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A blog about economics in the South Caucasus.

Electricity Generation in Georgia II: Blowing Wind into the System

In the first part of our article we pointed out that electricity generation by hydropower is subject to strong seasonal variations. We argued that the seasonality of hydropower reduces the profitability of new plants, as they deliver the highest output in the time of the year when electricity is relatively cheap anyway, while they produce rather little when electricity is expensive.

There are other problems why the potential of additional hydro power plants to solve Georgia’s energy problem are limited.

Chart 4 shows a simple projection for 2020: The prospective generation of three large HPP projects (Khudoni HPP, Namakhvani Cascade and Faravani HPP with total potential installed capacity of 1661 MW) is added to the hydropower generation of the year 2010 and is compared to the projection of electricity consumption in 2020 (assuming 3% growth per annum).

This scenario is quite optimistic: First of all, we are assuming that existing hydropower will maintain the 2010 level of production (the highest so far recorded). Secondly, the assumed growth rate of electricity consumption (3%) is slightly lower than the growth rate observed in the period 2007-2012. Interestingly enough, despite these assumptions, the predicted winter gap is increasing, as well as the excess generation in summer.

 

chart4

Source: ESCO

 

New small HPPs will not be able to make much difference as far as the winter gap is concerned. Without the ability of collecting water in dams, their generation capacity in winter months is reducing even more sharply than in the case of large HPPs with dams.

The persistence (and the potential increase) of a gap between generation and consumption in winter and the volatility in the generation of electricity during the year, in absence of an integrated regional electricity market capable of absorbing excess production and to cover for the winter gap in a reliable way and at reasonable prices, explains why the Georgian government seems to be starting to consider a number of alternative ways to achieve the planned goals.


ALTERNATIVE ENERGY SOURCES

Considering the points raised above, a possible solution seems to be the identification of a renewable energy source with a pattern of generation complementary to that of hydropower generation, able to generate electricity mostly in winter. Wind power, at this stage, appears to be the most promising alternative.

According to the Wind Atlas data produced by the Karenergo (a Wind Energy Scientific Center based in Tbilisi), Georgia has a considerable wind energy generation capacity. The strongest argument in favor of wind energy, however, is that in a majority of the most promising wind sites winds are blowing harder in winter, when the excess demand and electricity prices are the highest. Consequently, optimally placed wind farms can fill the gap in green energy production, contributing in a more effective way to the government’s long term objective to reduce country's dependence on electricity imports and thermo power (which itself depends on imported gas).

To demonstrate the potential benefit of wind power in terms of electricity sector independence, we produced Chart 5 based on our calculations. In contrast to the chart 4, chart 5 shows what could happen if Georgia built appropriate wind farms (with total potential installed capacity of 1270 MW) instead of HPPs (total installed capacity of 1661 MW). All other projections are similar to those from Chart 4.

 

chart5

Source: ESCO

 

Investing in wind generation might have one more potential benefit. At some point Georgia might want to start building "pumped-storage" reservoirs for some of its dams. These devices are storing excess (otherwise non-storable) electricity produced by variable renewable sources (such as wind) by using it to pump the water up into the reservoirs when demand is low. In this way, the same water can be used when the demand is high. So far, the "pump-storage" technology has not been utilized in Georgia since excess electricity produced by small HPPs in summer months could not be stored for lack of spare storage capacity (water reservoirs are quite full in summer). This technology could be instead easily employed to store excess wind electricity (e.g. at night) when reservoirs are half empty during the winter. The result would be higher daily production by both HPPs and wind farms.

Clearly, wind energy development faces many technical challenges such as variability, dispatch-ability and storability. However, the global trends in wind energy generation provide evidence that these challenges can be successfully addressed even in countries where wind accounts for a relatively large share of total electricity production.

So far the main reasons for the lack of investment in wind generation in Georgia have been the high level of startup costs and the lack of support from the government. Yet, considering global trends in wind energy technology and the evolution of the Georgian electricity market it may be high time to prepare for tomorrow by investing in relevant education, experimental wind farms, and pump storage facilities.

This seems, indeed, to be the direction taken by the Georgian Government. At a press conference on July 17 the Minister of Energy Kakha Kaladze announced the intention of the government to embark on the construction of wind power plants. A new step in the path that should lead Georgia to independence in the electricity sector and, in the intention of the government, to become a major electricity exporter in the region.

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Sunday, 12 July 2020

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