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Privatization of the energy sector is nearly complete, and energy efficiency, metering, and cost recovery have been improved in the past few years. The distribution of natural gas and electricity in Armenia is controlled, or at least influenced, by private interests outside the country. A joint venture of the government of Armenia, Russia’s Gazprom, and the Itera International Energy Corporation controls the distribution of natural gas. The electrical distribution company of Armenia was recently privatized and purchased by Midland Resources Holding, a company registered in the Channel Islands. The government is seeking investment partners to expand the thermal-steam production of electricity.

The contribution of renewable energy sources to the national energy pool is insignificant, and except for small hydropower plants, the government does not give high priority to development of these technologies. Because of its geology, topography, and climate, however, Armenia has the potential to develop renewable energy from water, wind, solar, and geothermal sources. Small private companies are developing and producing solar hot water and photovoltaic systems, biomass gas generators, fuel cells, and long-term uninterruptible power supplies. There also is private interest in developing pilot wind-driven power generation sites, but the economic benefits are not clear.

There are about 7,000 renewable energy companies and organizations around the world. The renewable energy sectors of national economies worldwide are usually based on small firms, at least in application. Some investments in this field in the United States and elsewhere have proven profitable. There are at least two examples of interesting private initiatives in Armenia. SolarEn is a company that employs about 25 people and produces solar-electric, solar-thermal, and biogas systems. The company also provides consulting services to the government, nongovernmental organizations, and the private sector. H2 ECOnomy is a company involved in the production of prototype hydrogen fuel cells, backup power supplies that function over extended periods, and related electrical conversion and stabilization equipment. The domestic and foreign markets for environmental assessment and consulting should also be a source of employment and contribute to economic growth.

Domestic use of renewable energy is potentially quite high. With the lack of fossil fuels and eventual closing of the ANNP, Armenia must either develop the financing and infrastructure to import oil, gas, and electricity or develop independent internal energy sources. High-capacity, centralized internal sources will require investments in large facilities and extensive distribution systems. Small-scale, but widely used, renewable energy sources might substantially advance Armenia’s energy independence.

The key question is: Can a significant small-scale renewable energy sector be established on a commercially feasible scale without subsidies, either to the developers and manufacturers of the generating equipment or to the customers who will purchase the products? This is difficult to determine without the development of a detailed and credible business plan, without greater insight into plans of

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