The messenger logo

Absence of energy strategy leaves the country without multibillion-dollar economic benefits, research finds

By Natalia Kochiashvili
Wednesday, August 12
Georgian National Energy and Water Regulatory Commission (GNERC) has approved the rules of the wholesale electricity market. The new regulation includes day-to-day, daily, balancing, and ancillary services market rules to ensure the safe and reliable operation of the electricity market, and the regulation of electricity trading on the energy exchange. The rules apply to market participants - power plant owners, large consumers, traders, and electricity suppliers. The rules prohibit possible conflicts of interest and cross-subsidization in the market.

The purpose of the day-to-day and daily market rules is to create the legal environment necessary for the development of a competitive electricity market in Georgia and the formation of a fair price, to promote efficient production and consumption. The rules provide for the introduction of hourly trading in electricity, which will allow customers to purchase electricity at an hourly rate.

The rules of the market of balancing and ancillary services will regulate the functioning of the market of balancing and ancillary services, determine the obligations of the transmission system operator and the balancing market operator, the person responsible for balancing and the balancing service provider related to the balancing of the power system. A self-dispatch model will be introduced to plan and operate the power system.

The rules are developed based on European regulations and its adoption is conditioned by the Law of Georgia on Energy and Water Supply.

Interestingly, World Experience for Georgia has recently completed work on a National Energy Strategy Regulation Impact Assessment Report. WEG presented the results of the study on August 7, 2020, at an online seminar organized by the USAID Energy Program.

Research shows that by implementing policies based on strategic analysis and research in energy, it is possible to reap multibillion-dollar economic benefits over the next 10 years. Besides, the strategy will help strengthen energy security, accelerate economic development, increase employment, better protect the interests of the population, and gain confidence in public policy.

Previous studies and consultations with experts show that the lack of an energy strategy has largely contributed to the accumulation of problems in the energy sector, including an increase in energy imports and monopolies, a reduction in private investment, and an increase in public investment. The research states that the lack of renewable energy resources hurts the sector and the country and poses development threats. "To address these problems, in-depth analysis, strategic planning, and implementation are needed, which requires proper analysis and research support and political will,” finds the research.

In the study, WEG considered 3 possible scenarios for the development of the strategy, of which the Ministry identified the establishment of a Strategic Analysis Center and energy research, allocating at least GEL1 million per year and considering the results in the policy. Cost-benefit analysis shows that spending GEL18-20 million over the next 10 years could bring in a profit of GEL7-10 billion.

The study was conducted as part of the USAID Energy Program project. It aimed to identify effective and optimal ways to develop in-depth energy strategies and to offer ways to overcome existing barriers for decision-makers.