Georgia’s challenges in developing its renewable energy potential

Georgias challenges

Georgia is methodically advancing towards realising its renewable energy potential. According to local solar technology vendors, interest in solar energy has doubled or even tripled in the last period. “Every business owner is thinking about switching to solar energy,” says Helios Energy founder, Tornike Darjania.

Indeed, investing in solar energy is lucrative. Over the lifespan of a PV station, which averages 20 years, a company can enjoy a reduced electricity bill, generate its own electricity and become more energy independent. Not only that, higher rates of electricity generation contribute to a shorter payback period for the investment. For example, if the payback period is five years, the company can profit from the electricity it produces for an average of 15 years.

However, developing the country’s RE potential comes with its own challenges. For instance, larger-scale solar power stations require significant investments, which in turn depend on the creation of an attractive environment for direct and foreign investment. With the deregulation of the energy market, it is difficult for investors to predict what may happen in the coming years. Therefore, it is very important to have instruments that can ensure a guaranteed income for the investor, even during the return period of their own capital.

The main challenge for investors today is to predict what the price of electricity might be tomorrow. Market liberalisation reforms have been initiated and the hourly trading market should be open soon, but many questions still remain about the market, especially regarding what the price drivers for electricity will be. It is difficult for any developer or analyst to predict today what the price will be tomorrow. Such information is crucial, as forecasts must be made for a period of 5-10-20 years with such long-term investment projects.

The second overall challenge is communication and awareness-raising, which require consistent effort from both businesses and the government. Market participants and the general public have to aware of the benefits of developing RE. Businesses should know about the financial returns that the relevant investments provide.

Creating a competitive market is of course a good objective, but innovation needs to be anchored first in order to grow investor confidence in the market. One way to build trust is to enable guaranteed purchase agreements for a short period while opening the free electricity market. As the market become more stable, investors gain incentive and choose to become participants in open trading.

Another related challenge is the level of expertise available on the market. With RE gaining popularity only in recent years, the market for technology suppliers remains small. Therefore, as the number of relevant experts is limited, increasing demand could put a strain on their availability. The experience of the GEFF in the region indicates that the presence of knowledge and expertise is crucial for technical projects such as solar, wind or hydro power plants. Many projects have suffered (decreased generation, damage to the station, etc.) precisely because of a lack of technical competence, poor installation or improper planning.

It is clear that Georgia’s government is keen on developing a number of RE stations; however, the steps required to overcome the challenges above still remain to be seen.