Energy Strategy Center of Scientific Research Institute of Energy PROJECT: Assistance to Energy Sector to Strengthen Energy Security and Regional Integration Impact of RES Implementation on Technical and Economic Characteristics of Regionally Integrated Armenian Energy System Dr. Vahan Sargsyan Energy Strategy Center of Scientific Research Institute of Energy

Objectives Study of cost-effectiveness of Armenian power system integration for the period 2015 – 2020 Evaluation of the impact of new renewable energy sources on the power sector economic indicators

Scenarios of Isolated and Integrated Mode of Operations Annual growth rate of domestic consumption for all scenarios is 2.7% BAU – based on generation structure as of 2012 Decommissioning Armenian NPP (for 2020 only) Additional construction of small HPPs: 87 МW in 2015 and another 61 MW by 2020 Construction of Loriberd and Shnokh HPPs (2020) Construction of Wind Farms: 40 МW by 2015 and in addition 120 МW by 2020 Construction of new 1000 МW NPP (2020)

Indicator of Effectiveness Cost of electricity generation for domestic consumers in Armenia is defined as the main indicator for effectiveness

–Commercial Dispatching Tool Developed by Argonne National Laboratory, USA Used to study complex marketing and system operational issues Maximizes the revenues of the power system Optimizes hydro and heat generation Calculates the cost of energy at regional markets Calculates the operational costs Models agreements on mutual energy exchange

GTMax Model of Armenian System

Study Results: Isolated Mode of Operation of Armenian Power System Междунардоная Конференция по фопросам евразийской интеграции

Description of optimization Base case generation price: 33.75 $/МWh (2015) 36.98 $/MWh (2020) “Reallocation of water” – optimized water use of Vorotan Cascade of HPPs by additional accumulation of 70 GWh during the period of April-June and later by draw down in July- September Change of the period of Armenian NPP refuelling from September-October to May-June

Summary: Electricity Generation Prices, $/MWh

Impact of Wind Farms (WF) Wind power generation in Armenia is characterized by large variability (planned capacity by 2020 – 160 МW) Winter day, kW for 20 MW turbine Summer day, kW for 20 MW turbine Taking minimum price for WF production at $100/MWh we have the following additional negative impacts: for 2015 – 0.81 $/МWh or $5 mln. in projected generation of 100 GWh for 2020 – 2.5 $/МW or $17.5 mln. in projected generation of 350 GWh

Study Results: Integrated Mode of Operation of Armenian Power System Междунардоная Конференция по фопросам евразийской интеграции

Methods of economic calculations The accepted method of determining efficiency of integration includes analysis of development of strategies of all energy systems of neighbour countries, including technical, economic and political aspects Calculations in GTMax were made for all seasons, each of which requires specific technical restrictions, followed by hourly optimization

Methods of economic calculations Calculations of export income and costs of import were made by breaking down by seasons and time zones of the day and according to the prices (within the price range) Calculations were done for prices at the Armenian border varying from $180 to $240 per thousand cubic meters

Description of optimization The breakdown by time periods and settlement prices for export / import in $/Wh (based on the analysis of energy system market of the region) Period 1 January-February Period 2 March Period 3 April-June July – middle of August Middle of August – end of September NPP Maintenance November - December Hrazdan TPP Operation of & Yerevan TPP Stop of Hrazdan TPP Stop of all TPPs in Armenia. Limitation of import demand of the region’s countries, especially, Turkey Possibility of export from Armenia wo TPPs. Max consumption and prices in the Turkey market. Stop of Hrazdan TPP. Operation with and wo Yerevan TPP Operation of Hrazdan TPP and Yerevan TPP. Min possibilities of Georgian export Nighttime export 40 30 12 40 Daytime export 62 52 40/30/20 60/50/40 62 Nighttime import 50 50 Daytime import 70 70 60 75

Description of optimization Export prices for Armenia are determined by profitability for Georgia to use that energy for either in internal market or re-export/ transit to third countries Prices for import to Armenia from Georgia are considered higher, than in other countries, in particular in Turkey

Analysis of Results for 2015 Gas Price $180/thousand m3 Generation Price, $/МWh Price Reduction, % Cost Reduction, $ mln. Gas Price $240/thousand m3 Generation Price, $/МWh Price Reduction, % Cost Reduction, $ mln.

Analysis of Results for 2020 with NPP Gas Price $180/thousand m3 Generation Price, $/МWh Price Reduction, % Cost Reduction, $ mln. Gas Price $240/thousand m3 Generation Price, $/МWh Price Reduction, % Cost Reduction, $ mln.

Analysis of Results for 2020 w/o NPP Gas Price $180/thousand m3 Generation Price, $/МWh Price Reduction, % Cost Reduction, $ mln. Gas Price $240/thousand m3 Generation Price, $/МWh Price Reduction, % Cost Reduction, $ mln.

Impact of construction of new NPP on economic indicators In isolated mode it would not be possible to operate a new NPP with the capacity of 1000 MW Under the integrated mode it would be needed to export not less than 3000 GWh annually Generation price for domestic consumers would exceed 80 $/MWh

The Main Findings Isolated mode of operation of Armenian energy system will require the NPP unloading which will affect the economic indicators To increase annual generation by NPP it is advised to either optimize the use of water resources or change the NPP refueling period to May-June It would be possible to procure full quantity of SHPPs generation only in case when measures mentioned in point 2 will be implemented Construction of wind farms brings to deterioration of economic indicators

The Main Findings, cont’d The integration of Armenian power system to the power grid of Georgia is a cost-effective for both parties, even at relatively low exchange volumes due to additional loading of АNPP to its maximum level with competitive export price provision, as well as due to replacement of TPP generation with cheap electricity import in certain periods of time Construction of Loriberd and Shnokh HPPs will be efficient if the NPP is decommissioned or if the systems are integrated

Thank you Energy Strategy Center of Scientific Research Institute of Energy 5/1 Myasnikyan avenue, 0025 Yerevan, Armenia Phone/Fax: +374-10 559-664 E-mail: piuesc@energinst.am Vahan.sargsyan@energinst.am