Energy Policy
The maximum utilization of the abundant hydro-resources is one of the priorities of the state. The main objective of the long-run energy policy is the attraction of foreign investments for the construction of the new power plants.
One of the objectives of this policy is the complete satisfaction of the country’s demand with its own resources, which should be implemented in stages: first, the import, and then the thermal generation replacement.
According to the potential of high-capacity power generation and the increasing demand, the main objectives of the energy policy were identified:
• Rehabilitation of the infrastructure connecting to the neighbour countries’ energy systems
• Construction of the new transmission lines and substations
• Export of the surplus power generated in new and existing power plants.
Market Structure
The new model of the Georgian energy market provides a clear distinction between the duties and responsibilities of the subjects functioning in the energy sector.
Ministry of Energy and Natural Resources carries out the state policy in energy sector, participates in adoption of the state strategy and programs, studies their implementation and draws up the relevant recommendations.
One of the main objectives of the Ministry is to create the competitive environment in the energy market. Ministry has the right to make decisions on deregulation or partial deregulation of a specific segment of the sector.
According to the state energy policy, Ministry’s priorities include the preferential utilization of renewable and alternative resources and the attraction of foreign investments in the energy sector. In this regard, the State Program –“ Renewable Energy 2008” was adopted in 2008, which has been successfully implemented since then.
In addition, the Ministry is responsible for the environmental safety and ecological aspects during the project design.
Georgian National Energy and Water Supply Regulatory Commission is the regulatory body for the energy sector. It is established on the basis of state property and doesn’t depend on the state organizations. The main source of its finance is the regulatory payment paid by the licensees, importers, providers and Electricity System Commercial Operators. Commission consists of 5 members appointed and dismissed by the President of Georgia.
Regulatory Commission issues the generation, transmission, dispatching and distribution licenses. It should be noted, that power Stations less than 13mw do not need generation license.
Georgian National Energy and Water Supply Regulatory Commission approves the tariff methodology. According to this methodology, commission identifies and regulates the generation, transmission, dispatching, distribution, transition, import, export, supply and consumption tariffs, as well as the tariffs of the system's commercial operator services, the guaranteed capacity fee and the guaranteed capacity source’s power generation tariff. It should be also noted, that hydropower plants greater than. 13 MW built after August 1,. 2008, have been fully deregulated and are entitled to trade electric power at deregulated tariffs. There are 13 licensees and 25 low- capacity power plants in Georgia. Among them, only “Engurhesi” and “Vardnilhesi” have been remained in state ownership.
The total installed capacity of the country is around 3300 MW and the average annual output equals to 10 bln KWh. 90 % of the domestic demand for electricity is satisfied with the existing hydro power plants. After the launch of the new HPPs this figure will increase to 100%.
Electricity transmission and transit are carried out by the two transmission licensees:
1. Listed in the fixed assets of "Georgian State Electrosystem” are 35–110–220 kV transmission lines and 500/220/110/35 kV substations. GSE is owned 100 % by the state.
2. JSC “Sakrusenergo” manages the 220/330/500 kV transmission lines.
Georgian electricity system is connected to the four neighbouring countries’ power grids through the transmission lines.
|
MW |
GW/H |
|
Total |
1,740 |
15,235 |
|
|
800 |
7000 |
Georgia - Russia |
|
250 |
2190 |
Georgia - Azerbaijan |
|
160 |
1400 |
Georgia - Russia |
|
80 |
700 |
Georgia - Turkey |
|
180 |
1580 |
Georgia - Armenia |
|
80 |
700 |
Georgia - Russia |
|
80 |
700 |
Georgia - Russia |
|
30 |
265 |
Georgia - Armenia |
|
80 |
700 |
Georgia - Armenia |
In order to promote the utilization of hydro potential and electricity export, the government made decision to increase cross border transmission capacity. In this regard, construction of the 500/400 kV high-voltage transmission line (Black Sea Regional Transmission Line) has begun, which connects Turkey and Georgia. Cost of the Black Sea Regional Transmission Line is 260 mln. euro. It has been financed by the International Financial Institutions, such as KFW, EBRD, EIB. Transmission line will be launched in December, 2013. It should be noted, that the priority for the usage of the new transmission line will be given to the newly constructed plants. In addition, there are plans to construct the 500 kV transmission line connecting Azerbaijan and Georgia, and the 400 kV line connecting Georgia and Armenia. After the implementation of hese projects Georgia will become the major energy hub of the region.
JSC "Georgian State Electric System" is the only dispatch licensee. It is in charge of Georgian power system operative management, bearing also responsibility for 500-220-110-35 kV transmission facilities’ proper operation as well as for power system stability. The central dispatchers provide the operation of the power system as an unified object in both normal and accidental regimes.
Three companies carry out distribution of electricity in Georgia: "Telasi",supplying Tbilisi and its surrounding area, "Kakheti Energy Distribution" supplying Kahketi region, and "Energo- Pro Georgia", supplying the other territory of the country.
Consumers using more than 7 mln kV/h electricity , are direct consumers. They purchase electricity from the system’s commercial operator or producer through the direct agreement. According to the state energy policy, the margin of access of the third party to the electricity transmission and distribution networks will be reduced in stages and by 2017 it will equal to 1 kW/h.
There are 7 direct consumers registered in Georgia:
1) Ltd. City of Light
2) Ltd. Georgia Water and Power
3) Ltd. Tbilisi Transport Company
4) Ltd. Georgian Railway
5) Ltd. Georgian Manganese
6) Ltd. Saqnakhshiri (GIG Group)
7) Ltd. Rustavi Water
Electricity System Commercial Operator (ESCO) ensures purchase and sale of balance Electric Power (capacity) (including by means of conclusion of middle- and long-time import/export agreements), and sets up the unified data base on wholesale purchase and sale (including creation and management of unified registry of reporting) and submits relevant information.
In terms of the MOU on construction of a new power plant, signed between the Georgian government, ESCO and the relevant person, commercial operator is required to sign a direct agreement with the relevant person about the purchase of the electricity generated in newly built power plant, under the conditions, which were agreed by the Georgian government, ESCO and the relevant person.
Electricity Trade
According to the electric power marker rules, the license carriers of electric power sector make short term (one year) or long term (5 years) direct contracts on sale and purchase. The contracts are made between the customer and the producer, while the contract on the balance capacity purchase is made with the commercial operator.
The commercial operator balances the difference between the actual consumption and the amount of the electric power specified by the direct contract between customers and producers.
The electric power trading is carried out by the commercial operator in two ways.
1) First way is either the unplanned over consumption or when the direct contract is not made. In this case the customer automatically purchases the electric power from the commercial operator.
2) According to the second variant the commercial operator and the customer make a contract, which doesn't specify either the amount or the price of the required electric power.After each concrete request the sides offer the prices acceptable for them, in this case the trading is carried out in the so-called electric power exchange format, which doesn't affect the consumer tariff. The system's commercial operator renders services according to the tariffs established by GNERC (Georgian National Energy And Water Supply Regulatory Commission).
Note, that the customer is able to purchase the balanced electric power not just from the commercial operator but also by the direct contract.
The purchaser is obliged to have reserve power amounted to 10% of its utilized power (minimum 5% of this amount should be supplied by local sources. ) for ensuring energy security of the country. It is possible to supply the reserve power by direct contract, private sources or commercial operator.
10% quota of the years 2013-2015 is to be completely supplied by local sources. 2016-2019 required reserve quota will be raised to 15%, which will have to be fully supplied by local sources.