Energy-efficient technologies and materials can be widely deployed given, among other conditions, the right governance and policy environments, functioning markets and access to financing. This section explores approaches to expand the deployment of energy-efficient technologies in Armenia’s buildings, beginning with envelopes and whole-building retrofits. It provides insights and recommendations, including for cooling, which is one of the fastest-growing sources of energy consumption both in Armenia and globally.

Armenia faces significant obstacles to comprehensively retrofitting entire buildings including their envelopes (i.e. external walls, insulation, windows, doors, etc.), particularly for the many MABs in cities such as Yerevan. Due to the poor condition of many buildings, basic structural repairs may be needed before an energy efficiency intervention is logical or feasible (Econoler, 2015).

Armenia is not alone in the challenge of scaling up and replicating building efficiency retrofits. While many individual projects have proven the cost-effectiveness of “deep” building renovations, most countries are not at the stage at which these kinds of retrofits are commonplace.

In addition to technical and structural challenges – and market and financial barriers – successful energy efficiency interventions in whole buildings can involve a long list of stakeholders, including the owners of the buildings and/or individual apartments, installers and lenders. Ensuring that all these stakeholders work together on one or more whole-building efficiency projects is not always easy.

In Armenia, stakeholders involved in achieving whole-building retrofits include households (e.g. apartment owners and tenants); HOAs and HMCs; suppliers and installers (including energy auditors and other professionals); LFIs and IFIs; local governments; and energy providers.

Despite the complexities involved, envelope improvements and partial building retrofits are achievable through targeted engagement with key stakeholders, as illustrated by the REELIH project. In addition, nearly half of Armenia’s housing stock was built during 1951‑75 and 40% was constructed between 1976 and 1995. Only a small portion (around 7%) was constructed following the mid-1990s (EDRC, 2015). This suggests there may be potential to scale up and replicate structural repair programmes and/or envelope efficiency improvements systematically for many buildings of similar age and characteristics (i.e. construction profile).

One initiative that has employed precisely this kind of programmatic approach to building efficiency retrofits (including exterior wall improvements) is known as Energiesprong. Using prefabricated facades, carefully selected and efficient heating and cooling equipment, and insulated and solar photovoltaic (PV)-equipped roofing materials, Energiesprong has demonstrated the feasibility of retrofitting entire neighbourhoods at one time rather than targeting buildings individually (Energiesprong, 2020).

Given the differences in economic indicators, condition and type of buildings, etc., between Armenia and the Netherlands (or other EU countries and US states), policy makers may question whether the Energiesprong approach is feasible for Armenia. While specific technologies and methods would likely differ given Armenia’s local requirements, some of the Energiesprong model’s non-technological aspects may be relevant.

One of these is the business model itself, which is based on a repayment scheme wherein homeowners do not incur additional or upfront costs. Instead, the refurbishment cost is paid over a 30-year period through lower energy bills, factoring in budgets for planned maintenance and repairs. The model also works through HOAs, with homeowners paying Energiesprong via their HOA through a service charge that is equivalent to their regular payments for energy, maintenance and repairs (Energiesprong, 2020).

Including maintenance and repair in a residential building-efficiency business model may be particularly advantageous for Armenia. A repayment model based solely on energy savings – even over a long time period – would likely be insufficient to cover the potentially significant repair and refurbishment costs of the country’s buildings. Integrating efficiency investments with the estimated USD 200 million Armenia spends annually on the upkeep of public buildings and social housing could be doubly beneficial.

Based on R2E2 estimates, the incremental cost of achieving a significant (up to 50%) efficiency improvement as part of comprehensive public building refurbishment is between USD 17 and USD 20 per m². This is approximately 10% of the average USD 200 per m² required for comprehensive rehabilitation of a public building in Armenia (Econoler, 2015).

Armenia has already shown leadership in stimulating local markets and supply chains as part of the R2E2 project targeting public buildings. This project provides a proof of concept for the creation of a local ESCO market in Armenia, driven by demand for energy efficiency improvements in a large number of buildings.

A renewed investment campaign initially targeting public buildings could eventually create demand for similar systematic retrofits of the many thousands of residential dwellings in Armenia. Indeed, this is precisely the focus of an ongoing United Nations Development Programme (UNDP) and Green Climate Fund (GCF) project that seeks to “reduce the overall investment risk profile of energy efficiency building retrofits to encourage private sector investment and reduce fuel poverty” (UNDP, 2016).

Heating is a central issue in Armenia’s building efficiency discussions. Due to the length of the heating season and the severity of winter, particularly in certain rural parts of the country, heating (for space heating and hot water) accounts for the majority of energy consumption in Armenia’s buildings. Heating also has important fuel poverty, health and wellbeing implications. Of 2 500 households surveyed across Armenia in 2015, less than 40% claimed to be “comfortable” in winter, while nearly half are merely “close to comfortable” and more than 9% said they “hardly cope”. The survey results indicate that discomfort due to insufficiently heated homes is more prevalent in villages, and in cities and towns other than Yerevan (EDRC, 2015).

Historical circumstances are partly to blame for this relatively high incidence of underheating. While 90% of MABs and public buildings relied on district heating networks or central heating during the Soviet era, after its collapse central systems were almost entirely replaced by individual installations such as gas-fired boilers and heaters, particularly in MABs (UNDP, 2020). Meanwhile, households in villages continue to heat their homes primarily with homemade stoves that burn wood or other forms of biomass. Strong reliance on individual heating systems that combust fossil fuels or biomass means Armenians are highly exposed to the risks associated with gas price fluctuations, and with biomass cost and availability.

Given the situation, a mixture of policies and efforts will be required to increase the efficiency, performance and affordability of heating technologies in Armenia. (Re)constructing district, co generation or central heating systems is clearly one option, particularly for MABs in which the underlying infrastructure for these systems is still viable. As part of a UNDP-funded project, 76 MABs in Yerevan (Avan district) have been connected to a modern co generation facility since 2010. The initiative has proven successful, as it provides better heating for residents while cutting average heating costs by 20% compared with individual gas heaters (UNDP, 2015a).

Beyond technical feasibility considerations, expanding district heating and co generation installations will also require that policy makers address a range of barriers, including weak regulatory frameworks, a lack of incentives to commercialise existing district heating operators and lack of capacity among market participants, notably MAB management associations (UNDP, 2012).

When district-level or central heating strategies are not feasible or economical (e.g. in village homes), policy makers may need to consider other ways to deploy efficient technologies. A bulk procurement approach (as outlined in the section on lighting) may be an option for technologies such as condensing boilers. Programmatic initiatives such as Energiesprong (discussed above) may also be worth exploring, as efficient heating technology installations are generally included in this type of retrofit package.

New Zealand’s experiences may also be relevant. To address fuel poverty concerns in low-income households, since 2009 the government in Auckland has been working on a series of energy efficiency grant programmes that provide insulation retrofits as well as heating upgrades. Warmer Kiwi Homes, as the programme is now known, has provided both energy savings as well as measurable improvements in the health of building occupants (IEA, 2020b).

Furthermore, beyond “pure” efficiency technologies, Armenia has significant potential to integrate renewable energy with energy efficiency, notably through geothermal heat pumps and solar thermal water heaters. For instance, Armenia’s 2011 Renewable Energy Roadmap estimates that geothermal heat pumps could provide more than 4 terawatt hours (TWh) of capacity annually, which is nearly four times Armenia’s current heat generation based on natural gas and oil (Econoler, 2015; IEA, 2015). While geothermal heat pumps are currently at the testing and pilot stage only, solar thermal has been identified as one of Armenia’s most feasible sustainable energy technologies, and local market growth has exceeded expectations.

Although renewable heating and renewable energy and are not the focus of this roadmap, these important subjects intersect with building-efficiency policy development – especially in relation to NZEBs (Energy Charter, 2020). Heating is therefore likely to remain a central topic for Armenia’s policy makers during NEEAP deliberations and for the implementation of standards and labels for key technologies such as boilers and heat pumps.

Unlike heating, cooling is still responsible for only a relatively small portion of overall energy demand in Armenia. Only 5% of Armenian households have an AC unit, although the figure is higher in Yerevan at just over 10% (EDRC, 2015). However, cooling is one of the fastest-growing sources of Armenian energy demand, mirroring a global trend resulting from climate change-induced average temperatures increases (IEA 2020b).

Average annual temperatures in Armenia are expected to rise by up to 2.2°C by 2050 (USAID, 2017). In addition, most Armenian cities are in the country’s “moderate” and “warm” climate areas (EDRC, 2015). With greater population density in cities and urban heat-island effects, it is likely that demand for AC units and other cooling technologies such as fans will increase further, particularly among Armenia’s city dwellers during summer heat waves.

Globally, “[s]pace cooling accounted for around 13% of the overall growth in electricity demand between 1990 and 2016 and 22% of the increase in electricity use in buildings alone” (IEA, 2018b). These trends are particularly visible in the United States and the People’s Republic of China (“China” hereafter), as well as in emerging economies in the hottest parts of the world, where an expanding middle class and rising income levels have created unprecedented increases in energy demand for cooling. While China leads AC manufacturing and sales, yearly installations are rising by up to 15% in India and other hot emerging economies. This demand is driving up energy use and GHG emissions (both energy- and refrigerant-related) while creating significant pressure on already-strained electrical grids, especially during peak times (IEA, 2020a).

For policy makers working on cooling in Armenia and the world at large, a key consideration for regulation is the average efficiency of AC units available on the market. As discussed above, EESL programmes are likely to be critical tools, particularly since consumers in most markets are buying AC units that perform at well below their energy efficiency potential.

One strategy that is being used to address this problem in at least 25 countries, including India and China, is the development of national cooling action plans that feature timetables for the adoption of MEPS and labelling programmes (among other measures), in parallel with efforts to phase out harmful refrigerants (K-CEP, 2019; K-CEP, 2019a). Development of Armenia’s second NEEAP could be a unique and timely opportunity to include cooling-related measures in an overarching efficiency strategy.

A key first step to develop any cooling action plan – whether as a standalone plan or part of NEEAP-3 – is data collection. Having accurate and comprehensive information about energy-consuming technologies is critical to formulate effective policies and programmes, notably MEPS and labels. For cooling, policy makers need details about the efficiency performance of AC units and other equipment being sold to consumers in order to establish minimum standards or improvement targets for manufacturers; to develop labelling schemes; and to create incentives to help consumers access the most efficient models.

In Armenia’s commercial and industrial sector, some data have already been collected and are being used to populate a technology selector developed in collaboration with the Green Economy Financing Facility (GEFF) and the EBRD. The technology selector features only products eligible for financial support by these IFIs because they meet established MEPS and “surpass current market practices” (GEFF and EBRD, 2018). The tool covers industrial and commercial technologies as well as residential cooling equipment such as efficient AC units. Mainstreaming and expanding the technology selector could make it a central component of Armenia’s strategy for sustainable cooling, since it would facilitate access to financing instruments for households wishing to purchase more efficient AC units, for example. Indeed, the challenge faced by policy makers across the globe (especially in developing economies) is to balance affordability with high efficiency.

Armenia is already showing leadership in international engagement in this area. For example, a representative from the Ministry of Nature Protection presented a paper entitled “Financial Mechanisms to Support Adoption of Efficient and Clean Cooling Products” during a workshop on the climate and energy-efficient cooling in 2018 (UN Environment, 2018). In parallel, energy efficiency is a key priority in Armenia’s first NDC (Government of the Republic of Armenia, 2015). However, based on key recommendations developed in a potential action plan on cooling, for example, more specific emphasis could be placed on energy-efficient cooling in Armenia’s enhanced NDC while it continues to engage actively and in a co‑ordinated manner with the Kigali agenda on ozone-friendly cooling. Recently published guidance is available to support policymaker efforts (K-CEP, 2019).

Light-emitting diodes (LEDs) are perhaps the most iconic of all building efficiency technologies. LEDs are up to six times more efficient than conventional technologies such as incandescent and halogen lamps, so they can reduce energy consumption dramatically while delivering equivalent or better lighting. In addition, they last much longer than incandescent lamps, meaning fewer replacements are required.

Armenia has made considerable progress in converting to LED lighting, according to local experts. However, precise data for level of LED penetration – or, conversely, the number of remaining inefficient incandescent lamps still in use – is currently not available. A survey of 2 500 households conducted by UNDP in 2015 found that incandescent lamps were still highly prevalent (up to 70%) in Armenian households (EDRC, 2015). For policy makers charting the future of efficiency in Armenia, a more accurate picture on the status of LED penetration would help to inform whether additional efforts are needed in this area. After all, those Armenian households that are still using incandescent or other inefficient technologies are spending more of their scarce resources on lighting compared with other Caucasus and Central Asian countries that have lower household electricity tariffs.

It is worth noting that, despite their higher efficiency, longer lifespan, and significant long-term cost-savings potential, introducing LEDs widely is not always straightforward. Several barriers hamper their large-scale deployment particularly in low-income countries across the globe. The primary obstacle is the upfront cost of LEDs, which is often higher than for incandescent lamps, making them potentially inaccessible for low-income households that may not have sufficient funds to purchase them at their local shop. In addition to affordability concerns, consumers may not be fully aware of the benefits of efficient lighting. Alternatively, they may be misinformed about the health impacts – believing erroneously that LEDs contain mercury, for example – or may simply consider the quality of the light “too bright” (EDRC, 2015).

Some of the barriers to greater adoption of LEDs can be addressed with targeted communications and awareness campaigns that inform consumers about the benefits of switching away from energy-hungry incandescent lighting. However, policy makers need to consider at least two additional market issues.

The first is the quality of efficient lighting technologies available to consumers. Low-quality LEDs are likely to appear “too bright” (technically due to the colour temperature of the lamp being too low) and may fail after only several months of use. Like other consumer products, testing and labelling as well as quality controls on imports are critical to ensure that consumers have access to reliable technologies.

The second issue is financial support to overcome the higher upfront costs of more efficient lighting (an issue that affects nearly all high-efficiency technologies). In addition to preferential loans, grants or other direct support for households, governments could consider the more ambitious strategy of bulk procurement.

Compared with heating and cooling technologies, devices such as electric stoves, televisions, computers and washing machines generally account for a smaller share of building energy consumption (primarily electricity). However, due in part to an increased proliferation of consumer electronics, connected devices and other small plug loads, energy-using devices now represent nearly 15% of global final electricity demand. In addition, most of this energy use is not covered by MEPS, particularly in developing economies where consumption is expected to grow rapidly in the next decade as incomes rise (IEA, 2019).

In Armenia, device ownership and usage levels are still relatively low. While most Armenian households have a stove, refrigerator, washing machine and television, ownership of devices such as microwaves, dishwashers and freezers is much lower. Computers, meanwhile, are present in approximately three-quarters of households (EDRC, 2015). Although these levels have already increased with economic growth and rising incomes, they will likely continue to rise. More disposable household income is naturally desirable and is indeed a core objective of economic development in any country.

Although standards and labelling programmes are commonly used by governments to manage the inevitable increase in device energy use as households become wealthier, policy makers could also consider direct market interventions that target specific types of technologies. As discussed in the previous section, bulk procurement of lighting technologies is an example of this kind of approach that has been successful in India and Mexico. Other countries have had similar success with refrigerators.

In Ghana, for instance, policy makers realised during the mid-2000s that average household refrigerators were consuming more than twice as much energy as devices in Europe and the United States. This was due largely to a proliferation of imported second-hand refrigerators, which, while inexpensive to purchase, were highly inefficient and sometimes accounted for 70% of household electricity demand. During this period Ghana was also struggling with significant power shortages (due to a prolonged drought that impaired hydroelectricity production) while energy demand was climbing significantly as a result of rising income levels and expanding energy access (Energy Commission, 2017).

The Government of Ghana adopted a two-pronged approach to address these issues. First, imports of used refrigerators were banned and MEPS were set for refrigerators (as well as for other energy-using devices). Second, with financial support from the GEF and UNDP, the government implemented a scheme whereby private citizens could trade their old refrigerators for vouchers to purchase new, efficient models. 10 000 refrigerators had been replaced under the programme by 2015, with new refrigerators now constituting 90% of the market. Meanwhile, participating households saved an average USD 140 annually on their electricity bills, while countrywide electricity savings totalled approximately 400 GWh (Energy Commission, 2017).

A similar approach is currently being deployed in Colombia as part of a “cash for clunkers” programme, under which a significant reduction in value-added tax (VAT) is being offered for new refrigerator purchases along with a recycling scheme for older models. The government aims to replace more than 1 million inefficient refrigerators, which is expected to create 12 000 jobs (Ministry of Mines and Energy of Colombia, 2018).

An effective roadmap must consider the longer-term issues at the heart of future energy systems that will inevitably impact Armenia’s efforts to make its buildings more efficient. As Armenia’s building energy efficiency transformation will not happen overnight, there is ample time and opportunity to explore emerging technologies and trends, to assess whether they are relevant for the country. Plus, taking advantage of emerging technologies and trends may allow Armenia to bypass previous methods and instead take advantage of the latest innovations to address the persistent barriers and challenges that have not been overcome through traditional approaches.

This section therefore offers a brief overview of the main areas of buildings-sector innovation, as well as the broader market and energy system innovations that affect buildings, beginning with digitalisation.

A proliferation of digital technologies, notably smart phones, low-cost sensors and internet-connected devices has created a veritable revolution across countless industries. This revolution is based on a combination of data (i.e. digital information), analytics (the ability to compute vast amounts of data to produce actionable insights) and connectivity (the exchange of data between machines, or humans and machines, through digital communications networks). For analysing the energy efficiency of buildings, digitalisation offers very detailed insights into the performance not only of individual technologies but of the building as a whole (IEA, 2019).

Digital innovations in several areas can be applied to advance building efficiency in Armenia, both in the immediate future and the longer term. For instance, “smart” building energy management systems (BEMS) rely on sensors, software, analytics and even artificial intelligence to improve building efficiency and performance. BEMSs are particularly useful in public and commercial buildings, where they provide greater energy-efficiency potential, a range of additional insights such as building occupancy and usage patterns, and other functionalities such as the ability to control individual offices and even connectivity with renewable energy and battery-electric vehicle (BEV) charging infrastructure.

As part of an ongoing project in Armenia, the UNDP is placing a type of smart BEMS – referred to in the project as an Energy Management Information System (EMIS) – at the heart of its framework for measuring, reporting and verifying (MRV) energy savings in public buildings. Data obtained from the EMIS will be used to inform key stakeholders, especially financial institutions, to strengthen the business case for efficiency retrofits. According to the UNDP, a similar project in Croatia led to public budget savings of USD 18 million annually (EDRC, 2016).

In residential settings, digitalisation through the “smart home” phenomenon can be transformativeRather than merely consuming energy (i.e. electricity or gas) provided by utilities at a fixed rate, smart homes “interact” with the energy system in a much more proactive way. Appliances and other energy-using devices can be programmed to operate at optimal times only, when electricity prices are at their lowest. Smart homes also produce renewable electricity, usually through rooftop solar PV, and they can help store excess grid electricity in EVs connected to onsite charging infrastructure. In this way, residential buildings and households are transformed from energy consumers into energy “prosumers”, meaning they both consume and produce energy.

While these types of homes are not common in Armenia – indeed they are not common in most parts of the world, including advanced economies – many experts agree that this kind of connectivity and interactivity between homes and grids can play a key role in energy system decarbonisation. Furthermore, digital connectivity can be important in enabling the development of NZEBs, as discussed briefly in the next section and explored in more detail in a separate roadmap for Armenia (Energy Charter, 2020).

Traditional buildings are standalone structures that consume electricity and gas based on occupant needs and/or the services provided within the building. In such buildings, demand-side modifications – e.g. energy efficiency improvements, or changes in occupant behaviour or equipment use – are the primary ways to impact energy consumption. In contrast, buildings that have some form of onsite renewable energy generation capacity such as rooftop PV and are connected to the grid have the potential to reduce their carbon emissions much more than they would through demand-side measures alone.

This is at the heart of the NZEB concept, which combines a high degree of energy efficiency (or performance) with the ability to generate onsite renewable power. For building occupants, owners and/or operators, this offers greater independence than reliance on grid-based electricity alone. At the macro level, it also provides an opportunity to dramatically reduce the overall carbon footprint of the buildings sector. As mentioned in the introduction, Armenia is already exploring its NZEB future through the development of a dedicated roadmap (Energy Charter, 2020).

Beyond offering grid independence and reducing the carbon footprint of individual buildings, NZEBs or any grid-connected buildings with onsite renewable energy generation can be active participants in the energy system. As discussed above, digital technologies are enabling an important shift in the way buildings interact with the energy system, notably with electricity grids. For energy policy makers and energy system operators – especially distribution system operators (DSOs) – this creates both opportunities and challenges that need to be addressed as part of wider energy strategy development.

BEV numbers are on the rise globally, expanding by a factor of seven in less than a decade from negligible levels in 2010 to more than 7 million vehicles in 2019. According to a June 2020 conversation with the UNDP, there are currently only 500 BEVs in Armenia. However, this figure represents a sharp increase and is likely to rise further as major global vehicle manufacturers – notably in China and Europe – begin to shift their focus to electric alternatives, particularly in the wake of Covid-19 (Bloomberg Green, 2020).

While transport policy, BEV promotion and related topics are outside the scope of this roadmap, the growth of electric mobility is directly relevant to the buildings sector in at least two ways. First, buildings – and the land areas connected to them – are part of the core charging infrastructure for electric mobility. Facilities such as commercial and public buildings, airports, bus terminals and logistics distribution centres will be critical as the number of BEVs continues to increase.

Second, BEVs themselves can serve as power storage units for excess electricity generated onsite or supplied by the grid. For example, office parks designed for commuting employees could become BEV charging and/or power storage hubs, at least during daytime hours. While these kinds of systems are generally just at the pilot stage, the notion that passenger cars could be transformed from being “gas guzzlers” to an integrated part of energy storage at the building and grid level is compelling. Should this type of technology be developed at a global scale and become much more affordable for consumers (like BEVs in upcoming years), it is likely that BEV integration will become more pertinent for policy makers in Armenia.