BY AREG GHARABEGIAN
YEREVAN—Armenia imports about 60% of its primary energy needs, mainly natural gas, and suffers from obsolete power generation infrastructure. Hydropower stations, which provide about 1/3 of the electricity in Armenia, are the only source of domestic renewable energy resources. However, the large hydropower plants do not meet international technical, economic, or environmental performance standards. Despite its favorable topography and hydrology, Armenia suffers from underinvestment in hydropower generation capacity. The government has launched an initiative to promote private sector investment in the country’s energy infrastructure, including hydropower. As a result, numerous small hydro power plants have been built during recent years.
The Sevan-Hrazdan Hydro Power Plant (HPP) Cascade is the largest hydropower generating facility in Armenia and supplies about 10% of the country’s electricity. The system was built between 1930 and 1962 and has a significant role in supporting the balance of the electric grid, and also provides more affordable energy than thermal power plants. The system consists of seven small to medium size run-of-the-river hydropower stations located along Hrazadan River and its tributaries between the Lake Sevan and Yerevan. The Cascade is approximately 70 km long and the seven power generation plants are: Sevan, Hrazdan, Argel, Arzni, Kanaker, Yerevan-1, and Yerevan-3. Total installed capacity of the Sevan-Hrazdan Cascade is 560 megawatts (MW) and mean annual output is around 500 million kilowatt hours (kWt/h). Figure 1 presents sizes of these seven stations.
Five stations are operational year-round and the remaining two stations work only during the irrigation season when additional water from Lake Sevan is released into the system. In order to maintain and control water level in Lake Sevan, the amount of water supply from the lake each year is based on water availability in the lake and irrigation requirements as determined by the government. Because agriculture is a priority sector in the country and water availability from the Lake Sevan is limited, then operation of the cascade is completely dependent on the country’s strategy for irrigation. Usually 150 million cubic meters of water is annually released from Lake Sevan.
The Sevan-Hrazdan HPP Cascade is comprised of open diversion canals and tunnels which transports water from the Lake Sevan to the HPPs. Most of the canals were built in the middle of the last century and they are in very poor condition and require major rehabilitation. Another major issue is illegal connections to the canals.
International Energy Corporation (IEC) owns and operates the Sevan–Hrazdan Cascade Hydropower System. IEC was incorporated in the Republic of Armenia in May 2003. IEC took ownership of the system in July of 2003 and obtained a license for generation of electric power in September of 2003. The initial owner of IEC was Inter RAO Company, a Russian state-owned company. In 2010, HydroInvest (a subsidiary of RusHydro) acquired Inter RAO’s ownership in IEC and currently RusHydro (through HydroInvest) holds the majority of the shares (90%) and controls IEC. In 2003 the Government of Armenia gave Sevan-Hrazdan Cascade to Inter RAO Company for $25 million as partial payment toward $40 million debt that Armenia had to Russia from importing fuel for generating nuclear energy.
RusHydro, was incorporated in 2004 in Russia as part of the state program for power sector reform and creating a competitive industry. RusHydro is 67% state owned and its remaining shares are publicly traded on the Moscow and London stock exchanges. RusHydro is the Russia’s largest hydropower generation company and the leader in renewable energy using water currents, sea tides, wind, and geothermal energy. The company owns 61 hydro power generation facilities with 35 gigawatt (GW) of electricity generating capacity.
The Sevan-Hrazdan Cascade Hydropower requires significant rehabilitation to extend its working life and reduce the risk of major failures. Aside from the rehabilitation of the hydropower plants, some of the channels and tunnels also need to be reconstructed to eliminate leaks and loss of water. IEC has committed to undertake the rehabilitation of the Cascade. The estimated investment required for the complete rehabilitation is approximately $66 million. IEC will be financing this investment through both internal sources ($16 million) and external debt financing ($50 million).
Asian Development Bank (ADB) and European Bank for Reconstruction and Development (EBRD) have agreed to provide a $25 million loan maturing in 2029 to IEC for the rehabilitation of the seven hydropower plants of the Sevan-Hrazdan Cascade. Both ADB and EBRD have been financing different projects in Armenia since the country’s independence. As of early 2013, EBRD has invested over $850 million in Armenia. Investing in green energy generation is one of the EBRD’s key priorities in Armenia.
The planned hydro-power rehabilitation will be completed in 2017. The project aims to restore the capacity of the hydropower plants by 44.7 MW, improve their reliability and safety, as well as reduce operational and maintenance expenses. The following are the major components of this rehabilitation project:
• The project will restore part of the currently unavailable old power generation capacity, and make it available for generating additional electricity.
• The project will enhance operational efficiency, reliability, and safety of the system and help avoid major outage and associated impacts on the populace.
• The project will contribute to more efficient use of water resources by reducing water leakage from the system.
After repair of the diversion channels, it is estimated that water leakage will decrease by 50 million to 85 million cubic meters annually. This amount of water can generate additional 18 to 30 gigawatt hours (GWh) of electricity and which can also be used for irrigation. The rehabilitation of the hydropower plants will raise the technical standards in line with best international practices and restore the lost capacity while avoiding further deterioration. This will ensure the continued stability and security of the country’s domestic electricity supply while improving overall generation efficiency and carbon emissions.
Environmental and Social Issues
The main environmental impacts and risks from the system operations and proposed rehabilitation are related to reservoir management; management of oils and lubricants for turbines, transformers, and support infrastructure; management of lead/acid batteries, material, and waste management; as well as occupational and community health, safety and security. Some environmental impacts are expected from the proposed dredging of Yerevan-1 dam mainly on the biological environment downstream from Yerevan-1 dam due to increased turbidity.
The negative socio-economic impacts are mostly related to construction works and transportation of equipment and materials including air emissions and noise, which are expected to be localized and short term. All work items are planned within the existing footprint and the planned rehabilitation does not consider expansion of the existing facilities or installation of new facilities.
Proposed Loan International Energy Corporation Sevan–Hrazdan Cascade Hydropower System Rehabilitation Project, Armenia, Asian Development Bank, Project Number: 46941, March 2013.
Non Technical Summary, Sevan-Hrazdan Cascade Rehabilitation Project, Final Version, prepared by DG Consulting Ltd, October 2012.
ADB PROJECT DATA SHEET, Sevan-Hrazdan Cascade Hydropower System Rehabilitation Project, February 2013.
EBRD news releases, January of 2013.