In a report, the ADB says that Georgia’s electricity reforms have resulted in a dramatic turnaround in service and efficiency, which has helped support a resurgence of economic growth.
Kathie Julian, The ADB’s Georgia country director, said: “The reforms have restored 24-hour uninterrupted power supply, and ensured nearly every home has electricity, as well as creating an efficient, competitive power industry.”
However she added that “there are still vulnerabilities in the sector and the challenge for Georgia’s policymakers will be to continue down the reform path to overcome them”.
Since 1995, sweeping reforms have been carried out to the power sector to improve the regulatory environment, boost efficiency and encourage competition. This, says the ADB, has “paved the way for major physical improvements to state-owned generation, distribution and transmission assets, privatization of distribution companies, and construction of new hydropower plants”.
The bank says that collectively these measures have sharply improved the power system’s efficiency, benefitting the government and industry, while households now have reliable power supplies, with the result that there have been almost no total blackouts in recent years.
The report stresses that the power sector changes have complemented other economic reforms, and coincided with a substantial rebound in gross domestic product growth since the mid-1990s. The share of average household income spent on power has fallen steadily since 2006, while increases in electricity supply from hydropower and system efficiencies at thermal power plants have reduced CO2 emissions.
The report cautions that while these reforms have been crucial for improving services, vulnerabilities still need to be addressed. Georgia’s heavy reliance on hydropower, which supplies up to 90 per cent of its electricity needs, leaves it exposed to droughts, and to external supply shocks and price spikes when it needs to import gas for its thermal plants. Pricing and planning issues still need to be tackled as well.
At the same time, the report notes that Georgia’s reform experience provides key lessons from which other countries can learn. These include making power reforms an integral part of a wider economic reform process; encouraging private sector investment to improve service quality; and ensuring transparency and regulatory fairness in the treatment of all players in the power market to build competition.
As of the end of last year, the ADB’s assistance to Georgia totalled more than $1.6bn, including $259m in approved loans and technical assistance grants in 2014 alone.