destructive earthquake in the north of the country in 1988 the Council of Ministers of the USSR and the Council of Ministers of the Armenian SSR decided to cease operations out of fear that another such earthquake could have horrific consequences were the plant to suffer a meltdown or malfunction.

Five years later, in 1993, the authorities of the now-independent Armenia decided to put the plant back into operation. In the face of a real lack of sources of electrical energy, this was the only way to save the country from an energy crisis that resulted due to the collapse of the USSR.

Back then, the atomic energy station began to occupy a key place in the overall energy system of Armenia. Today, it is strategic, despite the fact that the Metsamor atomic energy station gives rise to a number of questions in the European Union which insists that it must either be shut down or modernised.

Economist Vahagn Khachatryan believes that ‘the possible closing of the atomic energy station is a big problem for Armenia, because the plant plays an enormous role in the energy system of the country. This is one of the most important components of energy security in the country’.

Both the authorities and community experts speak out about the need to preserve nuclear energy. In the face of being pressured by the EU, the authorities of the republic need to find the best solution to this problem.

Thermal energy and hydropower

In addition to atomic energy, other sectors have also emerged during the years of independence and have developed rather dynamically. In particular, thermal energy and hydropower.

There are two thermal energy plants in Armenia which provide for 40 percent of the country’s electricity. The largest plant is the Razdan thermal energy plant which is operated and owned by the Russian Federation. In 2012, the fifth most important thermal power unit was put into operation. The station runs on gas which is supplied from Iran.

Hydropower provides for twenty percent of the country’s power. As of 1 January 2017, there are 178 hydroelectric stations, most of them small in size. Armenia is also interested in constructing a hydropower station at the border town of Meghri. However, putting the project into action is proving difficult.

Blue Fuel and Gazprom

Armenia has to buy natural gas, which it can do from both Russia and Iran. This is also an achievement if one looks at it from the perspective of delicately balancing the energy interests of the country:

“Armenia, as far as diversification goes, has achieved quite a bit. Despite the crisis of individual industries in the Armenian energy system, as a whole the energy sector in the republic can be characterized as diversified, especially from the point of view of external deliveries,” notes political scientist and energy security specialist Vape Davtyan.

Russia remains the main exporter of blue fuel to Armenia. However, the flow from the north is, from time to time, a cause of concern for Yerevan.

In 2010, Georgia excluded the Mozdok-Tbilisi gas pipeline from a list of pipelines which are of strategic importance. Since then, there have been rumors from Russia that Azerbaijan wants to buy the gas pipeline.

Another aspect which is of concern for local experts is the ‘expansion of Russian capital’. Practically all large energy-related infrastructure in the country belongs to Russian companies. Gazprom-Armenia has a monopoly in terms of importing natural gas into the republic and is entirely under Gazprom [Russia] control.

Gazprom also owns the pipeline that runs from Iran into Armenia and the Razdan thermal energy plant. Vape Davtyan emphasizes that this is the price for Russian capital and the modernization of the sector:

“Armenia has made several compromises in its ‘energy sovereignty’ in exchange for Russian investments. There are a number of risks involved, most of which mean that when we look around for other energy opportunities, we always have to look at Gazprom first. The main risk ise the loss of sovereignty.”

Armenian-Iranian energy cooperation

On the topic of the influence of the Russian Gazprom on the energy policies of Armenia, one must also keep in mind Iran, with which Yerevan has signed some large projects. The 140km pipeline from Iran to Armenia was put into operation in 2007.

This project was designed to create an energy corridor running from Iran, to Armenia, Georgia, the Black Sea, Ukraine then into Europe for Iranian gas. However, it was decided to narrow the diameter of the gas pipeline from 1.4 meters to 711 millimeters to bring it in line with Gazprom pipes. At that time, many believed that this decision was made after being pressured by Gazprom in order to prevent Iranian gas from entering the European market.

Now there is no need to talk about the transit of Iranian gas through this pipeline. Economist Vahagn Khachatryan believes that if necessary, the Armenian authorities will be able to make a deal with Gazprom, but they will have to build new pipes.

The Iran-Armenia pipeline is currently not operating at full capacity, providing about 20% of the total amount of blue fuel entering the country.

It is worth noting that from time to time, Armenia discusses the possibility of getting cheaper gas from Iran.

Vahe Davtyan believes that Russia remains the best market for the purchase of gas:

“Iranian gas is estimated at USD 180 – 185 per 1 000 cubic meters, while we buy Russian gas for USD 150. It’s another matter if a political decision is taken to reduce the cost of Iranian gas for the Armenian market. The second point is the quality of Iranian gas, which is far inferior to that of Russian gas.”

Nevertheless, Tehran continues to be a very important partner in the energy sector for Armenia. For many years, the countries have been bartering, exchanging electricity for gas. Armenia is also interested in the “North-South” energy corridor, which is intended to connect the energy systems of Iran, Armenia, Georgia and Russia.

Regional cooperation

On 30 October 2017, in the presence of the presidents of Azerbaijan, Georgia and Turkey, the Baku-Tbilisi-Kars railway was launched. Although this is not an energy project, it is another attempt to leave Armenia outside of major regional economic initiatives.

As for the energy sphere, considering the geopolitical situation in the region, it is vitally important for Armenia to retain Georgia as its partner, with which a ‘barter’ exchange of electricity has also been established.

According to the scheme, in the summer Armenia buys an excess of cheap electricity produced by Georgian hydroelectric power stations. In the winter, it sells electricity to Georgia. There are plans to increase the export of Armenian electricity to the north by 20% in 2017, and by 2018 to commission a fourth electricity transmission line between Armenia and Georgia.

Georgia has been called upon to play an important role in building the “North-South” energy corridor, which is actively being promoted by Yerevan. Vahagn Khachatryan thinks that the key component of the success of this project may be the position of Russia:

“Russia is also interested in Armenia being able to use its energy resources productively to implement this program. The energy network, which will work between different states, will positively affect the energy security of all these countries. “

Armenian experts also believe that Armenia’s energy system is more developed than Georgia’s, and over time the republic has been able to export more electricity to its neighboring country.

USA and “clean” energy in Armenia

Moreover, the energy system of Armenia may undergo serious changes if the USA takes active participation in its development. Richard Mills, the US ambassador to Armenia, has said that ‘American investors are more than interested in the energy sphere and there is a possibility of investing up to eight billion dollars into the energy sector’.

This concerns solar energy. Though there hasn’t been much of a follow up on the ambassador’s statement, it can hardly be called baseless. Experts note that Armenia has great potential in this area. This year the first industrial solar plant was launched. However, these are only the first steps the republic has made in this direction.

Vahe Davtyan thinks that in order to develop the solar energy sector, the republic needs some time:

“In order to develop the solar and wind energy sectors, we need more than just potential. We need a rather long period of time. If we take even the most advanced countries where clean energy is a dominant aspect of the energy system, then we can see that it took them a long time to get there. Denmark for example started to develop the sphere in the 1960s. We had no real programs to develop the energy sector before this current period.”

A serious obstacle to development is the high cost, as solar energy could still not compete with atomic energy. The country lacks the infrastructure too:

“Today there is no real possibility of developing the solar energy sector. For this we would need government subsidies before all else. The state would doubtfully be able to do this in this period,” notes Vahe Davtyan.

What does Armenia need for energy security?

Energy is one of the few spheres of the Armenian economy that has gone through a serious development phase and met with success in the years of independence. Among the key achievements is the diversification of energy logistics, which allows the authorities to be ready for such external crises such as the 2008 Georgian-Russian crisis.

The fact that the republic is able to fully satisfy domestic demand for electricity can also be considered a success. Despite certain problems with the Armenian nuclear power plant, the electric power industry is also quite diversified.

At the same time, Armenia has lost control over the most important energy infrastructure of the country, which significantly affects the country’s transit potential and makes it dependent on Gazprom. A vivid example is the Iran-Armenia gas pipeline, which, in fact, has become an exclusively interstate project.

In the coming years, the key task in the field of energy for the Armenian authorities will be the creation of an energy corridor that will connect the energy systems of Iran, Armenia, Georgia and Russia, which will neutralize losses from the energy tandem Azerbaijan-Georgia-Turkey.

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