OREANDA-NEWS. Georgia is boosting cross-border power trading activities with its neighbours and is assessing the feasibility of imports from Turkey and the development of a new asynchronous connection with Armenia, Georgian deputy energy minister Mariam Valishvili told Argus.

And Tbilisi is pressing ahead with domestic reforms that seek harmony with the European and Turkish markets, she said.

Georgian power exports to Turkey rose following the start-up of the 700MW Akhaltsikhe-Borcka interconnection last spring. The countries signed an intergovernmental agreement (IGA) on energy co-operation last month that includes the provision for two-way flows consistent with EU regulation.

The countries' transmission system operators (TSOs) are now working on the physical practicality of Turkish flows to Georgia. This would be a technical, as opposed to a commercial, coupling, Valishvili said.

"We are definitely the deficit country and if the price is there, we could be importing from Turkey rather than Russia, Azerbaijan or Armenia, and this is good," she said. "That was our major intention: to have regional development and more freedom and flexibility in cross-border trade."

The country was a net importer in 2012-14 owing to rising domestic demand, despite cross-border capacity expansion. Georgian power demand growth averages 7-8pc/yr, while gas demand growth stands at around 15pc/yr. Georgia is able to export its abundant hydro-generated electricity in the spring and summer, but it imports during the heating season, with exports banned in the winter months — although the country can act as a transit route for power generated elsewhere.

Turkey has been unable to absorb as much Georgian power as expected so far this spring because of wetter weather, higher renewables output and rising coal-fired production. These factors have weighed on prices. Turkey's grid operator has curtailed power this month in some hours as a result of oversupply in the region that the interconnector feeds. The second-quarter contract expired at 145 lira/MWh (€50/MWh), while spot prices have averaged TL105/MWh in April-May to date. The June contract is expected to average TL130-140/MWh.

"All trade is based on competitiveness. Traders will trade with Turkey, when it is reasonable to do so based on market prices and when power in available," Valishvili said. "We are, of course, monitoring what is happening and looking at how to shape policies in the long run, to give proper incentives to the market."

New renewable power producers have secured supply agreements that award priority to exports through the interconnector, instead of receiving feed-in tariffs.

"We have a conceptual understanding that we should make bi-directional flows work... This will definitely take time, but it does not hinder our aspiration to make it happen," she added. Georgia may be be able to take receipt of power from Turkey this winter, depending on prices, with contractual negotiations expected to take place near to the beginning of the import season.

New routes

The country is expanding its connections with Armenia, which is seeking new export routes. A 350MW back-to-back substation in Ayrum, Armenia, is planned, as well as an asynchronous power transmission line between the countries. The project is supported by an €85.2mn loan from German state-owned KfW Bankengruppe, a €10mn grant from the European Commission's Neighbourhood Investment Facility, €10mn from the European Investment Bank, €1.5mn from Armenia and €6.6mn from Georgia. The development will take at least two years to complete.

Growing reserves

Hydro sources generate the majority of Georgia's domestic electricity, but reserve capacity continues to grow, with a new 230MW combined-cycle gas-fired unit due on line at the existing 300MW Gardabani plant in August. The addition is forecast to use much less gas than older units at the complex and will run mostly base load during the country's heating season. Testing is under way. Georgian thermal capacity will reach 800MW, when the unit begins operations. In contrast, the country's installed hydropower capacity is around 3GW.

The state-owned 1.3GW Enguri dam is now running at full capacity, following rehabilitation work on the facility's five units. Maintenance at the 220MW Vardnili hydropower cascade on the Enguri river is continuing.

EU harmonisation

Georgia is looking to harmonise its power market with EU regulatory and legal frameworks. It signed an association agreement with the EU last year and applied for membership of the region's energy community. Negotiations are still advancing.

State-owned dispatch operator GSE became the country's sole TSO in December, after an amendment was passed to national electricity and gas laws. GSE must present its ancillary services proposal by next month, with a view to creating a dedicated ancillary department by December.

Georgia is now working on the technical details for an hourly settled day-ahead planning market. Participants began submitting hourly nominations for the next-day delivery at the end of last year. This has already improved system reliability and helped reduce imbalance service costs. Balancing takes place on a monthly basis at present, but the aim is to introduce daily, and then hourly, balancing.

The associated metering, platform and regulations need to develop in parallel, before the commercial aspects of the system emerge, Valishvili said. Georgia's regulator GNERC is reviewing tariff structures and methodologies — tax policy adjustments are likely to form part of the development.

Turkey launched its day-ahead planning market in 2009. The country introduced its fully fledged day-ahead market at the end of 2012.

The IGA commits the countries to deepen bilateral co-operation, sign a construction agreement for the 400kV Akhlatsikhe-Tortum interconnection no later than next year, and support the realisation of the 154kV Batumi-Muratli transmission line. And it stipulates that Turkey has to provide "knowledge and experience sharing on the [European system operators association] Entso-E integration process".