Gardabani - a questionable investment
23 January, 2014
Gardabani - a questionable investment
The state-owned shareholding company Partnership Fund (PF) and its daughter company, Georgian Oil and Gas Corporation (GOGC), are starting construction of a new thermal power plant in Gardabani, in the Kvemo Kartli region. Calik Enerji, a Turkish energy giant, is constructing the plant.
The 230 megawatt plant’s estimated generation potential is 1.8 billion kilowatt/hours, and the investment amounts to USD 220 million. The new plant is scheduled to be put into operation by the end of 2015. PF and GOGC will
be jointly financing the project.
Unlike the old thermal stations that already operate in the country, the new project entails construction of a combined cycle thermal plant that is almost doubly effective. Additionally, if there is any problem with electricity supply in the country, the plant will have a reserve capacity to supply the energy grid of Georgia for 25-30 minutes, guarantying sustainability of the whole system. That inspires Irakli Gharibashvili, Prime Minister of Georgia, to call the project unique and marking a new era in the country’s energy development.
“For any country and especially for Georgia, energy independence and energy security is vital and directly connected with the security of the whole country,” Gharibashvili said at the project launch ceremony on 17 January in Gardabani. “For the first time ever in the history of Georgian independence we witness implementation of such a large scale energy project … that makes it very important. The Gardabani thermal plant generated electricity will be the most reliable energy, and will strengthen the energy security of Georgia even more.”
But sector analysts question the reliability of thermal stations as guarantees of energy security once Georgia is completely dependent upon imported gas. Some recommend a focus on utilization of the ample hydro resources of Georgia, rather than financing of thermal stations that very likely will generate relatively expensive electricity. In fact, Georgian electricity consumption amounts to 10 billion kilowatt/hours today, while its hydro potential exceeds 30-35 billion kilowatt/hours.
“The combined thermal stations are of around 1.5 fold higher efficiency than general condensed thermal stations employed in Georgia at the moment,” Revaz Arveladze, President of Energy Academy of Georgia, told Georgian Journal. “So yes, it will be more efficient, but there is another side of the coin - energy independence of the country. The energy generated by imported gas cannot increase the energy security of the country. In a country where hydro resources are not utilized I think the state should attend to hydro energy utilization first and foremost - it is fundamental for the energy security of Georgia.”
It is certainly true that the price of the thermal plant electricity will always be dependent on gas prices on so much volatile international market. At the moment Georgian thermal stations are supplied by relatively cheap gas: USD 150 per thousand cubic meters (tcm). This price is available thanks to the free gas Georgia gets from gas transit projects. Moreover, Georgia gets bulk gas supply from Azerbaijan at a preferential price averaging USD 200 per tcm. However, the existing pool is totally distributed to household consumers and thermal stations.
The new station apparently needs a new supply that can be delivered either at the market price, averaging USD 300-400 per tcm, or the state will have to negotiate additional volumes of preferential gas with Azerbaijan. Azerbaijan, as a regional partner to Georgia, may go on concessions, but this option is far from guarantying the energy independence of the country. “There are no eternal partners, and enemies in politics, the world practice shows,” Arveladze reminds.
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