World Bank supports exploration of geothermal resources in Armenia

The World Bank Board of Executive Directors today approved a US$8.55 million grant for the Geothermal Exploratory Drilling Project (GEDP) for Armenia. The new project is to confirm whether the geothermal resource at the Karkar field is suitable for power generation and, if confirmed, to involve the private sector in the development of a geothermal power plant.

The objective of the Government is to construct a geothermal power plant at the Karkar site in Sjunik region upon the confirmation of the availability of the resource. Unlike other renewable energy technologies, such as wind, solar, and hydro, it is not possible to validate the geothermal resource with sufficient confidence for commercial development without performing exploratory drillings at depth to assess specific parameters of the geothermal field.

The selection of the Karkar site for exploratory drilling is based on field investigation works completed for two prospective sites, which were deemed the most promising by the local and international geothermal experts. The field investigation works at the prospective sites were supported under the Armenia Geothermal Project, financed by the Global Environmental Facility (GEF) and completed in 2012.

“By investing in exploration that can lead to the first commercial project, we can help build domestic capacity for the development of additional geothermal resources at other prospective sites. The total potential for geothermal power in Armenia is currently estimated at around 150 megawatt,” said Laura E. Bailey, World Bank Country Manager for Armenia. “A successful project of this type will also strengthen the investor confidence that geothermal is a viable and profitable investment opportunity in the country.”

The Government will use Scaling-up Renewable Energy Program (SREP) resources for Stage 1 of the Karkar geothermal project to carry out the exploratory drilling and, if the resource is confirmed, to assess the feasibility of a geothermal power plant at Karkar and support involvement of the private sector for the full development of the geothermal power project.

Stage 2 of the Karkar project would be the construction of a geothermal power plant. The early-stage analyses suggested that a 28 MW geothermal power plant with a total estimated cost of US$90-100 million could potentially be constructed at the site. The potential geothermal power plant could be developed with a mix of public and private capital. In addition. The development of geothermal power would contribute to the reduction of greenhouse gas emissions.

“If adequate geothermal resources are confirmed, then future construction of a geothermal power plant would help the Government to meet the forecasted electricity demand and improve the energy security and independence of the country,” said Arthur Kochnakyan, World Bank Task Team Leader of the Project.  “Low-cost electricity from a potential geothermal plant can help keep the electricity affordable for the poor.”

The R2E2 Fund will implement the project since it has the required capacity and experience in implementing Bank financed projects. The Fund is a non-profit organization established by the Government in 2005 with the mandate to promote the development of renewable energy and energy efficiency markets in Armenia and to facilitate investments in these sectors.