Georgia’s transmission capacity is set to improve significantly over the next decade. Total investment is estimated at EUR 809mn, according to the 10-year network development plan set out by GSE, and will accommodate an additional 4,000MW of installed capacity. Hydro development remains strong: 27 HPPs with an estimated investment value of US$ 3.2bn are currently at the licensing or construction stages. Domestic consumption growth has decelerated on the back of a slowdown in industrial consumption. The electricity trade deficit decreased 84.2% y/y in 2015, with Turkey the main contributor to export growth despite the significant decline in Turkish electricity prices. The design of a competitive electricity market and power exchange is underway, with active involvement from all stakeholders.
Domestic consumption growth decelerated to 2.1% y/y in 2015, while generation increased 4.5% y/y. A slowdown in industrial consumption was the main drag on consumption growth, while the key contributor to the increased generation was the Gardabani combined-cycle power plant, which commenced operations in September 2015. 11 HPPs with a combined installed capacity of 161MW have been launched in the past three years and an additional 286MW is expected to come online by the start of 2017. 27 HPPs and one wind plant, with a total installed capacity of 1,873MW and estimated investment value of US$ 3.2bn, are at the licensing or construction stages.
Georgia’s transmission capacity is set to improve significantly, with planned investment of EUR 809mn. GSE has put forward a 10-year network development plan, communicating a clear vision of how domestic and trans-border transmission capacity will be enhanced to accommodate an additional 4,000MW of installed capacity. The main bottlenecks in the internal transmission system are the east-to-west 500kV lines. To address these limitations, several lines and corresponding substations are to be constructed. Sizable investment will be made in new cross-border transmission lines and back to-back stations to increase electricity export and transit potential with an additional 2,400MW of cross-border transmission capacity.
Electricity trade deficit decreased 84.2% y/y in 2015. Turkey was the main contributor to export growth (+77.4% y/y), despite the significant decline in Turkish electricity prices. Turkish market prices were lower than Georgian wholesale electricity prices for most of the year. While Georgian export prices remained competitive in 2015, Turkey’s transmission system operator capped the transmission capacity to be used for electricity imports from Georgia in 2016. The cap is not yet a limiting constraint, as Georgian demand for export capacity is below the limit set by TEIAS. We look to the enhancement of east-to-west transmission capacity within Turkey and a rebound in Turkish electricity prices to prompt Turkey to remove the cap in the future.
Georgia aims to create a power exchange and an open electricity market. At the current pace and with strong stakeholder involvement, we expect the power exchange to be operational by 2020. A trading model has yet to be developed and a legislative and contractual framework established. The model will likely leverage the experience of Turkey and the Balkan nations, which recently underwent the same process. We expect approximately 10-15% of annual electricity trade to be conducted on the power exchange in its initial years.
