Technical Assistance Project in Support of the Georgian Energy Sector Reform Programme

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With the signing of the Accession Protocol to the Energy Community on the 14th of October 2016, Georgia has committed itself to transforming its electricity market to one akin to EU’s internal electricity market. Accordingly, over the last two years, supported by a Policy Based Loan with the Kreditanstalt für Wiederaufbau and the Agence Française de Développement, the Georgian Government took step towards to implementing a reform with the goal of establishing an electricity market in compliance with the EU’s Third Energy Package.

This Project aims to accommodate the reform through providing a variety of assistances, in the form of technical assistance measures, to key stakeholders in implementing the reform.

More precisely, the Project consists out of 26 technical assistance measures which focus, on the one hand, on deploying energy efficiency within Georgia, and, on the other hand, in deploying an EU style organised market as envisaged in the Third Energy Package in the context of the Georgian electricity sector. Accordingly, the Project is in the support of the ongoing Georgian Electricity Sector Reform Programme.

Georgian Energy Sector

After the breakup of the Soviet Union, Georgia experienced a severe economic recession, with GDP declining by more than 70% between 1990 and 1994. The Georgian economy recovered, growing 5.6% p.a. between 1994 and 2015, and exceeded its 1990 level of GDP per capita in 2013.

This economic recovery has led to a significant growth in electricity consumption. Between 2009 and 2015, electricity consumption increased by 9.2% p.a., reaching a total consumption according to the Electricity System Commercial Operator (ESCO) of 11.9 TWh in 2017. Meanwhile, on the supply side, Georgian electricity production has increased too, growing by 4.5% p.a. between 2006 and 2017 and reaching a total of 11.5 TWh in 2017. Currently, there are two principal sources of electricity production in Georgia: Hydroelectric power plants (HPPs) - the primary source of electricity, and natural gas fired thermal power plants (TPPs). Hydro has been and is the main source of electricity generation in Georgia. For example, hydro generation in 2017 accounted for about 80 % (or 9.2 TWh) of the domestic electricity production. Moreover, the International Energy Agency estimates that Georgia holds 15 GW of potential HPP capacity and a production potential of 50 TWh. This means, Georgia realised less than 20% of its potential production in 2017. Natural gas fired generation accounts for most of the remaining power generation. Natural gas is imported mainly from Azerbaijan. As consumption in 2017 increased faster than production Georgia’s net import of electricity went up to 0,8 TWh.

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