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Report: Renewable Energy Potential in Armenia

By Tamara Babayan, Areg Gharabegian, Artak Hambarian, Morten Søndergaard, Kenell Touryan

YEREVAN (A.W.)–Danish Energy Management, in close consultation with main stakeholders and local experts in Armenia, recently 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 the World Bank GEF Grant. This paper is a summary of the findings and conclusions of the studies and roadmap.

Wind turbines in Lori Marz

Renewable energy development has been slow in the past, but its application throughout the world is accelerating. Policies to stimulate a faster deployment of clean energy technologies are necessary and will, in turn, create a level playing field by addressing market barriers, creating transparent pricing structures, and facilitating access to infrastructure financing. Because the renewable energy industry is not yet at the same level of development as the more traditional energy industries, it needs a more favorable regulatory environment in the near term for its development, survival, and transformation to a mainstream energy resource.

Some renewable energy technologies—such as hydro, biomass, and wind—are close to becoming commercial and should be the first to be deployed on a massive scale. While other renewable energy technologies exhibit promising potential, they are less mature and require long-term vision, government encouragement, and favorable regulations to flourish. The U.S. and European Union have implemented effective support policies for renewable energy development, which have resulted in the acceleration of renewable energy technology deployments in recent years.

Current energy status in Armenia

Armenia does not have any fossil fuel or coal reserves, and is therefore entirely dependent on imported fuel for transportation, electricity generation, and heat production. While surrounded by countries that possess significant hydrocarbon reserves, Armenia’s fossil fuel reserves are limited to a small number of lignite or brown coal mines located in the vicinity of Gyumri and Spitak. Oil drilling results have shown that while some oil reserves exist, they are located too deep to be economically viable for extraction.

Armenia has overcome the energy crisis of the 1990’s and has built a viable energy system. However, compared to the year 1988, which was the peak of economic output for the Soviet Republic of Armenia, energy consumption continues to lag far behind 1988. The generation capacity that year was over 3.5 gigawatts (GW), but the energy use in 2010 was on average below 1.2 GW. This can be explained by the fact that the energy industry in Armenia has yet to recover fully from the economic decline that started with the collapse of the Soviet Union.

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. Hydropower is responsible for approximately one-third of the total power generated. The Armenian government is planning to decommission Metsamor Plant between 2017 and 2021. And there are plans to build a replacement nuclear power plant with a 1,000 MW capacity no later than 2021.

Thermal energy generation capacity has also changed substantially during the last two decades. During the Soviet era, there were no air-conditioning systems 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 Soviet Union, most of the urban centralized heating systems were dismantled. Now a large portion of the population, approximately one-third, 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 seen an increase in the number of privately owned cars. The greater 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.

Currently Armenia can meet only 35 percent of the total current demand for energy with its domestic resources.

Energy independence

Renewable energy resources offer numerous benefits as they can not only reduce pollution, but also add an economically stable source of energy to the mix of electricity-generation sources in Armenia. Depending only on imported fuel for energy production makes the country vulnerable to volatile prices and interruptions to the fuel supply. Since most renewable energy sources do not depend on fuel markets, they are not subject to price fluctuations resulting from increased demand, decreased supply, or manipulation of the market. Because fuel supplies are local, renewable resources are not subject to control or supply interruptions from outside the country or region. The nation’s fossil fuel dependence also has serious implications for national security.

Any addition to the energy independence of Armenia has high direct social, industrial, and political value in addition to psychological benefits. Such benefits tend to be rather difficult to assess in a monetary way. However, a potential approach could be based on the results of the analysis that indicate that a 1 percent increase in the use of renewable energy is equivalent to 3.65 days of independent supply in the event of a total energy blackout.

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.

General energy-related issues in Armenia are regulated by the Energy Law, and specific issues related to renewable energy are regulated by the Law on Energy Saving and Renewable Energy. The main purpose of the latter is to define the state policy on the development of energy saving and renewable energy. The idea is to strengthen the economic situation and energy independence of Armenia by increasing the level of indigenous renewable energy production.

Renewable energy options

As a country possessing no fossil fuel resources, Armenia could use the different sources of renewable energy available in the country. The findings of a comprehensive review of renewable energy potential in Armenia have ranked small hydropower 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 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 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 the 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 hydropower generation systems or for 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 hydropower generation systems can be constructed. The 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 hydropower installed capacity will grow to be about 215 MW from the 100 MW level that existed in 2010.

According to one study, Armenia theoretically has 5,000 MW of 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, which 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 (1.5-3 MW) and composite blades (up to 52 m. in length) from a port of entry to the selected site in a landlocked, mountainous country like Armenia. Therefore, no 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 2011, only 2.6 MW of wind power was operative in the Lori region.

Currently the most cost-effective approach for using photovoltaic solar panels for power production is to import solar cells and to assemble them into modules in Armenia. The second alternative is the development of an industrial base in Armenia to manufacture silicon-based solar cells in the country, using its abundant quartzite deposits. This alternative is expected to require an investment of approximately $300 million. Presently there are only a 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 percent 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 not feasible 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 and the total potential power output.

Although municipal waste is not strictly a renewable source, it is indigenous to the country, and its disposal is a monumental nuisance and very costly. The average annual generation of municipal solid waste in Armenia today is estimated to be 1,600 metric tons/day. The traditional disposal of municipal waste is in engineered landfills or in mass burn incineration, both of which generate serious environmental problems. Land for disposal is becoming increasingly scarce in urban areas. The more recent and beneficial use has been to generate methane gas through anaerobic digestion, and then to use the biogas to generate electric power.

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

Environmental benefits and impacts

Renewable energy generation will have mainly positive, long-term environmental effects as it reduces the need for power generation based on fossil fuels, thereby reducing Greenhouse Gas (GHG) emissions. Of course, renewable energy will cause environmental impacts during construction and operation. Impacts during construction are normally temporary and no worse than other industrial projects.

Approximately two-thirds of the current power generated in Armenia is based on nuclear and hydropower, which in turn lowers the per capita GHG emissions for Armenia. While the reduction of GHG emissions is still among the targets to pursue, Armenia’s energy independence and its reduction of the cost of energy generation are of higher importance.

The main potential problems associated with small hydropower plant projects could be their impact on migrating fish stock if proper fish bypasses are not installed or if proper precautionary measures are not implemented to avoid fish being sucked into the turbines. The main impacts resulting from the operation of wind farms are low-frequency noise and the visual pollution of the landscape. There is also the possibility of birds colliding with turbine blades; avoiding bird migration paths for wind turbine farms would minimize this impact.

Bio-fuel production results in virtually no net carbon emissions during a complete life cycle if forests are not destroyed to make land available for planting feedstock. Even though gasoline that is mixed with bio-ethanol has less CO2, the blend produces higher nitrogen oxide than gasoline, which is the main component of air pollution that causes smog. Depending on the feedstock, the leftover by-products could be useful as fertilizer, or fuel for operating processing plants, or become waste.

Entities in the field of renewable energy

There are a handful of institutes, laboratories, and centers in Armenia that are involved in renewable energy research and development. Several private companies are also involved in the field of hydro, solar, and wind power generation. The majority of these companies are engineering and consulting firms that mainly provide engineering design and feasibility studies for small hydropower plants. There are a few small companies that assemble stand-alone solar water heaters or hybrid units that work in conjunction with central heating units of apartment buildings or social and educational institutions.

Job creation

The use of renewable energy will not only keep hard currency in Armenia, but will also create significant benefits through economic development. The use of renewable energy technologies will create jobs using local resources in the form of a new, “green,” high-tech industry with an important export potential. Banks and construction firms will also benefit from the 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.

Conclusions

The findings of a comprehensive review of renewable energy potential in Armenia have ranked small hydropower plants and solar hot water heaters as the most economical for Armenia in the short to medium term, followed by wind farms and the use of heat pumps. Photovoltaics, geothermal power, and bio-fuels, especially bio-ethanol, 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 long term. Biomass is also a viable source for heat and electricity production in the short term. Finally, although not strictly a renewable resource, municipal solid waste in landfills is a practical source for generating methane for power production.

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 feasible and economically viable renewable energy resources will create stable, domestic power-generation capabilities, which in turn could be a major component of Armenia’s national security.

Tamara Babayan is the director of the Renewable Resources and Energy Efficiency Fund (R2E2) in Yerevan, Armenia. Areg Gharabegian is a principal project manager with Parsons in Pasadena, Calif. Artak Hambarian is a professor in the School of Engineering at the American University of Armenia (AUA) in Yerevan. Morten Søndergaard is a project manager with Danish Energy Management in Denmark. Kenell Touryanis a visiting professor in the School of Engineering at AUA and a retired researcher from the National Renewable Energy Laboratory (NREL) in Denver, Colo.

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