Georgia must accelerate the construction of a planned power line to Romania to give the country a direct link to the EU power system as soon as possible, Tbilisi-based hydropower developer Energy Solutions says.
As Georgia gradually implements EU energy market rules, the country increases the "regulatory gap" with its direct neighbours, notably Russia and Azerbaijan, Energy Solutions managing director Giorgi Abramishvili said. Import capacity from Russia to Georgia is 700MW, which may not sound like much, Abramashvili said, but "is enough to destroy the market".
Georgia's power exchange Genex plans to launch the country's day-ahead and balancing market on 1 September 2022, following a series of delays. A planned 1GW subsea cable through the Black Sea linking Jvaria and Anaklia in Georgia with Constanta in Romania is not expected to be built before 2030. The feasibility study is due to start soon and will provide more clarity on whether there is a "very small" chance for the power link to be completed before 2030, said the head of the energy policy department of the ministry of economy, Tornike Kazarashvili.
Abramashvili, who is also executive director of the Georgian Renewable Energy Development Association (Greda), said that there is a risk that power exporters drive down wholesale market prices by bidding with power plants that have been written off. This could thwart investments in the new renewable capacity that Georgia needs, Abramishvili said.
Gas-fired power plants in Georgia will not set the price as in Europe, given their relatively low marginal costs — as a transit country of the South Caucasus Pipeline, Georgia has special drawing rights on Azeri gas. The regulated price for power plants excluding value-added tax was recently set at $9.50/MWh.
Georgia is the only member or contracting party of EU-led regulatory body the Energy Community (EC) that has no direct links to an EU member state. Regulatory body GNERC commissioner Maia Melikidze admits that some of Georgia's direct neighbours have "different agendas and systems", but she stresses the "reliability" of Turkey and its higher-priced market, with which Georgia is linked through a 700MW power line.
Melikidze says that Georgia's main concern is the growing gap between its consumption and generation levels. The country has been a net importer since 2017, with annual consumption growing by at least 5pc.
Potential investors in Georgian renewable power have in the past few years been in a regulatory vacuum that is expected to end once the market is launched. The new support system, to replace the state-controlled power-purchase agreement (PPA) system abolished three years ago, will be linked to the market price, in the form of a feed-in-premium (FiP) of US$15/MWh.
Tbilisi-based solar photovoltaic (PV) company Helios Energy Georgia managing director Tornike Darjania said the premium is much too low, as an initial market price could well hover around $30/MWh.
Energy consultant Walter Boltz, a former chairman of Austrian regulator E-Control, suggests that an "effective" supervisory body comparable to Remit in the EU should be introduced in Georgia, and pricing on the electricity exchange could initially be limited to a range of, for instance, €35-120/MWh. Boltz also suggests supporting renewable investments through a contracts for difference scheme, which would provide investment security.
Georgia has 4.5GW of total installed power capacity, with hydro accounting for 3.3GW. Thermal units — mostly gas-fired — account for around 1.1GW. The country has one 21MW wind farm and 20MW of installed PV capacity. Georgia will have 10.4GW of installed capacity in 2031, including 686MW of wind capacity and 260MW of solar power, according to the country's latest grid development plan.
