Energy efficient technologies and products
Energy efficient technologies and products
Business Model Description
Support energy efficient technologies and products through either 1. energy efficiency contracts where an energy service provider provides funding and energy services (such as design works or installation of energy saving technologies) and the customer repays the energy efficiency investment from the energy savings generated by the project, so there is no need for customer upfront capital; or 2. subsidized interest rate loans provided through the financial market where the Government, through the R2E2 Fund, lends money to banks and credit organizations to finance projects (with the difference with the market interest rate being covered by the Government, and banks providing 20 percent co-financing).
Expected Impact
Promote the wide use of energy efficiency technologies in public and private buildings to reduce energy costs and lower the use of timber for heating and cooking to avoid environmental impact.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Armenia: Countrywide
Sector Classification
Infrastructure
Energy efficiency in infrastructure is critical for energy security. Armenia's energy intensity indicator is moderate (128.3 kg O.E. per $1,000 GDP). The country's energy efficiency in material utilization (2.56 kg per $1 in 2016) is five times less efficient compared to the EU average (28) and also lags behind most ECA peers (7, 8, 9).
Energy security is a high priority in the Government agenda. Government policies promote the investment in renewable energy and energy efficiency technologies (1, 21, 22). These include the Scaling-Up Renewable Energy Program (SREP) and the Law on Energy Efficiency and Renewable Energy, which provide a sound foundation and principles for promoting sustainable energy practices.
In cooperation with international partners, Armenia invested around $200 million in energy efficiency at industry, municipality and household levels, which is anticipated to lead to saving 3 GWth energy by 2020 (24).
Limited access to financing and lack of knowledge about energy efficiency practices for infrastructure are key bottlenecks in the sector (25, 26, 28).
Infrastructure
Low-efficient energy practices lead to high household costs and negative environmental impacts, such as air and soil pollution and deforestation. About 34.6% of households in Armenia use wood for heating their houses, which increases to 72.4% for rural areas (26).
To promote investment in energy efficiency, the Government offers a number of programmes, including low interest rate lending via the Energy Efficiency Fund (22, 24, 28).
Engineering and Construction Services
Pipeline Opportunity
Energy efficient technologies and products
Support energy efficient technologies and products through either 1. energy efficiency contracts where an energy service provider provides funding and energy services (such as design works or installation of energy saving technologies) and the customer repays the energy efficiency investment from the energy savings generated by the project, so there is no need for customer upfront capital; or 2. subsidized interest rate loans provided through the financial market where the Government, through the R2E2 Fund, lends money to banks and credit organizations to finance projects (with the difference with the market interest rate being covered by the Government, and banks providing 20 percent co-financing).
Business Case
Market Size and Environment
USD 100 million - USD 1 billion
240,000 Armenian households can benefit from thermal insulation retrofitting.
72.4% of Armenia's 230,000 rural households and 25% of the country's 200,000 urban households use firewood for heating. The retrofitting of each household to improve thermal insultation costs $1,500-2,000 and results in 40% energy saving (27).
Indicative Return
15% - 20%
The return profile of the energy efficiency investments depends on the type of technology and materials. Thermal insulation results in at least 40% energy saving. On average, thermal insulation provides $520 savings per household per year. The estimated IRR of such an investment is 17% (25, 27).
Investment Timeframe
Short Term (0–5 years)
The installation of thermal insulation technologies in houses typically pays back within two years (25, 27, 34).
Ticket Size
< USD 500,000
Market Risks & Scale Obstacles
Capital - Limited Investor Interest
Business - Supply Chain Constraints
Impact Case
Sustainable Development Need
Armenia's energy intensity indicator is moderate at 128.3 kg O.E. per $1,000 GDP and lags behind the regional average. The country's efficiency in material utilization was 2.56 kg per $1 in 2016, which is five times less efficient compared to the EU average (28, 7, 8, 9).
Low-efficient energy practices lead to high household costs and environmental problems, namely air and soil pollution and deforestation. About 34.6% of households in Armenia use wood for heating their houses, which increases to 72.4% in rural areas (26).
Gender & Marginalisation
Marginalised communities suffer most from inefficient energy set ups due to the lack of alternatives given the limited purchasing power.
Expected Development Outcome
Retrofitting of energy efficient technologies and products in buildings allows for energy savings of at least 40%, which constitutes household savings of $500 per year (28).
The greater energy efficiency of buildings results in air pollution reduction and can lead to the potential saving of over 5,500 ha forest per year by Armenia's rural households alone (29).
Gender & Marginalisation
Women, for example, are expected to benefit from greater energy efficiency, for example through the lower use of wood for cooking and heating.
Primary SDGs addressed
7.3.1 Energy intensity measured in terms of primary energy and GDP
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Public sector
Indirectly impacted stakeholders
Planet
Corporates
Public sector
Outcome Risks
Toxic materials and hazardous products are used for manufacturing some energy efficient materials and equipment, which can indirectly affect the environment in the manufacturing and disposal stages.
Impact Risks
The scale up of building retrofitting may be limited by loan market failures to serve energy efficiency programmes, especially due to administrative barriers and limited involvement by banks.
Lack of awareness and knowledge about the impact of energy efficiency practices may lead to low uptake among rural households and ineffective use of energy saving technologies and products.
Impact Classification
What
Enhanced energy efficiency in buildings results in lower energy costs and reduced impacts on the environment.
Risk
The model is proven and the technologies and products exist, but users are required to follow best practices to achieve the desired impact.
Impact Thesis
Promote the wide use of energy efficiency technologies in public and private buildings to reduce energy costs and lower the use of timber for heating and cooking to avoid environmental impact.
Enabling Environment
Policy Environment
Among the Government's policies promoting investment in energy efficiency, the Scaling-Up Renewable Energy Program (SREP) and the National Energy Efficiency Action Plans (NEEAP) aim at a 37.4% reduction of energy consumption with the wide use of energy efficient technologies (21, 22, 30).
The Law on Energy Efficiency and Renewable Energy provides the foundation and principles for promoting sustainable energy practices in Armenia (11).
Armenia is part of the EU-led Covenant of Mayors, where local authorities adopt energy efficiency policies and programs. To date, 25 municipalities in Armenia have committed to developing sustainable energy action plans (SEAPs) (23).
Through the Energy Charter, the Secretariat of the Ministry of Territorial Administration and Infrastructure works towards eliminating bottlenecks in building energy efficiency and eco-labelling legislation (32).
Financial Environment
Financial incentives: The R2E2 revolving fund lends money to banks to finance projects with duration of up to 8 years at 4% interest rate. The difference from the market interest rate is covered by the Government. Banks provide 20% co-financing when lending money to legal entities (22, 24).
Regulatory Environment
Around two dozen of energy efficiency and renewable energy standards were developed and adopted to support the implementation of sustainable energy practices by business entities as well as households in Armenia (31).
HST 362-2013 defines energy conservation and offers a building energy passport; HST 317-2016 outlines the methodology for carrying out energy audits in residential and public buildings (31).
HST EN 15217-2012 offers methods of reflecting energy characteristics of buildings and energy efficiency certification; HST ISO 13153-2014 provides a framework of the design process for energy-saving single-family residential and small commercial buildings (31).
HST ISO 13790-2014 supports the calculation of energy use for space heating and cooling (31).
Marketplace Participants
Private Sector
Providers of retrofitting equipment and products, such as Architon LLC, Menhir LLC, Ayr Design LLC, Shincertificate LLC and P. Abajyan LLC.
Government
Ministry of Territorial Administration and Infrastructure, Ministry of Environment.
Multilaterals
Several international financial institutions and multilateral banks support the promotion of energy efficiency, such as the World Bank, European Bank for Reconstruction and Development (EBRD) and the Asian Development Bank (ABD).
Non-Profit
Energy Saving Foundation; Renewable Energy Producers’ Association Union of Legal Entities; EU Covenant of Mayors (25 communities in Armenia joined the Covenant).
Public-Private Partnership
Renewable Resources and Energy Efficiency Fund (R2E2).
Target Locations
Armenia: Countrywide
References
- (1) Government action program 2019-2013, https://www.gov.am/am/Five-Year-Action-Program.
- (2) Development of the energy system of Armenia (until 2036), Government Protocol Decision No 54 of 10 December 2015, https://www.arlis.am;Development of the energy system of Armenia (until 2040), Government Decision No 48-L of 14 January 2021, https://www.arlis.am.
- (3) Concept implementing the provisions of energy security provision of the Republic of Armenia (schedule for 2014-2020), President Decree 182-N of 23 October 2013, https://www.arlis.am/DocumentView.aspx?DocID=86169.
- (4) Action Plan of the Government of the Republic of Armenia 2018 - 2022, https://www.arlis.am/DocumentView.aspx?DocID=125528.
- (5) Ministry of Energy, Infrastructures and Natural Resources of the Republic of Armenia, http://www.minenergy.am.
- (6) Government Protocol Decree No 4 of 2 February 2017 on the “Report on the Implementation of the First Stage of Energy Efficiency Action Plan, http://www.arlis.am/DocumentView.aspx?DocID=111712.
- (7) UN ESCAP SDG Help desk, https://sdghelpdesk.unescap.org/re/armenia.html.
- (8) World Bank Data (and author’s calculations), https://data.worldbank.org/indicator/EG.EGY.PRIM.PP.KD?locations=AM-EE-CZ-EU-SI-LT-NL-DK-7E-Z7.
- (9) Eurostat, Resource Productivity Database, https://ec.europa.eu/eurostat/databrowser/view/t2020_rl100/default/table?lang=en.
- (10) Environment and natural resources in RA in 2017, Statistical Committee of Armenia, https://www.armstat.am/file/article/eco_book_2017_6.pdf.
- (11) Law on Renewable Energy and Energy Efficiency, https://www.arlis.am/DocumentView.aspx?DocID=141298.
- (21) Development of the energy system of Armenia (until 2036), Government Protocol Decision No 54 of 10 December 2015, https://www.arlis.am;Development of the energy system of Armenia (until 2040), Government Decision No 48-L of 14 January 2021, https://www.arlis.am.
- (22) National program of energy saving and renewable energy of the Republic of Armenia, Government Protocol Decree No 4 of 2 February 2017, https://www.arlis.am/DocumentView.aspx?DocID=111712.
- (23) Covenant of Mayors, EU, http://www.eumayors.eu/about/covenant-community/signatories.html,27 January 2020.
- (24) Armenia Renewable Resources and Energy Efficiency (R2E2) Fund, http://r2e2.am/en.
- (25) UNDP interviews with stakeholders, 2019.
- (26) Household Integrated Living Conditions Survey (HILCS), 2017, SC Armenia, calculated based on HILCS microdata.
- (27) Baseline study - Energy demand, supply, and efficiency, Armenia, 2019, A. Pasoyan (Energy Saving Foundation), N. Sahakyan (Women in Climate and Energy), Management of Natural Resources and Safeguard of Ecosystem Services for Sustainable Rural Development in South Caucasus (ECOService).
- (28) Government Protocol Decree No 4 of 2 February 2017 on the “Report on the Implementation of the First Stage of Energy Efficiency Action Plan", http://www.arlis.am/DocumentView.aspx?DocID=111712.
- (29) Basis for estimates: (1) National forest inventory; (2) Казарян В.О., Арутюнян Л.В., Хуршудян П.А., Григорян В.Г., Барсегян А.М. Научные основы облесения и озеленения Армянской ССР.Ереван, : 1974; (3) Хуршудян П.А., Тер-Газарян К.А., Габриелян В.Г. Леса и лесное хозяйство Армянской ССР, 1987.
- (30) Scaling up Renewable Energy Program (SREP) Armenia Investment Plan (IP), https://www.worldbank.org/en/country/armenia/brief/srep.
- (31) Catalog of Standards, Standardization Institute of Armenia, https://www.sarm.am/am/standards.
- (32) Ministry of Territorial Administration and Infrastructure (Energy), http://www.minenergy.am/page/498.
- (33) Energy Efficiency Project, 2019, The World Bank, https://ieg.worldbankgroup.org/sites/default/files/Data/reports/ppar_armeniaenergy.pdf.
- (34) Improving Energy Efficiency in Buildings project implemented jointly by UNDP and Global Environmental Fund (GEF), http://www.nature-ic.am/en/projects/Improving-Energy-Efficiency-in-Buildings/2.