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Galt & Taggart: Main tendencies of 2020 and 2021(Q1) electric energy market



Reduction of electric energy use, Electric energy providers' problems, and the temporal closure of Enguri HPP was the association's main concerns when Covid-19 "Turned off the lights" in markets, restaurants, and other public places.


However, the recent stability and predictability of the pandemic allowed the businesses to "turn the lights back on."


Considering the tendency mentioned earlier, Bank of Georgia's brokers and scientists group Galt & Taggart (G&T) recently published the statistics, including the most exciting directions revealed in 2020 and the first quarter of 2021.


Consumption


If the economy is measured by energy consumption, it comes out that the Georgian economy is awakening.


In 2020, because of Covid-19 lockdowns and reduced economic activity, electric energy use in Georgia, Including the self-declared republic of Abkhazia, decreased by 4.9% and amounted to 12 TW/h.

In the rest of Georgia (excluding the region of Abkhazia), energy consumption was reduced by 10%. However, in the first quarter of 2021, it was only reduced by 1.4% (compared to 2019), implicating economic reestablishment.


Meanwhile, in 2020, in the region of Abkhazia, energy consumption rose by 23.9% and in the first quarter of 2021 by 18,6%.


However, during the past year, energy consumption still did not reduce:

"The pandemic showed us how much the electric energy system depends on the commercial sector." stated the G&T senior analyst Mariam Chakhvashvili in an interview with "Investor.ge." "The domestic energy use in 2020 increased by 4.2% because of workers avoiding going to their offices and working from home," she mentioned. This experience stopped the 5-year tendency of average 0.1% domestic energy use growth per year.


G&T Electricity Market Watch analysis underlines one more exciting tendency of the pandemic: "Energo-Pro Georgia" subscribers' domestic energy use increased by 7.4% compared to last year, and "Telasi" subscribers' decreased by 0.4%. Stated statistics show perfectly how the population migrated from Tbilisi to the other regions.


Production and Import


In 2020, almost two thirds (64.6%) of electric energy demand was supplied by hydro energies. 22.1% by thermal production, 0,7% by wind turbines, and 12,6% by imported electric energy.



Wind and sun continue playing an important role in Georgian internal energy production. Nowadays, five wind farm projects are ready to be built, notes a G&T analyst.


"feasibility studies have been conducted, and projects are already ready. However, several challenges remain. Companies that implement this kind of project want to see incentives from the government, such as electricity purchase agreements (P.P.A.). Furthermore, there are restrictions on the amount of variable renewable energy that connects to the grid from the state power system.


​​Distribution and transmission networks should be upgraded, or power plants should have higher backup capacities.


There are directly written issues in the development plan of Georgia of 2021-2031, which envisages tripling the currently allowed amount of variable energy,"- explained Chakhvashvili.



Georgia remained a net importer of electricity in 2020: in 2020 the country imported 1.6 TWh (-1.0% y / y) but officially exported only 0.2 TWh (-36.8% y / y), which indicates 1.4 TW / h (+ 5.3% y / y ratio) on net imports. However, the trade deficit was reduced by 16.8% ($ 58.7 million).


The relatively low cost of imports explains the trade deficit reduction through the Salkhino power line, which is intended for the Abkhazia region (22.8% of total imports), which reduces the entire cost of imports. Also fell exports earnings (by 25.4% to $ 5.8 million), accordingly reducing electricity exports.


In 2020, despite decreasing consumption, imports of electricity and thermal energy were still stable to make up for the winter shortage and the reduction of power generated by hydropower plants due to the unusual weather for the season.


In 2020, 45.1% of imported electricity came from Azerbaijan, 35.4% from Russia, and 19.5% from Turkey. Until recently, Turkey was the export market of the Georgian generation, but due to the reduction of market prices, imports have become the norm in this direction.

In 2020 installed electrical power capacity increased by 432 MW, including 230 MW fossil-fuel power station in Gardabani, 178 MW Shuakhevi HPP in the region of Achara and six small hydropower plants that power sums up to 23,4 MW.


In 2020 operating hydropower plants met 2.2% of electricity demand, of which 2.0% comes from Shuakhevi HPP.


After the shutdown of the Enguri HPP, which is located on the administrative border between Georgia and Russian-occupied Abkhazia, and underwent urgent repair works to increase the capacity of Georgia's largest hydropower plant by 30%, electricity imports almost doubled (+93%) in the first quarter of 2021 before this Abkhazia was receiving energy from Russia through the "Salkhino" transmission line.



"Naturally, the additional capacity of the "Enguri HPP" will reduce the need for imports." - notes the analyst - "However, as the economy is recovering continuously, consumption is increasing, and Georgians will need to use renewable energy resources to ensure energy security.


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