ISET

ISET Economist Blog

A blog about economics in the South Caucasus.

Access to Electricity: Is Off-the-Grid an Option?

Assuring access to modern energy services for the whole population is a crucial step to improve human well-being and stimulate economic and social development. The International Energy Agency (IEA) has identified the lack of access to modern energy services as one of the main obstacles to overcome in order to achieve the UN Millennium Development Goals. In its 2011 World Energy Outlook, the IEA argued forcefully about the need to find and mobilize the resources required to extend access to modern energy services to the poor around the world.

Transition countries are not typically considered particularly problematic as far as access to energy services is concerned. However, in such countries coverage is sometimes far from complete and substantial efforts are still required to ensure full coverage.

One such clear case is that of Georgia. Most of the infrastructure used for the transmission of electricity and the transportation of gas was seriously damaged (and/or substantially deteriorated) in the years immediately following the separation of the country from Soviet Union in 1991. Despite the impressive improvements taking place after the Rose Revolution of 2003, some challenges still lie ahead.


ACCESS TO ELECTRICITY

According to 2012 data from the Statistical Office of Georgia (Geostat), 100% of Georgian households had access to electricity.

However, the Ministry of Energy of Georgia has recently published a list of 36 villages for which this data is not true. In this list one can find high mountain villages from the regions of Adjara, Racha-Lechkhumi & Kvemo Svaneti, and Mtkheta Mtianeti; alongside other villages from the regions of Kakheti, Shida Kartli, Kvemo Kartli, Samtskhe Javakteti and Imereti.

The Ministry of Energy of Georgia has estimated the total cost of bringing electricity to these villages to be about 5.5 million USD. This is the cost of an on-the-grid” solution, according to which these villages will be connected to the grid (i.e. new transmission/distribution lines will be built). The estimated cost of access per household shows a large variation (see table): from about 900 USD per household in the village Janjghari (in Adjara) to about 86,000 USD per household in the village Tkemlovana (in Sida Kartli).


feb28-2014-1
The cost of granting households access to the grid can, therefore, be quite high.

A way to reduce these costs could be moving (in some cases) from an “on-the-grid” to an off-the-grid” solution. Renewable sources of energy can provide interesting off-the-gridopportunities. For example, solar energy generation seems to be especially promising in the Georgian case. The annual yield of solar energy in Georgia is estimated to be good (at between 1,250-1,800 kWh/m2), particularly in isolated mountain locations. An investigation into the cost of installing sufficient solar generation capacity to cover the needs of an average household (500 watt generating capacity, plus accumulators) has quantified the necessary initial investment to be approximately 6,000 USD (this estimate is based on the experience of a Georgian firm specialized in the installation of stand-alone solar generation systems in remote areas of the country: www.sun.org.ge).  While almost four times higher than the lowest cost of connection to the grid, this amount is 14 times lower than the highest one. Considering the energy savings, the expected long life of the investment (20-30 years for the panels and 3-8 years for the accumulators) and the flexibility of this solution – thanks to which fixed costs do not increase significantly, even for isolated households – this definitely looks like an interesting alternative that could save the Georgian government a substantial amount of resources.

While the obstacles that Georgia has to overcome to assure full access to modern energy services for all its citizens are still substantial, the impressive results achieved in the last decade and the initiatives presently being undertaken seem to suggest that the final goal could be achieved in the not too future. The costs of achieving such a goal (and the time required in the process) will obviously depend on the capacity of Georgian institutions (and especially of the Georgian Ministry of Energy of Georgia) to keep a flexible approach, making full use of all available options, ranging from direct public intervention to the use of market forces.

Rate this blog entry:
8 Comments

Related Posts

Comments

 
Guest - Helene Ryding on Saturday, 01 March 2014 04:31

Off the grid electricity (whether hydro or solar) has one drawback compared with on the grid electricity: there is no electricity company to deal with problems of maintenance, and you have to manage it yourself, which includes the tricky problem of making sure people are paying for the electricity. No electricity is free, even from renewables. So low maintenance and ability to pay are important in the choice. Some sort of self-management company is needed. That does not mean it is impossible, as there are many off grid small hydros in Georgia. It just needs thinking about in the case of solar as well.

Off the grid electricity (whether hydro or solar) has one drawback compared with on the grid electricity: there is no electricity company to deal with problems of maintenance, and you have to manage it yourself, which includes the tricky problem of making sure people are paying for the electricity. No electricity is free, even from renewables. So low maintenance and ability to pay are important in the choice. Some sort of self-management company is needed. That does not mean it is impossible, as there are many off grid small hydros in Georgia. It just needs thinking about in the case of solar as well.
Guest - Irakli on Wednesday, 05 March 2014 00:23

So, with small subsidy there might a new business opportunity... and not temporary. The main point missing is the discussion of possible alternatives in the ministry. While one option (on-the-grid) is evaluated, there is no alternative discussed. Or at least not publicly available to clinch the argument of using on-the-grid option. Maybe on-the-grid or combined option is the best. Who knows...

So, with small subsidy there might a new business opportunity... and not temporary. The main point missing is the discussion of possible alternatives in the ministry. While one option (on-the-grid) is evaluated, there is no alternative discussed. Or at least not publicly available to clinch the argument of using on-the-grid option. Maybe on-the-grid or combined option is the best. Who knows...
Guest - Helene Ryding on Thursday, 06 March 2014 23:57

In all my experience implementing change in post-socialist countries, I have never known a Ministry of Energy really take any interest in "small power", they like big stuff. It's often better to work through the Ministry of Environment and strengthen that ministry so it can tough it out in the government arguments over what to do. If EU Accession activities are far enough advanced, arguments about social cohesion can be made to support off the grid power.
But I agree there's a business opportunity.

In all my experience implementing change in post-socialist countries, I have never known a Ministry of Energy really take any interest in "small power", they like big stuff. It's often better to work through the Ministry of Environment and strengthen that ministry so it can tough it out in the government arguments over what to do. If EU Accession activities are far enough advanced, arguments about social cohesion can be made to support off the grid power. But I agree there's a business opportunity.
Guest - Iñigo Arencibia on Tuesday, 11 March 2014 01:05

A subsidy could go some way to help set up a cooperative or similar enterprise in the village which will be responsible for the installation/operation of the electricity system. But after that, costs will have to be borne by the users/villagers.

Cooperatives? So we are back to the social vs boding capital debate.

A subsidy could go some way to help set up a cooperative or similar enterprise in the village which will be responsible for the installation/operation of the electricity system. But after that, costs will have to be borne by the users/villagers. Cooperatives? So we are back to the social vs boding capital debate.
Guest - Vano on Tuesday, 11 March 2014 11:30

Nice post, Irakli.
One has to account also contribution of solar energy development into energy security of Georgia. In the country where energy resources import constitutes 70% of the total demand, it is worthwhile to utilize domestic resources that are scarce and limited but at the same time renewable...

Nice post, Irakli. One has to account also contribution of solar energy development into energy security of Georgia. In the country where energy resources import constitutes 70% of the total demand, it is worthwhile to utilize domestic resources that are scarce and limited but at the same time renewable...
Guest - Helene Ryding on Tuesday, 11 March 2014 20:46

Not sure that last comment is correct since most (if not all these days) electricity comes from hydro, which is certainly not imported (most of the year). But it's still good to try to replace the import of oil or gas with the use of renewable energy.

Not sure that last comment is correct since most (if not all these days) electricity comes from hydro, which is certainly not imported (most of the year). But it's still good to try to replace the import of oil or gas with the use of renewable energy.
Guest - Vano on Wednesday, 12 March 2014 01:21

Dear Helen, again, Georgia imports 70% of its ENERGY resources... I would agree to you if it is electricity, but I am talking on the energy as a general. Hydro power is just ~15% of TPES for the country. So hydro power currently contributes not so much to the country's ENERGY needs, but certainly very high (~80% in 2012) to its electricity needs. But I agree with you on the last sentence of the comment...

Dear Helen, again, Georgia imports 70% of its ENERGY resources... I would agree to you if it is electricity, but I am talking on the energy as a general. Hydro power is just ~15% of TPES for the country. So hydro power currently contributes not so much to the country's ENERGY needs, but certainly very high (~80% in 2012) to its electricity needs. But I agree with you on the last sentence of the comment...
Guest - Irakli on Tuesday, 11 March 2014 21:08

From business point of view, replacing oil and gas consumption with electricity generated from renewable sources does not seem cost-effective (because of high prices and cost of re-equipment). Providing access to cheap power might increase the share of renewable in total energy consumption (not only electricity). Besides promoting off-grid or self-generation opportunities, which could mainly aimed to residential consumers, additionally, enabling environment should be created to businesses to buy directly from generators. While the law allows such transactions with small HPPs, there are other obstacles for the trade to take place.

From business point of view, replacing oil and gas consumption with electricity generated from renewable sources does not seem cost-effective (because of high prices and cost of re-equipment). Providing access to cheap power might increase the share of renewable in total energy consumption (not only electricity). Besides promoting off-grid or self-generation opportunities, which could mainly aimed to residential consumers, additionally, enabling environment should be created to businesses to buy directly from generators. While the law allows such transactions with small HPPs, there are other obstacles for the trade to take place.
Already Registered? Login Here
Register
Guest
Monday, 13 July 2020

Captcha Image

Our Partners