The Government of Georgia has been signing PPAs (Power Purchase Agreements) to attract investors in Georgia's hydropower sector for years.
However, in 2017, according to the IMF recommendation, a moratorium was announced on the issuance of new PPAs. This means that investors are left without an incentive mechanism.
In July 2020, the government adopted a special resolution to create a new type of incentive mechanism and set the so-called "Feed in Premium" tariffs.
So far, no business has benefited from these tariffs, as power trading platform Energy Exchange has to be launched for it first. However, even after the power trading platform enters into force, the income received by investors will be much lower than in the case of PPA.
Speaking to BMG, Giorgi Abramishvili, head of the Georgian Renewable Energy Development Association, notes that “Feed in Premium” tariffs do not generate adequate income for investors to develop energy projects in Georgia.
Energy companies are still demanding renewal of PPA contracts, but the government opposes its resumption, which is also confirmed by Finance Minister Lasha Khutsishvili.
According to the government decree, the government does not undertake to purchase electricity under the “Feed in Premium” tariff. Instead, the state imposes a co-financing of 1.5 cents, which the operator receives only if the electricity selling price is below 5.5 cents. If the price of electricity is 4 cents, the company receives a co-financing of 1.5 cents per kilowatt from the state. But if the price is 5 cents, then the co-financing is 0.5 cents, and at 5.5 cents the co-financing amounts to 0.
“It is clear that the Ministry of Finance wanted to abolish the practice of PPA contracts. But our position is that it is impossible to implement projects only with “Feed in Premium” tariffs. Everything is getting more expensive, and we are in the process of harmonizing standards with the EU, which means incurring many types of expenditures. It means that everything becomes more expensive for the investor, but on the other side, the price of nothing can be changed. As a result, the financial condition of the project is no longer sustainable”, - Giorgi Abramishvili declares.
