Solar power generation




Business Model Description
Establish large-scale private solar power stations linked to the central grid of the Electrical Networks of Armenia and provide electricity at guaranteed price for revenue generation; or establish small-scale, decentralized solar power stations with up to 0.5 MW, where the station generates electricity for own use in households, businesses and communities.
Expected Impact
Promote solar energy production to increase income and resilience of SMEs and households, reduce use of fossil fuel and the country's environmental footprint, and improve its energy security.
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: Gegharkunik
- Armenia: Aragatsotn
- Armenia: Vayots Dzor
- Armenia: Kotayk
Sector Classification
Renewable Resources and Alternative Energy
Armenia is self-sufficient in energy generation but dependent on imported fuel (4). 85% of energy is from thermal and nuclear power plans, with negative environmental effects on soil, air and water. After closure of nuclear plants, the need for alternative energy will increase. Armenia has underutilized potential in renewable energy (4,400-4,900 GW/year) with 180 small hydropower plans (24, 25).
Energy security is a high priority in the Government agenda. Government policies promote the investment in renewable energy and energy efficiency technologies (1, 2,3). 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.
To promote investment in renewable energy, the Government leads a number of support programmes, including feed-in tariffs in solar energy sector and tax advantages for investment in renewable energy, including small hydropower plants, solar and wind (2, 3, 7, 27).
Alternative Energy
The Government introduced feed-in tariffs for solar energy, which allows households to sell the excess electricity to the electric networks, and coupled it with subsidized financing in the subsector, which is expected to make solar energy projects feasible in Armenia in the mid-term perspective (2, 3, 7, 27).
Solar Technology and Project Developers
Pipeline Opportunity
Solar power generation
Establish large-scale private solar power stations linked to the central grid of the Electrical Networks of Armenia and provide electricity at guaranteed price for revenue generation; or establish small-scale, decentralized solar power stations with up to 0.5 MW, where the station generates electricity for own use in households, businesses and communities.
Business Case
Market Size and Environment
Annual renewable energy sector capacity of 4,400 - 4,900 GW.
Armenia's renewable energy sector capacity is estimated at 4,400-4,900 GW annually (24, 25, 26).
There are around 950 ha of land available under the category in the land cadaster as “objects of energy, transport, communication and utility infrastructures”, which can be used for establishing solar power stations (24, 25, 26).
Indicative Return
15% - 20%
An IRR of 15-18% is expected for small utility and off-grid panels of 0.5 MW, while higher capacity panels expect to generate an IRR of 14-17%. An IRR of 15% has been recorded in Masrik-1 solar power plant with 55 MW (21, 28).
For bigger size solar installations, special licenses and quotas are provided (100 MW for 2018, 50 MW for 2019) (21, 28).
Investment Timeframe
Medium Term (5–10 years)
5 MW is seen as the optimal minimal size investment with about $500,000 - 700,000 for 1 KW and a payback period of 7-10 years (21, 28).
Ticket Size
USD 500,000 - USD 1 million
Market Risks & Scale Obstacles
Capital - CapEx Intensive
Market - Volatile
Market - Volatile
Impact Case
Sustainable Development Need
Armenia depends on imported fuel to cover its electricity needs (4). 85% of energy is from thermal and nuclear power plants, with negative environmental effects on soil, air and water. After closure of nuclear plants, the need for alternative energy will increase. (24, 25).
Armenia has high potential for solar energy; the average annual solar energy output per 1 m2 of the horizontal surface is 1720 kWh/m2 and one-fourth of the country has 1850 kW/m2 of solar energy per year. Solar is a renewable energy source, with possibility to produce at varying scale - from small set-ups for household use to industrial level solar power stations (6, 8).
Gender & Marginalisation
Women and children particularly suffer from unstable electricity supply, hampering for example educational opportunities.
Expected Development Outcome
Reduced use of fossil fuel in thermal power plants and reduced radioactive waste (also addressing the high cost of its treatment) thanks to greater renewable energy application overall.
Enhanced energy security, increased share of renewable energy, and reduced environmental footprint of Armenia's energy sector through the solar installations.
Gender & Marginalisation
Increased income for rural and marginalised communities thanks to stable energy supply.
Income generation opportunities for women engaged in the production of solar energy.
Primary SDGs addressed

7.2.1 Renewable energy share in the total final energy consumption
Secondary SDGs addressed



Directly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Public sector
Indirectly impacted stakeholders
People
Corporates
Public sector
Outcome Risks
Industrialization of solar power may increase the average electricity tariff since renewable energy has higher end tariffs, making it unaffordable for consumers.
Toxic materials and hazardous products are used for manufacturing solar systems, which can negatively impact on the environment when the installations are dismantled and not recycled responsibly.
Transportation and installation of solar systems can created significant levels of greenhouse gases.
Impact Risks
High capital costs for solar installations, and challenges in accessing financing, may limit the realisation of large installations, which will minimise the positive effects of the energy source.
Procedural difficulties related to allocation of land for building solar power stations may limit the realisation of solar installations.
Possible changes of the currently beneficial tariff for solar energy may discourage investors, leading to the non-realisation of installations.
Impact Classification
What
Investment in solar energy contributes to increasing income, independence and resilience of small- and medium-firms and households; higher share of sustainable energy, and less use of fossil.
Who
Small- and medium- enterprises and households benefit from improved resilience via infrastructure development and job creation.
Risk
The model is proven and the technology for solar power stations is readily available and affordable.
Impact Thesis
Promote solar energy production to increase income and resilience of SMEs and households, reduce use of fossil fuel and the country's environmental footprint, and improve its energy security.
Enabling Environment
Policy Environment
Promote solar energy production to increase income and resilience of SMEs and households, reduce use of fossil fuel and the country's environmental footprint, and improve its energy security.
To enhance the capacities in renewable energy, the Government plans to support the creation of 60 MWT capacity in the next 2 years, which is in addition to the 55 MWt PV station already set up (2).
The Government is in the process of liberalising the energy sector of Armenia, which will be completed by 2022. Solar power stations will support energy liberalization goals (29).
Financial Environment
Financial incentives: Armenia offers various financial instruments, such as green leasing, that offer below market interest rates for renewable energy production. Beneficial tariffs are applied for renewable energy producers (2, 7, 8).
Fiscal incentives: Armenia extends tax privileges for importation of materials and equipment for the renewable energy industry, which also allows for extended VAT payment times for imported products (10).
Regulatory Environment
Energy tariffs are set by the PSR Committee and beneficial tariffs are applied for electricity from renewables (solar, wind and biofuel). The tariff for solar energy is applied since 2017 (7, 27).
The Law on Renewable Energy and Energy Efficiency increased the net metering limit for legal entities from 150 kWh to 500 kWh, to allow large energy consumers to execute functions of autonomous power generators to meet their own needs. The Law also improved the energy transit timetable (9).
Feed-in tariffs are applied in solar energy sector, which means that households are allowed to sell the excess electricity to electric networks (9, 27).
Industrial solar power stations with power exceeding 500 kWt are subject to licensing by the Public Services Regulation Committee (30).
Construction of a solar PV station is permitted on the land categorized in the land cadaster as “objects of energy, transport, communication and utility infrastructures” (31).
Marketplace Participants
Private Sector
SMEs setting up small to medium scale solar installations, such as Shtigen, Arpi and Optimum Energy. Large solar installations include Talin 2, Masrik 1 and 2, Gagarin, Dashtadem, Merdzavan with a planned 109 mWt power. PV panel producers such as Solaron (24, 25).
Government
Public Services Regulation Committee, Ministry of Territorial Administration and Infrastructure, Ministry of Environment.
Multilaterals
Several international financial institutions and multilateral banks support the promotion of renewable energy, such as the World Bank, European Bank for Reconstruction and Development (EBRD) and the Asian Development Bank (ABD).
Non-Profit
Renewable Energy Producers’ Association Union of Legal Entities.
Public-Private Partnership
Active partnerships, such as Vayots Sun, which is the largest solar PV station in the Vayots Dzor and is supported by international donors and financial institutions.
Target Locations

Armenia: Gegharkunik
Armenia: Aragatsotn
Armenia: Vayots Dzor
Armenia: Kotayk
References
- (1) Government action program 2019-2023, https://www.gov.am/am/Five-Year-Action-Program.
- (2) 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.
- (3) Development of the energy system of Armenia (until 2036), Government Protocol Decision No 54 of December 10 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.
- (4) International Energy Agency (IEA), EU4Energy, https://www.eu4energy.iea.org/countries/armenia.
- (5) UN ESCAP SDG Help Desk, https://sdghelpdesk.unescap.org/re/armenia.html.
- (6) World Bank, Development Indicators, World Bank Data, https://data.worldbank.org/indicator/EG.EGY.PRIM.PP.KD?locations=AM-EE-CZ-EU-SI-LT-NL-DK-7E-Z7.
- (7) Public Services Regulatory Commission (PSRC), www.psrc.am.
- (8) Armenia Renewable Resources and Energy Efficiency (R2E2) Fund, http://r2e2.am/en.
- (9) The Law on Renewable Energy and Energy Efficiency, https://www.arlis.am/DocumentView.aspx?DocID=141298.
- (10) Tax code, https://www.arlis.am/DocumentView.aspx?DocID=152750.
- (21) UNDP interviews with stakeholders, 2019.
- (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/Doc.
- (23) Concept implementing the provisions of energy security provision of the Republic of Armenia (schedule for 2014-2020), President Decree No NK-182-N of 23 October 2013, http://www.minenergy.am/page/492;https://www.arlis.am/DocumentView.aspx?DocID=74450.
- (24) Armenia Renewable Resources and Energy Efficiency (R2E2) Fund, http://r2e2.am/en.
- (25) Ministry of Energy, Infrastructures and Natural Resources of the Republic of Armenia, http://www.minenergy.am.
- (26) Cadaster Committee of Armenia, 2019, https://www.cadastre.am/storage/files/pages/pg_7311379278_2019NaxnHanr_bal1.pdf.
- (27) Public Services Regulatory Commission (PSRC), www.psrc.am.
- (28) Feasibility study for Masrik, PV power plant, http://images.mofcom.gov.cn/oys/201703/20170302120925015.pdf.
- (29) Government Decree N 1030-L of 6 September 2018, https://www.arlis.am/DocumentView.aspx?DocID=125528.
- (30) Law on Licensing, https://www.arlis.am/DocumentView.aspx?DocID=150834.
- (31) Land Code, https://www.arlis.am/DocumentView.aspx?DocID=152345.
- (32) Commission Decision N 88-N of 22 April 2015, https://psrc.am/contents/library.
- (33) Global Solar Atlas, World Bank, https://globalsolaratlas.info/download/armenia.