Energy Sector in New Reality
“The year of 2020 will be decisive in terms of liberalizing the Georgian electricity market, while full liberalization will be achieved in 2021”, Maia Melikidze, member of the Georgian National Energy and Water Supply Regulatory Commission (GNERC) told the Business Partner TV program.
In 2017, Georgia took up the obligation to liberalize the energy market after the country joined the European Energy Union, following the Georgian-EU association agreement signed in 2014. The country prepared the corresponding legislation at the end of 2019, and established the Georgian Energy Exchange to regulate the transmission, supply and distribution of energy resources, and multiply options for consumers, she noted.
The year 2019 was fully dedicated to developing new legislation. Crucial work was provided by the Parliament and the Ministry of Economy and Sustainable Development. At the end of 2019, two important laws were adopted – the first one will regulate water supply and electricity supply, and another law will regulate the renewable energy sector, she added.
“At this stage, we are developing energy efficiency legislation. The market will be fully liberalized. In December 2019, we established the Georgian Energy Exchange, i.e. the Georgian energy market, involving transmission, supply and distribution. Today, if you want to receive electricity at your room, it is necessary to apply to TELASI.
Our objective is to separate TELASI from this chain, and leave it only in the distribution sector. We should establish another major company in the electricity supply chain”, Maia Melikidze noted, and added that energy companies will have to determine their own responsibilities.
“The year 2020 will be a period of transition, and in 2021 the market will be fully liberalized. The different Function should be differentiated. The companies with both transmission and distribution obligations should be divided in full. This means that two independent companies should be established in the place of of TELASI. One of them will provide distribution services and another will provide supply services. Therefore, this process will bring certain challenges to the companies; however, this process will generate jobs, and more suppliers will appear on the market. Furthermore, consumers will have more options in Tbilisi, not only TELASI”, Maia Melikidze pointed out.
The market’s liberalization has already increased the demand for constructing small 13-MW hydro power plants (HPPs), which are not subject to GNERC regulations, she explained.
“The regulation of HPP means that it can sign an agreement with a direct supplier. For instance, in May 2019, we directed several major consumers directly to the free market. This means that they were able to find a generator themselves, and sign agreements with suppliers directly, and they have managed to do this”, Maia Melikidze noted.
Electricity has become a difficult product in Georgia. Therefore, its import and prices have increased. To lower expenditures, it is necessary that consumers learn how to spare energy and, simultaneously, they should try to create their own small generators, so as to sell excessive power on the free market. The new energy market reality will provide this opportunity, Maia Melikidze noted, and added that today, the power generated in Batumi may be consumed in Borjomi. Before, power was to be generated and consumed in the same location. This means that if a person generates power in Batumi and does not consume it, he/she can consume electricity in any other location, on an exchange.
“We identified this in 2019. Thanks to so-called reverse meters, when a person generates and consumes power, the meter rotates in the other direction. If a person does not use the generated power, and this power is supplied to the common network, then this power is bought by the distribution company. Consequently, on the 1st of May, every year, the company is obliged to pay citizens who have generated excessive power, and supplied it to the network. The companies were unhappy with this innovation, but this is a GNERC decision, and they have no other options”, Maia Melikidze explained.
This regulations will only apply to the energy sector, at this stage. Later, these changes will apply to the field of natural gas supply, too. Because of these reforms, GNERC expects consumer tariffs to decline, she noted.
“We will be able to boast of many achievements, because a lot of developed countries proudly note that prices have almost zeroed out thanks to the promotion of power generation in the private and individual sector”, Melikidze pointed out.
We are actively cooperating with Tbilisi City Hall to install about 300 electric car charging stations in the capital. Therefore, in 2020, GNERC plans to introduce new regulations for charging electric cars.
GNERC plans to learn from international experiences, Melikidze said.
“We plan to launch a so-called twinning program. We will apply international and European experiences on the market. We have counted the number of electric cars in the country. The number isn’t big, because their battery life is small, but we actively cooperate with city hall on charging stations. About 300 charging stations will be installed, especially at parking spaces. These stations will also work in the suburbs, where, at this stage, private companies have installed charging stations, and they receive income, but I believe the Government should also engage in this field”, Melikidze said.
Energy efficient investments see returns in 3-4 years, while power supply is guaranteed for at least 20 years. The Georgian energy market’s moves towards liberalization and the corresponding legislation was established at the end of 2019. The Georgian Energy Exchange was established to regulate the transmission, supply and distribution of energy resources, and to provide wider options for consumers. As for energy efficiency issues, there is no corresponding legislative basis in the country, and even the terms should be specified, Maia Melikidze said.
“At this stage, we lack energy efficiency legislation. Even the terminology should be specified. We are still analyzing which term is better – “energy-efficient” or “energy effective”. To be frank, I, as a GNERC member with a background in economics,, believe that the term “Energy Effective” is more appropriate, because it reflects long-term development. We should keep up active communication with city hall, because the construction of new buildings with energy effective standards will raise costs. However, based on our estimations, people are able to return the investments in 3-4 years, and energy efficiency will be achieved in at least 20 years”, Maia Melikidze said.
GNERC is ready to assess the energy efficiency of buildings, the GNERC member noted.
“Our mission is to promote various mechanisms in terms of saving energy, especially in terms of billing. Naturally, at this stage, we determine prices in the consumer level, but we should also look towards energy efficiency, and determine what benefits this or that building can bring, and someone is to examine this aspect. First, this will apply to private houses, and then multi-apartment buildings. We are open to cooperation in this respect”, Maia Melikidze told Business Partner.