3 Regional and Extra-Regional Energy Cooperation: Strategic Perspectives from Armenia and Georgia Armenia Having been isolated from much regional energy develop­ment to date, Armenia plans to expand its electricity exports not only to Iran, but also to other markets, potentially via Georgia. Given Armenia’s lack of electricity trade with neigh­boring Turkey and Azerbaijan, the country would benefit sig­nificantly from becoming a member of regional and extra-re­gional electricity trade. The expansion of variable renewable sources requires a higher level of integration, exporting sur­plus electricity in periods of high renewable generation and importing it when it is low. The Energy Sector Development Strategic Program outlines a general plan to develop transmission and distribution net­works, as well as to digitise and modernise the infrastruc­ture. In terms of regional integration, the country has a 350 MW interconnection capacity with Iran, planned to in ­crease to 1,200 MW through the construction of a 400 kV substation. With Georgia, the current 200 MW intercon ­nection capacity is to increase to 350 MW, an amount which would potentially be doubled and tripled later on 35 through a 500/400 kV back-to-back connection(as the two systems are asynchronous). These developments would not only strengthen Armenia‘s position as a re­gional energy transit hub, but also attract investments in renewable energy projects. Lacking large pumped storage reserves and other storage installations, Armenia would benefit significantly from the added flexibility of interconnections in any effort to miti­gate daily fluctuations of wind and solar, as well as sea­sonal variability of hydropower. Emergency situations may also be better managed as a result, given that Armenia and Georgia have had a bilateral agreement on emergency electricity provision since 2012. 36 Georgia Georgia’s strategic location at the crossroads of Europe and Asia positions it as a key player in regional energy connectivity and cross-border electricity trade . Already interconnected with the energy systems of Turkey, Arme­nia, Azerbaijan, and Russia, Georgia holds increasing po­tential to become a renewable electricity transit hub be ­tween the South Caucasus and the European Union . With the EU’s increasing interest in diversifying energy sources and securing green electricity imports – particularly under initiatives such as the European Green Deal and REPowerEU – Georgia’s abundant hydropower, wind, and solar resources make it a valuable partner in supporting Europe’s decarbonisation goals. To understand the prospects for regional integration, it is es­sential to examine the specific characteristics and priori ­ties of Georgia‘s domestic power sector . The Ten-Year Net ­work Development Plan(2024–2034) 37 outlines Georgia’s strategic goals, emphasising supply reliability, energy securi­ty, and long-term system resilience. Among its main drivers are the integration of renewable energy(especially hydro­power), the replacement of outdated thermal plants with ef­ficient combined-cycle gas turbines, and the reinforcement of infrastructure to meet increasing domestic demand. Georgia’s internal transmission structure reflects legacy im­balances. The power system is predominantly west-to-east oriented, with much of its hydroelectric generation concen­trated in the western region, while consumption hubs – such as Tbilisi and Rustavi – are in the east. This imbalance, es­pecially acute in spring and summer when river flows are high, results in eastward flows that stress key substations. Moreover, significant portions of the infrastructure – espe­cially hydro and thermal power plants – are aging or deteri­orated, leading to reliability challenges and insufficient op­erational reserves. Without N-1 compliance at critical substa ­tions, outages could necessitate load shedding, thereby compromising system security. 38 In this context, regional integration emerges not merely as a policy objective, but as a practical necessity. According to Georgia’s Integrated National Energy and Climate Plan (NECP) , cross-border electricity integration offers multi ­ple benefits: enhanced system flexibility, stronger ener ­gy security, and improved integration of variable renew ­able energy sources . Strategic initiatives – such as devel 35  Republic of Armenia Energy Sector Development Strategic Program to 2040 36  Energy security – Armenia energy profile – Analysis – IEA 37  Ten-Year Network Development Plan of Georgia 2024–2034 38  Ten-Year Network Development Plan of Georgia 2024–2034 12 Friedrich-Ebert-Stiftung e.V.