In the early 2000s, Georgia had a scheduled electricity supply due to inadequate energy generation and infrastructure. However, with energy independence becoming a top priority, Georgia now exports electricity at certain times of the year, thanks to the abundance of renewable energy sources within the country. These sources include hydroelectric plants, solar power, and wind power. Notably, Georgia has tailored regulations and tax systems to attract investors.

Last year, the electricity sector in Georgia had an outstanding year with record-high export revenues of $84.3 million and a positive trade balance of $43.2 million. The country managed to maintain low electricity prices on the local market and was not affected by the global energy crisis and price hikes. Over 70% of the supply comes from hydro generation meaning its cost does not depend on external factors. 

Amid rising local and international demand, the country seeks to start new energy projects and revive old ones. The government expects about $3 billion in investments for new energy generation projects in the next three years.

At the end of 2022, Georgia's installed capacity was 4.5 GW. Within this figure, hydropower plants contribute 3.4 GW, wind power plants represent 0.02 GW, and thermal power plants account for 1.1 GW. By introducing a contract for differences (CFD) as a new support mechanism for renewable energy, the government anticipates an increase in investor interest and an acceleration of capacity additions in the coming years. According to the scheme, the state commits to purchase electricity from the private sector with the price set at the public auction for 15 years, thereby promoting the development of local generations. As a result, the scheme ensures stability for contracting parties amid energy price fluctuations. 

"Within the framework of the new mechanism supporting the sector, auctions will be announced for 1,500 MW of electricity in the next three years. 950 MW will be hydro generated, 500 MW will come from solar and wind stations, and 50 MW will come from other types of generation. The first capacity auction of 300 megawatts was completed a few weeks ago. We have received 78 proposals for 900 MW in total. As a result of the review and evaluation, 24 companies have been identified as winners. The projects cover hydropower, wind and solar power plants. The government of Georgia believes that this scheme will contribute to the emergence of new investments in the field", says Romeo Mikautadze, First Deputy Minister of Economy and Sustainable Development of Georgia. 

One of the primary obstacles facing Georgia's electric energy sector is its seasonality. From May to September, favorable weather conditions enable the country to export electricity, but for the rest of the year, it depends on imports. As a result, constructing new power generation facilities in the country is a crucial priority, particularly given that the domestic consumption has been increasing yearly in line with economic growth. Currently, only 30% of the hydro resources are utilized, making the sector particularly enticing for investors.

Apart from production, Georgia uses its geographical location and adopts the role of an energy transit country. The "Akhaltsikhe-Borchka" transmission line, which links Georgia's electricity grid to Turkey, operates at full capacity. As a result, Turkey received 4.02 TWh of electricity from Georgia in 2022, from which 0.86 TWh was exported from Georgian producers (+290.9% y/y), and 3.16 TWh was transited through Georgia from surrounding nations (up by 3.03 times).

In the near future, Georgia's energy sector will witness the launch of its most substantial historical project, which will enhance the country's transit role in the region: the Black Sea underwater power transmission cable. The project will link the South Caucasus region with South-Eastern Europe through a power cable estimated to have a total length of about 1,195 km, with 95 km being on land and 1,100 km underwater. The transmission cable will facilitate electricity export from Georgia, Azerbaijan, and Armenia to the European Union. The estimated cost of the project is $3 billion. 

"The Black Sea submarine cable is a regional project. It is an opportunity not only for Georgia but also for our neighboring countries. All countries involved in the project will have the opportunity to import and export electricity from and to Europe. The price of electricity is higher in the EU market than in the region, creating an affordable environment for investment", says Romeo Mikautadze. 

The project has a target completion date of 2029. The World Bank is heavily involved in the construction process, conducting technical and economic feasibility studies. The European Union also supports the project and has highlighted its considerable importance.

As a member of the EU Energy Community, Georgia must comply with European legislation, which includes the liberalization of its energy market. An energy exchange stock will be launched soon, enabling companies to participate in daily trading.

In addition to local investors, there is great interest from foreign investors. For instance, the Georgian Energy Development Fund (GEDF) intends to build Georgia's largest solar power station in collaboration with Abu Dhabi-based company Masdar, a global leader in renewable energy and sustainable development. The solar power station will have an installed capacity of up to 100 MW.

"Solar power projects will significantly reduce Georgia's dependence on energy imports. It will also help the country meet its commitments under the association agreement with the EU and achieve its goals related to renewable energy action plans and addressing climate change", says Jaba Khmaladze, director of GEDF. 

In Georgia, 1.53TWh of electricity was imported in 2022, accounting for 10.3% of the total demand. Of the total imports, 82.5% came from Russia, 8.4% from Azerbaijan, and 9.0% from Armenia. 

The first European company to enter the Georgian energy sector in 2006 was Energo-Pro Georgia. Owned by the Czech company Energo-Pro, it is the largest electricity distribution company in the region. It operates 15 hydropower plants with a total installed capacity of up to 500 MW and one gas turbine power plant with a 110 MW capacity. The country can count on its "vast potential in hydro generation, its clear regulations and its open market", says Givi Jgarkava, member of the board of directors at Energo-Pro Georgia, before adding that "full and precise implementation of EU practices will positively affect transparency and fairness of prices in the market. This liberalization process is currently ongoing".

The fact that Georgia is attractive to foreign investors is confirmed by Peri, one of the country's first and leading construction companies of energy generation facilities. Peri aims to develop a power facility with an installed capacity of around 500 MW within 3-4 years, including a 206 MW wind power plant set for completion in 2024, a 50 MW solar installation in the Kakheti region, and an expected 200 MW of hydroelectric generation. The Executive Director of Peri, Lasha Iordanishvili, notes that foreign partners from the United States of America, the European Union, and Japan are represented in multiple of their projects. "We have a positive evaluation of the new energy support scheme developed by the Georgian government, as we believe it is one way to reduce the country's dependence on imports. Hydro, solar and wind energy have the potential to contribute significantly to the nation's energy mix, fostering a sustainable and self-sufficient energy landscape", says Mr Iordanishvili.

The Georgian Industrial Group (GIG), which owns and operates thermal and hydropower plants with a total installed capacity of 662 MW, is also planning and developing around 70 MW of hydro and wind energy facilities. GIG and its subsidiaries hold a significant market share in electricity generation in Georgia and are the largest electricity trader in the country. "I recommend all investors interested in Georgia to visit the country first so that they can see with their own eyes the potential that exists in the country today", says Lasha Mikava, CEO of Georgian Industrial Group. 

The energy sector's representatives believe that enhanced economic ties with diverse nations, such as the United Arab Emirates, can enable the country to allure a greater number of investors to its most promising area of growth, which happens to be the energy sector. With ambitious plans of regional significance in this field, the country aims to tap into the abundant opportunities available for development.

‍