Hitting European targets through American model
28 April, 2011
Hitting European targets through American model

Georgian energy policy is controversial. It sets European targets focused on energy-efficiency but regulates market through pro-American liberal rules. Inconsistency in targets- and-regulation draws country back from achieving its declared European tasks, Liana Jervalidze, an energy expert, came to this conclusion recently after researching Georgian energy policy.

In spite of its ample hydro resources Georgia is an energy-deficient country and declares allegiance to the EU energy policy targets aimed at green energy. The EU has an obligation to have 20%

of its entire energy balance based on renewable green energy source. Therefore, European legislation regulating energy sector, obligates big distribution companies to base 15-20% of their energy distribution on renewable energy sources that includes small Hydro Power Plants (HPP), as well as alternative energy sources like wind and solar plants. The point is green energy sources are much more expensive than the ordinary non-green electricity generated by big HPPs and thermal stations and nobody would buy them without this obligation, Jervalidze explains, and it would be impossible to implement the environment-friendly energy policy that is so important against the backdrop of aggravating ecological problems. 
Logically, expensive energy source should jack consumer tariffs up, but to escape tariff hike EU regulation restricts distribution companies to increase consumer tariffs on electricity supply and they balance tariffs through mix of expensive green energy with the cheaper non-green energy.
Georgia that sets the European green-energy-oriented targets on declaration level [it has no official commitments as of yet] adopted the pro-American liberal principles of energy market regulation and imposes no restrictions and obligations to electricity distribution companies to make them greener. Out of green energy there are only small HPPs developed in Georgia, the more expensive wind and solar-based power plants are not deployed in the country in fact, only few volunteer entrepreneurs or households install individual solar heaters and electricity generators. The point is that nobody wants to undertake a risky venture to produce green but expensive electricity that cannot find market demand as far as Georgian regulation does not oblige distribution companies to buy green energy, Jervalidze said.
Accordingly only 3% of Georgian energy balance is made by small HPPs that face bankruptcy due to liberal regulation. At first sight the single way out to make the country greener is adoption of a law that would be obliging distribution companies to buy expensive green energy on one hand, and enterprises and companies to install energy-efficiency equipments for they are the key consumers of the electricity globe over.
But not in Georgia. Here 80% of electricity is consumed by household with very low purchase power and the remainder 20% is made by enterprises bigger part of which scarcely survives. Governmental standpoint is that introduction of obligatory energy-efficient regulation is impossible when the purchase power of the country is so low and only market demand can dictate stricter regulations.
Only energy-deficit may force government to develop alternative energy sources, energy experts think. 
According to Rezo Arveladze, President of Georgian Energy Academy, Georgian hydro potential is not as high and reliable as government touts and development of alternative source will be inevitable when economy will be developed and consumption increased. The entire theoretical hydro potential is 200 billion kilowatt/hour (kw/h) in Georgia but 80 billion is technically available, and 40-45 billion economically reasonable, while wind resources stand at 4 trillion kw/h that exceeds the hydro potential by100 times.
“Technically available wind potential is 3-4 billion kw/h that is 10 times lower than hydro. But it is on a par with Georgian demand that makes 8 billion kw/h consumption per year, and if we utilize even 10% of this wind resource [1 billion]  it will be great,” Arveladze said.
According to him, even if Georgia makes available 40-45 billion kw/h of hydro potential, it still will be energy-deficient and dependent on import in winter: the point is in winter when consumption increases in Georgia, electricity generation decreases due to water reduction at HPPs; while in summer consumption decreases but generation increases and the excess is exported.
But if Georgian economy develops and energy consumption increases from 8 billion to 40 billion kw/h and more which is an average consumption in developed countries, no electricity will remain for export. And government will have to think of green energy in the European way.


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