Armenia’s regional power links: plans and opportunities
When it comes to electricity interconnections, Armenia remains relatively isolated, with active links only to Georgia and Iran – both limited in capacity by regional standards. Yet, strong cross-border interconnections are critical for the functioning of Armenia’s electricity system, especially as the rapid expansion of variable solar generation creates challenges for grid stability. Furthermore, they would enhance energy security and open additional trade opportunities. Currently, electricity trade is dominated by exports to Iran under a barter agreement, with smaller seasonal exchanges with Georgia. Direct trade with Turkey would offer large potential but remains conditional on political developments. In contrast, the long-planned but delayed strengthening of the interconnection with Georgia represents Armenia’s most promising option for enhancing regional integration and trade in the medium term.
Background
Armenia’s electricity generation relies heavily on thermal and nuclear power, both dependent on imported fuels. In recent years, solar power has expanded significantly – supporting both the green transition and energy security by reducing import dependence. However, the variable solar generation introduces challenges for its integration into the system. Strong regional interconnections, paired with energy storage, are essential to address these issues. By enabling cross-border balancing of supply and demand they increase system flexibility. In doing so, they can limit the need for extensive and costly energy storage capacity (see GET study). Importantly, enhanced connectivity with neighbouring countries also opens the door to new export opportunities, allowing Armenia to monetise excess renewable generation and avoid unnecessary curtailment. Finally, improved regional interconnection is vital for Armenia’s energy security, by ensuring more reliable access to electricity imports during shortages.
Limited existing interconnections
Currently, Armenia is relatively isolated in the region, with active power interconnections only to Georgia and Iran, as historical links to Turkey and Azerbaijan remain inactive due to political reasons. With 150 MW and 350 MW respectively, both existing connections are small in regional comparison. Moreover, the link with Georgia is asynchronous, requiring a temporary grid disconnection and operation in so-called isolated mode for trading – making the connection unsuitable for flexible or short-term trading.
Regional transmission capacity, 2024 and 2034
Source: own illustration based on GSE “TYNDP (2024-2034)” and USAID[1].
Note: Position of interconnectors only indicative. Solid line: 2024 transmission; dashed line: plan for 2034
Low diversification in electricity trade
Armenia’s electricity trade patterns show little diversification, shaped more by structural and geopolitical constraints than by market dynamics. Power flows are dominated by exports to Iran under a long-standing gas-for-electricity barter agreement, amounting to around 1.1 TWh annually. Trade with Georgia – Armenia’s only conventional electricity trade – plays a smaller role. With over 70% of its capacity based on hydropower, Georgia’s electricity flows are shaped by seasonal water availability. Armenia exports electricity to Georgia in winter when hydropower is low and receives imports from Georgia’s hydropower surplus in summer.
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In 2022-2023, exceptionally high electricity prices in Turkey led to additional electricity flows from Armenia to Georgia for onward export to the Turkish market. While Armenia benefited from the higher export volumes, it could only partially capture the price advantage due to the indirect nature of the trade.
Interconnection expansion plans
Against this backdrop, transmission expansions with its neighbouring countries are essential for Armenia.
Iran: transmission upgrade for barter trade
A major transmission upgrade with Iran is underway, expected to increase capacity from 350 MW to 1,200 MW. As Armenia does not trade electricity with Iran beyond the barter deal it cannot rely on imports from Iran in times of need nor can it export electricity that is not generated from Iranian gas. The planned expansion therefore supports the execution and possible expansion of the gas-for-power barter agreement but does not enhance Armenia’s energy security or facilitate renewable energy integration.
Turkey: political barriers, but long-term potential
Direct electricity trade with Turkey would be the most promising option for Armenia for enhanced renewable energy integration and additional export opportunities, provided political conditions allow. With a peak load of 58 GW in 2024, Turkey’s large power system offers a reliable off-take for Armenian solar exports, both due to its consistently high demand and its ability to absorb the relatively small volumes Armenia could supply. In addition to these technical advantages, Turkey’s higher electricity price levels make it the most attractive market in the region. However, direct trade depends on a political agreement between the two countries. Even then, reactivating the transmission line between the asynchronous grids would take time and investment.
Georgia: most promising option in the medium term
An expansion of the interconnection with Georgia from 150 MW to 350 MW, including a back-to-back station, has been planned for years but remains delayed. The back-to-back station would allow for more efficient electricity trade between the asynchronous grids. For Georgia, the urgency of expanding this link is lower, as it is already well connected regionally and actively trades with all neighbouring countries – importing mainly from Russia and exporting primarily to Turkey. Nonetheless, a stronger connection with Armenia would also benefit Georgia to further diversify its trading partners and enhance energy security. This is particularly relevant given Georgia’s high reliance on hydropower, which increases its exposure to climate risks such as droughts – making cross-border flows important for managing potential supply shortages. In addition, as Armenia rapidly expands its solar capacity — which typically has lower generation costs than hydro — there may be opportunities for Georgia to access cost-effective imports from Armenia, especially if Georgia faces challenges in meeting its own hydro expansion plans. This interconnection expansion could therefore provide a mutually beneficial option for regional electricity trade in the medium term.
Outlook and policy implications
With Armenia’s growing need for diversified electricity trade partners, stronger regional infrastructure integration must remain a key priority. As trade with Iran remains confined to the barter agreement and direct trade with Turkey is unlikely in the near term, Armenia should focus on expanding its interconnection capacity with Georgia by actively advancing the delayed upgrade project. Beyond infrastructure, unlocking future trade potential will also require regulatory action – notably, for better integration of solar power into the domestic system and cross-border trade. This includes liberalising the balancing market, as well as aligning trade regulations and ensuring interoperable power exchanges to facilitate cross-border electricity trading.
This newsletter is partly based on the Policy Study Electricity trade between Armenia and Georgia: current situation and future developments.
[1] USAID. (2024). Renewable energy sources grid integration and flexibility study. Prepared by Tetra Tech ES, Inc. for USAID.
