By Lia Avagyan
Armenia’s energy sector faces significant challenges due to its heavy dependence on Russian infrastructure and resources. In an interview with CivilNet, Astghine Pasoyan of the Energy Saving Foundation outlined the country’s energy security concerns and potential pathways to greater independence. Here are the key insights from the discussion.
The Russian grip on Armenia’s energy
Since the Soviet Union’s collapse, Armenia’s energy infrastructure has progressively fallen under Russian control. While privatization was intended to improve market transformation through open international tendering, Russian companies have acquired most vital assets, either through direct purchase, offshore intermediary acquisitions or debt-for-asset swaps. This includes thermal power plants, management of the nuclear power plant, and control of both high-voltage and low-voltage transmission networks.
The dependence runs deeper than infrastructure. Russia supplies 88% of Armenia’s natural gas which is used both for electricity production and heating. The transportation sector is particularly vulnerable, with 73% of vehicles running on natural gas.
The Iranian alternative
Armenia’s attempts to diversify through Iranian gas supply have faced significant obstacles. Russia responded to the Iran-Armenia pipeline with immediate price penalties and even influenced the pipeline’s diameter. Moreover, the pipeline can only supply gas to the Russian-owned block of the Hrazdan thermal power plant.
This makes the Iranian option increasingly limited. Iran’s domestic gas consumption is expected to grow, reducing its export capacity. Additionally, Iran’s nuclear power development may decrease its need for electricity imports from Armenia, potentially undermining the current barter arrangement between the two countries.
Hidden costs of energy waste
Armenia’s buildings consume several times more energy per square meter than European ones. This inefficiency, according to Pasoyan, stems from artificially low energy prices that encourage wasteful consumption. “Subsidy is the enemy of the market,” she emphasizes, explaining how artificially low prices create a perception of abundance that leads to waste.
The solution lies in transitioning from universal subsidies to targeted support for vulnerable populations. Armenia has made progress in this direction over the past two decades, moving from blanket subsidies to tariffs and programs specifically designed for low-income households. These include block tariffs, energy efficiency initiatives, high-efficiency heating device subsidies, and building retrofits. These, however, are quite limited in scope and must be scaled up.
The nuclear dilemma
The aging Metsamor nuclear plant presents Armenia with difficult choices. While its life has been extended to 2036-2040, replacing it poses significant challenges. A full-scale Russian reactor would cost $4.6-6 billion – an unsustainable debt for Armenia’s $20 billion economy. As Pasoyan puts it, it would be “like giving a loan to buy a Lamborghini to a student who’s on a stipend.”
Small modular reactors (SMRs) are being considered as an alternative, but require careful technical and economic assessment to avoid trading one form of dependency for another. The decision cannot be emotional or political but must be based on thorough feasibility studies considering fuel supply sustainability and long-term economic implications.
Also read: Armenia sets up company to draft roadmap for new nuclear power plant
Renewable energy options and a path forward
Armenia possesses substantial renewable energy potential, particularly in solar power, with annual sunny days comparable to Egypt. The government aims to reach 20% solar generation by 2040. However, artificially low Russian gas prices – about $175 per 1,000 cubic meters compared to European prices of over €510 – create market distortions that discourage renewable energy development. Renewable electricity generation is further constrained by the inability to evacuate peak power through regional electricity markets.
Pasoyan advocates for introducing a security premium into energy pricing while protecting vulnerable populations through targeted assistance. This approach acknowledges the true cost of energy dependence while ensuring social protection. The devastating economic impact of the 1990s energy blockade, which led to a 60% GDP decline, underscores the urgency of reducing dependency on a single supplier.
The solution involves a comprehensive approach: improving energy efficiency, developing renewable resources, and carefully considering nuclear options. The key, Pasoyan emphasizes, is understanding that cheap energy prices today may come at a devastating cost tomorrow.
The post Armenia’s energy dependence: a complex web of challenges appeared first on CIVILNET.