Our Analytics 6 june — 12:19

Armenia will have to import Azerbaijani electricity (New geoeconomics)

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BY MAMMAD EFENDIYEV, ECONOMY SECTION

The only thing that Armenia did not experience a lack of during the crisis decades was electricity. The country not only provided its own needs, but also exported it to neighbouring Iran and Georgia. But times have changed, and today Yerevan is also concerned about how and where to get the missing amounts of energy.

We have already written about the shutdown of the Armenian nuclear power plant in Metsamor for repairs. The government decided to continue the technical re-equipment of the nuclear power plant in defiance of the demands of the world community (especially neighbouring countries, including Azerbaijan), and not completely stop its activities. Old technology and worn-out equipment cause concern not only among specialists. But the already approved 'Strategic Energy Development Program until 2040' provides for the extension of the life of the Metsamor NPP even after 2026.

Armenia's last hope - worn out Metsamor - stopped for repairs

And then, as luck would have it, electricity also ceased to flow from Karabakh, liberated by the Azerbaijani Army from the Armenian occupation. This year Yerevan planned to import from Karabakh more than 300 million kWh of cheap electricity at a price of about 25 drams (4.8 cents) per 1 kWh. (For comparison, note that 1 kWh of electricity at the Hrazdan TPP in Armenia costs more than 30 drams). And if earlier Armenia imported electricity from plush Nagorno-Karabakh, then after the end of the second Karabakh war, the opposite picture developed. Azerbaijan, along with the liberated territories, received numerous hydroelectric power plants. But Yerevan cannot allow problems with the energy security of the part of Nagorno-Karabakh that remained under the control of the Russian peacekeepers, the system of which is connected to the electric power system of Armenia.

A strange situation has developed at the Hrazdan TPP. At the 5th power unit, there was a need for repair work. And according to the estimates of the Gazprom Armenia company, which owns the station, urgent work requires 16 million euros. But these costs are not compensated by the tariffs in force in the country. This explains the contradiction between the country's Public Services Regulatory Commission (PSRC) and Gazprom Armenia, which cannot come to a consensus in any way, as a result of which the entire system is under threat. However, on the eve it became known that the work of Hrazdan-5 was temporarily suspended due to the need to overhaul the main equipment.

Problems at the Hrazdan TPP too

Experts believe that from a purely commercial point of view, the behaviour of Gazprom Armenia is logical and understandable. Not a single company, especially a foreign one, will operate at a loss. But if we consider the issue on a broader level, then the problem rests on the redundancy of the energy system of Armenia, which dictates the need for a constant increase in exports in order to ensure a steady flow of foreign currency into the country. However, the absence of a clear and predictable strategy leads to similar situations when, given a certain potential, a country is forced to import electricity.

And in the Georgian direction of electricity export, Yerevan was almost completely deactivated. Moreover, it essentially lost this market, giving way to the Azerbaijani company Azerenerji, which today is almost the only importer of electricity to Georgia. And Armenia is now importing electricity from Georgia, as Deputy Minister of Territorial Administration and Infrastructure Hakob Vardanyan pompously emphasises, 'taking into account its cheapness.'

They say that imports are not due to a shortage of electricity in Armenia, but due to the fact that Georgia had more cheap electricity than was produced in Armenia. 'Thanks to this, from February to June, we ensured a positive result in the tariff in the amount of 2.6 billion drams,' said Vardanyan. But how much the Georgian electricity is cheaper and the volume of supplies from Georgia, he did not name. Perhaps this is Armenian know-how, and the deputy minister is afraid that Azerbaijan can intercept all the cheap electricity, depriving Armenia of such a gain.

Hakob Vardanyan shrugs his shoulders

As for the Iranian direction, Yerevan has been dreaming of a third Iran-Armenia air power transmission line for many years. But this project has so far been implemented by a maximum of 30%, although the construction of the power transmission line began in 2006. By 2017, out of 711 pillars, only 17 had been installed here; concrete was poured in another 35 pillars. Currently, concrete has been poured into more than 550 pillars, and about 450 pillars have already been installed. How much time at such a rate it will take to complete all the work - no one dares to say. Although the project was originally planned to be completed by the end of 2018. The last time the project was delayed was in 2019 - to the end of 2020.

And does Armenia need to rack its brains over the export of electricity today? In this situation, the main generation burden falls on the Yerevan TPP. But a year ago, gas tariffs in the country increased by 5-6%, this will form a tariff burden on the country's electricity system. It is much easier to import cheaper electricity. Even if it conflicts with the national energy interests of Armenia, since its system is focused on the export of electricity. As a result, Yerevan is trying to compensate for the shortage of electricity through supplies from Georgia. By the way, a representative of its government has already been sent to Tbilisi to coordinate the volume of imports. But in terms of energy, Georgia itself is in a state of deficit, the largest hydropower plant Inguri has been suspended for repairs. In this regard, Georgia is increasing imports of electricity.

So, whatever one may say, in the end Yerevan will have to import Azerbaijani electricity, no matter how unpleasant it may be for it. A simple analysis of the structure of Georgia's electricity shows that its lion's share belongs to Azerbaijan. Therefore, even Armenian experts, who can hardly be accused of sympathising with the Azerbaijani side, believe that since May this year, the electricity that comes from Azerbaijan to Georgia can be sent to Armenia through re-export. And if this is translated from Armenian, it turns out that Yerevan will have to buy Azerbaijani electricity in order to cope with its energy crisis. After all, there are no more neighbouring countries with excess generating capacities.

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