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SECOND NATIONAL ENERGY EFFICIENCY ACTION PLAN FOR ARMENIA

ARMENIA RENEWABLE RESOURCES AND ENERGY EFFICIENCY FUND

FIRST DRAFT

20 JULY 2015

Table of Contents

Table of Contents.................................................................................................................................. ii

ABBREVIATIONS.................................................................................................................................. 1

EXECUTIVE SUMMARY........................................................................................................................ 3

INTRODUCTION.................................................................................................................................... 1

1           OVERALL CONTEXT OF THE SECOND NEEAP...................................................................... 3

1.1          Highlights of the Second NEEAP........................................................................................ 4

1.2          National context of energy savings.................................................................................... 5

1.3          Setting the Target............................................................................................................... 11

2           MEASURES FOR THE PRIMARY ENERGY SAVINGS........................................................... 22

2.1          Reducing high-voltage network losses and Enhancing reliability of Power Supply in Armenia22

2.2          Reducing low-voltage electric network losses................................................................ 23

2.3          Promotion of EE-integrated renewable energy applications                                          24

2.3.1      Enforcing Net Metering for Independent Solar Electricity Producers                     25

2.3.2      Greater Use of Solar Thermal Energy                                                                          26

2.3.3      Piloting Geothermal Heat Pumps for Scalable Centralized Heating Solutions       26

3           FINAL ENERGY SAVINGS IN THE END USE SECTORS....................................................... 28

3.1          Review of final energy saving targets and final energy saving achievements            28

3.1.1      National overall end-use energy savings targets and progress towards them      29

3.1.2      National targets for nearly zero energy buildings                                                      33

3.2          Horizontal Measures........................................................................................................... 34

3.2.1      Financial Support for Energy Efficiency in All Sectors                                             45

Capacity Building for Financial Institutions and Supporting the Market for Energy Services            57

c)....... Establishing and operating a EE business information centre                                      58

a)        Combined Study tour and Capacity Building Workshop on EE Awareness Raising. 59 3.2.2      Promotion of the Covenant ofMayors.................................................................................................................................... 59

4           ALL INDIVIDUAL MEASURES.................................................................................................. 69

4.1          Buildings Sector................................................................................................................. 69

4.1.1      Regulatory Measures.................................................................................................... 70

Technical Regulations for Building Energy Performance                                                     75

4.1.2      New Construction......................................................................................................... 75

4.1.3      Residential Buildings................................................................................................... 87

4.2         Public Buildings and Services........................................................................................ 104

4.2.1      Public Buildings.......................................................................................................... 104

4.2.2      Street-lighting.............................................................................................................. 108

4.3         Agricultural Sector........................................................................................................... 111

4.4         INDUSTRY,  SMEs and POWER...................................................................................... 161

4.4.1      Power Sector............................................................................................................... 164

4.4.2      Energy Management and Clean Production Industrial and SME                           165

4.4.3      Financing of Industrial and SME Energy Efficiency                                                166

4.4.4      EE-Integrated Renewable Energy Sources                                                               168

4.5         Transport/Mobility............................................................................................................ 187

COMPETENT BODIES AND ASSIGNED ORGANIZATIONS......................................................... 212

LIST OF FIGURES

Figure 1. Energy Efficiency Policies, Strategies and Regulations......................................................... 3

Figure 2. Total primary and final energy sources used in Armenia since 1990,  statistics  and  forecast  5

Figure 3. Economic Growth and Energy Use in Armenia. WB 2014..................................................... 5

Figure 4. Final energy consumption in Armenia by sector (in ktoe)*..................................................... 6

Figure 5. Total Primary Energy Sources by Fuel, 2012......................................................................... 8

Figure 6  Electricity generation by fuel (in GWh).................................................................................... 9

Figure 7. GHG Emissions in Armenia until 2010 (in Gt CO2eq excluding LULUCF)............................. 10

Figure 8. Comparison of Energy Consumption per Capita and Energy Intensity by Countries........... 10

Figure 9. Energy Intensity (TPES/GDP) in CIS countries, 1990-2012................................................. 13

Figure 10. Energy Intensities of the CIS Countries.............................................................................. 14

Figure 11. Energy Losses in 0.38-110 kV network (% of energy entering the network)..................... 23

Figure 12. Solar PV Installations, 2011-2015....................................................................................... 25

Figure 13. Estimated Trend of Installed Solar Water Heating Capacities: Output and Savings.......... 26

Figure 14. Structure of Final Energy Consumption by Sector, 2012................................................... 28

Figure 15. Final Energy Use Trend and Projections by Sector..................................................... 28

Figure 16. Overview of the major donor and IFI funding directions in the field of energy efficiency... 46

Figure 17. EE/RE PORTFOLIO FOR 2010 - 2020, USD.................................................................... 49

Figure 18. EE / RE PORTFOLIO FOR 2010 - 2020, USD................................................................... 50

Figure 19. EE / RE LOANS PROVIDED BY LOCAL BANKS IN 2010 - 2015, 1,000 AMD................. 52

Figure 20. EE / RE LOANS PROVIDED BY LOCAL BANKS and UCOs IN 2010 - 2015 (including IFI funds,USD)       54

Figure 21. EE / RE LOANS PROVIDED BY LFIs and IFIs IN 2010 - 2015, USD............................... 55

Figure 22. Share of EE projects in total loans disbursed by LFIs in 2010 - 2015, %.......................... 56

Figure 23. Growth dynamics and forecast for residential and public building stock in Armenia.......... 69

Figure 24. Energy Use in Residential Sector, 2010-2030.................................................................... 70

Figure 25. Energy tariffs and Energy Consumption in Residential Sector, 2010-2015....................... 71

Figure 26. Natural gas import price and tariffs for two different final customer groups (2003-2015)* 73 

Figure27. Total housing stock and breakdown by urban and rural settlements, million km2. 2010-2013

....................................................................................................................................   87

Figure 28. Structure of MAB stock by age, floors, and construction material                                       88

Figure 29. The number and area of public buildings in Armenia, 2013                                              104

Figure 30. Energy Intensity of Gross Agricultural Output, 2010-2012                                                111

Figure 31. Dynamics of energy consumption in agricultural sector (energy use for 2010-2012 from EC- LEDSEnergy Balance, for 2014 – authors’ own calculations based on PSR & NSS data)

..................................................................................................................................  112

Figure 32. Natural Gas Consumption in the Greenhouses and hectares of Greenhouses in 2010–2012

..................................................................................................................................  114

Figure 33. Industrial Energy Intensity Trend, 2010-2012................................................................... 162

Figure 34 - Industrial Energy Use by Sub-sector, 2010-2012                                                             163

Figure 35: Electricity Consumption by Industry Sub-Sector, 2010-2012                                            164

Figure 36. Final Energy Consumption in Transport Sector, 2000-2015 (ktoe, % of total, % annual change)187

Figure 37. Annual Growth of Motor Fuel Consumption by RT, 2000-2013, (in 1,000 tons)               190

Figure 38. Motor Fuel Consumed by Armenian RT, 2000-2013                                                         191

Figure 39. Annual Electricity Consumption (Million kWh) by Armenian Transport Sector,  2003- 2014.   192

Figure 40. Passenger Turnover (Million Passenger Kilometers Travelled)                                        193

Figure 41. Energy Intensity of Transport Sector................................................................................ 193

Figure 42. Investments Needed to Implement the Republic of Armenia’s Sustainable Transport Strategy194

List of Tables

Table 1. Electricity consumption by major customers (unit: MWh)........................................................ 7

Table 2. Natural Gas Consumption Structure........................................................................................ 9

Table 3. Total Primary and Final Energy Sources (ktoe) in 2010-2012............................................... 12

Table 4. Energy intensity indicators for different sectors of energy consumption............................... 14

Table 5. Energy and Population Dynamics, 2010-2012....................................................................... 14

Table 6. Summary Overview of firts NEEAP Targets and Accomplishments, Revised Targets for secondNEEAP          15

Table 7. Energy Losses in the Armenian Energy System.................................................................... 22

Table 8. Losses in ArmElNet System and Potential for Energy Saving............................................... 24

Table 9. National Indicative Targets under the Second NEEAP.......................................................... 30

Table 10. Overview of targets and achieved/projected energy savings both in respect of primary and finalenergy        31

Table 11. National indicative targets.................................................................................................... 31

Table 12. Tons of CO2 emission avoided by target year based on Sectoral Measures                      32

Table 13. First NEEAP Assessment: Cross-cutting/Horizontal Measures (without quantitative impact)  34

Table 14. Summary of Cross-cutting Measures With Quantative Energy Saving Impact.......... 37

Table 15. Main indicators of Banks loan portfolio for 2010-2015......................................................... 51

Table 16. Main indicators of UCOs loan portfolio for 2010-2015......................................................... 52

Table 17. Total loans disbursed by LFIs.......................................................................................... 53

Table 18. Information on SEAPs of the Covenant signatories in Armenia.......................................... 60

Table 19. Sectorial capital intensity of SEAP measures...................................................................... 61

Table 20. Energy efficiency of SEAP measures................................................................................... 62

Table 21. Efficiency of measures in solar energy sector within CoM SEAPs...................................... 63

Table 22. Summary of All EE financing Facilities and Programs, and their Assessed Impact............ 65

Table 23 Electricity tariffs for final customers (in national currency).................................................... 72

Table 24. RA Natural Gas Supply and Payments, As of 2014............................................................. 74

Table 25. Summary of Regulatory Measures for Energy Efficiency Improvement from 1st NEEAP... 79

Table 27.  Energy Efficiency Improvement Measures in Residential Buildings................................... 94

Table 28. Energy Saving Potential in Public Buildings...................................................................... 107

Table 29. Municipal street-lighting systems in RA............................................................................. 108

Table 30. Summary of EE Improvement Measures in Public Buidling and Streetlighting................. 110

Table 31. The current status of agricultural machinery in Armenia................................................... 113

Table 32. Summary of EEIMs in Agriculture...................................................................................... 116

Table 33. Structure of Natural Gas Consumption by Sectors (2011-2013)....................................... 163

Table 34.      EE Project Financing by IFIs in Industrial and SME Sectors........................................ 166

Table 35. Summary Overview of EEIMs for the industry sector (power, industry & SME)................ 169

Table 36: Specific measures associated with the initiatives presented in Table 35 above............... 171

Table 37. RT Fleet (Number) Actually Running in 2010, by Main  Category  and  Motor  Fuel  Burned.   189

Table 38. Major Development Partners in Armenia’sTransport Sector............................................. 195

Table 39. Overview of Individual Measures in the Transport Sector................................................. 196

Table 40. Competent Bodies and Assigned Organizations................................................................... 1

ABBREVIATIONS

BAU               Business as Usual

BEP                Building Energy Performance

BU                  Bottom Up

CDM               Clean Development Mechanism

CHP                Combined Heat and Power

CoM               Covenant of Mayors

E5P                Eastern European Energy Efficiency and Environment Partnership

EBRD             European Bank for Reconstruction and Development

ECU               Eurasian Customs Union

EE                  Energy Efficiency

EEAP             Energy Efficiency Action Plan

EED              Energy Efficiency Directive

EMS              Energy Management System

EPBD             Energy Performance in Buildings Directive

ESCO            Energy Services Company

ESD               Energy Services Directive

EU                  European Union

GEF               Global Environmental Facility

GGF               Green for Growth Fund

GWh               Gigawatt hour

GHP               Geothermal Heat Pumps

IFI                   International Financial Institutions

ITS                 Inogate Technical Secretariat

KfW                (Kreditanstalt für Wiederaufbau) German Development Bank

Ktoe              Kilotons of oil equivalent

kWh                kilowatt hour

LEDS             Low Emissions Development Strategies

LFI                local financial institution

MWh              Megawatt hour

MoENR          Ministry of Energy and Natural Resources

MUD              Ministry of Urban Development

MoE               Ministry of Economy

MoT                Ministry of Communication and Transport

NBU                National Bottom-Up

N/D                 No data

NEEAP          National Energy Efficiency Action Plan

NGO             Non-Governmental Organization

NSSD             National Strategy for Sustainable Development

RES              Renewable Energy Sources

SEAP             Sustainable Energy Action Plan

SWH              Solar Water Heater collectors TD Top-Down

Toe                 tons of oil equivalent

TPP                Thermal Power Plant

UNDP            United Nations Development Program

USAID           United State Agency for International Development 

WB               World Bank

EXECUTIVE SUMMARY

Energy efficiency policy has a pivotal role to play in Armenia’s economy: It is essential for creating conditions for economic growth while improving energy security. By reducing the energy intensity of thenational economic output, energy efficiency holds the key to maintaining a safe, sustainable andaffordable energy supply, while meeting increasing energy demand and improving quality of life for the Armenian population. Under conditions of extreme import dependence for fossil fuels, energy that Armenia’s citizens, businesses, and infrastructure do not use is the cheapest, cleanest, and most secure energy resource.

The potential for energy efficiency in all sectors has been assessed repeatedly and remains high, despite the relatively low energy intensity of the economy. The Armenian Government has taken legal action to promote efficiency through various programs and policies, but the potential for efficiency improvement still remains largely untapped. With energy prices rising, the urgency of accelerating theuptake of energy efficiency throughout Armenia’s economy has increased. The goal of the secondNational Energy Efficiency Action Plan (NEEAP) is to assess the effectiveness of ongoing efforts by the Government, donors, international financial institutions and the private sector to improve the efficiency of energy use since 2010, when Armenia’s first NEEAP was developed. The second NEEAP also identifies barriers to more extensive efforts in this direction, proposes measures to help overcome these barriers, and offers additional energy efficiency improvement measures for the period covering 2015–2020. The key pillars of the second NEEAP are:

v Reducing energy demand by improving the efficiency of energy end use;

v Improving national energy security by reducing the need for imported energy resources;

v Decreasing the energy content of the key economic outputs to reduce costs and raise the competitiveness of output;

v Addressing growing energy affordability concerns through energy efficiency solutions (instead of relying on social aid); and

v Providing impetus for behavioral change by decoupling growth from energy use, and thus enhancing the quality and sustainability of development through the introduction of knowledge and traditions for resource efficiency and smart growth.

The development and adoption of the Second NEEAP for the Republic of Armenia is one of the steps on the pathway upon which the Government of Armenia embarked a decade ago, by adopting Armenia’s first Law on Energy Saving and Renewable Energy. The Republic of Armenia developed its first NEEAP in 2010 to accelerate the implementation of its national energy efficiency policy. The first NEEAP set forth a set of programmatic and policy measures for energy efficiency improvement for all economic sectors of the country. The first NEEAP, adopted by Government Resolution #43 on 4 November 2010, set the country on track for a ten-year process with intermediate targets and interim evaluations.Because adequate data

were not available at the time for developing targets based on statistics, the first NEEAP provided rough estimates of the potential impact of the proposed measures as fractions of the overall target up to 2020.

The 2010 energy balance was prepared shortly after the completion of the first NEEAP. The indicativetarget for the end of the first NEEAP was thus later quantified by the team developing the second NEEAP using the energy balance data for 2010.1 Since the second NEEAP was prepared in 2015, the first period was assumed to cover 2011-2014. The energy saving target for the first period of the first NEEAP was baseline energy consumption of 2010 (1900.6 ktoe). The second NEEAP sets an interim target of 3.3%,equivalent to 63.3 ktoe. The assessment of the first NEEAP revealed that this target has been outperformed: The overall energy saving reached by 2014 was 6.3% (120.3 ktoe).

The second NEEAP continues the relevant measures from the first NEEAP, and in addition proposes an updated bundle of measures and energy saving targets for the second period, covering 2015-2017. The second NEEAP tracks both the indicative milestone year 2018, as well as a long-term plan until 2020. The document was prepared based on the template recommended by the Energy Community, in which the Republic of Armenia has had observer status since 01.10.2011.

In accordance with the NEEAP methodology, the baseline used in the second NEEAP is the averageenergy consumption from three consecutive years (2010, 2011 and 2012), in this case 2,047 ktoe. Based on the assessed progress under the first NEEAP and the expected impact of the ongoing and new energy efficiency improvement measures, the second NEEAP proposes a new set of targets for 2017(9.9% instead of the 10.4% proposed in the first NEEAP),

1 EC-LEDS Program In Armenia.

for 2018 (11.2% instead of 13.8%), and a higher overall target for 2020 (34.2% instead of

22.3%).

Table 0. 1. National Indicative Targets under the Second NEEAP

It is noteworthy that some of the ongoing energy efficiency programs in Armenia, particularly those financed by international financial institutions and the banking sector, have been assessed in depth forpast performance, but were reluctant to provide any projections of future

lending due to market volatility. For this reason, the reduced targets of the second NEEAP may be outperformed when energy efficiency financing is quantified in the third NEEAP.

Table 0. 2. Overview of targets and achieved/projected energy savings both in respect of primary and final energy

Table 0. 3. Overview of targets and achieved/projected energy savings in respect TO BOTH final AND primary energy

The second NEEAP introduces new measures for all sectors. The broad range of measures includes enforcing new regulations, integrating energy efficiency into public procurement, encouraging improved energy performance of industrial and small and medium enterprise (SME) energy consumers, andintroducing a comprehensive monitoring and planning approach for the transport sector.

In addition, the measures include promoting end-use distributed generation of renewable electricity andthermal energy by energy end-users. This—primarily includes the increased use of solar energy for hot water preparation and the application of heat pumps and increased use of solar photovoltaic technologyvia net metering. These proposed measures are based on and

closely related to existing strategic documents, action plans and programs to promote renewable energy.

The national intermediate indicative targets for 2017 and onward were calculated on the basis of the average final consumption of energy during the realization of first NEEAP.

Table 0. 4. National indicative targets for 2017

A significant number of strategic documents and regulations related to the implementation of energy efficiency measures have been adopted in the Republic of Armenia. The impacts of these individual actions are difficult to evaluate separately due to their synergistic natures and overlapping results -- particularly in the case of horizontaland cross-sectoral measures. For this reason, a combination of top- down and bottom-up methodologies wasused to estimate the achieved (2014) and potential (through 2020) energy saving impacts of these programs (see Table 0.4).

Table 0. 5. Tons of CO2 emission avoided by target year based on Sectoral Measures

In order to achieve these estimated savings through implementation of the energy efficiency measuresproposed in the second NEEAP, it is necessary to strengthen Armenia’s institutional framework, especially related to buildings. Several steps forward have already been taken in this regard: For example, the newly adopted Housing Legislation stipulates that every multi- apartment facility must operate as a legal entity, requiring residents to form a community of building tenants or delegate the housing maintenance function to a professional organization. This legislation, combined with the enforcement of the amended Law on Energy Saving and Renewable Energy and the related secondarylegislation, will enable faster renovation of multi- apartment buildings. In addition, the increased establishment of Home-Owners Associations will ensure a higher quality of housing maintenance and,potentially, increased efforts at thermal modernization of buildings. This is an expected outcome of the establishment of private maintenance companies and the enhanced development of energy services companies (ESCOs).

The Ministry of Energy and Natural Resources (MoENR) is responsible for monitoring the implementation of the second NEEAP and reporting results based on measurement and verification of energy savings. As a first step, the MoENR will need to establish an information system for tracking all energy efficiency activities and assessing the energy savings; this will help avoid measurement and verification problems stemming from the current lack of data (apparent during the preparation of thisNEEAP) needed to calculate the savings from individual measures. This task may be assigned (outsourced), if necessary, to expert teams outside MoENR.

The implementation of the second NEEAP will also require identification of stable funding sources to support the measures that depend on extra-budgetary sources of financing; a

number of measures outlined in the second NEEAP still do not have committed funding. A small part of the budgetary resources (Central and Local) are still available to be allocated for the drafting of thepolicies, development of tariff reform, and preparation of programs within the specific measures; however, significant additional funding necessary for the implementation of the energy efficiency investments will be required from donors and IFIs.

Table 0.5 summarizes all of the energy efficiency measures in the sectors of final energy consumption that are outlined in the proposed second NEEAP, as well as the assigned responsibilities for implementation and the estimated funds required.

A more precise assessment of necessary financial resources, as well as proposed sources of financing,will be elaborated in the programs and plans for the implementation of specific energy efficiency measures identified in this NEEAP.

Table 0. 6. Summary of energy efficiency measures in the sectors of final energy consumption

The successfull achievement of the envisaged measures entails the full commitment of all participants in this process. The second NEEAP was prepared using the following control list of measures necessary for effective realization:

v  Continued reform and eventually amendment of the Law on Energy Saving and RenewableEnergy and associated bylaws on energy auditing and energy efficiency in public procurement

v  Continued operation of the Renewable Resources and Energy Efficiency Fund

v  Smooth integration of Eastern Europe Energy Efficiency and Environment Partnership (E5P) funds to leverage lending with grant co-financing

v  Development of new/improved housing legislation

v  Building codes enforcement

v  Tariff reform

v  Incentives   for   wider   combined   energy   efficiency-integrated   renewable   energy application

v  Improvement of energy efficiency data collection and periodic energy balance calculation

v  Low-income assistance for implementation of energy efficiency measures

v  Development and provision of technical assistance in best available energy efficiency technologies for the industrial and agricultural sectors (e.g., greenhouses and aquaculture)

v  Strengthening the institutional capacity of the State to develop and implement energy efficiencypolicy..

One of the highest priorities is to urgently develop an efficient information system for monitoring and verification of activities and energy savings associated with the implementation of energy efficiency measures. The success of the proposed measures largely depends on systematic and timely oversight of implementation of the measures set out in this NEEAP. Table 0. 7. Summary of first NEEAP Targets, Achievements, and Revised Second NEEAP Targets at a glance.

Second National Energy Efficiency Action Plan forArmenia

Armenia Renewable Resources and

Energy Efficiency Fund

FIRST DRAFT

Table 0. 7. Summary of first NEEAP Targets, Achievements, and Revised Second NEEAP Targets

INTRODUCTION

The Armenian Government has taken ambitious steps to reform the energy sector, improve the economicefficiency of energy use and promote the greter use of renewables. Several policy documents, such as the Energy Sector Development Strategy, the Law on Energy Saving and Renewable Energy, the National Program on Energy Saving and Renewables, the first National Energy Efficiency Action Plan and the Energy Security Concept have all clearly voiced the priotity that the Government of Armenia attributes to development ofrenewable energy, energy efficiency and energy saving programs, diversification by primary energy sources and supply routes, regional integration, as well as development of nuclear energy.

The Republic of Armenia has developed its first National Energy Efficiency Action Plan (NEEAP) in 2010 for theperiod 2010 – 2014 as part of the overall attempts to accelerate the implementation of the national energyefficiency policy. The first NEEAP set forth a set of programmatic and policy measures for energy efficiencyimprovement for all relevant economic sectors in the country. According to the European best practices,development of NEEAP is a regular process and targets at a ten-year period. The first NEEAP was developed without adequate statistical basis, but provided rough estimates of the potential impact of the proposed bundle of measures as fractions of the overall target up to 2020 (adopted by Goevrnment Resolution #43 from 4 November 2010.

The present document is the second NEEAP in this series and provides the Government of Armenia with an assessment of progress against these targets during the period of 2010-2012 using the estimated baseline energy consumption for 2010. Due to the experienced delay in the preparation of the second NEEAP, the firstNEEAP assessment goes beyond the reported timeframe for the first period and tracks programs and measuresimplemented up to 2014, inclusive. The second EEAP uses the 1st NEEAP assessment conducted by the R2E2 for horizontal/cross-cutting measures, newly conducted assessment of implemented sectoral programs as foundation to, where necessary, revise the current measures and establish a new sectoral measures in order to ensure the achievement of objectives by year 2017, 2018 and 2020. Then the second NEEAP continues the relevant measures from the first NEEAP, as well as proposes an updated bundle of measures and energy savingtargets for the second period covering 2015-2017, tracking both the indicative milestone year 2018, as well as along-term plan until 2020. The document was prepared based on the template recommended by the EnergyCommunity which the Republic of Armenia holds an observer status since 01.10.2011.

The NEEAP provides a framework for the development of measures to enhance energy efficiency improvement, with a stronger focus on the energy end-use, and platform to evaluate the energy savingsresulting from the implementation of these measures in the long run. The method and specific features of the assessment of the total and intermediate indicative targets are described in this document.Aggregate and individual data on energy consumption have been used to set the targets

based on the 2010-2012 energy balance data.2 Where possible, total primary sources and final energy consuption was roughly assessed beyond 2012 to allow for adequate assessment of the impact of the first NEEAP measures.

The updates in the second NEEAP are largely aimed at documenting a diverse package of measures that have been undertaken by various players in all sectors of the economy, new initiatives that have been introduced after the first NEEAP was developed, as well as refreshing the data on timing for implementation of energy efficiency (EE) improvement measures in the light of growing energy prices and emerging energy supply sufficiency concerns. The legal ground for preparation of EEAP is determined in the Government Decree adopting the 1st NEEAP.The second EEAP for the period 2015-2017, considering targeted energy efficiency savings by 2018 and 2020, prescribes the energy savings objectives and prescribes measures and activities for achieving intermediate energy savings target for 2017.

The 2nd NEEAP will provide a framework for the development of measures to enhance energy efficiency improvement, in particular for end-use energy consumers, and platform to evaluate the energy savings resulting from the implementation of these measures.

2 Enhancing Capacity for Low Emission Development Strategies (EC-LEDS) Program in Armenia. Available at http://energybalancearmenia.am/

1                                 OVERALL CONTEXT OF THE SECOND NEEAP

The Armenian Government has developed and adopted several major national policies, strategies and programs, secondary legislations and regulatory frameworks as well as international treaties related to the implementation of energy efficiency policies. The chart below lists the acting policies, programs, regulations and treaties governing the scope of NEEAP implementation.

Figure 1. Energy Efficiency Policies, Strategies and Regulations

The review of the above policy framework is attached to the Second NEEAP with consideration of accomplished energy savings as well as expected savings from continued policy efforts in market transformation in the consequent chapters, as well as further reform recommendations.

The desk study revealed the gaps in the policies, including:

• The lack of financial incentives for energy efficiency to support the enforcement of the voluntary provisions of the Law on Energy Saving and Renewable Energy
• The lack of enforcement in the existing energy efficiency regulations, including enforcement procedures for the latest Government decree on mandatory compliance with EE requirements in state investment projects and residential construction

• A number of legislative initiatives have been put forward (technical regulations on building safety and energy performance, amendments to the Law on Urban Development, draft amendments to the Law on Energy Saving and Renewable Energy, draft regulation on appliance labeling), which are still pending adoption or on hold. Their status as well as impact on national energy saving targets must be reassessed to conclude on recommended further steps in these reform directions. Furthermore, the present legal initiatives, particularly those related to appliance labeling, must be revisited to adjust the provisions of the earlier draft regulation on appliance labeling targeted at EU Labeling directive transposition to comply with the EEU.
• Many donor- and IFI-funded initiatives have already tested a number of a successful and promising technical and financial solutions for promotion of energy efficiency in various sectors of the economy. These have also provided solid empirical evidences on the expected impact of particular energy efficiency measures, as well as potential barriers which can hamper the successful implementation of specific energy efficiency measures.

The second NEEAP seeks to propose scaling these up to national efforts. Similarly, the assessment of the first NEEAP and the work on thesecond NEEAP revealed limited attention to other types of EE Investments, hence the second NEEAP seeks to propose a new set of EE improvement measures and programs addressing the market barriers and utilizing the untapped energy saving potential in other sectors.

1.1            Highlights of the Second NEEAP

The second NEEAP assesses the progress made in the directions outlined by the first NEEAP. The intention was to use the average energy demand for 2008-2010 as the reference, but since the energy balance was only calculated for 2010 and further two years, 2010 was the only reference for a baseline. But since the first NEEAP, the 2010, 2011 and 2012 energy balances were prepared, and the following target yeras (2017, 2018 and 2020) use the average of these three consecutive years as a reference baseline for the consequent energy saving targets.

1.2            National context of energy savings

Armenia’s energy consumption currently represents only a small fraction of the level prior to collapse of the Soviet Union.

Figure 2. Total primary and final energy sources used in Armenia since 1990, statistics and forecast.

Since independence, Armenia has struggled to recover the level of economic output and the economy has grown at a steady rate, and so did the energy use. The restructuring of the economy with more focus on services and away from heavy industry has helped reduce the energy intensity of economic growth and decouple energy from growth which is a major step towards a sustainable energy pathway and green economy (See Error! Reference source ot found.).

Nevertheless, final energy consumption has increased in recent decade. The residential sector was the the largest consumer, responsible for

GDP, PPP (Index, base year=1990) Energy use (Index, base year=1990)

Figure 3. Economic Growth and Energy Use in Armenia. WB 2014

over one third of total final energy, followed by the transport sector with a share of 25% in 2012. Nevertheless, both sectors make only insignificant contributions to GDP. Industry used only 18% of energy, which is far beyond the industry’s share in the soviet era. Commercial and public services accounted for about 16% and agriculture - for about 7%. The share of the residential sector fluctuates depending on weather conditions. Only the commercial and the public service sector showed steady increase of energy consumption over the last years.

Figure 4. Final energy consumption in Armenia by sector (in ktoe)*

Source: USAID, 2012. Reference scenario for 2015-2030.

*Data for 2000 and 2005 are from IEA, Statistics

Source: Annual Report of the Ministry of Energy and Natural Resources of RA

Currently available projections3 are based on 2006 data and assume an increase of the share of industry in overallfinal energy consumption until 2030, as well as a slight increase of the share of transport. The share of all other sectors was expected to decrease. Practice seems to develop differently. The Long- Term Strategic Development Program of the Armenian Government 2014-2025 plans an annual economic growth of up to 6-7% and a doubling of GDP by 2025. Highly qualified jobs ensuring high labour productivity is considered as the main directions. The Program, in fact, may become a straightforward strategy for a country poor in naturalresources. The envisaged work places indeed may be less energy-intensive. Therefore, in a reference scenario, one would expect an increase in energy consumption in commercial and public services.

After the deep fuel crisis in 1992 when consumers had only 2-4 hours of electricity per day and most households depended on firewood or electricity for heating (World Bank, 2011), the electricity system

3Although the projections are not compatible with current development and need to be adjusted there was no other projection to rely on. Say explicitly that a new study is needed here.

has been restored. Electricity generation in Armenia relies mainly on natural gas (54% of total installed capacity)followed by hydropower (22% of installed capacity). The nuclear power plant built in the Soviet period is still in operation and contributes 19% of total installed capacity.

Table 1. Electricity consumption by major customers (unit: MWh)

More than half of facilities producing 4.4 GW of total installed capacity of operating power plants are older than 40 years, and thus are at the end of their lifecycle; moreover many units operate far below

their installed capacity.4 They need replacement or substantial investment into refurbishment to extend their life span. The same is true for the electricity grid which requires comprehensive rehabilitation.

Efforts on modernization of power plants had been undertaken and two new modern gas-fired thermal power generation capacities were constructed (the Yerevan CCGT Unit with an installed capacity of 271.7 MW commissioned in 2010 and the Hrazdan Unit N5 with an installed capacity of 480 MW commissioned in 2011).

A steadily growing electricity demand (see Figure 6) and the necessary shut-down of under-maintained infrastructure, including about 1,300 operable power generation facilities, have resulted in the need for new power-generating capacities to be constructed in order to meet an envisaged supply gap in 2017 (World Bank,2011). The operable capacity of

the current Nuclear Power Plant (NPP) cannot be increased and hydro energy is dependent on weather conditions. Discharges from the Sevan Lake to the Sevan-Hrazdan cascade are limited and strongly depend on the irrigation regime. The working capacity of the Vorotan cascade power plants is also limited due to the water flow in in the river. Therefore the load of Vorotan cascade is highest during the spring-summer months and lowest during the autumn-winter months. The assessment of the gap has shown different results ranging from 800 to1,100 MW of new, operable generation capacity in order to meet peak load and to maintain a 25% reserve margin (World Bank, 2011)5. Substantial export capacities will remain. 75% of the capacity of the new YerevanCCGT and of unit 5 at Hrazdan TPP, as well as full capacity of the Meghri HPP (to be operational in 2019) arededicated to electricity export.The

4 At Hrazdan TPP 800 MW are operable out of 1050 MW installed, and at Yerevan TPP only less than 10% of installed capacity. Efficiency is very low (370g of fuel per kWh)compared to new gas fired blocks at Hrazdan (260-270 g/kWh) and to the new Yerevan CCGT (170g/kWh). (World Bank, 2011)

5The IMF assumed a 4% annual GDP growth rate during 2011-2030. (World Bank, 2011, 11)

current and forecasted structure of electricity generation is presented in Figure 6 below.

14,000

12,000

10,000

8,000

6,000

4,000

2,000

0

2005

2010

2011

2012

2013

2015

2020

2030

Figure 6 Electricity generation by fuel (in GWh)

Aside from electricity generation, natural gas is consumed in all other sectors. Gasification reached 96% of the country, being competitive against electricity prices, despite the continuously growing prices. The dynamics of gas prices is presented in the Chapter 4.1.

Table 2. Natural Gas Consumption Structure

The energy consumption is still strongly correlated with greenhouse gas emissions, nonetheless some decoupling trend has been observed due to introduction of more renewables into the energy mix, particularly the small hydro power capacities.

Figure 7. GHG Emissions in Armenia until 2010 (in Gt CO2eq excluding LULUCF)

Source: RoA 3^rd National Communication to UNFCCC

As an indicator of efficiency of energy use studies usually compare energy intensity of GDP. But another illustrative indicator is the per capita energy use. For both indicators Armenia remains one of the lowest thelowest if compared with counties in the region, the Energy Commnunity and the EU Member States.

Figure 8. Comparison of Energy Consumption per Capita and Energy Intensity by Countries

Armenia’s first National Energy Efficiency Action Plan (NEEAP) was developed in 2010 when there was no detailed energy balance in the country and the latest bottom-up data collection was conducted in 2005 for the development of the National Program on Energy Saving and Renewable Energy, adopted in 2007. The lack of statistical data limited the possibility of assessing the energy saving potential adequately, as well as quantifying the indicative energy saving targets.

1.3      Setting the Target

As a best-practice strategy for NEEAPs, the baseline is selected based on the average of the three consecutiveyears for which adequate statistics were available. Given the availability of detailed energy balance for 2010-2012 in Armenia, the present NEEAP uses the average of these three years to set the baseline.

This NEEAP also uses the energy intensity of GDP, sectoral energy intensities, as well as primary or final energy use per capita. Similarly, the targets set by the Government for national programs and strategies aimedat energy efficiency usually use primary or final energy sources used by a target year. The NEEAP is no exception. Energy efficiency targets for the NEEAPs can be set based on:

›   primary or final energy consumption;

›   primary or final energy savings;

›   energy intensity.

Considering that the energy system losses are estimated by various studies at approximately 30%, and that thesecond NEEAP also focuses on supply-side energy efficiency measures, which will also deliver substantial primary energy saving. A TPES target will be better for Armenia’s economy with consideration of the resourceefficiency, economic competitiveness and energy security considerations. As recommended by the European best practices, and for the ease of use and monitoring, Armenia’s second NEEAP also expresses those targets in terms of an absolute level of primary energy consumption and final energy consumption in 2020 and shall explain how, and on the basis of which data, this must be calculated.

The comparison of total primary energy consumption in the CIS countries—among them Armenia and Georgiaacting as observers to the EnC Treaty and Ukraine and Moldova acting as contracting parties— shows that TPES consumption in Armenia is the second lowest in the region (See). As noted above, this does not necessarily act as an indicator of efficiency, but rather shows a lack of technological advancement and economic development, as well as heavy reliance on service sectors. These factors allowed Armenia’s GDP to grow faster than its energy consumption.

The below table presents the total primary energy sources and final energy consumption for the three latestyears for which adequate statistics was available and their average as the baseline for the second NEEAP energy saving target.

Table 3. Total Primary and Final Energy Sources (ktoe) in 2010-2012

An absolute energy consumption limit for a country is adequate if it needs to meet a certain quantitative target (e.g. need to cut national energy use by 20% to cope with the deficit in Ukraine in 1990, or the EU countries bound by the 20-20-20 target of the Union6). Since Armenia is not expected to contribute to any absolute target,cost-effectiveness and alignment with national economic development objectives are the applicable decision criteria, and the size of the target is based on the remaining cost-effective energy savings potential and its abilityto pay for the necessary investments, i.e., their current GDP and its future changes.

Hence, Armenia’s target is decoupled from any absolute quantitative target and a linkage is proposed to the enforcement and effectiveness of national policies, energy efficiency financing, promotion of energy services and the provision of information. Such a target is tied to quality of growth, reducing the energy content of the output without geopardizing the economic development of the country. As the graph below indicates, Armenia has already made some progress in this direction in the past decade.

6 Bertoldi, P., EU 2020 and 2030 Energy Saving Targets and the role of National Energy Efficiency Actions Plans, Presentation, ACEEE, 2014

Figure 9. Energy Intensity (TPES/GDP) in CIS countries, 1990-2012

Figure 10. Energy Intensities of the CIS Countries7

Table 4. Energy intensity indicators for different sectors of energy consumption

Since the building sector is very mixed in purpose of use and is not universally contributing to creation of value towards the national economy, the usual energy intensity of GDP does not adequately characterize the building sector. Energy consumption per capita and/or per heated space area are the common indicators used to charachterize the energy performance of the building sector.

Table 5. Energy and Population Dynamics, 2010-2012

Based on the analysis of the above indicators and sector-specific opportunities, the second NEEAP of the Republic of Armenia has assessed the energy saving impact of a range of ongoing, planned or proposed activities. This assessment allowed measuring progress against first NEEAP targets as well as revise those targets to match the new developments.

7 van der Hoeven, M., Energy Policies Beyond IEA Countries: Eastern Europe, Caucasus and Central Asia, IEA, 2015 publication launch, 13.04.2015

Table 6. Summary Overview of firts NEEAP Targets and Accomplishments, Revised Targets for second NEEAP

2                                 MEASURES FOR THE PRIMARY ENERGY SAVINGS

Except for certain hydro-energy resources and a small amount of other renewables (including some fire- wood, the consumption of which led to severe deforestation), Armenia does not possess any own conventional (fossil and nuclear) fuel resources and is not a transit country for oil and gas as well. Thus, the country is heavily dependent on energy imports, which has placed an increasing burden on the current account. In 2012 energy imports amounted to 90% of the total of 3.377 Mtoe primary energy supplied. The share of energy imports in TPES fluctuates slightly depending on the hydro potential. In dry years, imports increase.

Although reduced during the recent years, overall energy losses are still high. About 30% of the total primary energy supplied was lost through transformation, transmission and distribution (USAID, 2014). This underlines the importance of energy infrastructure improvement and EE development. This is the reason why the IFI support requested by the Armenian Government in the energy sector also largely focuses on loss reduction, reliability and increased effectiveness of the distribution networks.

All EE measures that are provided by this program are measures for reduction of energy consumption among end users. The same applies and for EE measures which are taken in the power plants that generate electricity and thermal energy. It is necessary to emphasize that the implementation of measures at the site of energy end users is considerably more conducive to reducing the consumption of primary energy, compared to power plants that generate energy. The reason for this lies in the fact that the generation of energy, except losses during transformation of primary into secondary form of energy, appear and additional losses of transmission and distribution.

2.1            Reducing high-voltage network losses and Enhancing reliability of Power Supply in Armenia

Optimal approach is to predict the energy efficiency measures in all steps – at the side of power supply (production of transformed form of energy, transport, distribution) and at the side of the energy end users.

Table 7. Energy Losses in the Armenian Energy System

As the above table indicates, the losses in transmission and distribution processes are significant and their mitigation is in the Government’s list of priorities.

The planned projects which target loss reduction and efficiency in distribution networks include the following:

1. "EBRD -Armenia Power Supply Rehabilitation Project: Phase 1. Rehabilitation of 220 kV transmission network and substations in Armenia (EUR 65,000,000), of which :
2. "WB Electricity Supply Reliability Project. Rehabilitate key substation and transmission lines criticalfor system-wide reliability of power supply (US$ 41,550,000 for now) or US$ 66, 600,000) reducing system losses from 2.2-2.7 % to 0.7% reaching positive net economic benefit in 2030.

2.2            Reducing low-voltage electric network losses

In addition to the high-voltage network losses and reliability issues, losses remain higher than allowed by the regulator in the low-voltage networks operated by the Armenian Electric Networks.

Figure 11. Energy Losses in 0.38-110 kV network (% of energy entering the network)

Source: PSRC, 2015

The actual losses are about 10 percent higher than allowed by the Public Services Regulatory Commission. Hence, the second NEEAP must include measures for the reduction of the losses in the low-voltage networks.

In addition to the above, the lossess in the low-voltage network of the Armenian Electric Networks (ArmElNet) have persistently been beyond the regulated permissible level. See below table for details.

The losses visualized in Figure 11 are quantified along with the energy saving potential below in Table 8.

Table 8. Losses in ArmElNet System and Potential for Energy Saving

As the above table indicates, the ArmElNet has potential to save an average of 62 GWh energy per year which will result in an average of AMD 1.5 billion financial savings due to reduced commercial losses.

2.3            Promotion of EE-integrated renewable energy applications

As Armenia lacks own fossil fuel resources, energy efficiency (EE) and utilization of country’s significant renewable energy (RE) potential are key to sustainable development and national security. In order to

facilitate investments in EE and RE solutions, and increase the use of clean, efficient, safe and affordable heating technologies the Government of Armenia has joined the donor community to create replicable technical and financial models for enhanced access to renewable energy use. The 2011 Renewable Energy Roadmap identified the RE technical-economic potential (e.g. almost 4 Terawatt- hours of solar photovoltaic(PV) electricity per year, and over 4 TWh in geothermal heat pumps). In 2013 the President of Armenia approved the National Energy Security Concept. In 2014 the Scaling Up Renewable Energy ProgramInvestment Plan set targets for renewable energy development until 2025. The survey of Armenian REequipment vendors conducted in June 2015 revealed that there is a notable growth trend in implementation of RE practices in many different sectors of the economy. The graph below illustrates the cumulative areas and capacity of installed solar panels by the local companies during last five years derived from the survey. While the trend is positive, the installed capacities are still less than 0,2% of the solar PV target set for 2020. The level of utilization of solar PV electricity can be promoted through possibilities of grid-connection and definition of parralel operation through net metering.

2.3.1                Enforcing Net Metering for Independent Solar Electricity Producers

Net metering policies have facilitated the expansion of renewable energy through on-site generation, also known as distributed generation. Common distributed generation sources, which can be located at a house, school or business rather than utility-owned property, are solar panels, micro-turbines or other renewable energy sources. Increasing numbers of utility customers are using net metering to generate electricity from sources on their property. Net Metering provides PV customers with opportunity to have a zero charge against their electricity consumption if it is offset by the PV generation; in case they

Figure 12. Solar PV Installations, 2011-2015

produce and export to the grid more energy than they consume, they will receive the relevant remuneration or, alternatively, will be charged

for the excess consumption, if it exceeds the level of PV generation. The 2003 Law on Energy Saving and Renewable Energy created the legal provision for net metering. In 2005 the PSRC developed the procedures for parallel operation of autonomous renewable energy producers, which defined the non- commercial relationship of the electric network with the micro-generation facilities with capacity under 150 kW (PSRC Resolution №194, 30.11.2005). The regulation, however, has failed to be implemented

due to tax accounting issues, which require immediate solution. With the growing energy tariffs, the small-scale solare PVs systems hold a large potential to help develop the distributed RE generation.

2.3.2                Greater Use of Solar Thermal Energy

The solar water heaters’ market has been evolving rapidly. A vendor survey conducted specifically for purposes of second NEEAP preparation revealed a trend much faster than expected (See Figure 13).

Figure 13. Estimated Trend of Installed Solar Water Heating Capacities: Output and Savings

The growing energy prices, the availability of loan financing from IFIs (EBRD, GGF, AFD, pending KfW’s plans to diversify the current small HPP lending to also cover SWHs) for concentrated solar thermal technologies, have jointly lead to an expansion of the SWH capacities of over 4.7 MWh throughout Armenia in variousconsumer groups, which leads to annual cummulative thermal energy output of over 8,600 MWh per year as of mid-2015. If the growth trend continues, which is highly probable given the increased availability of loans and leasing schemes for SWHs, Armenia may accoplish more than the targets set for 2020 for SWHinstalled capacity and energy output (at current rate, by 2020 there will be 15 MW installed capacity, which is more than the SREP target by 5MW, similarly the energy output will be 25GWh per year instead of the 13 GWh / year set in the SREP Investment Plan.).8

2.3.3                Piloting Geothermal Heat Pumps for Scalable Centralized Heating Solutions

Another EE-integrated renewable energy solution for Armenia is geothermal heat pumps, which have been estimated to have significant potential for space heating. The Renewable Energy Roadmap of

8Scaling up Renewable Energy Program (SREP) Investment Plan, 2014.

Armenia has estimated maximum 75MW capacity for geothermal energy, which can be event more if utilized for supply hot water and heating to nearby locations.Unlike other countires, there is no applied experience of geothermal heat pumps’ in Armenia. Development and piloting of geothermal district heating system for the resort town of Jermuk for supply to municipal, residential and commercial buildings (sanatoriums/spas), utilizing the water from local high-temperature mineral springs. Jermuk has a long heating season and high tourism traffic which creates need to supply high qualiity heating and hot water services to the multiple hotels and resort facilities. Should the system be found efficient in Jermuk, there is replication potential in other towns of Armenia.

Such investments have to be estimated for each particular site and terrain (variable borehole drilling cost), however, under Armenia’s general circumstances a pilot project for a typial building 5-floor building isnecessary to verify the cost-effectiveness and economic viability of this technology for heating residential and public buildings. It is key to seek a public-private partnership arrangements whereby a private energy serviceprovider can partner with the local Government (Jermuk municipality, in this case) for utilization of municipal assets and private management, investment co-financing and know-how. At the same time, geothermal heatpumps for heating can reduce the demand for imported gas for heating purposes and associated greenhouse gas emissions, utilize indigenous clean and sustainable energy resource.

The assessment of the primary energy saving measures are presented in the section on Industry, Power andSMEs.

3                                 FINAL ENERGY SAVINGS IN THE END USE SECTORS

3.1            Review of final energy saving targets and final energy saving achievements

As Figure 14 indicates, Armenia’s final energy consumption largely takes place in the buildings (residential, public and commercial) and the transport sectors. What is noteworthy, both sectors make only small insignificant contributions to GDP. Industry used only 18% of the energy, while selivering about 33% of the GDP. Commercial and public services accounted for about 16% and agriculture - for about 7%. The share of the residential sector fluctuates depending on weather conditions.

As the below figure indicates, the commercial, and the public service sector is the only one which showed steady increase of energy consumption over the last years. With the projected economic trends, the industrial energy use and buildings are expected to grow substantially and lead to a significant hike in the final energy consumption. The

Figure 14. Structure of Final Energy Consumption by Sector, 2012

dinamics and forecast of final energy consumption is presented in Figure 15.

Figure 15. Final Energy Use Trend and Projections by Sector9

3.1.1                National overall end-use energy savings targets and progress towards them

3.1.1.1.                  Achievement of the 2014 intermediate energy end-use target

The 2010 energy balance was prepared shortly after the completion of the first NEEAP. The indicativetarget for the end of the first NEEAP was thus later quantified by the team developing the second NEEAP using the energy balance data for 2010.10 Since the second NEEAP was prepared in 2015, the first period was assumed to cover 2011-2014. The energy saving target for the first period of the first NEEAP was baseline energy consumption of 2010 (1900.6 ktoe). The second NEEAP sets aninterim target of 3.3%, equivalent to 63.3 ktoe. The assessment of the first NEEAP revealed that this target has been outperformed: The overall energy saving reached by 2014 was 6.3% (120.3 ktoe).

The second NEEAP continues the relevant measures from the first NEEAP, and in addition proposes an updated bundle of measures and energy saving targets for the second period, covering 2015-2017. The second NEEAP tracks both the indicative milestone year 2018, as well as a long-term plan until 2020. The document was prepared based on the template recommended by the Energy Community, in which the Republic of Armenia has had observer status since 01.10.2011.

In accordance with the NEEAP methodology, the baseline used in the second NEEAP is the averageenergy consumption from three consecutive years (2010, 2011 and 2012), in this case 2,047 ktoe. Based on the assessed progress under the first NEEAP and the expected impact of the ongoing and new energy efficiency improvement measures, the second NEEAP proposes a new set of targets for2017 (9.9% instead of the 10.4% proposed in the first NEEAP),

9Source: USAID, 2012. Reference scenario for 2015-2030.

10 EC-LEDS Program In Armenia.

for 2018 (11.2% instead of 13.8%), and a higher overall target for 2020 (34.2% instead of

22.3%).

Table 9. National Indicative Targets under the Second NEEAP

It is noteworthy that some of the ongoing energy efficiency programs in Armenia, particularly those financed by international financial institutions and the banking sector, have been assessed in depthfor past performance, but were reluctant to provide any projections of future lending due to marketvolatility. For this reason, the reduced targets of the second NEEAP may be outperformed when energy efficiency financing is quantified in the third NEEAP.

3.1.1.2.                  Expected savings in relation to the 2018 overall energy end-use target

New measures are introduced in all sectors second NEEAP. These measures primarily relate to enforcing new regulations, integrating energy efficiency into public procurement, encouraging improved energy performance of industrial and SME energy consumers, promoting end-use distributed generation of electricity and thermal energy by energy end—

users, as well a introducing a comprehensive monitoring and planning approach for the transport sector.

Table 10. Overview of targets and achieved/projected energy savings both in respect of primary and final energy

This primarily concerns the increased use of solar energy for hot water preparation, but also significant attention and application of heat pumps and increased use of solar photovoltaic technology via net metering. Envisaged measures are closely related to strategic documents, action plans and promotional measures for greater use of renewable energy.

The national intermediate indicative targets for 2017 and onward was calculated on the basis of the average final consumption of energy during the realization of first NEEAP.

Table 11. National indicative targets

A significant number of strategic documents and regulations have been adopted in the Republic of Armenia. Those documents contain various activities related to the implementation of EE measures.The impact of these individual actions can hardly be separated and difficult to

evaluate due to their combined nature and overlapping results. For this reason, when there are no defined standards and methods for this purpose, the effect of these measures cannot be accuratelyassessed.

The climate change mitigation potential of the second NEEAP measures has been assessed ad is presented below in Table 12.

Table 12. Tons of CO2 emission avoided by target year based on Sectoral Measures

A combination of top-down and bottom-up methodologies was used. For the implementation of the proposed set of energy efficiency measures, it was necessary to strengthen the institutional support, especially inbuildings. Adoption of the new Housing Legislation – stipulating that every multi apartment facility must operate as a legal entity – to form a community of tenants of the building or delegate the housing maintenance function to a professional organization, is a big step forward in the legislation, which, combinedwith the enforcement of the amended Law on ES & RE and the secondary legislation, should enable faster renovation of these buildings. Establishment of Home-Owners association will ensure higher quality ofhousing maintenance and potentially - implementation of thermal modernization of buildings. This process is envisioned with the establishment of private maintenance companies and development of ESCO services,too.

Monitoring of the implementation of the second NEEAP and reporting results based on measuring and verification of energy savings are under responsibility of the Ministry of Energy and Natural Resources. In order to monitor the actual energy savings and to avoid problems related to the lack of data needed tocalculate the savings from individual measures, which was present in the preparation of this NEEAP, the MoENR must establish an information system to track all activities of energy efficiency and energy savings assessment. Tasks can be assigned (outsourced) to expert teams outside MoENR, if necessary.

Realistic and stable funding sources for the implementation of the second NEEAP have to be provided in most of the extra-budgetary sources of financing and market mechanisms. The second NEEAP

includes measures which still do not have committed funding. A very small part of budgetary resources (Central and Local) have to be allocated, for the drafting of the policies, development of tariff reform, preparation of the programs within the specific measures, however significant funds will benecessary for the implementation of the energy efficiency investments will remain under the funding of the donors and IFIs.

3.1.2                National targets for nearly zero energy buildings

Armenia has not formally established a national target for nearlyzeroenergy buildings – buildings withenergy consumption close to zero. Nevertheless, several steps have been taken to support buildings beyond the current codes’ requirements. These initiatives are aimed at a broader of green architecture, sustainable communities, smart cities and green economy.

These initiatives particularly include the following:

• Drafting of the Law on Yerevan City Center, with beyond codes ambition for energy performance in new construction if it is to happen in the Center of Armenia’s capital;

• Drafting of Law on Green City of Dilijan, Tavush Marz

• Developing a dialogue and concept for smart cities in Armenia with the example of Goris, Vayots Dzor Marz.

• Avedisian School and Community Center in Yerevan’s Malatia-Sebastia district was constructed as a “green” building and was certified for Leadership in Energy and Environmental Design (LEED), utilizes renewable energy and is low-carbon footprint.UNDPestimated that energy consumption in the building will be reduced by 30 percent, which is even a stricter criteria than required in the EU and the US. The green roof of the school will provide insulation, lowering heating and cooling costs. Rainwater will be filtered and stored to waterplants, shrubs, and provide water for the grass on the soccer field.

• UWC Dilijan College built in Tavush Marz was built and certified as good by the Building Research Establishment Environmental Assessment Methodology (BREEAM)11. The building has a green roof, green walls and holistic building management system (BMS), meets high standards for health, environment, life security, water, materials, recycling, ecology, land-utilization and pollution as well as based on the impact of its use on the environment.

11See more at: arka.am/en/news/economy/uwc_dilijan_college_first_breeam_certified_in_armenia/#sthash.e7FLUxc4.dpuf

·       Educational curriculum and courses were developed and delivered on integrated building design and energy efficient construction, supported by UNDP/GEF and ITS.

While having no international obligation for transposing any directives or international standards for nearly zero, green or passive buildings, Armenian Government and business community voluntarily endeavors tosupport the construction of new nearly zero energy buildings and the achievement of thislevel of energy performance in the refurbishment of existing buildings.

Basictasksforthisperiodincludeeducation ofdesignersas well as providingtraining for developers, architects and contractors. Thistaskwill be carried outin parallelwiththe determinationof criteria for priorityareas for implementation, constructionofpilotsites andthe definitionofmomentumfor the implementationofthesemeasures to complywith thefinancial resources. Due to the voluntary nature of this process, it can only be promoted through certification, recognition and publicity of such accomplishments, which through professional associations and academia can set the tradition andculture for nearly zero energy performance in construction.

3.2            Horizontal Measures

The first NEEAP set forth a set of horizontal measures in seven key areas, largely directed at the legal-regulatory framework, capacity building and financing for energy efficiency. Considering the horizontal nature of these measures, their quantitative assessment is presented among the respective sectoral measures.

Table 13. First NEEAP Assessment: Cross-cutting/Horizontal Measures (without quantitative impact)

The regulatory initiatives which are cross-cutting but also concern the buildings sector and which have contributed to the achievement of the first NEEAP targets is presented below (the complex programs and initiatives which have both a regulatory and a financial element are presented in the Financing section.):

Second National Energy Efficiency Action Plan forArmenia

Armenia Renewable Resources and

Energy Efficiency Fund

FIRST DRAFT

Table 14. Summary of Cross-cutting Measures With Quantative Energy Saving Impact

The individual measures are presented below. These individual financial programs have been intergated in their respective sectoral programs to assess the impact on the sector. Those financiers, whose efforts are aimed at more than one sector, are described below.