By Levan Kokaia
- The New Stage of Georgia’s Renewable Energy Sector
In recent years, Georgia’s renewable energy sector has become the subject of unprecedented interest. Wind, solar and hydropower projects with capacities of hundreds of megawatts, memoranda signed with the state, conducted CfD auctions and grid connection requests have created the impression that the country is emerging as one of the regional leaders in renewable energy. However, quantitative growth has not always translated into actually realized investments.
A practice has developed in the sector where economic value is generated not by a built power plant, but by the right obtained to construct it. It was common for investors to secure grid connection capacity, sign memoranda with the state or win support scheme auctions and then, instead of developing the projects themselves, attempt to sell or transfer these rights. As a result, significant transmission network capacity remained “reserved” for years by projects that never even reached the construction stage.
This issue is not unique to Georgia. In European practice, it is referred to as Paper Projects, Capacity Hoarding, or Connection Queue Speculation. Such projects hinder real investment, increase systemic uncertainty and reduce the efficient use of electricity infrastructure.
In this context, particular importance is attached to the amendments adopted in June 2026 by the Georgian National Energy and Water Supply Regulatory Commission to the Grid Rules. The new regulations substantially change the rules of the game. The transmission system operator is now given the possibility not to maintain a grid connection offer or agreement for projects that, according to information provided by the Ministry are not at either the feasibility study stage or the construction stage. At the same time, particular attention is paid to ensuring that the capacity indicated in the application corresponds to the actual parameters of the project, while projects at the study stage are granted the possibility of extension only under strictly defined conditions.
The main idea behind these changes is simple: grid capacity should belong not to “paper projects,” but to investors who are actually building power plants. This is one of the key principles of modern energy policy, already successfully applied in many EU countries for years.
Similar approaches have been introduced in Spain, where grid access is linked to phased obligations and strict deadlines; in the United Kingdom, where the “First Ready, First Connected” principle has replaced the old “First Come, First Served” model; and in Germany and Italy, where grid capacity reservation is directly tied to the actual progress of a project. As a result, the number of speculative applications has significantly decreased and freed-up grid capacity has been allocated to real investment projects.
However, Georgia’s renewable energy sector is already facing a new challenge. If a few years ago the main problem was the non-implementation of projects, today the agenda increasingly includes the issue of managing excess renewable energy generation.
The future of Georgia’s energy sector is no longer defined solely by how many new projects are announced. Success will be determined by how quickly real power plants are built, how efficiently the transmission grid is utilized and how flexible the entire energy system becomes.
The regulatory changes of 2026 mark the beginning of exactly this new stage. They create a market in which the advantage is given not to those who merely hold rights on paper, but to those who actually invest, build power plants and create new generation capacity. Such a transformation is a necessary precondition for Georgia to fully utilize its renewable energy potential and establish itself as a regional energy hub.
2. International Experience - When the Era of “Paper Projects” Came to an End
Georgia is neither the first country to face this challenge nor will it be the last. Alongside the rapid development of renewable energy, virtually all European countries have encountered a similar problem - thousands of megawatts of grid capacity were reserved for projects that were not, in reality, financially or technically ready for implementation.
That is why, in recent years, many EU Member States have introduced the so-called “Use it or Lose it” principle. This means that access to the grid is no longer permanent or subject to speculation - if an investor fails to demonstrate real project progress within defined deadlines, they lose both their right of access to the grid and their priority status.
One of the most illustrative examples is Spain, which, as part of its 2020 legislative reform, introduced clear development milestones for projects. Investors are required to submit environmental permits; construction permits and other essential documentation within specified timeframes; otherwise, they automatically lose the reserved grid capacity.
A similar reform has been implemented in the United Kingdom, where the national system operator is gradually transitioning to the “First Ready, First Connected” model. Under this approach, it is no longer the applicant who submits first that is connected to the grid, but rather the one who is actually ready to begin construction and subsequently move into commercial operation.
In Germany, Italy and Denmark requirements for reserving grid capacity have also been significantly tightened. The common approach is the same everywhere: transmission infrastructure is a constrained and high-value national resource and therefore the right to use it should be granted only to projects that have a genuine prospect of implementation.
In this context, the reforms implemented by Georgia are fully aligned with European practice. The country’s energy policy is gradually shifting from an economy of speculative projects to a performance-based market, where the key value is no longer a secured right on paper, but a power plant that has actually been built.
3. The New Challenge – How Should Georgia Manage Renewable Energy Surplus?
If in the past the sector’s main challenge was “paper-based” projects, today Georgia’s power system is entering a completely new stage of development. More specifically, the management of renewable energy surplus is becoming increasingly relevant on a seasonal basis.
During certain periods in spring and summer, when hydropower generation is high, solar power plants are operating at peak output and domestic consumption is relatively low, the system may no longer have the capacity to absorb all generated electricity. In such cases, for system security reasons, power plants are temporarily required to reduce generation, which directly affects their economic performance.
Energy storage systems (BESS) and pumped storage hydropower are of course the most well-known solutions to this problem. However, modern energy systems rely on a much broader set of tools.
One of the most effective mechanisms is demand response, where large industrial consumers or high-intensity energy users temporarily increase or reduce electricity consumption in response to price signals or market needs. In essence, the system “stores” energy not in batteries, but in flexible consumption.
Equally important is the introduction of dynamic tariffs, successfully implemented in Scandinavian countries. When electricity prices decrease during certain hours of the day, consumers automatically shift intensive energy use to those periods whether for electric vehicle charging, industrial processes or other consumption activities.
Another important instrument is virtual power plants (VPPs) and AI-based forecasting systems, which significantly increase system flexibility by coordinating thousands of small-scale generators and consumers in a unified management framework.
Ultimately, the most effective solution is never a single technology. Modern energy systems are based on a combination of complementary instruments, flexible demand, digital control systems, integration with regional markets, green hydrogen, flexible grid arrangements and energy storage technologies. Together, these elements form the energy system of the future.
Conclusion
Georgia’s renewable energy sector is currently at a historic turning point. If in recent years the main objective was to attract investment and initiate projects, in the next phase success will be determined by their actual implementation, efficient use of grid resources and the flexibility of the power system.
From this perspective, the recent changes to grid regulations are not merely administrative or technical adjustments. They represent a new expression of energy policy, grounded in a simple principle: national energy infrastructure must serve real investments, not false expectations.
At the same time, it is already clear that Georgia’s next major challenge will not be limited to building new generation capacity. It will be equally important to ensure the effective integration of existing generation, the rational management of electricity surplus and the development of a flexible energy system capable of safely, economically and competitively absorbing the growing share of renewable energy.
The successful combination of these two directions support for genuinely implementable projects and the development of systemic flexibility will determine whether Georgia can not only increase renewable energy production but also establish itself as one of the most modern and competitive energy markets in the South Caucasus.
Levan Kokaia – Lawyer at the Georgian Renewable Energy Development Association (GREDA).
