Georgia possesses large untapped hydropower resources. At project appraisal, its hydropower potential was estimated at as much as 80 terawatt-hours (TWh) per annum, of which up to 60 TWh was considered economically feasible and less than 20% was being utilized. At the same time, its power system had a significant generation-load imbalance: two-thirds of its energy resources were in the northwest while two-thirds of domestic demand was in the east; most of its potential export market was to the south.
In 2012, the government sought to develop a regional power market comprising Armenia, Azerbaijan, Russia, and Turkey, with Georgia serving as a transmission hub and a seasonal exporter of environmentally clean hydropower—primarily to Turkey, which had been experiencing capacity shortfalls and inflated electricity prices in the peak summer period. The transit of electricity from Azerbaijan was also possible, which meant that the rich energy resources in the Caucasus could eventually be exported to European energy markets.
However, to increase hydropower production to meet rising domestic and regional electricity, two critical technical issues needed to be resolved: (i) Georgia must have a more stable, reliable, and efficient power transmission system to minimize system blackouts; and (ii) Georgia needed to increase transmission capacity. Resolving these issues would require investments to rehabilitate substations and strengthen transmission facilities.
Against this backdrop, the Asian Development Bank (ADB) approved in December 2012 a loan in various currencies equivalent to $48 million for the Regional Power Transmission Enhancement Project. The project was designed to improve the reliability and efficiency of the power transmission system and increase its capacity by: (i) rehabilitating and improving substations, (ii) constructing a new 220/110-kilovolt (kV) substation in Khorga, (iii) providing consulting services, and (iv) undertaking a study of potential hydropower projects. The new Khorga substation was to increase transmission capacity by 400 megavolt-amperes (MVA) from the Enguri hydroelectric power plant (HEPP), the country’s largest, and the Vardnili-1 cascade of HEPPs. This would improve the availability of power supply to the industrial zone of Poti and to Turkey and stabilize the operation of the overall transmission network.
At completion, the project improved or extended 3 existing substations: the Menji, Marneuli substation, and Ksani substations. The new Khorga substation, completed as designed, enhanced network capacity and system stability in western Georgia, thus assuring an efficient link between the transmission and distribution systems. The study on potential hydropower investments was cancelled upon advice that this component would be financed by other sources, including the state budget. Funds originally allotted for this component were reallocated to the rehabilitation of existing substations.
Successful completion of all the revised outputs enabled the project to achieve its intended outcome. By end-2016, the Georgian State Electrosystem (GSE) reduced undelivered electricity to customers by 72% and increased substation capacity on the 220 kV and 500 kV transmission grids by more than 500 MVA. As a result, the project succeeded in achieving its expected impact. In 2017, Georgia’s annual power export share increased to 5.9% of domestic generation and its power generation resources increased to 11.53 TWh. It is expected that power generation resources will achieve the 2019 target of 12 TWh. However, the 20% power-export-share target will be achieved only once regional economic growth returns and demand for electricity recovers in Turkey.
Although the project was not directly involved in the import of electricity from Georgia, it has major implications for the future transit and trade of electricity in the region. The substations it constructed/rehabilitated are integral to increasing exports to Turkey and the electricity trade between Russia and Armenia. The project was executed by the GSE. A project management unit, established within the GSE, took charge of day-to-day implementation.
