Why am I writing about this? I work for the British government and Armenia is a small country far away. Well, it starts with a project at my work that matches up employees who would normally have never met, to discuss their work and life over coffee. It’s called ‘coffee connect’ and I’ve met some really interesting people across a range of grades. One person I met recently told me about some time they’d spent in Armenia a number of years ago, and both working at the government department for energy, we inevitably discussed the energy angle. Some additional context is that I’m flying to Georgia tomorrow, so the region is especially relevant to me now.
When we looked at the trilemma, I noted how different countries have different priorities. For Armenia, this is energy security. To understand this, you not only need to go back to shortly before the fall of the Soviet Union, but also understand the elephant in the room – Armenia’s relationship with Turkey and Azerbaijan.
Nuclear shutdown: Following the 1986 Chernobyl disaster, the Armenian SSR faced a political problem. Armenia’s main power source – the nuclear power plant in Metsamor – was based on Chernobyl technology and public pressure was mounting. When a heavily destructive earthquake occurred in 1988 in a region neighbouring Metsamor, the USSR’s Council of Ministers ordered the plant to shut down. With Armenia scant on domestic resources, this left it heavily dependent on other countries – such as Azerbaijan – for the import of fossil fuels.
Energy crisis: Following Armenia’s independence, and the nuclear shutdown earlier, Armenia was heavily dependent on imported fossil fuels. Tensions with neighbours (that continue to this day) led to severe energy shortages that caused rolling blackouts. This in turn caused poverty, the destruction of industry, emigration, and individual suffering.
Between 1991 and 1996—because of disruptions in gas supply—customers suffered through several of Armenia’s brutal winters with little more than two hours of electricity supply per day. Meanwhile, the import price of natural gas has continued to increase. The increases of the price of imported gas meant steady increases in end-user tariffs for natural gas and electricity. Between 2005 and 2013, the end-user natural gas tariff increased by 170 percent. End-user residential tariffs for electricity increased 52 percent during the same time period.
Recommissioned nuclear: Recommissioning the Metsamor NPP was seen as a key step to get out of the energy crisis, as it would provide a significant part of the country’s energy needs. Whilst there were protests and anti-nuclear public sentiment before, nuclear power is still viewed as a positive – even after the events of Fukushima.
Gas network sale: Armenia sold much of its gas network to Gazprom, which was later fully sold. I see this as an acceptance of dependency on Russia. This was key because Armenia wouldn’t have been able to pay for critical infrastructure development. However it creates problems further down the line if Armenia chooses to liberalise all of its energy market, or pivot away from Russia politically – given that Gazprom has ‘exclusive rights’ in the Armenian energy market until 2043. It’s estimated that Russian interests control around 80% of Armenia’s energy market.
Iran-Armenia pipeline: Iran’s natural gas pipeline to Armenia is an important diversification of imports, which is often in return for Armenian electricity and went alongside other projects such as wind power and hydro.
What’s in the mix?
Over the last several years situation has hovered around a third each for thermal power, nuclear and hydro, with sources differing by as much as 5-10%. The source for the chart below is r2e2.am.This puts Armenia as one of those most diverse energy mixes in the wider Caucasus. However, it’s worth noting that a majority of heating is gas, and unusually, a majority of transportation use (which is worth a blog post in its own right).
So what can we say about how energy is moving forward in Armenia? I think there are six key points to make.
The first is that nuclear power is essential to Armenian energy security. This is just one nuclear power plant, which is in a difficult position. A failure with this, coupled with supply crises elsewhere, would cripple Armenia. The Armenian government recently approved construction of a new nuclear power plant, which is important news, but details are lacking.
The second is that natural gas is a pressure point. It is based mainly on Russian supply, with some Iranian imports. It is essential for the country due to cold winters, and the use in transportation as CNG (compressed natural gas). One thing to factor is the effective subsidy that Armenia receives from cheaper gas. Armenia is thus vulnerable to political pressure, or price increases.
The third is the reliability that hydropower contributes will continue, but there are limits to expansion. The areas with the largest hydropower potential have already been developed, but there is limited potential for small hydro. Hydro contributes stable baseload with minimal carbon emissions.
The fourth is that RES potential could be important, as Armenia has windy valleys and a lot of Sun, and is trying to shake off dependency on foreign fuels. This is key for Armenian independence in foreign policy. Tied in with this is increased energy efficiency.
The fifth point, and one I raised at a presentation in 2016, is that Armenia should try and balance its threats of fuel dependency by exporting an excess of electricity generation. This is now the case, and Armenia is now a net exporter in electricity. Armenia must encourage new investment to continue this hard-fought trend.
On a positive note, Armen Movsisyan argued that:
“[The Energy] sector has moved from severe crisis—characterised by crippling supply shortages, and near-financial bankruptcy of the sector—to stability more characteristic of developed countries than emerging markets” – Armen Movsisyan
The next time I look at Armenia it will be to discuss its national energy strategy, and look at the fundamentals behind different sources of energy in more detail. If you’d like me to focus on a specific country next, message me with some details and I’ll consider.