TI Georgia: Georgia is not Significantly Dependent on Russian Electricity

On April 5, Transparency International Georgia (TIG), a local watchdog, released a report on the main trends in the energy sector of Georgia in 2010-2022, according to which, despite the increase in imports of energy resources from Russia in recent years, Georgia is not significantly dependent on Russian electricity and “even if electricity from Russia is completely cut off, the country will not face an energy crisis.”

At the same time, domestic electricity consumption in the country exceeded production in the period under review, leading to an increase in imports. In turn, the tariff “increased significantly” amid the increase in electricity imports and the devaluation of the national currency, the lari. It is also noteworthy that intermediary companies of former top officials are involved in the import, “which also makes electricity more expensive”.

Tariffs and imports

According to Transparency International Georgia, electricity tariffs for household consumption in Georgia have increased by 40% over the last 10 years. In Tbilisi, after 2012, the consumer tariff has increased by an average of 40.5%; according to the latest data, in case of consumption of electricity up to 101 kWh per month in Tbilisi, the tariff for 1 kWh is 18 tetri (including VAT), in case of consumption of 101-301 kWh – 22.1 tetri, and in case of consumption of more than 301 kWh – 26.5 tetri.

As for the regions, the electricity tariff increased by 39.3% in the same period. According to the latest data, the tariff for Energo-Pro Georgia subscribers is 17.7 tetri (including VAT) for consumption up to 101 kWh per month; 22.7 tetri for consumption of 101-301 kWh hours and 26.2 tetri for consumption of more than 301 kwh hours.

In 2010, the share of imports in electricity consumption was 2.6%. By 2021, it increased to 7.4%, mainly due to the partial shutdown of the Enguri HPP. It is noteworthy that in 2019-2021, the occupied region of Abkhazia made a significant contribution to the increase in imports due to the increase in electricity consumption and the decrease in generation at the Enguri HPP. Abkhazia is supplied with electricity from Russia via the Tbilisi-controlled territory. In 2022, the share of imports in consumption decreased to 4.5%.

As for the importing countries, until 2013, Russia’s share in Georgia’s imports was up to 95%, which was significantly replaced by Azerbaijan in the following years, and in 2017-2021, it occupied the first place with a share of 66%. In 2021, Azerbaijan’s share in electricity imports stood at 59%, and Russia’s share – 25%. In 2022, Russia’s share in imports increased to 58% (excluding electricity supplied to Abkhazia), while Azerbaijan’s share fell to 20%. The share of electricity imports from Armenia increased to 22%.

Despite the increase in electricity imports from Russia, the share of Russian electricity in Georgia’s domestic consumption remains low. It was 1.8% in 2021, and 2.6% in 2022. Therefore, “even if electricity from Russia is completely cut off, the country will not face an energy crisis.”

Import intermediaries

The report also focuses on the intermediary companies involved in importing electricity, which have profit-making objectives that in turn increases the tariff. “The question of why it was necessary to involve intermediaries in this process remains unanswered.”

For example, according to the report, Elgreen Holdings Incorporated founded by former Prime Minister Zurab Nogaideli is involved in importing electricity from Azerbaijan. Lux Energy Trading LLC, an intermediary, is involved in the import of electricity from Russia. 50.01% of the company belongs to Russia’s Inter Rao, and the final beneficiary of 49.99% is Vakhtang Ambokadze, a person related to the former Minister of Economy, Ivane Chkhartishvili, who was the Director General of the Energy Service Company ESCO until 2019.

Electricity generation and consumption

In 2011-2022, Georgia’s domestic electricity generation increased by 42%, and consumption by 68%. Up to 75% of the electricity produced in Georgia is generated by HPPs, 24% by thermal power stations and up to 1% by wind power plants. 26% of Georgia’s electricity is generated by the Enguri HPP.

Due to the fact that HPPs operate at high load in the period from May to September, Georgia exports electricity (to Turkey and Armenia). Although exports increased significantly in 2022 compared to 2021, they decreased by 36% between 2011 and 2022.

Recommendations

According to Transparency International Georgia’s recommendations:

• It should be transparent how much the price of imported electricity is increased by the fees of the intermediary companies. If there is no justification for the need for involving intermediaries in the import, the state should purchase electricity without them.
• The main goal of Georgia’s energy policy should be to increase the efficiency of electricity consumption and domestic production.

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