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Energy Sector in Review

The current year was very important for power sector. Like previous years, the current year was full of challenges.

Despite Ministry of Energy and Ministry of Economy merged in 2017, the Authorities prioritizes to develop the power sector. Consequently, the current year was special in the power sector in terms of development of generation and infrastructure.

It should be noted that Georgia’s hydro-potential is a strategic resource for power sector development. When talking about state resources, we should remember that there are 26 060 rivers in Georgia with a total length of 60 000 kilometers.  Total reserves of spring water in Georgia, which consists of water resources of glaciers, lakes and water reservoirs, constitutes 96.5 cubic meters. From all rivers, about 300 ones fit for power generation with 50 billion kilowatt/hour annual generation on average. However, regretfully, today about 20% of total resources are employed that is about 3000 megawatts in total installed generation.

Electricity consumption analysis also confirms the necessity of maximal use of hydro power resources of the country and construction of new hydro power stations. Over the past 9 years (2007-2016), annual electricity generation rose by 38% from 8.346 million kilowatt/hours to 11.573 million kilowatt/hours. It should be also noted that in the mentioned period domestic consumption (2007-2015) rose by 60% from 7.815 million kilowatt/hours to 12.435 million kilowatt/hours, including by 31% on Georgia-controlled territory and by 43% in Russia-occupied Abkhazia. Electricity holds about one fifth of Georgia’s power consumption (20% in 2016).

Moreover, if we take into account electricity consumption forecast indicators due to the base scenario, electricity annual generation in Georgia will rise by 5% and the demand will hit about 17.51 billion kilowatt/hours in 10 years. It should be noted that the demand for 17.51 billion kilowatt/hour consumption may be satisfied from two various sources: imported power and steam power, which is generated of imported raw materials.  The first variant, that is electricity imports, is very expensive, because electricity price permanently grows and prices reach the peak in winter period.  Moreover, another important problem enhances dependence on the neighboring country and this is quite serious burden on Georgia’s power and political safety. As to the second variant, which implies a maximal charging of steam power stations, naturally, many problems will arise in this direction too. On the one hand, power generated by steam power plants is very expensive and on the other hand, we have problems with energy independence and safety in this case too and naturally, these factors make negative impact on the state development.

Hydro Power

The above-mentioned statistics reaffirms that employment of the mentioned resources is the most important task. Therefore, the current year was very interesting in terms of construction of new hydro power plants. Namely, four hydro power plants were put into exploitation in 2017: Khelvachauri 1 HPP (47.48 megawatt installed generation), Maqsania HPP (0.5 megawatt installed generation), Nabeghlavi HPP (2 megawatt installed generation) and Shuahkevi HPP (187 megawatt installed generation).

The last one is the biggest hydro power plant built ever in Georgia after Enguri HPP. Total length of the tunnel is 37 kilometers and it is the world’s second biggest hydro power plant tunnel. The project’s investment value exceeds 420 million USD. The year of 2017 is very interesting because of building the mentioned HPP, because this year the biggest HPP was switched to the power system in the history of independent Georgia.

Currently, 44 power station projects are passing various phases of licensing or construction and total installed generation is 1643 megawatts and presumable investment value is 3 billion USD. Moreover, research work is being carried out for more than 100 projects are at the stage, including for wind and solar power station projects and their supposed installed generation exceeds 3700 megawatts, while total investment value is about 6 billion USD.

Steam Power

Besides employment of hydro power resources, for the purpose of developing the joint power system, it is of crucial importance in terms of technical issues to accumulate efficient reserve powers in the network. It is worth noting that currently Georgian power system lacks for equipment for reserve powers. As a result, regulation of frequencies is complicated. At the same time, the system switches off, when power aggregates are disrupted and this factor causes serious discontent in the society. To improve this situation it is necessary to ensure power reserves through construction of regulatory hydro power stations, powerful combined steam power plants and/or rehabilitation of the existing steam power stations. The government policy for removing the mentioned problems may be appraised as consecutive and reasonable. In 2016 Gardabani combined-cycle steam power plant of 230 megawatts was put into exploitation and this fact has considerably improved the network’s valuable operation. In this respect, the year of 2017 was also special one. Namely, this year a foundation was laid of the second block of 230 megawatt combined-cycle steam power plant. At this stage, the facility is waiting for obtaining due licenses and negotiations are underway on loan agreements. The steam power plant is expected to launch operation in 2020. The project’s investment value is 159 million USD. Moreover, we are also constructing Tkibuli-based coal-based steam power plant with 150 megawatt installed generation. Its investment value is 180-200 million USD. The project implementation will be finished by the end of 2021.

Natural Gas Market

Natural gas market stability is of crucial importance for Georgia’s power security. Natural gas consumption in 2016 constituted 2.261 billion cubic meters. Natural gas averaged consumption due to the base scenario grows by annual 7%. Moreover, the natural gas sector embraces extreme seasonal factors. Namely, in winter season (October-March) the consumption constitutes about 75% of total consumption. Naturally, based on the existing consumption structure and for improving power security system it is necessary to build a gas storage tank. Consequently, in terms of gas storage system development, the year of 2017 was very important. Namely, in September 2017 a pre-qualification stage of open international tender for purchasing of designing, purchasing, installation and  exploitation (EPIC) works for Samgori field underground gas storage tank were finished. The selected companies will introduce detailed technical proposals in the second phase of the tender, at the beginning of 2018, as well as EPIC works price. Gas storage tank construction works will start in the first half of 2018 and will end by 2021. According to preliminary estimations, total value of the project will exceed 250 million USD and the storage will hold about 300 million cubic meters of gas.

Underground gas storage tank construction will considerably strengthen Georgia’s power security. The project will regulate seasonal misbalance between gas supply and consumption and peak consumption will be satisfied in winter period. Moreover, if supplier countries cease gas supply to Georgia, Georgian consumers will receive natural gas from the gas storage tank.

Infrastructure

As to measures for electricity infrastructure construction and development of the network reliability, it should be noted that very important projects were implemented in this segment in 2017. Namely, in April 2017 Georgia and KfW signed a 125 million EUR project agreement for implementing the open program II for Georgian electricity transmission network expansion. This agreement calls for constructing Tskaltubo-Akhaltsikhe-Tortum 500 kilowatt transmission line, Guria Transmission Lines Infrastructure Enhancement and Northern Transmission Line (the first phase). Moreover, construction of the first phase of 220 kilowatt transmission line of Akhaltsikhe-Batumi was also finished; currently, the 19 kilometer section of Tsiteli Khidi-Gardabani 700 mm diameter gas pipeline of East-West main route is being reconstructed.

European Perspective

European Energy Community is one of the most powerful power organizations worldwide. Key objectives of the organization is to create integrated power markets, merger with EU markets, attracting investments and ensuring continuous power supply, enhancement of Europe’s power security and improvement of environment. European Energy Community was founded in 2005 with the aim to unite EU nonmember countries in South Europe and Black Sea Region.

On July 1, 2017 Georgia became a plenipotentiary member of European Energy Community and this fact should be appraised as one of the important events in Georgian power sector. Negotiations on membership started in 2014, while protocol on Georgia’s connection to the Energy Community founding agreement was signed on October 14, 2016. It is worth noting that the Energy Community was recognized by European politicians as a certain waiting space for the countries aspiring for integration into EU.

Andria Gvidiani