World Bank Approves $40 Million for Energy Transition project in Armenia

Armenia's energy sector faces significant challenges due to its heavy reliance on imported fuels, particularly natural gas, which accounted for 62 percent of its total energy supply in 2021.

The World Bank’s Board of Executive Directors has approved $40 million in funding for the Enabling the Energy Transition project in Armenia. This project aims to support Armenia’s Energy Sector Development Strategy to 2040 by focusing on the rehabilitation of power transmission substations, promoting energy sector modernization, and fostering regional energy cooperation among emerging and developing economies in Europe and Central Asia.

Armenia's energy sector faces significant challenges due to its heavy reliance on imported fuels, particularly natural gas, which accounted for 62 percent of its total energy supply in 2021. This dependency poses substantial energy security risks, especially amid the global energy crisis. The country also depends on oil (16 percent), nuclear (14 percent), and hydro (5 percent), with only a minor contribution from wind and solar energy (1 percent).

The project aims to attract private investment, which is crucial for funding the large-scale energy projects needed to improve the sector. It includes integrating approximately 1.1 GW of renewable energy generation capacity into the transmission grid by 2032, potentially powering over 690,000 households and reducing annual greenhouse gas emissions by 540,000 tons. The initiative is expected to draw $550 million in private investment, upgrade all transmission substations with automated control and digital protection systems, and increase the total capacity of transmission substations from 2,711 MVA to 3,109 MVA.

Carolin Geginat, World Bank Country Manager for Armenia, emphasized the importance of ongoing investments in modernizing the power transmission network and enhancing the commercial viability of the High-voltage Electric Networks of Armenia JSC to ensure a reliable, affordable, and clean electricity supply for consumers. These measures are also critical for reducing greenhouse gas emissions and mitigating climate change.

The project is part of the Europe and Central Asia Renewable Energy Scale-Up Multiphase Programmatic Approach (ECARES MPA) Program, which has a total financing envelope of $2 billion. Approved by the World Bank on March 28, 2024, the ECARES MPA aims to increase renewable energy capacity, accelerate the renewable energy transition, and achieve significant scale and impact through private investment while promoting regional knowledge sharing among participating countries in the Europe and Central Asia region.