From Crisis to Stability in the Armenian Power Sector : Lessons Learned from Armenia's Energy Reform Experience

In the wake of the Soviet Union's collapse, Armenia, like other former Soviet republics, began to struggle with the implications of its newfound independence. In the electricity sector, this meant learning how to manage and sustain a fragment of a system that had never been designed to function as a stand-alone grid. Armenia's electricity system-and, indeed, its entire energy supply system-had been designed to operate as part of a much larger, integrated Trans-Caucasus system. Plants were built to run on fuel imported from thousands of miles away, from neighbors who, with the Soviet Union gone, could offer little certainty that such supply would continue under terms that Armenia could afford. The problems with this system began to show in 1992. The start of the war over Nagorno Karabakh, and the resulting imposition by Azerbaijan and Turkey of an economic blockade, cut off Armenia's only source of gas and oil for its thermal plants. Four years prior to that, a massive earthquake had forced a shut down of the Medzamor nuclear power plant, a source of roughly one-third of Armenia's generating capacity. Supply from a new gas pipeline, built in 1993 through neighboring Georgia, was regularly interrupted by acts of sabotage. Armenia was left to rely almost entirely on its hydropower resources, at great expense to Lake Sevan, one of the country's most precious natural resources.