Armenia`s electric energy exports down last year; possible evidence  of decline in real economy - expert 

ArmInfo.In Armenia, electricity production and exports decreased in 2023, which raises some concerns.  This may indicate a slowdown in the real economy stated Associate Professor of the Armenian State University of Economics, economist Agasi Tavadyan.

As the expert notes, for a landlocked country heavily dependent on  imported fossil fuels, solar energy becomes important for several  reasons. Meanwhile, in Armenia, solar power plants accounted for 8.7%  of electricity generation in 2023, and 42% or 3,715.6 million kWh was  produced by thermal power plants, which use gas imported from Russia  to produce electricity and are the most expensive source of  electricity in the domestic market. In monetary terms, the republic  annually consumes electricity worth 260 billion drams, recalls  Tabadyan. "By using solar energy, Armenia can significantly reduce  its vulnerability to geopolitical tensions, price fluctuations and  supply disruptions associated with imported gas," he notes.

Regarding the reduction in electricity production and exports,  Tavadyan points out that in 2023, 8.845 million kWh of electricity  was produced, and in 2022 - 9.165 million kWh. Actual electricity  production fell by 3.5%. With the exception of solar power  generation, all other major forms of electricity production declined.  The production of thermal power plants decreased by 4.2%, the  production of nuclear power plants - by 4.8%, and the production of  hydroelectric power plants - by 15.2%. The increase was provided only  by electricity produced by solar power plants, where the increase was  about 55%. In 2023, 8.7% of the total volume of electricity produced,  or 772 million kWh, was provided by this source, 41% of electricity  was provided by thermal power plants, 31% by nuclear power plants,  19% by hydroelectric power plants.

Of course, the increase in solar electricity production is a positive  fact from the point of view of ensuring energy security, but the  decrease in total electricity production is worrying and may indicate  a decline in the real economy, since electricity is a commodity that  must be consumed immediately after generation, and the fact that 3.5%  less electricity was produced in 2023 than last year, indicating a  decline in industrial demand for electricity.

Meanwhile, the expert notes, forecasts for the next 2 years indicate  that, most likely, an increase in electricity production is not  expected, and other things being equal, 2023 may become the peak year  for electricity production.

At the same time, the economist points out, the reductions in  electricity exports are more significant. Thus, in 2022, electricity  exports recorded a record growth of 74.5% (from $50.9 million to  $88.8 million). This was mainly due to the economic recovery after  the pandemic and a large influx of capital from Russia. At the  moment, there is an outflow of capital, he notes.

In 2023, there is a decrease in electricity exports by 23.4% to $68  million. The sharp decline in exports on an annual basis continues,  Tavadyan emphasizes. Electricity is mainly exported to Iran under the  gas-for- electricity program. Since electricity must be consumed  during production, exports are arranged overtime, he adds.

"There is a worldwide trend toward electric vehicles and renewable  heating. Much of the heating of apartments and charging of cars will  probably be carried out using electricity in the future. The latter  will increase the demand for electricity, in which case an increase  in household consumption will lead to an increase in electricity  production. However, this could put a strain on Armenia's energy  system, since if the majority of households switch to electric cars  and electric heating, this will increase electricity demand by about  2 times, for which Armenia currently does not have the infrastructure  capacity. A possible doubling of supply and demand could put a strain  on the electricity infrastructure, which is in urgent need of  upgrading. To avoid these risks, it is necessary to increase  production capacity and the scope of electrification infrastructure.

Thus, a certain plan must be implemented so that in a few years the  electrical infrastructure of Armenia will be ready to provide 18  billion kWh of electricity per year," summarizes Agasi Tavadyan.

According to statistical data, in 2023, 8,845.1 million kWh were  generated in Armenia. electricity. In particular, thermal power  plants reduced electricity production over the year by 4.2% - to  3,715.6 million kWh, Armenian Nuclear Power Plant - by 4.8% to  2,709.2 million kWh, hydroelectric power plants - by 15.2% up to  1,645.8 million kWh. Wind farms increased electricity production by  29.8% to 2.3 million kWh. The production volume of solar stations at  the end of 2023 amounted to 772.2 million kWh.

In the first quarter of 2024, electricity generation in Armenia  amounted to 2,475.9 million kWh, slowing down in annual decline from  2% to 0.4%. In particular, in the first quarter of this year. Thermal  power plants reduced electricity production by 5.3% per annum - to  1,053.6 million kWh. At the same time, hydroelectric power plants  increased the volume of electricity produced by 7% per annum - to  309.4 million kWh, and nuclear power plants - by 0.8% to 947.1  million kWh. Electricity generation by wind stations also decreased -  by 35.1% per annum to 0.6 million kWh, and solar stations, on the  contrary, increased the volume of energy produced by 14.4% to 164.4  million kWh.

In general, in 2023, Armenia's GDP growth slowed to 8.7% (from 12.6%  in 2022), amounting to 9.503 trillion drams ($24.2 billion) at  current prices. The drivers of GDP growth in 2023 were largely the  trade sector - 25.7%, the construction sector - 14.8%, the service  sector - 10.3%, and to a slightly lesser extent the industrial sector  - 4.1%, and the agricultural sector was in a decline of 0.3%. A year  earlier, in 2022, GDP growth came from all areas: the service sector  - by 28.2%, the trade sector - by 17%, the energy complex - by 16.1%,  the construction sector - by 12.5%, the industrial sector - by 7 .9%  and the agricultural sector - by 0.4%.