Georgia has one of the largest untapped hydro resources per capita in the world. The country has a potential to produce additionally up to 25 TWh hydro power annually, 2.4 times the consumption of 10.4 TWh in 2015. We are expecting Georgia’s electricity consumption to grow largely in line with the GDP growth rate. Electricity consumption compound annual growth rate for the last 8 years amounted to 3.6% and the growth rate figure in 2016 is expected to stand as high as 5.9%.
As of 2016, 75% of total installed capacity in the country (3,850 MW) is attributed to HPPs, which generated 78% of 10.8 TWh in 2015. The generation is expected to grow at 6.1% rate in 2016, whereas compound annual growth rate for the last 8 years amounted to 3.3%. The gap between generation and consumption growth rates indicates increasing room for implementation of energy projects. Therefore, the energy sector of Georgia has remained attractive for foreign investors, absorbing 13% of the total FDI in the last 5 years.
Another indicator of significant growth potential of Georgian energy sector is the country’s low electricity consumption per capita compared to Turkey and the average of former Soviet Union countries (by 11.8% and 24.5% respectively). (World Bank, 2013)
We believe that generation tariffs will grow in line with increasing consumption and upcoming commissioning of new HPPs. All generation units built after 2008 and those with installed capacity of 13 MW and below are deregulated. Average deregulated wholesale generation tariff in 2016 was 4.7 USD c/KWh in winter (Jan - Apr & Sep - Nov) and 0.52 USD c/KWh in summer months (May - Aug). Whereas, average ESCO balance tariff equaled to 4.6 USD c/KWh in winter and 4.5 USD c/KWh in summer correspondingly.
Due to the seasonality in the HPPs’ generation profile, Georgia exports in summer and imports in winter. The gap during winter period is bridged by thermal power and imports. As of 2015, the country is net importer, importing 6.7% (699 GWh) of total consumption and exporting 6.1% (660 GWh) of total generation. In 2016 average export price equaled to 4.0 USD c/KWh and average import price amounted to 4.4 USD c/KWh.
The key export market for the surplus of Georgian electricity during the summer is Turkey, as country’s consumption pattern moves inversely to that of Georgia. In 2013, a new 400 KV line connecting Georgia with Turkey was commissioned. Turkish market can absorb Georgia’s extra electricity production during summer period, due to its high seasonal demand in June-August. Turkey’s summer peak demand outstrips winter peak demand, pushing electricity prices above annual weighted average.
The Fund will focus on investing in the following categories of projects:
Medium and large scale hydro projects
Above 200 MW