Georgia’s Power Sector: Energy Crossroads in Uncertain Transition - საერთაშორისო გამჭვირვალობა - საქართველო

Georgia’s Power Sector: Energy Crossroads in Uncertain Transition

11 January, 2010

Georgia’s geo-strategic location as an east-west energy corridor is frequently cited by western policymakers as justification for large-scale financial investment, technical and economic aid, and political support for the incumbent government. According to one estimate, Georgia received nearly 3 billion USD in combined international assistance, private investment, and gas and electricity loans between 1995 and 2003. The EU/Georgia European Neighborhood Policy (ENP) Action Plan identifies “Enhancing cooperation in the fields of energy, transport and environment contributing to energy security and supply diversification needs for the EU” as a fundamental partnership goal (p. 2). Despite its location on a lucrative energy corridor, however, Georgia has struggled to secure a basic energy supply for its citizens since it declared independence from the USSR some eighteen years ago. Civil war and economic crisis in the early years of independence destroyed many state-owned energy assets, while the resources that remained were severely damaged or abandoned in disrepair. In the recent years, the urgency of Georgia’s energy supply crisis peaked in the last year as a result of increased political tensions with Russia—Georgia’s primary energy supplier. On 1 May 2007 Georgia’s independent National Energy Regulatory Commission (GNERC) hiked consumer gas tariffs in response to the more than doubling of the price of Russian gas at the beginning of the year. This year alone Tbilisi consumers have faced electricity cost increases of up to five cents (approximately eight Georgian tetri) per kilowatt hour. According to one account, some rural residents have seen electricity costs more than double. The Ministry of Energy estimates average annual per capita electricity consumption at 1,900 kilowatt hours. The following report addresses the Georgian government’s handling of the ongoing energy crisis. Taking the State Energy Policy as the government’s central strategy document, the report assesses the goals set forth therein and the extent to which these goals have been met to date. Three principle objectives are set forth in the document: diversification of supply sources (to include harnessing of the full potential of domestic hydropower resources), liberalization and de-regulation of the market (to attract competitive private investment), and maximization of Georgia’s benefits as an energy transit corridor.