Armenia has given its green light to the first large-scale solar power plant in the history of the country. The Government has issued the letter of award to a consortium of Fotowatio Renewable Venture B.V.(FRV) and FSL Solar of the Masrik-1 55 MW solar power plant, the first competitively-tendered Independent Power Project (IPP) in Armenia. The consortium led by FRV won the bid with the lowest tariff at $c4.19/kWh among five pre-qualified bidders.
This project will offset about 1 million tons of CO2 during its economic life-time of 20 years and create both short- and long-term jobs. In addition, the Masrik-1 plant will improve long-term energy security by promoting the development of solar resources and reducing the country’s dependence on imported natural gas, according to the World Bank.
“The Masrik-1 solar power plant is a pioneering project for Armenia, as well as for the South Caucasus region, and an exciting opportunity for the country to further develop its renewable energy potential”, said Sylvie Bossoutrot, World Bank Country Manager for Armenia. “Furthermore, the open and competitive bidding process carried out by the government has set an example for future investments in the country.”
In 2014, the Government had identified utility-scale solar photovoltaic (PV) as a priority under the Scaling-up Renewable Energy Program Investment Plan (SREP) which provided a US$2 million Project Preparation Grant. SREP and the World Bank team supported the Renewable Resources and Energy Efficiency Fund with installation of ground-based solar resource measurements; identification of Masrik-1 as the candidate site for the first round of tender; commissioning of feasibility studies and environmental and social impact assessments; and hiring of a transaction advisor to prepare and support the competitive tender process.
SREP and the World Bank also made available a guarantee instrument to mitigate investment risks, attract international developers and increase competition.
The launch of the Masrik-1 project opens up a new market for Armenia. Another five potential solar projects, with a total capacity of about 55 MW, already identified and prepared with support from SREP and the World Bank, are expected to be launched in a second round of competitive bidding in the near future.
This second round will greatly benefit from the experience gained from Masrik-1, with reduced transaction costs, given that a set of negotiated contractual documents will be readily available. Moreover, this experience will improve investors’ perceptions of the opportunities of utility-scale solar perspectives in Armenia.
The winner will have six months to conclude the financing agreements for the project, and two years after that to complete construction of the power plant and the associated transmission line. The solar power plant will sell its electricity) to Electricity Networks of Armenia (ENA) under a Power Purchase Agreement (PPA).