Hydro resources are one of Georgia’s most important natural riches. Approximately 300 rivers are significant for energy production, with total annual potential capacity of 15 000 MW and production potential of 50 TWh. According to GNERC, however, only 22.5% (3 380.2 MW) are used for hydropower.

Georgia’s wind energy potential is estimated at 4 TWh (1 500 MW). The average wind speed fluctuates from 2.5 metres per second (m/s) to 9 m/s. The most favourable places for wind farms are being identified over the entire country.

Meanwhile, solar energy potential is high, with annual solar days ranging from 250 to 280 and amounting to 1 900-2 200 hours. Solar irradiance in Georgia varies between 1 250 kWh/m² and 1 800 kWh/m² annually, and total solar energy potential is estimated at 108 MW. Household solar water heating systems have been installed in rural areas, where solar energy warms water to 40‑50°C.

Georgia’s geothermal water stock is estimated at 200‑250 mcm annually. Temperatures range from 30°C to 110°C, and the total debit is 160 000 m³ per day. More than the 80% of geothermal deposits are in western Georgia and the Zugdidi-Tsaishi geothermal field, as well as in Abkhazia. The relatively low temperature of Georgia’s geothermal waters does not, however, allow for electricity generation.

Economically viable reserves of crude oil were estimated at 5 Mt in 2012 with resources of 50 Mt, and natural gas reserves at 8 bcm with 102 bcm of resources. Hard coal reserves were 201 Mt in the same year, with 700 Mt of brown coal resources, and in 2022, 16 bcm of natural gas deposits were discovered near Tbilisi. The government and the private sector continue exploration work, expecting more deposits to be found.

Reliability in both the natural gas and electricity systems is improving. According to the MoESD, there have been no major outages in recent years, owing to rehabilitation and refurbishment of gas and electricity networks. Outages and losses are reported to GNERC as part of licensing obligations and are measured by the standard System Average Interruption Duration Index (SAIDI) and the System Average Interruption Frequency Index (SAIFI).

In 2021, due to planned and unplanned outages the SAIDI indicator totalled 429.87 minutes, and the SAIFI amounted to 5.98 for Telasi JSC. For Energo-Pro (EP) Georgia JSC, the SAIDI indicator reached 1992.48 minutes, while the SAIFI was 24.13.

Electricity transmission network losses are around 2% and outages are rare. The collection rate is nearly 100% and estimated commercial losses are minimal. Technical losses in the gas sector are around 0.5% in the transmission network, and loss detection is performed during regular field visits and using the Global System for Mobile Communications (GSM). Equipment for loss detection includes some advanced leak detection technologies and leakage metering equipment.

The Law on the State of Emergency (2005) defines and regulates emergency response, but Georgia has no declared strategy for emergency stockholding or fuel switching mechanisms for energy supply disruptions.

The government estimates that Georgia’s minimum strategic reserve for gas should be 120 mcm and is considering various storage options. Gas from the country’s proposed underground storage facility would be used to compensate for recurring winter deficits, which are expected to reach 200 mcm by 2030.

Emergency oil product reserves are also being considered, to be built up by obligating oil product supply companies to hold stocks of oil products in addition to their normal operating requirements. Possible arrangements and compensation schemes are under discussion. 

Despite the general trend towards hydropower development, Georgia has no formal strategy for switching away from fossil fuels. In fact, a new gas-fired thermal power plant has been constructed and another 272 MW of capacity is under way to replace old, inefficient thermal units and increase the efficiency of gas-based generation.

According to the draft National Energy Policy, the government is planning to improve Georgia’s energy security by 2030 by:

• Diversifying external energy supply sources, including gas supply alternatives (i.e. LPG, LNG and CNG swapping options).
• Reducing import dependency through energy efficiency and renewable energy development.
• Developing infrastructure, improving system safety and reliability, and installing SCADA and WAMS systems.
• Integrating renewable energy into the grid using new clean-energy technologies, including green hydrogen production, storage systems and microgrids.
• Exploring the country’s own fossil fuel reserves.
• Creating gas storage and emergency reserves of oil products.
• Developing its own oil refining capacity.
• Replacing outdated thermal units with combined-cycle gas plants.
• Improving security (cyber, kinetic, etc.).
  

Georgia has gas pipeline connections with Armenia, Azerbaijan, Russia and Türkiye, and oil connections with Azerbaijan and Türkiye as well as a Black Sea oil terminal in Supsa. It imports natural gas from Azerbaijan and Russia, and transits gas from Russia to Armenia and from Azerbaijan to Türkiye and further to Europe. Georgia’s oil product imports come from Azerbaijan, Russia and Turkmenistan, and it transits crude oil from Azerbaijan and Kazakhstan to Türkiye.

The Karadaghi-Tbilisi gas interconnection is the main pipeline for Georgia to import gas from the Azeri gas field, from the State Oil Company of Azerbaijan Republic (SOCAR). It has a diameter of 700 mm, and the Georgian section is 46 km long.

More gas imports reach Georgia from Azerbaijan by way of the South Caucasus Pipeline (SCP), which transports gas from the Shah Deniz field parallel to the route of the Baku-Tbilisi-Ceyhan (BTC) crude oil pipeline from Azerbaijan through Georgia to Türkiye. The SCP is 692 km long (442 km in Azerbaijan and 250 km in Georgia), 1 067 mm in diameter and has a capacity of 8 bcm.

With the 2019 completion of the second phase of Shah Deniz gas field developments, SCP Expansion (SCPX), and construction of the Trans-Anatolian Natural Gas Pipeline (TANAP) and the Trans-Adriatic Pipeline (TAP), additional gas is now flowing to Türkiye and thence to European countries for a total volume of 16 bcm. To increase system transmission capacity to 24 bcm, a parallel gas pipeline and additional compressor plants (61 MW each) were constructed in Georgia as part of the SCPX and commissioned in 2018.

Underground gas storage is crucial to Georgia’s energy security, to provide seasonal supply-demand balancing as well as compensate for possible supply interruptions. A 2016 feasibility study by the French company Geostock concluded that it is technically feasible to build an underground gas storage facility in the depleted Samgori Southern Arch oilfield and defined conditions for its commercial viability. However, funds allocated for the project have since been diverted into Georgia’s Covid‑19 emergency fund, so the project’s future is uncertain.

The North-South Gas Pipeline (NSGP) system is used to supply Georgia with Russian gas and transit it to Armenia. Georgia’s section of the NSGP (diameter 1 200 mm; length ≈133 km; operating pressure 55 bars) was built in 1988-1994, traversing eight separate tunnels totalling 4.6 km in length. Currently, the pipeline is still used mainly to transit gas from Russia to Armenia, but significantly less than in previous years. In 2019, the pipeline transported 1.94 bcm of natural gas to Armenia and 0.17 bcm to Georgia.

Georgia’s internal market receives gas through the East-West and North-South Main Gas Pipeline systems, consisting of the Kazbegi, Kakheti, Southern, Ajara and Poti branches. Georgia’s gas pipeline system is connected to Russia’s by the North-South Main Gas Pipeline System at the Georgia-Russia border, by the South Caucasus Pipeline entering from Azerbaijan at the Georgian-Azeri border and by the pipeline connection with Armenia near the Georgian-Armenian border. The integrated gas supply system also includes 19 000 km of gas distribution pipelines, gas distribution stations, metering units, and two currently inactive compressor stations.

In the gas sector, the GOGC administers the state’s share of gas obtained under production sharing agreements (PSAs) and manages its preparation, storage, transportation and sale. The GOGC ensures the long-term sustainable development of the wholesale natural gas market to safeguard energy security, and it constructs, commissions, rehabilitates and replaces gas pipelines on Georgian territory.

Three companies extracted associated gas in 2021: Ninotsminda Oil Company, a subsidiary of Blake Oil and Gas (XIE licence block); Block Energy (XIF, XIC, XIC, XIB, IX); and NVP Georgia (VIIIB). In addition, American-owned Frontera Resources produces minor amounts of gas and has announced the discovery of huge gas reserves, although no progress or confirmation have yet followed.

In 2022, the State Agency of Oil and Gas (SAOG) announced that a 16‑bcm natural gas field had been discovered near Tbilisi. Block Energy limited liability company (LLC), the area’s current licence-holder with shares traded on the London Stock Exchange, owns the right to extract resources from the two blocks. The licence requires horizontal drilling, with Block Energy expected to start working on the project late this year or early in 2023.

Natural gas transmission, distribution and retail services are fully unbundled in Georgia. GOGC subsidiary Georgian Gas Transportation Corporation (GGTC) is the gas transmission system operator, and the numerous gas distribution system operators are all private companies. SOCAR Gas is the largest distribution system operator with its two subsidiary companies (24.94% and 36.05% of the retail market), and it distributes gas to Georgia’s regions. Tbilisi Energy is the largest distribution system operator in Tbilisi, with a 24.87% share of the retail market.1 Many private companies are involved in gas retail. GGTC operates the main gas pipeline system, except the Georgian section of the SCP, which is operated by SOCAR.

GNERC determines the licensing rules and conditions for natural gas transportation and distribution, and it also regulates the tariffs for natural gas transportation, distribution, pass-through, supply and consumption.

Georgia has gas pipeline connections with Armenia, Azerbaijan, Russia and Türkiye. It imports natural gas from Azerbaijan and Russia and transits gas to Türkiye and Armenia. The 1 200‑mm and 700‑mm North-South Gas Pipelines transport 2-2.4 bcm of natural gas from Russia to Armenia annually. The 692‑km SCP, now operated by a SOCAR subsidiary, currently transports about 16 bcm of natural gas from the Shah Deniz gas field and connects to the Turkish gas system at Erzurum; the SCPX will raise natural gas transport to 24 bcm.

Cross-border agreements with suppliers in neighbouring countries are bilateral, but Georgia is also focused on developments in gas transit from the Caspian Sea to European markets, as this would diversify its imports and provide transit revenue.

As Georgia does not have a developed oil refining industry, it mainly imports oil products from the world market.

Oil products made up 26.6% of Georgia’s TES in 2020, with imports coming from various countries but mostly Azerbaijan, Russia, Turkmenistan, Romania and Bulgaria.

Oil transport pipelines serve mainly for transit purposes – for exporting Azeri and Kazakh oil to the world markets. The oil pipelines passing through Georgia are directly connected to terminals on the Black Sea coast and, through Türkiye, to Mediterranean terminals and Southeast European countries.

The BTC pipeline transports crude oil from Azerbaijan via Georgia to Türkiye’s Mediterranean port of Ceyhan, and from there the oil is shipped by tanker to world markets. The BTC pipeline is 1 768 km long, with 443 km in Azerbaijan, 249 km in Georgia and 1 076 km in Türkiye, and has been in operation since May 2005.

Operational since 1999, the Baku-Supsa Pipeline transports crude oil from offshore oilfields in the Caspian Sea (belonging to Azerbaijan) to Supsa, Georgia, on the Black Sea, where it continues to European markets via tankers. Of the pipeline’s 829 km, 375 km are in Georgia, and it has a capacity of 145 000 barrels per day. Recent agreements between Kazakhstan, Azerbaijan and Georgia will ensure the transport of increased volumes of Kazakh oil through these pipelines. 

The State Agency of Oil and Gas is a legal entity of the Ministry of Energy. Under the Oil and Gas Law, it regulates oil and gas operations, refineries and transportation.

The state-owned Partnership Fund owns the GOGC and has transferred 100% of GOGC shares to the Ministry of Energy (now the MoESD) for oversight as well as management rights. The GOGC administers the state’s share of oil produced under PSAs and manages its processing, storage, transportation and sale. It is responsible for: commissioning, rehabilitating and replacing oil pipelines on Georgian territory; designing and constructing new pipelines; building, sustaining and operating necessary infrastructure; implementing projects for transporting Caspian oil and resources obtained from other regions via trunk pipelines within Georgia; and participating in and implementing national and international projects to explore, transport and supply energy resources to ensure Georgia’s energy security. The GOGC also funded the construction and commissioning of two 230‑MW combined-cycle gas turbine (CCGT) plants in 2015 and 2019, and a 20.7‑MW wind farm in 2016.

The Association of Oil Product Importers and Distributors was established in March 2004. Its main objective is to assist in creating flexible, simple and clear customs and tax codes for oil production, import and distribution. It is involved in aligning oil market legalisation with the Georgian constitution and other legislation, and co‑operates with legislative and executive powers to prepare draft legislation. It also monitors available oil market information and conducts its own research. Oil product import, storage and transportation are carried out by private businesses.

Investor companies, selected through international tenders, sign PSAs with the state and carry out exploration and production work through Georgian subsidiary operation companies that perform the activities.

To date, 24 PSAs have been concluded between the government of Georgia and investor companies and, apart from the GOGC, seven oil companies are operating under these contracts: the Norio Operating Company, the Block Operating Company, the Kura Basin Operating Company, NVP Georgia, West Gulf Petroleum Engineering, Georgia Coalition Energy Limited and OMV Petrom.2

Only one company, Saknakhshiri LLC, extracts coal in Georgia. In 2019, after several coalmining accidents, the Georgian Industrial Group sold the company for a symbolic price to the Steel International Trading LLC. According to its managers, the company plans to increase annual production to 400 000 tonnes/yr.

In 2021, HPPs provided 80.5% of Georgia’s electricity, with natural gas-fired facilities generating 18.8% and wind power accounting for about 0.7%. The 1 300‑MW Enguri hydro facility is the backbone of the country’s electricity generation system. Small and medium-sized hydro facilities totalling 2 080.2 MW (as of 2021) also provide domestic power, either on a regular basis or seasonally.3 Because Georgia’s main long-term policy objective is to satisfy the country’s overall demand for electricity with domestic hydro resources, in addition to tendering new large HPPs the Ministry of Energy has sought foreign investment to develop new small and medium-sized HPPs.

The Georgian government plans to facilitate further development of smaller renewable energy technologies, especially micro hydropower plants and solar power systems. Under the Electricity Supply and Consumption Rules, GNERC has ensured micro power plants free access to the network and established fixed tariffs for electricity produced by these plants (Resolution No. 20, Amendment to Electricity Supply and Consumption Rules). Important steps were also taken in 2015 when GNERC developed a legal framework for net metering.

In 2022, feasibility studies were in progress for 100 HPPs (1 014 MW of total capacity), and 56 HPPs (1 914 MW) were at the licensing and construction stage.

In 2016, Georgia’s first wind power plant, Qartli Wind Farm, with installed capacity of 20.7 MW and annual generation of 88 GWh, was commissioned in the Shida Kartli region of the Gori and Kareli municipalities. Qartli Wind Farm LLC, developed by the Georgian Energy Development Fund and the GOGC, was privatised in 2019 when Georgia Capital acquired it for USD 14.4 million.

Georgia also has five operational thermal power plants (TPPs): Mtkvari Energy (300 MW); two units at Tbilsresi (270 MW); G-Power gas turbine station (110 MW); and the Gardabani 1 and 2 combined-cycle plants (230 MW and 255 MW).

Georgian State Electrosystem JSC (GSE) is Georgia’s largest transmission grid owner. GSE owns and operates 4 357 km of transmission lines and 93 substations all over the country. GSE neither generates electricity nor supplies it directly to consumers. It only provides electricity transmission from hydro, thermal and wind power plants and imports to power distribution companies (Telasi JSC and Energo-Pro Georgia JSC) and direct customers (large companies). The distribution companies in turn deliver the electricity to final customers, and direct customers consume it for their own purposes.

Unbundling of the distribution system operators took place in spring 2021, with Telasi JSC and Energo-Pro Georgia JSC defined as the electricity distribution system operators. 4 Based on Government of Georgia Resolution N236 of 25 May 2021, starting 1 July 2021 the Tbilisi Electricity Supply Company JSC was obligated to provide public supply services in the area of the Telasi JSC, and EP Georgia Supply was required to offer public supply services in the area of Energo-Pro Georgia LLC. The two companies have been appointed as universal service suppliers, electricity public service providers and suppliers of last resort in their respective territories.

On 4 January 2021, GSE and United Energy System (UES) Sakrusenergo JSC signed an agreement transferring the right of perpetual use (perpetual lease) of power transmission lines owned by UES Sakrusenergo JSC to GSE JSC. In addition, GSE and its subsidiary Energo Trans LLC merged in January 2021. Following these structural changes, GNERC certified GSE as a transmission system operator and issued it a new transmission licence that came into force 1 July 2021.

Two companies carry out electricity distribution and supply activities. Telasi JSC, which serves Tbilisi, supplied approximately 2.81 billion kWh to its consumers in 2021. As of 2021, the company had 656 490 customers (37.6% residential and 62.4% non-residential), and customer services and network maintenance and operations are carried out from ten business centres situated in all administrative districts of the city. The total length of power grids in the capital is 6 390 km, including 2 422.3 km of overhead transmission lines and 3 967.76 km of underground cable. There are also 36 step-down substations of 35/6(10) kV and 110 kV, and 2 191 transformer substations of 6(10)/0.4 kV.5

Energo-Pro Georgia JSC is the largest private owner of distribution assets. It accounts for approximately 4.76 billion kWh of power consumption annually (as of 2021), and its service area extends over 58 846 km² (84% of Georgia’s land base) with total customers exceeding 1.2 million. It owns a 35‑kV to 110‑kV high-voltage electricity grid, high-voltage 110‑kV and 35‑kV substations, and 6(10)/0.4‑kV transformers.

In 2021, EP Georgia unbundled its assets and registered two separate companies. EP Generation JSC owns 15 small and medium-sized HPPs with total capacity of 469.25 MW and one gas turbine power plant with a capacity of 110 MW.6 EP Georgia Supply is a subsidiary company providing electricity supply services for up to 1.2 million customers.

According to the GSE’s Ten-Year Network Development Plan (TYNDP), Georgia’s cross-border infrastructure in 2031 will include:

• with Russia: 500‑kV, 220‑kV and 110‑kV lines; 1 600 MW of capacity
• with Azerbaijan: 500‑kV and 330‑kV lines; 1 400 MW of capacity
• with Armenia: 220‑kV and 400-kV lines; 700 MW of capacity
• with Türkiye: 400‑kV, 220‑kV, and 154-kV lines; 1 400 MW of capacity.

The Black Sea Transmission Network (BSTN) Project, commissioned in 2013 and connecting Georgia and Türkiye via the Black Sea, includes a 700‑MW back-to-back direct current (DC) interconnection, 500‑kV transmission lines to Vardzia and Zekari, a 400‑kV interconnection line to Meskheti and the 500‑kV/400‑kV/220‑kV substation at Akhaltsikhe.

Cross-border electricity trade, electricity demand growth and anticipated seasonal energy exports require transmission infrastructure investments and further development of the network. In its capacity as transmission system operator, GSE has elaborated a Ten-Year Transmission Grid Development Plan to 2031 to meet emerging demand, incorporate new generation capacity and achieve even higher reliability standards. The GSE intends to complete numerous projects during 2021-2031:

• the Batumi-Akhaltsikhe Project
• the Jvari-Khorga Project
• the Ksani-Stepantsminda-Mozdok Project
• Marneuli-Ayrum Project components
• the Jvari-Tskhaltubo-Akhaltsikhe Project
• the North Ring-Tskaltubo Project
• the Guria Project
• rehabilitation of the 220‑kV Kolkhida-1 overhead line (OHL)
• the Akhaltsikhe-Tortum Project
• the Batumi-Muratli 1 Project
• the Namakhvani-Tskaltubo Project
• rehabilitation of the 500‑kV Imereti 1 Project OHL
• a substation renovation project
• reinforcement of the Kakheti infrastructure project
• the Security of Supply of Tbilisi Region Project
• rehabilitation of the 220‑kV backbone Zestaponi-Ksani Project
• construction of the second circuit of the 330‑kV Gardabani-Agstafa Project OHL
• the Georgia-Russia-Azerbaijan power system connection project (feasibility study)
• the Georgia-Romania Black Sea Submarine Cable Project (feasibility study).

Cross-border projects to increase power exchange and capitalise on energy trade opportunities with neighbouring countries include:

• the 400‑kV Akhaltsikhe-Tortum OHL and the 350‑MW high-voltage direct current (HVDC) back-to-back link at Akhaltsikhe substation (SS)
• the 500‑kV Ksani-Stepantsminda-Mozdok OHL and the 500‑kV/110‑kV Stepantsminda SS
• the 500‑kV Marneuli-Airum OHL, and the 500‑kV switchyard with linkage to the 220‑kV switchyard at Marneuli SS
• the 154‑kV Batumi-Muratli OHL and the 350‑MW HVDC back-to-back link at Batumi SS.

Georgia’s electricity system is interconnected with those of Russia, Azerbaijan, Armenia and Türkiye. ESCO has the authority to trade electricity with neighbouring countries to balance the needs of the Georgian market, and regional trade is arranged through bilateral agreements and memorandums of understanding (MoUs). The transmission system operator ensures operations with each neighbouring country and signs relevant agreements on technical issues.

In January 2012, Georgia and Türkiye signed an agreement on cross-border electricity trade using the Akhaltsikhe-Borcka interconnection. The agreement sets out competitive market trading rules and identifies the terms for managing electricity imports and exports on the line.

In 2015, the Khorga substation was completed under the Regional Power Transmission Enhancement Project funded by the Asian Development Bank, and the electricity transit corridor began operating from Russia to Armenia (daily average 30 MW) and from Azerbaijan to Türkiye (daily average 80 MW). Energy transfer between Georgia and Türkiye continues through the 700‑MW HVDC converter station and the related 500‑kV and 400‑kV lines.

In 2009, the Azerbaijan-Georgia-Türkiye (AGT) Power Bridge project was established by the transmission system operators of the three countries (AzerEnergy, GSE and TEIAS). The energy bridge became operational in 2015, and 813 million kWh of electricity were transited from Azerbaijan to Türkiye already in 2016. The table below lists existing and planned electricity interconnection lines.

Georgia’s electricity sector is partially deregulated and unbundled into generation, transmission and distribution companies. Most generation and distribution assets are fully privatised.

The wholesale electricity market operates predominantly under bilateral contracts, while the state-owned electricity market operator (ESCO) purchases and resells unsold power through bilateral contracts. ESCO is responsible for balancing and settlement according to market rules, and it exports surplus power. About 75.9% of all electricity generated is sold through bilateral contracts and the rest through ESCO. The Georgian Energy Exchange was to be launched on 1 September 2022 to introduce day-ahead and intraday markets as well as markets for bilateral contracts, significantly modifying the current electricity trade structure. However, its opening has been repeatedly postponed because of the incompleteness of market operation procedures.

Georgia’s one transmission system operator, GSE, operates the entire transmission grid, including the 500‑kV lines and interconnectors leased from Sakrusenergo through a 50/50 joint venture between the Georgian government and Russia’s Inter RAO UES.

Meanwhile, Georgia’s two distribution system operators are:

• Energo-Pro Georgia JSC – owned by Energo-Pro (Czech company)
• Telasi JSC – owned 75% by Silk Road Holdings BV (and ultimately Russia’s Inter RAO) and 25% by Best Energy Group LLC.

Electricity generators are regulated, partially regulated, or deregulated. The state-owned Enguri and Vardnili HPPs are regulated generators with GNERC tariffs. Most other HPPs have tariff caps, while small HPPs (15 MW or less) and HPPs built since August 2008 are fully deregulated and can sell their electricity at competitive prices to ESCO or any other market participant.