This section provides a brief overview of the status of Armenia’s buildings sector as well as key energy-use indicators and trends. While its gross domestic product (GDP) has increased significantly since 2012, Armenia continues to face economic and social challenges, including high rates of unemployment and poverty as well as substandard building infrastructure. These factors impact the success of policies and other initiatives to improve the efficiency of Armenia’s buildings. 

Buildings sector overview

Most of Armenia’s buildings are residential dwellings, whereby 52% are individual houses and 45% are MABs. Nearly two-thirds of Armenia’s population of nearly 3 million live in urban areas. MABs dominate in cities such as the capital, Yerevan, where 37% of Armenians live.

As of 2018, Armenia had just under 20 000 MABs with nearly 450 000 individual apartments. Houses, of which there are just over 400 000, are naturally more prevalent in rural areas, where just over 1 million Armenians live. Public and commercial buildings such as government buildings, schools, offices and shopping centres account for 12 15% of the country’s total building stock (Armstat, 2019; UNECE, 2017). Only 6% of Armenia’s total building stock is in “good” condition; 64% is “fair”; and 30% is “poor” (UNECE, 2015). Around 75% of the MABs were built during the Soviet era between 1951 and 1990, and they lack proper insulation (HFH, 2020).

From an energy efficiency policymaking perspective, residential buildings are a priority, assuming relatively high levels of energy consumption are a key focus of policy efforts. Nonetheless, public buildings also offer significant potential for efficiency gains and, furthermore, energy efficiency programmes for public buildings can stimulate markets for energy efficiency services that can then be used in the residential subsector.

Energy-use indicators and trends

With the notable exception of transport, the residential subsector consistently accounts for the highest share of TFC in Armenia – higher than the industry sector and exceeding commerce and public services (which includes commercial and public building energy consumption). Furthermore, solid residential energy demand growth is expected over the next 15 years.

Total final energy consumption in Armenia by sector, 2010-2036


The relatively high level of household energy consumption – primarily in the form of natural gas – translates into significant end-user costs. In fact, some low-income households spend up to 50% of their income on energy (HFH, 2020), primarily for home heating and cooking. However, it is cooling and water heating costs that are expected to increase more than any other end uses. While currently accounting for a relatively small share of overall demand, cooling-related energy use in Armenia is projected to quadruple from 0.36 PJ in 2020 to 1.61 PJ in 2036, overtaking energy demand for lighting.

Armenian energy demand by end use, 2018-2036


The relatively high level of residential energy demand for essential services such as heating and cooking means that energy tariffs are an important economic, political and social issue in Armenia, intertwined with geopolitical concerns related to gas imports and electricity exchanges with third parties. Higher gas and electricity tariffs (at peak winter heating times, for example) may be necessary to fund energy infrastructure investments and could also serve as an incentive for households (particularly middle- and higher-income ones) to invest in energy efficiency. Without mitigating policies for vulnerable population segments, however, tariff increases could provoke greater poverty and discomfort for low-income households that cannot afford home efficiency upgrades.

For Armenia’s larger energy consumers, including public buildings, natural gas tariffs currently decrease at higher consumption levels once a certain threshold has been reached. This not only incentivises greater gas consumption but discourages energy efficiency investments. While this roadmap does not include an in-depth exploration of tariffs, they are an important consideration because they affect building-efficiency policy formation, investment incentives and market development.

Influencing factors

This section examines some of the factors that influence efforts to make Armenia’s buildings more efficient. In addition to cross-sectoral issues such as data and governance, it investigates policies and financing that specifically target building efficiency improvements. It also discusses measures to raise public awareness while creating production capacity and markets for higher-efficiency building products and services. 

Data collection and quality

Having access to good data is indispensable for building-efficiency policymaking. The systematic compilation and dissemination of building energy data gives policy makers, operators and other stakeholders insights into how energy is being used in buildings, which can help them create the accurate consumption baselines needed to set energy-efficiency targets and track policy and programme impacts.

To facilitate analysis of whole-building performance, for example, it is important that governments establish uniform calculation methodologies (and that qualified building auditors and technicians adopt them) to help policy makers and market participants (notably lenders) compare and track building efficiency performance across sectors, geographies, etc. For individual technologies, strong data collection and supporting measures, such as import controls and testing facilities, are also often essential to determine minimum energy performance standards (MEPS) and labelling policies, as discussed in more detail in the following pages. Policy makers also need access to reliable datasets covering a range of equipment types, such as:

  • boilers and heating systems
  • stoves and appliances (e.g. refrigerators, dishwashers)
  • insulation, windows, and roofing materials
  • air conditioners (ACs) and fans.

Data is also linked closely with capacity, as discussed later in this section and elsewhere in this roadmap. Building energy audits, for example, which are an essential starting point for energy efficiency retrofits, can be carried out only by trained and qualified professionals. Furthermore, access to good data is crucial for lenders and financiers to quantify and articulate energy efficiency investment opportunities.

Although it is costly to collect high-quality energy statistics (e.g. based on surveys of final energy consumption), not having proper data could result in disadvantageous policy decisions and actions, and, consequently, even higher costs. Armenia’s data collection efforts could be critical to its ability to develop effective building efficiency policies, especially for the residential subsector for which a detailed household survey remains pending. In the public and commercial buildings subsector, information gaps exist concerning buildings’ energy performance and/or efficiency potential. More data are also needed from the construction sector to understand how new buildings are performing with respect to Armenia’s building codes and/or compared with international performance benchmarks (i.e. kilowatt hours per square metre [kWh/m2]), for example.

Institutions and governance

The Ministry of Territorial Administration and Infrastructure (MTAI) has overall responsibility for energy policy, including Armenia’s transposition of the 2010 EU Energy Performance of Buildings Directive (EPBD) as part of the EU-Armenia CEPA implementation. MTAI is supported in its EPBD transposition and other building policy issues by the Urban Development Committee, which is also involved in determining building codes for new constructions and housing policy. Other ministries, including Environment, Economy and Finance, also provide implementation or policy support related to building efficiency as required.

In addition, the Renewable Resources and Energy Efficiency Fund (R2E2) was established with support from the Global Environment Facility (GEF) in 2006. Although the R2E2 in effect acts as an energy agency in Armenia and plays a leading role in developing impactful efficiency projects as well as energy efficiency markets and capacity, it lacks the official power to be the overarching authority for energy efficiency policymaking. Instead, responsibility for energy efficiency policy pertaining to buildings is shared by several ministries and institutions.

Institutional arrangements and energy efficiency policy governance is a key issue in most countries. International experience, notably within EU member states, suggests that establishing a dedicated agency can be instrumental to create capacity for energy efficiency (as well as renewable energy) products and services in local markets. A dedicated agency and/or a more centralised approach to energy efficiency policymaking can also help ensure that energy market regulation creates incentives for energy efficiency in buildings and across the economy.

Policy and framework

The Armenian government has identified energy efficiency in buildings as an important part of its overall energy strategy, as evidenced by action plans, strategies and laws developed since the early 2000s. These include the Law on Energy Efficiency and Renewable Energy (2004), the National Program on Energy Efficiency and Renewable Energy (2007) and two National Energy Efficiency Action Plans (NEEAPs), whereby the NEEAP-1 was adopted in 2010 and NEEAP-2 was developed but not formally adopted in 2015.

The government has also adopted specific measures for energy efficiency and energy-saving regulations in the construction sector (2013) and minimum energy performance requirements for new and renovated buildings (2016). Furthermore, secondary legislation, norms, standards and calculation methods based on international best practice have been adopted for the buildings sector in the past decade to address energy auditing, thermal insulation, building energy performance and a range of other topics (Energy Charter, 2018).

Nevertheless, Armenia’s building efficiency policy framework contains gaps, and local experts frequently cite issues around implementation and enforcement of codes for new construction or retrofits, for example.1 Other important gaps exist around codes for new construction, the non-uniformity of methods used to calculate building energy performance and inconsistencies among the various norms and standards that Armenia has adopted (i.e. a mixture of International Organization for Standardization [ISO], Russian and EU standards).

In addition, key housing sector laws, notably the Law on Apartment Building Management and the Law on Condominiums, which mandate that every MAB must form a legal entity (e.g. a housing association that can manage or procure whole-building efficiency improvements), have not been fully implemented and enforced.2 Shortfalls in implementing and enforcing these and other key policies directly affects prospects for improving the efficiency of MABs, since “without the homeowners, no energy efficient interventions can happen” (HFH, 2017).

Policy makers in Armenia are already addressing this implementation and enforcement gap as part of the EU-Armenia CEPA. A number of important elements are addressed in the framework of this agreement, including a comparative methodology for calculating the optimal costs levels for the minimum energy efficiency requirements (as per the EPBD), the development of a range of technical and normative documents and improved building energy performance certification. According to the European Commission, “the development and enforcement of the laws and regulations, combined with enhanced donor co‑ordination, and support to effective institutional set-up will create the necessary enabling environment” for building efficiency (EC, 2019a).

Standards and labelling

MEPS and labels – or energy efficiency standards and labelling (EESL) programmes – are a cornerstone of effective building efficiency policy frameworks. Usually established through dialogue with a range of stakeholders including experts and leading companies, MEPS and labels can cover most energy-consuming devices available to consumers. When deployed effectively, MEPS keep the worst-performing technologies (from an energy efficiency standpoint) out of markets, thereby mitigating the impact of less-efficient technologies on energy demand, electrical grids and greenhouse gas (GHG) emissions. Labels, meanwhile, can provide simple information on product efficiency and can steer consumers towards more efficient devices.

Developing and introducing effective EESL programmes does, however, have cost implications and entails regulatory complexity. As a result, designing effective MEPS and labels generally requires governments to commit both budgetary and administrative resources. However, EESL programmes have also proven to be highly cost-effective policy instruments that do not necessarily increase prices for consumers. Based on studies covering 50 different equipment types in all sectors across 80 countries, the benefits of standards and labelling programmes outweigh the costs by 3 to 1, with little long-term impact on appliance prices and a highly positive effect on technology innovation (IEA 4E TCP, 2016).

Although Armenia has made some progress in developing its EESL framework for buildings sector technologies, some gaps remain. As part of efforts to complete this framework, a detailed report and recommendations to accelerate the adoption of MEPS and labels for five priority product groups was submitted in 2018 under the EU4Energy programme. Starting in 2021, Armenia must also implement standards for a range of energy-using technologies as part of its Eurasian Economic Union (EAEU) membership (UNDP, 2020a).

As mentioned above, beyond ensuring that individual technologies available to consumers comply with MEPS and are properly labelled, Armenia can also set and enforce energy performance requirements for existing buildings, making them visible and tangible through building energy efficiency performance certificates or “passports”. In addition, public awareness campaigns – accompanied by financial incentives such as grants, rebates or tax breaks – are often essential complements to standards and labelling programmes, since they help consumers understand the benefits of energy efficiency and provide information on how to procure more efficient technologies.


Financing is a key issue, as it affects virtually all aspects of energy efficiency in buildings. Although significant upfront investments are required in many cases to capture the full benefits of efficiency improvements, long-term returns are robust and certain high-efficiency technology investments can be recuperated in under two years. Individual building retrofits alone can save tens of thousands of dollars in reduced energy bills over a multi-year period, assuming appropriate financing instruments such as energy performance contracts (EPCs) or energy services agreements (ESAs) are in place. 

In addition, refurbishing a large number of buildings or procuring technologies in bulk, as discussed in more detail in the technology section of this roadmap, can have a transformative impact on markets and change the economics of efficiency. Major public-private investments and interventions in efficient buildings give local supply chains an incentive to mobilise the means to meet higher demand for products such as double- or triple-glazed windows, insulation materials, and efficient heating and cooling equipment, in addition to other technologies. This in turn enables parties all along the supply chain to procure materials in large volumes, creating the economies of scale needed to reduce technology costs, and thereby the overall cost of retrofitting.

So far, most investments in energy efficiency improvements in Armenia have been based on grants and loans from IFIs, with international organisations such as United Nations (UN) agencies or non-governmental organisations (NGOs) such as Habitat for Humanity (HFH) playing a central role in project delivery. During 2010-15, for example, IFIs committed an estimated USD 86 million to energy efficiency-related projects in Armenia, with the European Bank for Reconstruction and Development (EBRD) and the International Finance Corporation (IFC) providing the majority (nearly 90%) of funding, which leveraged over USD 23 million in additional financing from the private sector. These investments have had a notable impact on the country’s banking sector, as local financial institutions (LFIs) have not only administered funds but also invested significant additional funds through a variety of loans.

However, only a small portion of these significant sums – about 0.3% – was invested in improving building energy efficiency, mainly in public buildings rather than residential dwellings. Industry received the largest share at over 35%, the power sector garnered approximately 22%, small and medium-sized enterprises (SMEs) 18%, and municipal infrastructure projects 14% (Econoler, 2015). While these investments have created a market for energy efficiency financial services targeting industries and SMEs, for example, many LFIs in Armenia still do not offer financial products aimed at residential housing efficiency. In addition, central and local government budgets to implement and enforce building efficiency policy measures have been limited. 

Without a market for efficiency financing and a major increase in government budget allocations, Armenia will need to rely (at least initially) on further IFI support to capture the full potential of building efficiency improvements. Fortunately, energy efficiency projects tend to deliver solid long-term returns for investors and the financial viability of building-efficiency investments has been proven repeatedly, both in Armenia and globally. In principle, IFI funding can therefore help to create and solidify a domestic market for investments in building efficiency, causing residential financing instruments to become widely available without IFI support.

Some credit lines for energy efficiency improvements have already been deployed in Armenia, and policy makers are now working to further unlock residential building efficiency financing as part of a Neighbourhood Investment Platform (NIP) being developed with the European Union under the CEPA initiative. The NIP “will aim at supporting low-income households [and MABs] with piloting innovative financing schemes which could be scaled up in the future” (EC, 2019a).

International experiences may also be useful: in addition to grants that help homeowners purchase insulation and windows, some countries have developed revolving funds that help households access the financing they need to make their homes more efficient. Estonia, for example, created the KredEx Revolving Fund for energy efficiency in MABs in 2009 with support from IFIs, including Germany’s KfW. The fund was based initially on the disbursement of grants for efficiency upgrades in eligible homes, and cost savings resulting from energy efficiency gains are reinvested into the fund so that it can become self-sustaining and be scaled up over time (Cityinvest, 2017).

Revolving funds can also be deployed in a public sector setting or at the municipal level. Under the Municipal Services Improvement Project in Macedonia (MSIP), for example, municipalities are able to repay loans (co-financed by the World Bank and the Ministry of Finance) through cost savings generated by efficiency projects for public buildings and street lighting (World Bank, 2014).

Awareness and communication

Low awareness of the benefits of energy efficiency improvements, combined with insufficient capacity to secure financing for efficiency upgrades, is limiting the availability of financing for the residential housing efficiency improvements in Armenia (UNECE, 2015). Raising awareness is critical to create demand for energy-efficient products and services, which would in turn stimulate policy maker, consumer and market activity. Greater awareness is also important to raise financing for energy efficiency projects.

Making the decision to invest in a more efficient (but potentially more expensive) technology – such as a condensing boiler, a highly efficient air-conditioning (AC) unit or a double-glazed window – is not always straightforward even for wealthy and middle-income families, not to mention low-income households. Consumers and other market participants need accurate and accessible information about the benefits of energy efficiency, technologies and financing options – and about the cost of inaction.

As part of its Residential Energy Efficiency for Low Income Households (REELIH) project, which led to efficiency upgrades in 13 residential buildings in Yerevan, HFH proved the effectiveness of using a training programme to raise awareness among households (UNECE, 2019). A survey conducted post-training found that 71% of participants had begun to implement energy efficiency measures (conversation with HFH, June 2020).

In addition to raising householder awareness, the REELIH project facilitated dialogue among homeowners, the municipality and financial institutions to develop financial products that support energy-efficient retrofits. In other words, the project used outreach and awareness-raising to create capacity among key stakeholders involved in the project. Awareness is a central issue for building-efficiency initiatives generally, but it is especially linked with markets and capacity, as discussed further below.

Market and capacity

Once information about the benefits of energy-efficient buildings has become readily available and some level of market awareness has been established, capacity is needed along the value chain, notably among households and/or homeowner’s associations (HOAs), housing management companies (HMCs), LFIs, energy auditors, suppliers, etc. to actually implement efficiency measures. According to the European Commission, “strengthening the capacity of key energy sector stakeholders, including those at central and local government levels, as well as capacitating a one-stop shop for technical support, will further contribute to the success of planning and managing energy interventions” (EC, 2019a).

Armenia has already shown leadership in this area by using public buildings as models. As part of projects implemented by R2E2, energy efficiency improvements were carried out on 124 public and social buildings between 2012 and 2016. Projects were extended for a second phase to 2020 after they exceeded initial projected energy and GHG reductions targets by nearly three times and delivered average energy savings of more than 50% across all projects (EC, 2019a). R2E2’s efforts translated into energy savings of 540 million kWh and 145 tonnes of CO2 (t CO2) emissions (IEG and World Bank, 2019).

Beyond reducing energy consumption and CO2 emissions, the project also developed essential building blocks for an energy services market featuring energy service companies (ESCOs). For example, a new financing model for energy efficiency retrofits based on repayment through guaranteed energy savings (performance contracting) was developed, featuring an ESA that enables energy efficiency investments in public buildings without budgetary support. R2E2 also engaged extensively with construction companies and developed a turnkey services concept that includes auditing and design, financing, measurement and verification of savings and other services (IEG and World Bank, 2019).

While the successes of this project have so far not been replicated or scaled up in Armenia, it established a precedent and provides evidence that a market for energy services and ESCOs can, indeed, be developed. Public buildings, which have an average energy efficiency potential of 58%, could continue to play a leading role in the early establishment of this market, helping to generate demand for efficiency services, creating incentives for the supply chain to upskill and increase capacity to respond to the new demand, and spurring LFIs to develop more financial instruments for energy services (Econoler, 2105).

  1. Specifically, fulfilling the technical requirements of decision 426-N of the Armenian government on “The energy saving and energy efficiency in newly built residential multi-apartment buildings, as well as in the facilities built (reconstructed, repaired) at the state expense,” as adopted in 2018.

  2. These laws are designed to address issues related to the transparency with which government bodies manage the residential building stock; poor apartment-owner perception or awareness of their rights and liabilities concerning shared building ownership; and poor management and/or cash flow among housing management associations (UNECE, 2015).