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   Course Title    EThe Georgian Energy Policy Issues
Lecturer    Karine Melikidze
Institution    Georgian Academy of Sciences
Country    Georgia


1. The Course Aims and Objectives

Duration of the course: 36 academic hours (1 semester)

This is a specialization course of lectures for students of Environmental Management Department. The course aim is to prove the necessity of development and implementation of the modern efficient energy policy in Georgia. The course is mostly about the ongoing energy crisis in Georgia, its background; causes; influence on a various aspects of the modern Georgian life, with a special emphasis on environmental problems and ways of its solution.

The basic objective of the course is to help students to understand the necessity of existence of energy sector development.

2. Role of the course in the overall degree curriculum

The course is a case study of environmental management problems.

Energy sector case study helps to estimate the environmental problems and ways of its solution.

3. Course content

The course is built around two central subjects:

  • analysis of use of local energy resources and their role in local energy balance;
  • Georgian energy policy and strategies for overcoming the energy crisis.

The course consists of following lectures:

  1. Introduction. The development of energy balance in Georgia
  2. The fossil fuel resources and current state of their supply.
  3. The hydropower resources and their utilization.
  4. A concept for sustainable development and the application of renewable energy sources in Georgia.
  5. The estimation of solar energy resources.
  6. Wind power energy resources.
  7. Geothermal resources and their exploration.
  8. Causes of energy crisis and strategies for overcoming it.
  9. Restructuring the energy system.
  10. Technical and economic aspects of overcoming the energy crisis in the nearest perspective. Setting electrical power tariffs and their dynamics.
  11. Import-export operations in the Georgian energy sector. Current international support and foreign investment and its efficiency.
  12. Georgian energy policy and energy legislation.
  13. The privatization process in power engineering and its future prospects.
  14. Energy saving.
  15. The environmental problems of power engineering.
  16. Prospects of development for the Georgian energy sector.

Lecture #1

Introduction

The limited fossil reserves, the irregular import of and power from politically unstable regions and the necessity to take into account environmental issues makes it imperative to find more efficient ways of using the existing resources as well as of exploring new reserves of energy in Georgia. Power engineering surely needs long-term planning, which in its turn requires taking into account the capacity of traditional fuel-extraction and energy-producing technologies, as well as the prospects for using non-traditional and renewable energy sources. Even the most basic figures show how important it is to develop the power engineering sector in this country: today, 29 gigajoules of energy is consumed per capita in Georgia [1] (out of this the share of electricity is about 1,500kW h, or 5,4 gigajoules), which is much less than in developed countries (the world average of energy consumption in 1993 was 59 gigajoules per capita). And if we look at the amount of energy consumption per unit of national income, the lag becomes even more apparent. While in advanced countries these figures have been progressively decreasing, in Georgia the picture is the reserve: since 1990, power consumption has decreased approximately by half.

Lecture #2-4

The fossil fuel resources and current state of their supply

One of the main ways to overcome the power crisis in Georgia is the revival of the coal industry, as coal is the major local fuel resource. Through there are many coal deposits over the whole country, only the Tkibuli-Shaori deposits, where over three-fourths of the estimated coal resources are concentrated, have a future. Revival of other mines is less probable. However, it should be pointed out that thermal power engineering and utility services in Georgia are not ready to use coal, as within the last 20 years they switched to liquid fuel and natural gas. After oil and natural gas were given priory, coal consumption dropped dramatically and its extraction went down to 1.15 mill tons.

Industrial extraction of Georgian oil started in the 20-s of our century, though in very small quantities. From 1984 output began to decrease, in 1986-91 it fell to approximately 180 thousand t and later to 50 thousand t. Only in 1997 did it come close the level of 1990. Currently there are 15 oil deposits in Georgia with estimated reserves of 12 mill tons however, extraction is difficult. In 1997 initial aggregate oil resources were estimated at 580 mill tons, including 380 mill t in land deposits and 200 mill t beneath 9 thousand km2 of the Black Sea-bed aquatorium. But industrial extraction of this oil would need huge investment, which is beyond Georgia's capacity.

The initial total reserves of natural gas were estimated in the eastern part of Georgia alone as 98 bill m3 . The extraction of natural gas started in the late 80s. There is a great potential here but as gas deposits are not ready for extraction, Georgia will still be dependent on gas imports from such rather distant places as Orenburg and Makat via the Mozdok-Vladikavkaz-Tbilisi pipeline.

Lecture #5

The hydropower resources and their utilization

Georgian rivers are rich in hydropower potential, their power-producing capacity is estimated to be 18.2 mill kW, which corresponds to the annual potential power of 159.4 bill kW h. This capacity is divided between the big rivers-50% the medium size rivers -35% and the small rivers-15%. The technical hydropower resources of big and average rivers amount to 81 bill kW h per year, including 75% in western Georgia. Unfortunately, out of the total annual water flow (without regulation), the winter share is only one third, whereas summer period is two thirds. Only 25% of hydraulic resources in Georgia are utilized for power generating, which is considerably lower than in advanced countries. However, even if the existing hydraulic potential was

made full use of, no more than 10 bill kW h can be generated in winter, which is not going to be sufficient in future.

Lecture #6

A concept for sustainable development and the application of renewable energy

sources in Georgia

Today Georgia is living through an energy crisis. While seeking ways out of the crisis it is essential to think about the future of the energy sector. There are two entirely different views on the future of energy sector: the concept of "traditional development" and the second concept- that of "sustainable development".

"The traditional development" assumes that developing countries or, at least in our case, countries in crisis, will mainly follow the path trodden by developed countries. This tends to justify consumer attitudes and assumes that the damage caused to nature either poses no serious threat to our future or that humanity will be able to get along with it. "The sustainable development"- assumes that at the turn of the century environmental problems will become international and they can only be solved by joint efforts, a shift from consumer attitudes to energy in science and technology.

Lecture #7

The estimation of solar energy resources

The potential amount of solar energy resources in Georgia is 1011 MW h which is 500 times more than the absolute maximum of power consumed in the country, but the irregularity of solar energy supply limits its utilization: the length of interruptions may reach 45 hrs in winter and 24 hrs in summer (at night and on cloudy days). However, since the early 80s they started to transform solar energy into the thermal using flat solar collectors in particular for water-heating and for drying agricultural produce etc. It is expected that within the next 10 years up to 5% of low-potential thermal loads will be compensated by solar energy in Georgia, bringing some relief to the power system, though only in the summer months. If the use of solar resources develops, which experts say may become possible by the middle of the 21st century, this may cover one third of power consumption.

Lecture # 8

Wind power energy resources

Recently wind energy cadaster has been enlarged and Georgian regions have been classified according to the length of workable wind speed (over 4 m/sec). In the last 20 years the cost of 1kW h energy produced by wind-power machines fell from 50 cents to 5 cents, and it may drop further to 3 cents. The economically efficient share of wind energy amounts to an annual 4.5 bill kW h and it is planned to start work on it, in particular in Black Sea area, on the Likhi mountain range (Mount Sabuuuueti) and near Samgori. Locations favorable for constructing wind power installations are determined. A project to build a 50 MW capacity wind-power machine in Kapandibi at the mouth of the Chorokhi river is being considered by the Ajarian authorities. The annual output of this power installation will amount to 100mln kW h. Most interestingly, over two-thirds of the annual output of the Poti and Kapandibi power plants would come in the deficit-ridden winter months (October-March) thus favoring the stabilization of the power system schedule.

Lecture #9

Geothermal resources and their exploration

According to statistics from 1989 annual geothermal water reserves in Georgia amount to 15.5 mill m3 and can be further increased after deep drilling. Water temperatures and debits are especially favorable in Abkhazia, the Kolkhida Lowland and around Tbilisi. Since the greater share of these waters is rich in active elements, its utilization requires secondary applications which decreases economic efficacy.

At present the Georgian energy sector utilizes just 4 thousand m3 of geothermal waters daily, mainly for hot- water supply to the Saburtalo district of Tbilisi, other systems are either damaged or stuck at the testing stage. However, in a period of energy crisis the utilization of geothermal waters is especially expedient as this is a local, basic, renewable resource. The hydrogeological and geothermal conditions of Tbilisi and its surroundings could enable the creation of several geothermal circular systems, while the thermal potential of the Zugdidi deposit greatly exceeds the requirements of the town utilities, but also can be used for hot-houses and tea and poultry factories.

Lecture # 10

Causes of energy crisis and strategies for overcoming it

Analysis of the fuel and energy sector in Georgia shows that the country has been suffering steadily from energy shortage, especially in the winter periods, which has considerably impeded its economic development. The present situation is a result of planning flaws, delays in construction of power capacities and from the fact that in the last stage of the USSR the central authorities tended to shut-off financing to long-term and costly power engineering. It is very difficult to forecast the pattern of the long- term future developments in the Georgian energy sector : it depends on rather uncertain factors such political decisions , ecological factors and consumption growth. Foreign consultants propose computerized models for predicting energy demand and investments required until 2010 to meet that demand.

Lecture # 11

Restructuring the energy system

Reforms in the Georgian energy sector mainly consist of restructuring , corporatization and privatization. They are driven by a widely- shared understanding that if such a natural monopoly as the electric power sector (employing more than 30 thousand people in Georgia) is further reinforced and strengthened by state monopoly, this will leave no space for competition hence development in the area will be impeded.

Restructuring of the sector began , following a decree of the Georgian President #.437 of 1996. The Sakenergo State Department was reorganized by creating out of it three financially - independent sub-sectors: they were generating , transmission -dispatching and distribution. The transmission -dispatching sub-sector was not privatized at this stage and was turned into a state-run enterprise-the State Company Sakenergo under the Ministry of Fuel and Energy. In the distribution sub-sector, territorially divided municipal power companies were transformed into joint-stock companies. Entities in the generating sector, that is power plants and construction organizations were also transformed into joint-stock companies, managed by the newly formed State Company Sakenergogeneratsia.

Lecture # 12

Technical and economic aspects of overcoming the energy crisis in the nearest

perspective. Setting electrical power tariffs and their dynamics.

Energy shortage is one of the main causes of the economic crisis in Georgia and it is conditioned by following factors:

  1. The development of electric generating, especially base capacities lags behind consumption growth. One should remember that the two largest power plants- Tbilsresi and Enguri HEP, are incomplete installations, which are not yet operational.
  2. An imperfect system of power generating and transmission facilities; e.g. Kavkasioni transmission line, linking Enguri HEP to the energy system of Russia, creates a linear system rather then being one element in a circular system, greatly reducing the stability and reliability of the power supply.
  3. The power system is not designed to operate in an autonomous regime, the insufficiency of basic capacities ( 43% of the projected capacity instead of the desired two-thirds) makes the general structure of generating capacities defective.
  4. Seasonal peak outputs of the HEPs fall during summer floods, while the highest power consumption falls in long autumn and winter periods. Such disbalances were compensated for by intersystem transfers, which accounted for about one-third of the winter-period consumption. In recent years such transfers stopped so that energy supply became strictly limited.
  5. Physical and moral depreciation of equipment and machinery, slow reconstruction and modernization .
  6. Insufficiency of other energy sources leads to the domination of basic power, which results in multiple stages of energy transformation, heavy losses, overloading of the transmission system and frequents power outages.
  7. Lack of an efficient system of collecting payments from consumers, so that only 35-40 of power consumed is paid for. The main reason is that the share of non-solvent consumers has increased.
  8. Instability of the recent years, undermining experimentation, misplaced personnel decisions, the deterioration of labor discipline reduced the manageability of the power system.
  9. The power system frequently had to operate in critical regimes, with frequencies falling to inadmissible values.

Lecture #13

Import- exports operations in the Georgian energy sector. Current international support and foreign investment and its efficiency.

Because of the technical parameters of Georgian energy and its geographical location it is possible to reorient it towards foreign markets, first of all towards Turkey and Azerbaijan. This would attract foreign investors as well. Electrical power export should fully make use of Tbilsresi's capacities. There are several things in favor of this: a pipeline link between Tbilsresi and Turkmenistan's natural gas deposits, the immediate proximity of the promising regions of eastern Turkey, where until the construction of the Chorokhi HEP cascade is completed the deficit of power will continue to be felt, and the great need for peak energy in Azerbaijan. This will require construction of a 500 kV 200 km -long power transmission line supplying Turkey with 800 MW of power, four times more than is at present possible. Such a line has already been projected and construction works have started.

Lecture #14

Georgian energy policy and energy legislation

Developing a country's energy policy , defining its short and long-term priorities is an extremely complex task. It should envisage cost-efficiency of electrical power, enforcing ecologically safe standards, ways to reach high quality produced power and reliability of power supply. Obviously, such a policy cannot remain static for too long and it requires rethinking according to changes in the political and economic situation of the country as well as to the regional or global environment.

Until early 1990, the Georgian energy sector developed within the universal framework of the USSR. However, while in the whole of the former Soviet Union power engineering was developed at an advanced rate, in Georgia the situation was the contrary, that is - a serious disproportion developed between generating and consuming capacities, which was a recipe for economic dependency. As a result , Georgia produced twice as little energy per capita than the USSR generally ; respectively, electrical power-intensity in industry and agriculture was low, as well as use of electrical power in domestic and service spheres. The internal power deficit, which mainly fell in autumn and winter periods, increased every year, having reached 4 bill kW h by the time of independence; Georgia had to import annually some 3 bill kW h power from neighboring countries in winter times and returned part of it mainly in summer, as more costly peak energy.

Lecture # 15

The privatization process in power engineering and its future prospects

The process of privatization in this sector started in 1992. 19 out of 30 small HEPs controlled by Sakenergo Department were privatized in different ways. The aggregate projected capacity of these HEPs equaled 104 MW or 2.2% of the total capacity of the country's electrical power installations. The next stage of privatization was defined by a 1996 presidential decree. It gave priority to privatizing joint- stock company shares created on the basis of state entities in the distribution and marketing sector. The controlling shares of municipal power companies will be sold at tenders, so that attracting investment for renovation becomes a condition for potential buyers. 5% of shares will be transferred to the local authorities where the power company is registered , while the remaining shares will be sold at auction. Large power plants will also be transformed into joint stock companies and up to 49 % of their shares will be privatized , but the controlling shares will be retained by the state. Privatization of large HEPs alone (excluding Enguri HEP and plants situated in Abkhazia) is expected to bring 300 mill USD to the state budget. This sum will be used for modernizing the energy sector.

Lecture # 16

Energy saving

Energy conservation is a demand of our time. Reliable energy supply can only be guaranteed through economical use of power. The following considerations show why energy saving should be a priority and is feasible in Georgia:

  • Energy -saving reduces dependency on imported fuel and the related political risks
  • The advances of thermal insulation in buildings provides better living standards even with a lower level of energy consumption
  • There are great possibilities for energy -saving in industry, if a proper policy is brought to bear
  • Effective energy supply should be stipulated and a system of bonuses and penalties introduced, that is, the state should become more active in encouraging energy saving
  • It is also necessary to develop an informational database so that those concerned can have access to energy - saving technologies

Lecture # 17

The environmental problems of power engineering

In considering this issue of all it should be clearly stated that there are no absolutely clean energy sources; therefore the energy sector and its development should be closely monitored to ensure environment protection -by the public and state organizations and on a permanent basis, rather than in form of separate campaigns. The issue has become especially acute since the late 80s due to the reduction of the ozone layer as a result of the green -house effect from the increased concentration of carbon dioxide in the atmosphere. On a global scale this has encouraged the use of fuels with relatively small carbon dioxide , discharged attitudes to renewable energy sources to be revived and the Chernobyl catastrophe. Most experts believe that in the next 50 years that is up to the year 2040 when preference will be given to solar energy , nuclear energy should play the principal role in limiting carbon dioxide emissions.

Lecture # 18

Prospects of development for the Georgian energy sector

Overcoming the power crisis in Georgia is an extremely complex and controversial task and will require a rather long time, because it will be rather difficult to dramatically increase the output or import of energy when user-efficiency is low and investment is scarce. The energy sector policy should not repeat the previous strategic and technical mistakes, and should encourage market principles. First of all, the general public, which is the foremost consumer of electricity and fuel in Georgia, should understand that revival and development in power engineering is a national interest and everybody must be part of the solution to the problem.

The rapid growth of energy prices in the early 80s and the acute need to increase import forced a drastic reduction in energy consumption, which affects electrical power production , distribution and consumption. The non-rational , non-purposeful and non-economical use of energy should be stopped. Giving priority to non-productive consumers (such as restaurants, shops , residents) at the expense of limiting energy supplies to enterprises is unacceptable as it creates additional social tensions and unemployment, impedes development.



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