Why hydroelectric power is not the solution in Georgia
A controversial new dam project will not bring energy security or investment benefits, as the government claims. There are alternatives
Georgia’s government propaganda machine has been working tirelessly in the past few months to justify a controversial new hydroelectric power plant.
The Namakhvani project is a big deal for a country that relies heavily on foreign investment, with proposed investment valued at up to $800m, and a Turkish investor. The government’s argument is that the Namakhvani hydroelectric power plant (HPP) will bolster the country’s energy independence and security, and provide vital investment for an economy that is struggling from the global coronavirus pandemic.
But trying to justify the scheme, which involves building a vast dam in the Rioni Valley in the west of the country, also means denying the scale of environmental and economic damage the project will inflict.
Thousands of people have protested against this new dam, showing that popular feeling is much stronger than Georgia’s long experiment in social engineering. It is an honest protest by people who are tired of 30 years of unbridled privatisation and deregulation, and who always end up losers under government policies to attract outside investors.
Indeed, Georgians have been protesting against new dams for the country’s rivers since the 1980s. After the 2003 Rose Revolution, the newly elected United National Movement government renewed Soviet-era dam construction, despite opposition. In 2012, when the Georgian Dream coalition came to power, public attitudes towards dams remained unchanged.
This popular scepticism has its roots in reality. In 2014, the newly constructed Larsi Dam was damaged by a series of mudslides, killing more than ten people. Then in 2017, part of Shuakhevi Dam collapsed two months after its construction, resulting in 200m Georgian lari ($60m) in damages. In both cases, the government did not heed warnings by environmental groups.
Nobody denies that new energy sources are needed for economic development, but two questions keep coming back: what kind of economy is Georgia building and at what price? And who are the winners?
Sites at risk
The Namakhvani HPP refers to two ‘cascade’ dams: the Tvishi Dam (100 megawatts capacity) and the Namakhvani-Joneti Dam (333 MW). The project is currently at the preparatory stage, and envisages the creation of a 610-hectare reservoir, though the area flooded will be much greater – a large part of the forest that covers the surrounding hills will end up underwater.
Several cultural and natural heritage sites are also at risk, including the unique microclimates of Tvishi, a noted wine region, and a special variety of sturgeon. People living in the valley may be forced to leave their homes as a result of future geological or environmental events. Geological and seismic risks accompany projects of this scale, and the unpredictable nature of climate change on rainfall undermines any new dam projects.
In addition, there is concern about the unconditional transfer of land, water and other natural resources on a 99-year lease to the plant’s operating company.
No one is denying the environmental damage that will be caused by the dam. But the Georgian government, and the dam’s proponents, offer several arguments to support the project: energy independence; cheap domestic supply to meet the increasing consumption of energy; and $800m foreign investment during the pandemic.
First, let’s deal with energy independence. Annual energy consumption in Georgia amounts to around 60 billion kWh, and more than 80% of the country’s energy is imported, mostly from Azerbaijan and Russia. It cannot make up the shortfall between imported electricity and imported fossil fuels and domestic production via hydropower. Which means that even if we completely cement over all of Georgia’s rivers, the country will still not be able to achieve energy independence without our own oil and gas.
As for the price of electricity generated as a result of the project: the government says that Turkish company Enka won the contract because it offered the lowest energy price. According to official data, the guaranteed purchase price paid by the state to Enka is $0.062/kWh for eight months each year. (For the other four months, the state will pay market prices.) Under the 15-year power purchase agreement, that guaranteed price increases annually. For example, in the 15th year of operation, the purchase price per kilowatt will be $0.093/kWh, not $0.062.
This is why international finance organisations have advised the Georgian government to abandon the project. According to the World Bank, the Georgian state budget will have to pay 631m lari (GEL) to Enka by 2041 (based on the GEL exchange rate in 2018). Even if the current exchange rate remains fixed, the government budget will still end up paying 820m GEL. For comparison, the balancing electricity price in Georgia was $0.049/kWh in the first half of 2020, while the average price of electricity imports was $0.039/kWh.
To replace imports at the current demand, Georgia needs to generate an average of two billion kWh of electricity per year at its own capacity. According to preliminary figures, Namakhvani HPP’s capacity is 433 MW, with an estimated output of 1.496 billion kWh. But the main issue is that in winter – when the country is importing electricity – the plant’s maximum output is estimated at only 600-700 million kWh. Neither the state, nor the Turkish operator, seems to have considered this.
Therefore, the argument that the Namakhvani HPP is the best way to replace imports is also misleading. This is even before you factor in the environmental impacts and fiscal risks.
A better alternative?
In a recent ten-year development plan, Georgia’s national grid explicitly states that in 2020–21 the country’s power system could integrate 333 MW wind and 130 MW solar power plants, without having to implement new ‘balancing mechanisms’ – that is, without having to bid for increased or decreased power generation.
Wind power has an advantage over solar in that it is much more sustainable and seasonally stable - especially in winter when import is highest and hydropower supply is lowest. The Georgian government claims – falsely – that balancing capacities is one of the impediments to the development of wind and solar energy. Meanwhile, the Namakhvani HPP is often justified as renewable energy development.
In fact, the development of wind energy would be advantageous. Take Gori, Georgia’s first wind farm, which opened in 2016. Its capacity is 20 MW, while output in 2020 was 90 million kWh. Realistic calculations suggest that 500 MW of wind power would generate up to two billion kWh of electricity.
Why are we cementing over the Rioni Valley, destroying the environment and giving hundreds of hectares of land to investors for dubious reasons? Georgia could take a real step towards energy independence and import substitution by aiming for 500 MW of wind power within two years – without damaging the environment too.
For 30 years, Georgia has been a victim of neoliberal experimentation and proselytism. The principle of the purity of the free market has been elevated to a religious dogma, in which the political elite and so-called experts fetishise privatisation and are ready to capitulate to foreign investors at any cost.
The Namakhvani HPP is a continuation of this. The Turkish investor, Enka, is playing a game they cannot lose under a guaranteed purchase agreement, while the Georgian government is providing – free of charge – all natural resources and materials related to construction without any licensing demands. The government is also taking on all the risks, whether environmental, legislative or because of unforeseeable circumstances – which also could include construction delays resulting from protests.
The Georgian public has the right to know what we’re sacrificing our natural resources and collective wealth for. For cryptocurrency farms, which have spread fast in the country due to cheap land and electricity? Or for decent work opportunities, which will finally end the exploitation of both the environment and people?
As a participant in a recent protest said: “They are selling it like it belongs to them.” No one, including the Georgian government, has the right to sell off Georgia’s natural resources.
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