Electricity deficit in 2017 bridged by imports rather than TPPs. Electricity imports in 4M17 have already exceeded 2016 total imports by 85.1% and 2017 planned imports by 7.6%. 886.7 GWh of electricity (+138.2% y/y) was imported in 4M17, with Azerbaijan being the main source of imports (62.7% of total) and the rest coming from Russia (24.2%) and Armenia (13.1%). Relative prices of TPP-generated electricity and imports were the main reason behind choosing imports over TPPs to satisfy high demand (5.3% higher than planned) and make up for low HPP generation (11.0% lower than planned).
Price volatility on the Turkish market led to a reduction in the number of companies willing to export from Georgia to Turkey, leaving unallocated capacity of 4MW out of the 250MW allowed export capacity (ATC) in May 2017. Private companies with priority access to the Meskheti transmission line connecting Georgia and Turkey will be the main exporters to Turkey in 2017. Armenia has also become an attractive market for Georgian companies. Among the exporters to Armenia, besides the privately owned GIEC, is ESCO. In exchange for the imported electricity during 4M17 (116.3GWh), ESCO is exporting electricity to Armenia in May and June.
IMF has declared PPAs for power plants as a fiscal risk for Georgia in its country report issued in April 2017. IMF recommends refraining from initiating any PPA agreements until the institutional framework is in place. Taking into consideration the existing fall-winter period power deficit, partial PPAs currently under negotiation, with cumulative installed capacity of up to 500MW, are permitted to proceed, as long as the guaranteed purchase period is limited to eight months and the purchase price to USc 6.0/kWh.
Domestic consumption increased 7.9% y/y in April 2017 and 9.1% y/y in 4M17. Consumption of distribution companies increased 7.1% y/y in April: consumption was up 8.5% y/y by Telasi, 6.2% y/y by Energo-Pro, and 8.1% y/y by Kakheti Energy Distribution. The Abkhazian region’s electricity usage was up 13.7% y/y and accounted for 18.4% of domestic consumption.
Growth in domestic consumption was met mostly through imported electricity. Total electricity supply from domestic sources was down 6.6% y/y, while imports increased almost six-fold. Three quarters (74.9%) of domestic consumption needs were met by hydro generation; the rest was satisfied by thermal (8.9%) and imported (15.2%) electricity, while the newly built wind power plant accounted for 1.0% of total electricity supply.
Wholesale market prices in Georgia were 16.0% above the Turkish market clearing price in April 2017. The Georgian wholesale price in April 2017 was flat at USc 4.7/kWh (+0.7% y/y), mainly due to the low import price and a change in the balancing electricity purchase price methodology. Starting April 1, the price paid by the market operator (ESCO) to deregulated HPPs for balancing energy supply was lowered from the highest regulated TPP price (14.234 tetri/kWh) to the highest regulated HPP price (9.4 tetri/kWh). In April 2017 the share of such electricity in total balancing energy market was 9.1%, while imports were the leading component (52.3%). Overall, electricity traded through the market operator in April 2017 reached 280.0 GWh, 29.1% of total electricity supplied to the grid, with the rest traded through bilateral contracts.
