GEORGIAN ELECTRICITY ROAD MAP (2015-2020) WHITE PAPER FOR THE GOVERNMENT OF GEORGIA

The document was prepared by Deloitte Consulting LLP for the United States Agency for International Development (USAID) as part of the Governing for Growth (G4G) in Georgia program. The existing electricity market in Georgia is characterized by a balanced mix of low-cost hydro and thermal power plants. However, the market lacks a competitive framework for electricity trading, which hinders the development of new hydropower projects and limits the country's ability to export electricity to neighboring countries. To address this issue, the Georgian Electricity Market Model of 2015 (GEMM) was created to facilitate competitive electricity trading and provide a framework for the development of a competitive electricity market in Georgia. The GEMM is a strategy that enables Georgian Market Players to trade electricity cross-border into regional competitive power markets while providing long-term cost-effective electricity to domestic consumers. The GEMM 2015 provides details of the required legal and regulatory reforms and institutional capacity building in the Georgian Government and its electricity sector-related agencies to implement a competitive electricity market in Georgia. The Electricity Trading Mechanism (ETM) is a product of GEMM 2015 and represents the move from a monthly balancing market model to an hourly balancing and competitive electricity trading-based market model. The ETM is designed to facilitate Foreign Direct Investment (FDI) with non-recourse project financing from International Financial Institutions (IFIs) according to competitive electricity market principles in line with European Union (EU) energy directives. The ETM will enable Georgian Market Players to trade electricity cross-border into regional competitive power markets and provide long-term cost-effective electricity to domestic consumers. The implementation of the ETM will involve several stages, including the preparatory stage, stage 1, stage 2, and stage 3. Stage 1 involves the creation of a partial pool, bilateral contracting, and day-ahead trading, while stage 2 involves the transfer of risk to the competitive segment. Stage 3 involves the initial retail market opening, required changes, and balancing non-interval metered supply. The document also outlines the international electricity trading framework, which includes the development of an electricity exchange or PX node with Turkey, cross-border harmonization, and the development of a clearing mechanism. The Electricity Market Development Action Plan is also included in the document, which outlines the key actions required to implement the ETM and develop a competitive electricity market in Georgia. Overall, the Georgian Electricity Road Map provides a comprehensive framework for the development of a competitive electricity market in Georgia, which will enable the country to export electricity to neighboring countries and attract Foreign Direct Investment.