Calendar An icon of a desk calendar. Cancel An icon of a circle with a diagonal line across. Caret An icon of a block arrow pointing to the right. Email An icon of a paper envelope. Facebook An icon of the Facebook "f" mark. Google An icon of the Google "G" mark. Linked In An icon of the Linked In "in" mark. Logout An icon representing logout. Profile An icon that resembles human head and shoulders. Telephone An icon of a traditional telephone receiver. Tick An icon of a tick mark. Is Public An icon of a human eye and eyelashes. Is Not Public An icon of a human eye and eyelashes with a diagonal line through it. Pause Icon A two-lined pause icon for stopping interactions. Quote Mark A opening quote mark. Quote Mark A closing quote mark. Arrow An icon of an arrow. Folder An icon of a paper folder. Breaking An icon of an exclamation mark on a circular background. Camera An icon of a digital camera. Caret An icon of a caret arrow. Clock An icon of a clock face. Close An icon of the an X shape. Close Icon An icon used to represent where to interact to collapse or dismiss a component Comment An icon of a speech bubble. Comments An icon of a speech bubble, denoting user comments. Ellipsis An icon of 3 horizontal dots. Envelope An icon of a paper envelope. Facebook An icon of a facebook f logo. Camera An icon of a digital camera. Home An icon of a house. Instagram An icon of the Instagram logo. LinkedIn An icon of the LinkedIn logo. Magnifying Glass An icon of a magnifying glass. Search Icon A magnifying glass icon that is used to represent the function of searching. Menu An icon of 3 horizontal lines. Hamburger Menu Icon An icon used to represent a collapsed menu. Next An icon of an arrow pointing to the right. Notice An explanation mark centred inside a circle. Previous An icon of an arrow pointing to the left. Rating An icon of a star. Tag An icon of a tag. Twitter An icon of the Twitter logo. Video Camera An icon of a video camera shape. Speech Bubble Icon A icon displaying a speech bubble WhatsApp An icon of the WhatsApp logo. Information An icon of an information logo. Plus A mathematical 'plus' symbol. Duration An icon indicating Time. Success Tick An icon of a green tick. Success Tick Timeout An icon of a greyed out success tick. Loading Spinner An icon of a loading spinner.

Georgia’s energy transition

Picturesque houses and scenery
Georgia's capital of Tbilisi

As Georgia completes its economic turnaround and builds a closer relationship with the EU, more investment is needed in the energy sector. As an investor in renewable power generation, thorough Silk Road Group’s Bahkvi 3 hydropower project, I am supporter of Georgia’s journey towards energy independence. To achieve that, Georgia needs to prove to investors that its energy market is mature, competitive and predictable.

Georgia has a natural advantage in energy generation due to its geography. According to figures from the International Energy Agency (IEA), between seventy and ninety percent of Georgia’s electricity generation comes from renewable hydroelectric power.

This remarkable statistic doesn’t tell the full story, unfortunately. The natural abundance of Georgia’s rivers and dams do not come close to meeting our demand for energy. Two thirds of our primary energy supply is imported, the vast majority of which is natural gas, supplied by Azerbaijan and Russia for domestic heating and other applications.

Being an energy importer poses a number of problems for Georgia. Most significantly for the average Georgian citizen, domestic energy is relatively expensive for the region, even if it comfortably cheaper than the EU average. Georgians pay the equivalent of 0.074 EUR per kWh, according to Eurostat, compared to 0.211 EUR for the average EU citizen, but 0.041 EUR for Ukrainians, and even less for energy-rich countries like Azerbaijan.

The problem is compounded in the winter months. The newest and most advanced hydroelectric plants in Georgia produce reliable, year-round energy, but some of the legacy plant produces intermittent supply. In the winter, when the demand for domestic heat and electricity surges, the older hydro plants may not be producing to their full capacity.

Demand continues to grow as a result of Georgia’s successful economic turnaround. In common with other Central European countries, Georgia has since transformed its economy since independence, investing in technology and services industries. Georgia’s impressive economic growth means that even though demand from energy intensive industries has decreased as a proportion of the total, overall demand has grown.

It is not unusual for countries to import a portion of their energy each year, but relying on gas supplies from our near neighbours poses risks to our energy security. As recent events in the Arabian Gulf have shown, energy supplies are sensitive to geopolitical shocks, and many states are willing to use the threat of cutting off supply as a political weapon.

All of this points to a need for significant investment in new generation. When Silk Road Group first invested in the sector in 2011, we had the confidence to make this commitment because of Georgia’s commitment to market reforms, a hallmark of an advanced economy. It is no coincidence that Silk Road Energy was launched in 2014, the same year Georgia signed its association agreement with the EU.

The transition Georgia’s energy market is making is exactly in line with EU priorities, and together they add up to a package that inspires business confidence. Georgia now has a strong energy regulator, the GNERC, which is committed to liberalising the market structure. This will mean an end to hidden subsidies in the natural gas market, for example.

By 2023, it is expected that Georgia will have passed legislation to separate electricity distribution and supply contracts, allowing customers to switch to a cheaper supplier at will. Long term generation contracts will gradually give way to more sophisticated pricing, ensuring the grid buys cheapest possible supply at the time. In the wholesale market, new opportunities have opened to Georgia, acting as a transit country for electricity supplies across the region. All of these reform point to a well-functioning, transparent electricity market.

Georgia has a national action plan on energy efficiency, which will affect the whole economy. In April this year, the EU launched twinning project, which will see the GNERC benefit from expertise in other member states as it develops the regulatory infrastructure to roll out smart metering technology. This will enable households and businesses to monitor, manage and reduce their consumption, and will also drive more efficient and responsive pricing.

As well as setting the country on the road to energy self-sufficiency, more efficient use of energy will make demand more predictable and easier to manage. This would free the power grid from dependence on back up supply from gas generation, meaning that Georgia could accommodate more renewable power.

Georgia’s geography means that there is significant untapped potential for further hydroelectric generation, as well as onshore wind. All that is required for investors to start developing these renewable resources is consistent direction from the Government and partners in the European Energy Community. As an investor and as a Georgian, this transition from an energy-intensive economy that is heavily reliant on gas imports, to a clean, self-sufficient, European nation fill me with confidence for the future.

George Ramishvili is the Founder and Chairman of Silk Road Group, Georgia’s leading investment company. Silk Road Group has grown from a transportation and logistics business to invest in telecommunications, real estate, tourism and energy in Georgia.

Recommended for you

More from Energy Voice

Latest Posts