Market vs. Planning Approach for Resolving Transmission Congestion Problem
Friday, 03 June, 2016

Congestion in electricity transmission systems is a common problem all around the world, Georgia included. Two types of congestion are observed in the power sector; physical and economic. Physical congestion occurs when a transmission system is not adequate to supply an increasing amount of electricity. Economic congestion appears when prices in one region are different from those in another region, while cheaper electricity cannot be sold to the region at high prices. Both types of congestion are problematic for Georgia.

Physical congestion is prevalent in Georgia because electricity is heavily used in the eastern part of the country, while most power plants are in the west (such as large HPPs). Economic congestion occurs because cheap electricity in western Georgia cannot always be delivered to eastern Georgia, where power plants produce more expensive electricity.

Michael James Delphia, Senior Energy Expert of USAID's Governing for Growth (G4G) project, explained these problems in a public lecture to the ISET community and other invited guests on June 2nd. Mr. Delphia suggested different market mechanisms which could be a solution to significant economic congestion in the Georgian power sector. Most importantly, he discussed the concept of nodal pricing that is primarily used in the U.S. and Central America, and while this approach is less popular in Europe, it could possibly be a better solution to the economic congestion problem than the planning approach used in European power markets. After discussing these concepts, Mr. Delphia made several comments and answered questions on the current trends of power market development in Georgia and across the world.

Mr. Delphia has headed a number of USAID projects in Georgia aimed at reforming the country’s power sector. Throughout his career, Mr. Delphia spent around 20 years in the US energy industry and has supported power and gas reforms in over 70 countries around the world.