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09.02.2015 Hayk Harutyunyan: Solar energy tariffs to be competitive

Mediamax has talked to the Deputy Minister of Energy and Natural Resources Hayk Harutyunyan on renewable energy and its development in Armenia.

- Armenia has quite huge inexhaustible energy resources of its own and their utilization will allow satisfying up to 30% of demand for electricity in 2025. Which part of those resources is being used and what steps are taken for their more effective utilization?

- We provide over 30% of Armenian electricity through renewable energy sources. Today mainly hydro resources are used in Armenia’s renewable energy sector. We have 162 small hydropower plants (HPPs), as well as complexes of two major hydropower plants – Sevan-Hrazdan and Vorotan. As a policy shaping agency, the Ministry of Energy and Natural Resources carries out a number of projects and plans to implement projects aimed at utilisation of renewable energy resource of Armenia. I assure you that by 2025 we will have a very different energy system  to what we have today.

- You noted that nowadays water resources are the most used among energy resources. How can we carry out the full utilization of the potential of hydropower resources?

- According to design capacity, small HPPs were to generate 830 million kWh, but last year we received only 685 million kWh, which means we face certain challenges in this sector. The issues vary, ranging from technological, environmental and economic. The Ministry of Energy is shaping the sector’s policy, but unfortunately, it does not hold sufficient control mechanisms to punish any infringements and encourage the good work.

When conducting a retrospective analysis of the current situation, it would probably be better to bring the technical standards to comply with international practice at the start of the process and not to let small HPP investors choose the equipment to be installed at their own discretion. We have secured the quantitative development of the small hydropower. The goal for today is the qualitative development. As I said, we have 162 small HPPs and around 60 have been granted a license. Once their construction is over, the small HPPs will generate around 1 billion kWh, which will supply roughly 15% of total electricity demand.

It should  also be taken into account that the insufficient power generation is also a result of objective reasons, such as, for instance, decreased water resources, which is mainly the consequent of global climate change and inaccurate assessment of the hydro resource. Thus, we can make an accurate calculation of Armenia’s hydro power potential only after our water resources are reassessed.

It should be also noted that Armenia’s practice of small hydropower sector development is regarded as exemplary in the international scene and many countries are trying to repeat it.

- Presently, out of major rivers, the Debed with its Dzoraget tributary and the Araks are not used for energy purposes. You had plans to build HPPs on these rivers. When will those projects be carried out?

- In the south, we plan to implement the construction of Meghri hydropower planttogether with our Iranian partners . The initial structure of the project is as follows; the Iran makes the investment, builds the hydropower plant, exploits it for 15 years, sells the electricity and 15 years later transfers it to Armenia party as a our property, which is an internationally accepted Build, Operate, Transfer (BOT) practice. At first, it was planned to have a capacity of 131 MW or annual power generation of 800 million kWh, however, the Iranian party recently suggested building the plans with a capacity of 100 MW and explained it by reduction in water resources.

We have an untapped resource in the north – a project of two medium-sized HPPs – Lori-Berd and Shnogh, with an initial design capacity of around 60 MW and 70 MW. We are presently negotiating with investors and taking steps to renew feasibility and investment packages. We are going to announce an international bidding once the investment projects are ready and the investor proposing best terms, the main criteria being the low tariff and efficiency, will be granted a construction permit. Among other reasons, these projects are essential for the power system as we don’t have any significant power generation in the north of Armenia.

- What would you say about the utilization of the solar energy? To what extent is this renewable energy resource productively used in Armenia?

- Armenia has huge solar energy potential. To date, the main issue related to solar resource utilization has been that of the  of capital investment in that sector. The prices for solar photovoltaic elements considerably decreased over the past ten years, and today the construction of solar plants is highly profitable in economic terms. It has become around 80% more affordable only in the past four years. Solar power plants are already competing with conventional thermal generations in various countries.

We have devised specific solar energy development project. According to various assesments, there is potential of around 6-7 thousand MW in Armenia, however, we do not want arable and agricultural lands to be covered by photovoltaic elements. According to preliminary estimates, plants with an overall capacity of around 1000 MW can be built on lands not suitable for farming. In order to understand the peculiarities of the employment of those technologies in Armenia and the climatic impact, we will build plants with a capacity of 30-50 MW in the first phase. This also requires a trial period, which we are planning this year.

Weather stations for solar resource assessment will be installed in six different geographical locations in Armenia and photovoltaic elements will be their power source. Along with international experts, we will conduct studies lasting around a year and afterwards, will develop the feasibility projects and announce an international bidding. We will then select investors and will grant them permits to build a solar power plant.

Low kilowatt prices and plant productivity will be the main contest criteria. Our goal is to get the most appropriate tariff for 1 kilowatt for Armenia. During 2015-2016, we will prove that our resource is so good that we can have a record low tariff for 1 kilowatt of electricity generated through solar energy. I am convinced that solar energy rates will be competitive with thermal energy tariffs, or they will be even lower then from conventional generation.

Solar water heaters are already widely used in everyday life. These water heaters allow saving around 80% of hot water expenses and ensuring return on investment (ROI) within three-five years. Armenian banks offer quite good funding terms for these particular technologies, and I am sure in the near future, these terms will become more attractive and specific. We aim to create conditions in Armenia that will enable each roof to become a power generating micro-station. There is such global practice, and I believe that once we take few right steps, this process will also rapidly develop in Armenia in the near future.

- To what extent is your Ministry open to cooperation with individuals and the private sector on ways to use renewable energy resources?

- We are open to cooperation. We have meetings with investors and financial institutions on daily basis. We listen to opinions and proposals from all around. There are many good projects and we support them within our capacities. However, I should say that in Armenia I see no revolutionary inventions yet. I met with many scientists who had presented various projects, but almost none of them had passed a trial period, they were mainly not patented and the authors themselves had no clear idea of what type of support they were seeking.

Of course, there were companies with good ideas and projects, which get grants within joint projects carried out with the Energy Ministry and other structures in order to prepare sample products. We hope the private sector will come up with more practical proposals in the future.

- What about the wind power?

- We have quite effective wind potential, which however, occurs in high-altitude areas. This fact evokes certain logistical difficulties. It is almost impossible to take the wind turbines with big sizes and capacity (2 MW and more) required to generate energy from the wind to the relevant places. In this respect, the investors should take into account the geographical peculiarities of Armenia. Our state and private sector companies have investment projects with Iranian, Polish and Chinese companies. Ifwe implement those, then in the coming years we will have wind farms with a capacity of 200 MW. Our Ministry has created a wind map which will serve as a useful tool for investors. We also have a feed in tariff and provide power purchase agreement on all the produced electricity for a period of 20 years.

- You recently took part in the fifth session of the assembly of the International Renewable Energy Agency (IRENA) in Abu Dhabi where you introduced the potential of Armenia's renewable energy sector. What outcome should we expect from these meetings and can they be viewed as new cooperation opportunities?

- I got very optimistic feeling from the meetings. The discussions showed that even the falling oil prices in the global market cannot impede the development of the renewable energy. I don't think the results of our meetings will be visible soon.

Armenia should develop its renewable energy. We simply have no alternative. We have neither oil, nor gas. It should be noted once again that high equipment prices are the only issue we have been facing in this sector. We couldn't afford employing technologies that might have had adverse impact on electricity end user tariffsand it isour priority tasks to provide affordable electricity for our population. Presently, there is an unprecedented decrease in prices and increase in efficiency in this sector, and we should seize this opportunity. We aim for a safe, sustainable, independent and self-sufficient energy system in Armenia.

Siranush Yeghiazaryan talked to Hayk Harutyunyan