Over the last decade electricity consumption has grown largely in line with real GDP growth rate and reached 10.4 TWh in 2015. If This trend continues, in 10 years Georgia will have significant generation deficit. Between 2004 and 2010 as a result of renewal and rehabilitation of existing HPPs generation also grew significantly. Since 2012 twelve new HHPs have been commissioned, but as consumption continues to rise not only in Georgia, but in neighboring countries as well, there is great opportunity to develop new power plants to keep up with this ever increasing demand. According to estimates, only 25% of Georgia's energy potential is exploited. Meaning that there is huge untapped potential, mostly from hydro resources, but also from wind, solar, geothermal and biomass sources as well.
In 2015, Georgia’s electricity generation reached 10.8 TWh, of which hydropower accounted for 78% (8.5 TWh). Because of seasonality of electricity generation, Georgia had to import 0.7 TWh during winter months, but still managed to export 0.7 TWh to its neighbors during summer.
Currently, 17 hydropower plants are under construction, seven of them, with total installed capacity of around 300 MW, started in 2015. By the end of 2015, a 230 MW gas-fired combined cycle Thermal Power Plant was commissioned and construction of first Wind Power Plant in Georgia has started. In 2016, construction works on 14 new HPP's will commence. Georgian Energy sector is developing rapidly and with all the competitive advantages that country offers, it’s not too hard to see why.
Growing domestic demand
Starting from 2004 generation increased singificanlty, resulting in Georgia becoming net exporter of electricity between from 2007 and 2011. With the completion of the HPPs currently under construction, exports are expected to grow in the summer period, however during winter Georgia continues to use expensive electricity form TPP's and import. Without additional Power Plants Georgia’s generation capacity will not be sufficient to meet domestic demand during winter and in the long term, as per capita electricity consumption continues to grow, estimated deficit by 2025 is more than 5 TWh.
Liberalized and deregulated market
Starting from 2008 Georgia has liberalized and deregulated energy market. Renewable projects are based on Build-Own-Operate (BOO) principle. There are no tariffs set for newly built HPPs, investor is free to choose market and negotiate price. No fee is required for the connection to transmission grid. No license is required for export and new HPPs have priority access to the capacity on the new interconnection to Turkey. Generation and export activities are exempted from VAT tax.
Perfect Export opportunity
With abundance of high mountains and fast-flowing rivers, Georgia has competitive advantage over neighbors in terms of generation cost. Most attractive export market is Turkey who rankes first in Europe and second in the world after China in terms of electricity demand increase. Turkey experiences electricity shortage during summer months, while Georgia has generation surplus. Over the last decade, Turkey’s electricity consumption in 2014 was 257.22 TWh, with generation deficit of 5.2 TWh. The Turkish Electricity Transmission Company (TEIAS) forecasts that Turkish electricity consumption will grow by 5.5% on average annually. Almost 80% of electricity was generated by gas and coal-fired power plants. So, even with lower oil and gas prices, it’s expected that electricity prices in Turkey will remain high.
Developed Grid Infrastructure
Georgia has well developed transmission grid infrastructure. Whole territory of Georgia is covered with over 3,000 km high, medium and low voltage lines and about 100 substations. In 2013, a new 400 KV line with HVDC back-to-back substation connecting Georgia with Turkey was commissioned, adding to already significant transmission capacity with all neighboring countries. By the end of 2015, cross border transmission capacity will reach 5,000 MW.
Georgia has more than 20 000 rivers and almost 300 of them provide excellent opportunity for hydropower generation. Georgia is one of the top countries in terms of water resources per capita and it’s logical that today 78% of total electricity is generated from Hydro Power Plants (8.5 TWh). Despite this, there still is vast untapped potential, as only 25% of economically feasible Hydro potential is being exploited today. Georgia could produce aditional 25 TWh electricity annually with hydro resources alone. There are over 60 potential HPP projects identified by the Ministry of Energy, the list is public and can be seen on the website of Ministry of Energy.
All new hydro power plants are totally deregulated, license for export are not required and have priority access to new transmission line to Turkey. Investor is free to choose the market and negotiate the price. HPPs with installed capacity of 13MW or less don't require generation license and HPPs that have installed capacity of 2 MW or less don't need environmental impact permit either. They can sell generated electricity to direct consumers without third party.
Identified projects are only small drop of water in the ocean of Georgia's Hydro Potential. Any investor is welcome to reveal new opportunities by themselves and start developing power plants.
TPPs are source of guaranteed electricity supply. Usually, TPPs are in standby mode, ready to supply the system when needed, typically in winter period. Last year TPPs accounted for 21.9% of total generation, meaning they are vital to Georgia’s electrical stability. Because of this, even when in standby mode TPPs receive payment to cover maintenance and fixed costs. Tariffs are set by regulator.
By the end of 2015, new 230 MW combined cycle TPP, first of its kind in Georgia, was commissioned. Project was developed by Georgian Partnership Fund and will was built by Turkish company Çalik Enerji.
Currently, Georgian Energy Development Fund is working on another 250 MW CCGT project. Power plant will be 250 MW and will be commissioned in 2019, with another 250 MW is being considered for the future.
Georgia offers very attractive opportunity for investments in wind power plants, with estimated potential of 4 TWh. Wind power offers great addition to hydro power generations, as wind generation is higher during winter, when hydro generation is lower. It’s estimated that share of wind power in total generation will reach 10% by year 2025.
Currently, pilot 20 MW project, Kartli 1, is under construction. Developed by Georgian Energy Development Fund, this projects is one of the most efficient wind plants in the world and became first government project in the region which received EBRD project funding without additional guaranties from the state. Project capacity can be expanded up to 150 MW in the future. Two more wind projects are under development with many more under consideration.
Due to the geographical location of Georgia, the emanation of the Sun is rather high. In most regions of the country there are 250-280 sunny days in a year, which is approximately 1,900-2,200 hours per year. The annual radiation of the Sun varies depending on regions from 1,250-1,800 KWh/m2, while the average sun radiation equals 4.2 KWh/m2. The total annual solar energy potential in Georgia is estimated to be 108 MW, which is equivalent to 34,000 tons of standard fuel.
According to modern hydro-geological studies, the Georgian geothermal water reserves reach 250 mln m3 per year. At present there are more than 250 natural and artificial water channels where the average temperature of geothermal waters ranges from 30 to 110 C, while the total debit is 160,000 m3 per day and night. These water channels are grouped into 44 deposits. Within the territory of 3,500 km there are bore-hole wells with the water temperature of 85 C and more. Up to 80% of the geothermal deposits are in Western Georgia. In the Zugdidi-Tsaishi geothermal area, there are now 9 productive, 7 reinjection and 3 observation bore-hole wells which are considered to be exploitable.
Thanks to an advantageous geographical location and a climate favorable to forest and agricultural development, Georgia is endowed with major potential for biomass power plants, especially for producing heat and hot water. Biomass could be of the most important sources of power supply in rural areas, given that forests cover 40% of the country’s total territory.
JSC “Georgian Energy Development Fund” is a joint-stock company. 100% of Fund’s shares are in the state ownership and passed to the Ministry of Energy of Georgia with management rights.
The Georgian Co-Investment Fund (“GCF”) is a 6 bln USD private investment fund, with the mandate to provide investors with unique access through a private equity structure to opportunities in Georgia’s fastest growing industries and sectors.
JSC Partnership Fund (PF) is a largest state-owned investment fund, PF’s main objective is to promote investment in Georgia by providing co-financing (equity, mezzanine, etc.) in projects at their initial stage of development.
Adjaristqali Georgia LLC is a joint venture between India’s Tata Power and Norway's Clean Energy Invest (40 percent each), and IFC, a member of the World Bank Group (20 percent).
Georgia Urban Energy LLC is 90% owned by Anadolu Kafkasya Enerji Yatirimlari Anonim Şirketi, a subsidiary of Anadolu Endustri Holding A.S, one of the biggest holding in the Republic of Turkey. The remaining 10% of the share capital is owned by the European Bank for Reconstruction and Development.
On August 2014, Dariali Energy JSC and European Bank for Reconstruction and Development signed loan agreement for the financing of the 105 million USD Dariali HPP development, construction and operation project.