Georgia, a “hydro powered” country
Located at the crossroads of Western Asia and Eastern Europe — between the Black Sea, Russia, Armenia, Azerbaijan and Turkey — Georgia has a very strategic location and serves as a bridge between Europe and Asia. The country of Georgia has untapped hydroelectric potential of about 20 TWh annually and energy-hungry neighbors in Turkey, Russia and Eastern Europe. With a recent growth of investments, Georgia is expanding its hydro potential and generating revenue at the same time.
We can say that the country is largely based on hydro power; in fact 85% of the country’s total energy consumption is supplied by domestic hydropower plants. Despite this, Georgia has huge untapped hydropower potential remaining. The country’s natural wealth is comprised principally of water and water resources, and its hydroelectric potential per capita ranks among the world’s greatest, with at least 300 rivers capable of hydropower potential of about 20 TWh annually.
In recent years, Georgia has become a stable power-producing country through rehabilitation of existing hydroelectric plants and added capacity. We should underline the fact that Georgia is a developing country and there is a significant potential for domestic consumption to increase. For example from 2007 to 2011, the average growth rate in year-on-year electricity demand was more than 5%. Such growth had an effect on wholesale electricity prices, which rose by 6.5% annually. To meet growing demand and keep electricity prices comparably low, the country needs to add new capacity. That’s why Georgian government has developed a state energy policy so that energy sector development is planned to be one step ahead of the country’s economy. This kind of policy makes easier electricity exports whenever electricity generation exceeds national demand. According to regulations, there are no quotas set nor any permits or licenses required to export electricity from Georgia.
Georgia has been a net exporter of electricity since 2007, and since 2010 Georgia has exported energy to all its neighboring countries.
Georgian river flows are at their highest in the summer. Accordingly, the hydro plants generate excessive energy and significantly override domestic consumption. This energy needs to be exported. Fortunately, peak demand in neighboring countries occurs in the summer as well, making electricity exports more compelling. Turkey is the most attractive market for Georgian electricity exports and becomes an excellent export opportunity for Georgian producers. According to the Turkish Electricity Transmission Corp., over the past three decades Turkish demand for electricity has grown at an average rate of 7.6% annually.
The government of Georgia — in parallel with a number of well-known and local engineering and consulting companies, such as ECON Poyry, Fitchner GmbH, Black and Veatch, Stucky, and Mott McDonald — has identified up to 135 potential hydropower projects. Sixty two projects have already been contracted with private investors and are in different stages of development. Investments in Georgia’s hydroelectric sector have the potential to be quite lucrative. Hydropower projects in the country have attracted millions of dollars in investments from foreign and local businesses. One of the largest planned investments is the 702 MW Khudoni project on the Enguri River in Zemo Svaneti Region, a potential $776 million investment.
On average, 10% to 15% of Georgia’s annual energy consumption is supplied by importing electricity and natural gas for thermal power generation. State energy policy is to completely replace electricity imports and thermal generation with hydropower resources. In total, about 2,500 MW of new hydroelectric plants are expected to be developed in Georgia before 2020, which has the potential to cover the growing domestic and external demand, and more hydro could make the Georgian market more self-reliant.