Anna Donchenko, Expert in the field of international economic relations, Armenologist
NUCLEAR ENERGY: A FACTOR OF SUSTAINABLE DEVELOPMENT
In 2022, the IAEA conducted a series of national-level studies which identified the Republic of Armenia as having
significant potential in the use of nuclear energy. In particular, we are referring to the reduction of greenhouse gas emissions and the achievement of climate change targets, including those identified at the UN Climate Change Conference (COP26).Based on the results of the conference, more than 40 countries made commitments to abandon the use of coal: developed countries – in 2030, developing countries – in 2040. To date, approximately 30 countries have included nuclear energy into their plans submitted under the 2015 Paris Agreement.
These plans include “national-level contributions” for the near term (up to 2030) as well as long term strategies aimed at achieving zero emissions. The Government of the Republic of Armenia has developed a long term plan for the country’s energy system, which includes a range of projects in key areas such as electricity generation, transmission, unification and distribution. It is also very important to create an export-oriented energy system that is embedded in the regional electricity market. The development of nuclear power is a key priority in these processes, as its availability contributes to economic growth, reduces dependence on imports and achieves the main goals of sustainable development.
CHARACTERIZATION OF THE ENERGY SECTOR IN ARMENIA
The energy sector of Armenia is a highly efficient system. The share of electricity generation in the total industrial
production of the country is about 10%. The generating base of the Republic of Armenia is comprised of the Armenian Nuclear Power Plant (ANPP), the 5th power unit of Hrazdan TPP (Hrazdan-5 facility of CJSC Gazprom Armenia), thermal power plants of “Yerevan CHPP” and “Hrazdan CHPP” enterprises, ten hydropower plants of the Vorotan and Sevan-Hrazdan HPP cascades, small HPPs, as well as small generating facilities based on renewable energy sources (solar, wind and geothermal). The policy and strategy for the development of the country’s energy sector is under the responsibility of the Ministry of Territorial Administration and Infrastructure of the Republic of Armenia.
In 2021, the total installed capacity of Armenia’s generating sources was 2,878.7 MW: ANPP – 407.5 MW; Hrazdan TPP – 410 MW; 5th power unit of Hrazdan TPP – 467 MW; 1st power unit of Yerevan CCGT – 228.6 MW; Vorotan HPP cascade – 404.2 MW; Sevan-Hrazdan HPP cascade – 561.4 MW; small plants (up to 30 MW) on renewable sources – 400 MW (of which 380 MW – small HPPs).
DEVELOPMENT STRATEGY OF ENERGY SECTOR
The document defining the development of the energy sector in the Republic of Armenia is the Energy Sector
Development Strategy until 2040. It also includes a schedule plan for its implementation.
The main objectives of the Strategy are:
• ensure self-sufficiency and modernization of the energy infrastructure capable of generating 12 billion kWh of energy per year;
• creation of a regional energy center interfaced with the energy systems of neighbouring countries and the EAEU;
• liberalization of the electricity market based on the best international practices;
• ensure energy efficiency of the industry in accordance with all environmental protection standards.
The majority of existing power transmission assets have reached the end of their performance life and require extensive replacement and modernization work. Furthermore, approximately 90% of 220 kV overhead lines are in need of rehabilitation, and 42% of low-voltage substations are in poor technical condition.
NUCLEAR ENERGY: A FACTOR OF SUSTAINABLE DEVELOPMENT
In 2022, the IAEA conducted a series of national-level studies which identified the Republic of Armenia as having
significant potential in the use of nuclear energy. In particular, we are referring to the reduction of greenhouse gas emissions and the achievement of climate change targets, including those identified at the UN Climate Change Conference (COP26).Based on the results of the conference, more than 40 countries made commitments to abandon the use of coal: developed countries – in 2030, developing countries – in 2040. To date, approximately 30 countries have included nuclear energy into their plans submitted under the 2015 Paris Agreement.
These plans include “national-level contributions” for the near term (up to 2030) as well as long term strategies aimed at achieving zero emissions. The Government of the Republic of Armenia has developed a long term plan for the country’s energy system, which includes a range of projects in key areas such as electricity generation, transmission, unification and distribution. It is also very important to create an export-oriented energy system that is embedded in the regional electricity market. The development of nuclear power is a key priority in these processes, as its availability contributes to economic growth, reduces dependence on imports and achieves the main goals of sustainable development.
CHARACTERIZATION OF THE ENERGY SECTOR IN ARMENIA
The energy sector of Armenia is a highly efficient system. The share of electricity generation in the total industrial
production of the country is about 10%. The generating base of the Republic of Armenia is comprised of the Armenian Nuclear Power Plant (ANPP), the 5th power unit of Hrazdan TPP (Hrazdan-5 facility of CJSC Gazprom Armenia), thermal power plants of “Yerevan CHPP” and “Hrazdan CHPP” enterprises, ten hydropower plants of the Vorotan and Sevan-Hrazdan HPP cascades, small HPPs, as well as small generating facilities based on renewable energy sources (solar, wind and geothermal). The policy and strategy for the development of the country’s energy sector is under the responsibility of the Ministry of Territorial Administration and Infrastructure of the Republic of Armenia.
In 2021, the total installed capacity of Armenia’s generating sources was 2,878.7 MW: ANPP – 407.5 MW; Hrazdan TPP – 410 MW; 5th power unit of Hrazdan TPP – 467 MW; 1st power unit of Yerevan CCGT – 228.6 MW; Vorotan HPP cascade – 404.2 MW; Sevan-Hrazdan HPP cascade – 561.4 MW; small plants (up to 30 MW) on renewable sources – 400 MW (of which 380 MW – small HPPs).
DEVELOPMENT STRATEGY OF ENERGY SECTOR
The document defining the development of the energy sector in the Republic of Armenia is the Energy Sector
Development Strategy until 2040. It also includes a schedule plan for its implementation.
The main objectives of the Strategy are:
• ensure self-sufficiency and modernization of the energy infrastructure capable of generating 12 billion kWh of energy per year;
• creation of a regional energy center interfaced with the energy systems of neighbouring countries and the EAEU;
• liberalization of the electricity market based on the best international practices;
• ensure energy efficiency of the industry in accordance with all environmental protection standards.
The majority of existing power transmission assets have reached the end of their performance life and require extensive replacement and modernization work. Furthermore, approximately 90% of 220 kV overhead lines are in need of rehabilitation, and 42% of low-voltage substations are in poor technical condition.
The development of the generation sector in Armenia is currently focused on the expansion and modernization of grid facilities, with a particular emphasis on High Voltage Electrical Networks CJSC and Electric Networks of Armenia CJSC. In this regard, modernization and re-equipment projects are currently being implemented at almost all generating and grid enterprises.
SPECIAL FEATURES OF THE ENERGY MARKET IN ARMENIA
Special features of the energy market include the functioning of a barter system of electricity-for-gas exchange between Armenia and Iran. The agreement on gas supply in exchange for electricity (at the rate of 1 m³ of blue
fuel from Iran for 3 kWh of electricity from Armenia) was signed in 2004.
Gas is supplied through the Iran-Armenia gas pipeline, while electricity from Armenia is sent to Iran through two transmission lines. In November 2022, Armenia and Iran extended the Agreement until 2030. In addition, as of 1February 2022, Armenia switched to a new model of the wholesale electricity market, based on modern electricity trading rules, which works by balancing the supply and demand of industry participants.
STATE SUPPORT MEASURES
In accordance with the Energy Sector Development Strategy until 2040 and its implementation plan, the Government of the Republic of Armenia has identified 11 priorities for the development of the sector:
1. Development of generating capacities.
2. Development of high-voltage power transmission networks.
3. Development of power transmission network.
4. Development and liberalization of the electricity market.
5. Strengthening of regional cooperation.
6. Development of individual heating system.
7. Development of gas transport infrastructure.
8. Improvement of energy efficiency.
9. Digitalization of the energy sector.
10. Stimulating scientific developments in the energy sector.
11. Optimization of management of state-owned enterprises.
The approved Strategy implementation schedule plan for each priority task has specific development projects and deadlines for implementation; funds are to be provided from public, private or international sources.
EXTENSION OF THE OPERATING LIFE OF THE ARMENIAN NPP
In 2021, work was completed to extend the operating life of the Armenian NPP until 2026. As it was mentioned above, according to the Energy Sector Development Strategy until 2040, «the extension of the operating life of the NPP beyond 2026 is one of the main priorities of the Government of the Republic of Armenia». “ANPP” CJSC prepared a concept for the repeated extension of the operating life of Unit 2 of the NPP after 2026 for a period of 10 years.
On August 31, 2022, the concept was approved by the Nuclear Safety Regulatory Committee of the Republic of Armenia and sent to the Ministry of Territorial Administration and Infrastructure. JSC Rusatom Service was ppointed as the authorized organization on behalf of Rosatom State Corporation. This and other issues were discussed at the 21st session of the Intergovernmental Commission.
Rosatom State Corporation and the Ministry of Territorial Administration and Infrastructure of the Republic of Armenia were instructed to prepare for signing by the end of May 2023 the draft Agreement between the Government of the Russian Federation and the Government of the Republic of Armenia on cooperation in extending the operating life of the NPP Unit No. 2 or the Protocol to the Agreement between the Government of the Russian Federation and the Government of the Republic of Armenia on cooperation in extending the operating life of the NPP Unit No. 2 dated December 20, 2014.
SPECIAL FEATURES OF THE ENERGY MARKET IN ARMENIA
Special features of the energy market include the functioning of a barter system of electricity-for-gas exchange between Armenia and Iran. The agreement on gas supply in exchange for electricity (at the rate of 1 m³ of blue
fuel from Iran for 3 kWh of electricity from Armenia) was signed in 2004.
Gas is supplied through the Iran-Armenia gas pipeline, while electricity from Armenia is sent to Iran through two transmission lines. In November 2022, Armenia and Iran extended the Agreement until 2030. In addition, as of 1February 2022, Armenia switched to a new model of the wholesale electricity market, based on modern electricity trading rules, which works by balancing the supply and demand of industry participants.
STATE SUPPORT MEASURES
In accordance with the Energy Sector Development Strategy until 2040 and its implementation plan, the Government of the Republic of Armenia has identified 11 priorities for the development of the sector:
1. Development of generating capacities.
2. Development of high-voltage power transmission networks.
3. Development of power transmission network.
4. Development and liberalization of the electricity market.
5. Strengthening of regional cooperation.
6. Development of individual heating system.
7. Development of gas transport infrastructure.
8. Improvement of energy efficiency.
9. Digitalization of the energy sector.
10. Stimulating scientific developments in the energy sector.
11. Optimization of management of state-owned enterprises.
The approved Strategy implementation schedule plan for each priority task has specific development projects and deadlines for implementation; funds are to be provided from public, private or international sources.
EXTENSION OF THE OPERATING LIFE OF THE ARMENIAN NPP
In 2021, work was completed to extend the operating life of the Armenian NPP until 2026. As it was mentioned above, according to the Energy Sector Development Strategy until 2040, «the extension of the operating life of the NPP beyond 2026 is one of the main priorities of the Government of the Republic of Armenia». “ANPP” CJSC prepared a concept for the repeated extension of the operating life of Unit 2 of the NPP after 2026 for a period of 10 years.
On August 31, 2022, the concept was approved by the Nuclear Safety Regulatory Committee of the Republic of Armenia and sent to the Ministry of Territorial Administration and Infrastructure. JSC Rusatom Service was ppointed as the authorized organization on behalf of Rosatom State Corporation. This and other issues were discussed at the 21st session of the Intergovernmental Commission.
Rosatom State Corporation and the Ministry of Territorial Administration and Infrastructure of the Republic of Armenia were instructed to prepare for signing by the end of May 2023 the draft Agreement between the Government of the Russian Federation and the Government of the Republic of Armenia on cooperation in extending the operating life of the NPP Unit No. 2 or the Protocol to the Agreement between the Government of the Russian Federation and the Government of the Republic of Armenia on cooperation in extending the operating life of the NPP Unit No. 2 dated December 20, 2014.
They noted the mutual interest in the implementation of this project, including an agreement to start work on extending the service life of ANPP after 2026 as soon as possible. At present, the proposal of Rosatom State Corporation to carry out the relevant works is under consideration.
THE EAEU: COMMON ENERGY MARKETS
The EAEU member states are currently preparing to establish common electricity and gas markets by 2025.
Based on expert analysis, the position of the Republic of Armenia on this matter aligns with that of the Republic of Belarus and the Kyrgyz Republic, which are importers of hydrocarbons.
The formation of a common market for energy resources is a key element of the integration partnership. Armenia is keen to reach a consensus on the project to create a common gas market for the EAEU as soon as possible and considers it expedient to discuss the draft of the relevant international treaty.
In addition, as far as the common electricity market of the EAEU is concerned, the approach laid down in the Rules of Access to Interstate Electricity (Power) Transmission Services remains relevant. According to
the Armenian side, these rules will facilitate connecting Armenia with the relevant systems of the Eurasian states through a non-member country (such as Georgia), thereby establishing the regulatory and technical foundations for new foreign economic contracts.
Armenia is currently constructing a third high-voltage transmission line to Iran, with construction of a transmission line to Georgia also underway. These projects facilitate the creation of physical capacity for electricity flows between the Republic of Armenia and other countries. At the same time, a number of experts have stated that Armenia will not be able to leverage the EAEU’s common electricity market without first having the necessary infrastructure in place. It is therefore crucial to swiftly resolve the matter of the above-mentioned power transmission lines.
This will enable Armenia to capitalize on both the EAEU market and the North-South energy corridor (Russia-Georgia-Armenia-Iran) in a timely manner. However, Armenia has the potential to serve not only as a transmission link, but also as a significant exporter of electricity. It is essential to consider the country’s potential capacity in advance.
LIBERALIZATION OF ENERGY MARKET
The first stage of liberalization of the electricity market has recently started in Armenia. Electricity distribution and sales activities in the country are carried out by CJSC Power Grids of Armenia. The company offers fixed tariffs for households and small businesses; medium and large businesses will have to switch to market prices. A number of large industrial enterprises make purchases on the market, where about 15% of all electricity generated in Armenia has moved to.
NEAR-TERM PROSPECTS
Rosatom State Corporation offers advanced technologies to its Eurasian bloc neighbours, and negotiations are
underway with all EAEU countries to create generating capacities, including small and medium-sized ones, as well as to build nuclear power plants. In 2024, Armenia should sign an agreement on the construction of a new nuclear power unit. Given the possibility of extending the lifetime of the currently operating second power unit of the Armenian NPP until 2036 and the time it will take to build the new facility (8 years or more), it is crucial to sign the relevant agreement in two years. By 2026, Armenia is obliged to prepare documents confirming that the nuclear power plant will be able to operate for at least 10 more years after that date. Additional work must be carried out at the NPP to improve safety.
THE EAEU: COMMON ENERGY MARKETS
The EAEU member states are currently preparing to establish common electricity and gas markets by 2025.
Based on expert analysis, the position of the Republic of Armenia on this matter aligns with that of the Republic of Belarus and the Kyrgyz Republic, which are importers of hydrocarbons.
The formation of a common market for energy resources is a key element of the integration partnership. Armenia is keen to reach a consensus on the project to create a common gas market for the EAEU as soon as possible and considers it expedient to discuss the draft of the relevant international treaty.
In addition, as far as the common electricity market of the EAEU is concerned, the approach laid down in the Rules of Access to Interstate Electricity (Power) Transmission Services remains relevant. According to
the Armenian side, these rules will facilitate connecting Armenia with the relevant systems of the Eurasian states through a non-member country (such as Georgia), thereby establishing the regulatory and technical foundations for new foreign economic contracts.
Armenia is currently constructing a third high-voltage transmission line to Iran, with construction of a transmission line to Georgia also underway. These projects facilitate the creation of physical capacity for electricity flows between the Republic of Armenia and other countries. At the same time, a number of experts have stated that Armenia will not be able to leverage the EAEU’s common electricity market without first having the necessary infrastructure in place. It is therefore crucial to swiftly resolve the matter of the above-mentioned power transmission lines.
This will enable Armenia to capitalize on both the EAEU market and the North-South energy corridor (Russia-Georgia-Armenia-Iran) in a timely manner. However, Armenia has the potential to serve not only as a transmission link, but also as a significant exporter of electricity. It is essential to consider the country’s potential capacity in advance.
LIBERALIZATION OF ENERGY MARKET
The first stage of liberalization of the electricity market has recently started in Armenia. Electricity distribution and sales activities in the country are carried out by CJSC Power Grids of Armenia. The company offers fixed tariffs for households and small businesses; medium and large businesses will have to switch to market prices. A number of large industrial enterprises make purchases on the market, where about 15% of all electricity generated in Armenia has moved to.
NEAR-TERM PROSPECTS
Rosatom State Corporation offers advanced technologies to its Eurasian bloc neighbours, and negotiations are
underway with all EAEU countries to create generating capacities, including small and medium-sized ones, as well as to build nuclear power plants. In 2024, Armenia should sign an agreement on the construction of a new nuclear power unit. Given the possibility of extending the lifetime of the currently operating second power unit of the Armenian NPP until 2036 and the time it will take to build the new facility (8 years or more), it is crucial to sign the relevant agreement in two years. By 2026, Armenia is obliged to prepare documents confirming that the nuclear power plant will be able to operate for at least 10 more years after that date. Additional work must be carried out at the NPP to improve safety.
In 2024–2025, it is planned to complete works at two important facilities as part of the Armenian NPP lifetime extension programme.
The first is a new open switchgear, which is being constructed by a Russian company that won the tender. This is the first time when such a facility has been built in the country since independence. It is scheduled to complete the work in 2025.
The second facility is the cooling towers, which are also undergoing repair work. Once the cooling towers have been repaired, the NPP will be able to operate at a higher capacity without the risk of overheating.
These two facilities are the last of the large ones to be built or modernized as part of measures to extend the operating life of the NPP. To date, both turbine generators, emergency shutdown and backup power supply systems have already been replaced and they have accomplished a number of other significant works.
THE GEOPOLITICAL ASPECT
Nuclear energy has always been a fundamental political factor. Russia is currently the only state that can build a new nuclear power unit in Armenia, which would ensure energy security for the republic, as well as for the EAEU member states. Competent and efficient implementation of projects in Armenia’s energy sector can strategically affect the geopolitical balance of power in the region, as well as create all the necessary conditions for the development of the country’s socio-economic sphere.
The first is a new open switchgear, which is being constructed by a Russian company that won the tender. This is the first time when such a facility has been built in the country since independence. It is scheduled to complete the work in 2025.
The second facility is the cooling towers, which are also undergoing repair work. Once the cooling towers have been repaired, the NPP will be able to operate at a higher capacity without the risk of overheating.
These two facilities are the last of the large ones to be built or modernized as part of measures to extend the operating life of the NPP. To date, both turbine generators, emergency shutdown and backup power supply systems have already been replaced and they have accomplished a number of other significant works.
THE GEOPOLITICAL ASPECT
Nuclear energy has always been a fundamental political factor. Russia is currently the only state that can build a new nuclear power unit in Armenia, which would ensure energy security for the republic, as well as for the EAEU member states. Competent and efficient implementation of projects in Armenia’s energy sector can strategically affect the geopolitical balance of power in the region, as well as create all the necessary conditions for the development of the country’s socio-economic sphere.