In his current ministerial post since 2016, Ashot Manukyan has a wealth of experience in both the public and private realms, having worked in finance, the media and energy sectors, besides being a consultant to top companies such as Mitsubishi
What is your overview of where the country is today, where it has come from and what you think the future holds for the Republic of Armenia?
Armenia has undergone significant change in the last three decades, among them a serious energy crisis. But with each crisis, we sought opportunity. In the case of the energy crisis, we started ambitious reforms to decouple the production of electricity from distribution and started an ambitious effort in privatization and the attracting of private capital. Now Armenia exports about 20% of its produced electricity with more than 200 utility-scale production facilities, a privately owned distribution grid, developed export infrastructure, which we are strengthening constantly, and a number of large and important infrastructure investment projects lined up. So, in short, just like the future of our energy sector, the future of our country, is bright and sunny.
As minister of energy infrastructures and natural resources since 2016, what have been your biggest successes and what do you view as your biggest challenges moving forward?
I faced three main challenges in the energy sector. The first was the ongoing investment projects, which had to be carried out with maximum supervision and efficiency. For example, we are investing $300 million to upgrade our nuclear power plant in order to extend its lifecycle. This is a unique project in every aspect and has to be done with utmost caution considering its strategic value not only to our energy system but for the country overall.
The second challenge was to improve the efficiency of our energy system through targeted private investment and to revitalise the large investment projects of importance to our energy system. An example is the “Shnogh” hydropower plant with 76 MW installed capacity in the north of the country, which we started to implement last year with the investment fund “Investors Club of Armenia” and the US company Robbins. Total investment in this project will be around $200 million. The third challenge is liberalisation in the electricity market, which aims to increase the efficiency of the whole system through increased competition, scale up cross-border trade, maximize the efficiency of electricity production, and enable new private investment in the energy sector. The process has started and the new market model will operate fully in 2019.
In the mining sector, my main task was to attract investment into the exploration of our natural resources, identify the barriers for private investment, lift those barriers and create maximum transparency and a fair working environment for the existing mining operations.
With no reserves of hydrocarbons, Armenia clearly faces a challenge in terms of meeting rising energy demand. How big is this challenge? What are the key plans to meet Armenians’ energy needs? How big a role is it possible that renewables will end up playing, and could Armenia end up getting ahead of the game in the growth sector that is clean energy?
One of the main pillars of our energy policy is the diversification of energy production and the routes of supply of primary energy sources, like natural gas. Armenia gets its natural gas from Russia and Iran using two different pipelines and each pipeline is large enough to provide the needs of the whole country by itself. We are now producing about 8 billion kWh of electricity. One third of this comes from renewables (mainly hydro), the other third from nuclear and the remaining third from brand new thermal power plants that work with natural gas. We have no problem in providing for increased domestic consumption, which grew by around 20% in the last 10 years. We also have export obligations and very ambitious plans to become a regional hub for electricity trading. We are building two additional high-voltage lines to Iran and Georgia, which will increase our export capacity sevenfold.
In the coming years, we aim to increase the share of renewables to at least 50% by implementing solar, wind and midsize hydro projects. With renewables becoming cost competitive, we believe that almost all new generation in Armenia will come from renewables. We do have a project with an Italian company to build a 250 MW combined-cycle gas turbine (CCGT) power plant to replace our old existing thermal power plant, now only used as reserve capacity. But, the growing regional demand for electricity and the fact that we can get a cheap solar tariff in Armenia and attract private investment assures us that most of the new demand in the region will be supplied by solar. We are in the process of an international auction for a 55 MW solar PV power plant, in which Access Power from the UAE is taking part. Moreover, that same company is investing in the construction of a wind power plant with a capacity of 100 MW. They are now at the wind measurement campaign stage. We are positive that we will end up with a very competitive solar tariff, which will provide a solid foundation for a rapid growth in this sector in the coming few years. At the same time, we are aggressively promoting rooftop solar and have ambitious plans to install rooftop PV on every building in Armenia. To this end, we have what is probably the most forward-looking net-metering legislation in the world – the key to our success in this sector.
In general, I would like to say that Armenia has a proven track record of attracting private investment in the energy sector. One such example is our small hydro plant sector. With a feed-in-tariff and guaranteed power purchase agreement mechanism, we managed to attract more than $600 million in investment and build more than 300 MW of new capacity and upgrade the transmission grid in order to integrate the new renewable capacities. Overall, we have 184 small hydro plants and this number is growing. We have similar mechanisms for all other renewables.
We also have mutually beneficial trading schemes with Iran to export electricity and import natural gas. For now most of our exports come from our thermal generation. I also believe that given our trade schemes, in the coming decade all of our thermal capacity will be directed to export and our domestic consumption will come almost entirely from renewables and nuclear.
As regards the instalment of new capacity, importing energy sources and boosting various energy sectors, what are Armenia’s main needs in terms of investment? Is there scope for GCC states from the Gulf to partner in any of these areas?
We have a number of investment projects in hydro, solar, wind, geothermal and the waste-to-energy sectors. These projects are of various investment size and appetite. We are also inviting investors to invest in the production of solar panels and small wind turbines in Armenia, considering the large market potential and very preferential trading schemes within the Eurasian Economic Union (Russia, Kazakhstan, Belarus and Kyrgyzstan), the EU, the US and Iran. At the same time, as I already stated, we have initiated an electricity market liberalisation process, which means that we will be moving from the ‘single-buyer’ model to a liberal one. In that process, we are simplifying and empowering traders in order to boost regional electricity trading. We will need experienced traders and suppliers to come and operate with the new market rules.
How important is energy efficiency in Armenia’s plans to meet demand? Are there opportunities to develop new technologies and techniques that could also interest investors?
Energy efficiency is a priority for us as means of improving energy security, improving economic competitiveness and minimising the negative impact on the environment. To promote energy efficiency, the government’s commitment is reflected in the Law on Energy Saving and Renewable Energy, adopted in 2004 and since updated. With this legislation and strategic documents, our energy efficiency effort has become a very successful process and has attracted and motivated greatly the financial institutions and local businesses to invest in this sector. We prioritise energy efficiency because in the early 1990s we had constant long blackouts and everyone in the energy sector and in policy making assured themselves and the people that we would never return to those “dark ages”. So, we value electricity as a gift that should be used wisely and not be wasted. The investment potential is also quite diverse here, ranging from investment in local R&D to working with local financial institutions and ESCOs (energy service companies) to finance energy efficiency projects in public buildings, the residential sector and in industry.
How important is the mineral sector in terms of exports to favour Armenia’s economic growth? What are the key exports and which products and markets could be developed further?
With regards to the mining sector, mining and downstream processing contributes to about 5% of our GDP and more than a third of all exports. We currently have over 390 solid mineral mines with confirmed resources, including 29 metal mines. Our main mining exports are copper, molybdenum and gold. There are still dozens of fields with identified metallic mineral reserves, including copper, gold, zinc, and iron, which with some extra exploration can become very promising mines. My staff is ready to sit down with every investor and offer a selection of prospects depending on their wishes.
Are there plans to develop greater processing and manufacturing using the country’s mineral wealth? Again, could this provide investment opportunities?
Among base metal and precious metal deposits and mines in Armenia, there are predictive reserves of gold, silver, copper, molybdenum, iron, zinc, manganese and lead that have been estimated and pre-evaluated. The geological prospecting works in these areas will make it possible to discover new mines. At present, 22 metallic (geological prospecting works) organisations are functioning in Armenia. In addition, various exploration studies are underway. Besides, the organisation of the processing of non-metallic minerals (except construction materials derived directly from natural stones) will be of special value and significance for economy, in particular:
– Several types of basalts can be used in the chemical industry for the construction of acid-proof products.
– Perlite rocks can be used for production of lightweight concretes and energy-efficient construction materials.
– Magnesilicate rocks can be used for the production of cement, metallurgical products, glass and ceramics.
In addition, there is the possibility of constructing a copper smelting facility as the volumes of production in Armenia alone is sufficient to organise a largescale processing facility.
What measures is your ministry taking to protect the environment, especially taking into account Armenia’s growth as an attractive tourist destination?
In 2017, the Republic of Armenia attained the Extractive Industries Transparency Initiative (EITI) candidacy status. EITI implementation will ensure high standards of transparency and accountability in public life, government operations and in business, granting transparency and accountability to governance and the management of revenues from the extraction of natural resources. The initiative also promotes dialogue between the government, private sector and civil society. The EITI is also a good platform in Armenia for taking steps towards the development of a responsible mining industry, as a result of which a special attention will be given to works on environmental protection. Moreover, the Mining Code of the Republic of Armenia, as defined in EU Directives, regulates the efficiency of mining in terms of environmental safety, including land degradation, prevention or minimisation of damage to the environment or human health, and defines requirements on the use of mining waste and its recycling. We believe that the future of mining can only be assured through sustainable and environmentally sound practices.