ATTACHMENT_1_-_IEE.pdf

DCN: 2017-ARM-001

Armenia / Energy Market 1 EE.BEU Standard Form: RCE.v3

United States Agency for International Development (USAID) USAID Armenia

Request for Categorical Exclusion (RCE)

Program/Project/Activity Data:

Activity/Project Name:

More inclusive and sustainable economic growth Assistance Objective / Energy Market Liberalization and Regional Integration

Assistance Objective:

Increase economic growth that is more sustainable and inclusive

Program Area: Energy

Country(ies) and/or Operating Unit: Armenia/E&E

Originating Office:

Sustainable Development Office

Date: March 02, 2017

PAD Level RCE: Yes No RCE/IEE Amendment: Yes No Supplemental RCE: Yes No

DCN of Original RCE/IEE: DCN: 2014-ARM-006

DCN of Amendment(s):

If Yes, Purpose of Amendment: RCE for new energy activity

DCN(s) of Related EA/IEE/RCE/ER(s): DCN: 2015-ARM-010

Implementation Start/End:

AMD: FY2017-FY

LOP: FY2014- FY 2019

Funding Amount:

AMD: $ 6,000,000

LOP Amount: $37,908,423

Contract/Award Number (if known): TBD

Recommended Determination: Categorical Exclusion

Additional Elements:

Government to Government: Local Procurement: Donor Co-Funded:

1. Project and Activity Description

1.1 Purpose and Scope of RCE:

The purpose of this PAD level IEE Supplemental Amendment is to provide an environmental determination for the new energy activity to support energy market liberalization, energy diversification and regional interconnection with Georgia. This work will not include any design or physical construction activities but may include recommendations to consider climate and other environmental factors that should have positive impacts. This could also include references to EU regulations, international best practices as well as physical siting and other regulatory factors.

1.2 Project Overview:

In 2015, the GOAM adopted a long-term energy strategy for 2018-2036 based on USAID’s 2014 Least Cost Energy Plan for Armenia. The strategy outlines the importance of restructuring the energy market to be in compliance with western approaches in order to undertake energy trade with and via Georgia.

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To build off of USAID’s previous efforts, the proposed activity will support the implementation of Armenia’s Energy Strategy and Action Plan for Market Liberalization and Promotion of Cross-Border Trade, as well as NARUC’s Regulatory Road Map, and PSRC’s concept paper.

Through this activity, USAID will assist the GOAM in developing and implementing liberalized market rules, which will facilitate the electricity trade with Georgia.

This activity will focus on assisting in the establishment of the necessary legal regulatory framework, creating market rules, procedures, and software, and providing necessary training and consultancy in order to support a smooth transition to an open market. The activity will assist the GOAM and energy entities in the creation of an investor-friendly environment to accelerate competitiveness, power sector development, and regional trade, and in a broader context, improve the country’s economic development.

The implementer of this activity will have to work closely with other USAID mechanisms.

The activity has three components that support this project’s overarching goal, each detailed below.

2. Project Description and Climate Risk Screening

Defined or illustrative activities under Component One— Energy Market Development

Potential Climate Risk Climate Risk Rating*

1.1 Legal and regulatory reforms to support market

liberalization and an effective electricity trading mechanism, including development of the new Electricity law, as well as regulations and standards to support new legal framework.

Increased temperatures, less snow in the mountains, increase of flooding in the spring and drought in the summer and increase of forest fires risk

Low climate risk

1.2 Develop and implement the market model for

Armenia, including development of the software for the market operation and development of market trade mechanisms, and balancing services.

Increased temperatures, less snow in the mountains, increase of flooding in the spring and drought in the summer and increase of forest fires risk

Low climate risk

1.3 Strengthen the market and system operators and

market participants, including trainings, study tour, advisory services.

Increased temperatures, less snow in the mountains, increase of flooding in the spring and drought in the summer and increase of forest fires risk

Low climate risk

Two— Promote Energy Supply Diversification

Potential Climate Risk Climate Risk Rating*

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Two— Promote Energy Supply Diversification

Potential Climate Risk Climate Risk Rating*

2.1 Conduct Least Cost Energy Development Plan and

provide input to Energy Strategy, including analysis of GHG emissions for the different generation scenarios.

Increased temperatures, less snow in the mountains, increase of flooding in the spring and drought in the summer and increase of forest fires risk. The LCEP will consider climate factors.

Low climate risk

2.2 Hold discussions to improve the regulatory

framework and capacity building for new generation options

Increased temperatures, less snow in the mountains, increase of flooding in the spring and drought in the summer and increase of forest fires risk. The regulatory framework should consider the generation options climate risk factors.

Low climate risk

Defined or illustrative activities under Component Three— Cross Border Cooperation

Potential Climate Risk Climate Risk Rating*

3.1 Strengthen Armenia-Georgia electricity dialogue

Increased temperatures, less snow in the mountains, increase of flooding in the spring and drought in the summer and increase of forest fires risk

Low climate risk

3.2 Development of cross border trade approaches and

mechanisms through discussions and technical assistance

Increased temperatures, less snow in the mountains, increase of flooding in the spring and drought in the summer and increase of forest fires risk

Low climate risk

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3. Justification for Categorical Exclusion Determination The activities under the “Market Liberalization & Electricity Trade Program (MLET)” will not have an effect on the natural or physical environment and are among the classes of activities listed in 22 CFR 216.2(c)(2). Therefore, under §216.2(c)(1), neither an IEE nor an EA will be required for these activities.

Instead, a categorical exclusion threshold determination is recommended for the following identified activities under 22 CFR 216.2(c)(2): 1.1;1.2;1.3; 2.1; 2.2 and 3.1 and 3.2.

Activity 1.1; 1.2; 1.3; 2.1; 2.2 and 3.1 and 3.2. under §216.2(c)(2)(i) Education, technical assistance, or training programs except to the extent such programs include activities directly affecting the environment (such as construction of facilities, etc.);

4. Limitations of the Categorical Exclusion Determination:

This categorical exclusion does not cover classes of actions normally having a significant effect on the environment under §216.2(d):

i. Programs of river basin development;

ii. Irrigation and water management;

iii. Agricultural land leveling;

iv. Drainage projects;

v. Large scale agricultural mechanization;

vi. Resettlement projects;

vii. New land development;

viii. Penetration road building and road improvement;

ix. Powerplants;

x. Industrial plants; and

xi. Potable water and sewerage projects In addition, this categorical exclusion does not cover activities that:

Support project preparation, project feasibility studies, engineering design for activities listed in §216.2(d)(1);

Affect endangered species ;

Provide support to extractive industries (e.g. mining and quarrying);

Promote timber harvesting;

Lead to construction, reconstruction, rehabilitation, or renovation work;

Support agro-processing or industrial enterprises;

Provide support for regulatory permitting;

Lead to privatization of industrial facilities or infrastructure with heavily polluted property;

Assist the procurement (including payment in kind, donations, guarantees of credit) or use

(including handling, transport, fuel for transport, storage, mixing, loading, application, clean-up of spray equipment, and disposal) of pesticides or activities involving procurement, transport, use, storage, or disposal of toxic materials--pesticides cover all insecticides, fungicides, rodenticides, etc. covered under the Federal Insecticide, Fungicide, and Rodenticide Act; and/or

Procure or use genetically modified organisms.

Any of these actions would require a Europe and Eurasia Bureau Environmental Officer (BEO) approved amendment to the categorical exclusion.

5. Mandatory Inclusion of Environmental Compliance Requirements in Solicitations, Awards, Budgets, and Work Plans Appropriate environmental compliance language, including limitations defined in Section 4, shall be incorporated into solicitations and awards for categorical exclusions.

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The implementing partner shall ensure annual work plans do not prescribe activities that are defined as limitations in Section 4.

6. Revisions Under §216.3(a)(9), if new information becomes available that indicates that activities covered by the categorical exclusion might be considered major and their effect significant, or if additional activities are proposed that might be considered major and their effect significant, this categorical exclusion determination will be reviewed and, if necessary, revised by the Mission Environmental Officer (MEO) with concurrence by the BEO. It is the responsibility of the USAID Contract Officer’s Representative (COR)/Agreement Officer’s Representative (AOR) to keep the MEO and BEO informed of any new information or changes in the activity that might require revision of this determination.

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7. Recommended Determination for Categorical Exclusion:

Approval :

Deborah Grieser, Mission Director

Date

Clearance:

Marina Vardanyan, Mission Environmental Officer

Clearance:

Marina Vardanyan, AOR/COR

Concurrence:

Mark Kamiya E&E Bureau Environmental Officer

Distribution:

IEE File MEO (to also provide a copy to AOR/COR)

Attachments: Annex A Climate Risk Screening and Management Tool for Activity/Project/Strategy Design

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1.1: Defined or Anticipated DOs, IRs, or sectors*

1.2:

Timefram e*

1.3:

Geography

2: Climate Risks*

3: Adaptive Capacity*

4:

Climate

Risk Rating of

DO or

IR*

[Enter rating for each DO or IR* High, Moderate, or Low]

5:

Opportunities

6.1: Climate Risk

Management Options

6.2: How Climate

Risks Are Addressed in the Strategy*

7: Next Steps for Project and/or Activity Design*

8:

Accepte d Climate Risks*

Task 1.1 Legal and regulatory reforms to support market liberalization and an effective electricity trading mechanism

5 years (length of the project) country wide and maybe transbound ary issues increased temperatures, less snow in the mountains, increase of flooding in the spring and drought in the summer and increase of forest fires risk country financial resources are limited, as well as capacity and coordination

, getting support from the

EU, UN and donors

Low develop new regulatory structure that incorporates climate change impacts into the electricity markets including regional coordination include the anticipated needs for cooling water, increased temperatures and intense storms when designing projects including siting and types of technologies this project will help develop options that include climate risk management include EU and other international standards and best practices in developing the regulatory framework

N/A

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Task 1.2 Develop and implement the market model for Armenia

5 years country wide and maybe transbound ary issues increased temperatures, less snow in the mountains, increase of flooding in the spring and drought in the summer and increase of forest fires risk country financial resources are limited, as well as capacity and coordination

, getting support from the

EU, UN and donors

Low develop new regulatory model that incorporates climate change impacts including criteria to address impacts include the anticipated needs for cooling water, increased temperatures and intense storms when designing the model and consider new/innovativ e technologies to exceed standard options in terms of sustainability and energy security this model will help evaluate the viable options including climate risk impacts include EU and other international standards/best practices and leading technology options

N/A

Task 1.3 Strengthen the market and system operator and market participants

5 years country wide and maybe transbound ary issues increased temperatures, less snow in the mountains, increase of flooding in the spring and drought in the summer and increase of forest fires risk country financial resources are limited, as well as capacity and coordination

, getting support from the

EU, UN and donors

Low this will improve the capacity of the country to run its electricity market use support from USAID and others to implement more resilient systems and emergency planning these actions will put into place better management practices and improved services which will address climate change and improve energy security include EU and other international standards/best practices and leading technology options

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Task 2.1 Conduct Least Cost Development Plan and proivide input to Energy Strategy valid as long as it is kept current country wide and maybe transbound ary issues increased temperatures, less snow in the mountains, increase of flooding in the spring and drought in the summer and increase of forest fires risk country financial resources are limited, as well as capacity and coordination

, getting support from USAID and other donors

Low keep this plan up to date to inform the viability of the Armenia energy plan continue to refine the plan to improve its accuracy the plan will directly inform what options and strategies should be pursued and changed based on current conditions including climate impacts implement the update of the plan using relevant criteria and assumptions

N/A

Task 2.2 Regulatory framework and capacity building for new generation options valid as long as it is kept current and capacity built country wide with considerati on of regional electrical market increased temperatures, less snow in the mountains, increase of flooding in the spring and drought in the summer and increase of forest fires risk country financial resources are limited, as well as capacity and coordination

, getting support from

USAID,

WB and other donors

Low review to ensure it stays current and is coordinated with the least cost development plan periodically review the framework to ensure it is appropriate this framework will allow the regulatory program to be developed to include climate risks implement the update of the plan using relevant criteria and assumptions

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Task 3.1 Strengthen Armenia-Georgia electricity dialogue

5 years country wide with considerati on of the Georgia electrical market increased temperatures, less snow in the mountains, increase of flooding in the spring and drought in the summer and increase of forest fires risk country financial resources are limited, as well as capacity and coordination

, getting support from

USAID,

Georgia and other donors

Low successful coordination will provide improved grid services and quality and supply diversificatio n successful coordination will improve technical capacity and emergency planning this coordination will support compatibilit y of operations and a more robust regional electrical market coordinate with Georgia to develop the strategy and implementatio n plan

N/A

Task 3.2 Development of cross border trade approaches and mechanisms

5 years country wide and maybe transbound ary issues increased temperatures, less snow in the mountains, increase of flooding in the spring and drought in the summer and increase of forest fires risk country financial resources are limited, as well as capacity and coordination

, getting support from

USAID,

Georgia and other donors

Low successful coordination will provide improved grid services and quality and supply diversificatio n successful coordination will improve technical capacity and emergency planning this coordination will support compatibilit y of operations and a more robust regional electrical market transboundary coordination to develop the strategy and implementatio n plan