Removing Barriers to the Development of the Small Hydro Power Sector for the Mitigation of Greenhouse Gas Emissions in Georgia

GEO/00/G41/1G/99
Total budget: USD 200,000 (PDF B)
UNDP sector: Environment
Starting date: August 2000
Duration: 17 months

Georgia is facing a severe energy and economic crisis. In response to the crisis, rehabilitation and construction of small hydro power (SHP) plants is one of the options under consideration to increase the electricity production. Georgia has a significant potential to develop the hydropower sector as an alternative to the construction of new thermal power plants. Today 30 small hydro power plants exist in Georgia, a significant part of them privatised. Many of the plants work with low efficiency or not at all; therefore rehabilitation is crucial. According to some preliminary findings it would be possible to build 160 small and mini hydropower plants in Georgia with the total net capacity of approximately 650 MW, and an annual energy output of 3.9 billion kWh. Interest has been shown among the Government, investors, international organisations and IFIs to develop this segment of the hydro sector, but a number of barriers still remain to be removed before activities can commence.

The objective of the full scale project to be developed with the PDF (Project Development Facility) resources is to remove the existing barriers to the development of small hydro power sector, and to promote a self-sustaining market for small hydro power projects.

The initial activity is to identify the barriers to the development of small hydro power resources in Georgia, followed by development of a strategy and a set of activities to remove those barriers. This is done through extensive consultations with all the relevant stakeholders, including government authorities, local and international financing institutions, bilateral donors, hydro power companies and end-users of electricity. More specifically, the steps to be taken are described in the following:

1. Demonstration of the economic, financial and environmental feasibility of rehabilitating small hydro power plants in Georgia. This will be done through one or two pilot plants.

2. Assistance in developing a supportive legal and institutional framework to develop SHP resources.

3. Detailed incremental cost analysis of utilising SHP resources.

4. Involvement of the local and international financing institutions to support the development of SHP resources, and development and operationalisation of a supportive financing mechanism to finance SHP investments.

5. Training of the local stakeholders to develop project proposals and applications for financing their implementation.

6. Training of the owners and personnel of the SHP companies to manage and operate their enterprises on a commercially viable basis.

1. Successful implementation of the pilot projects, thereby demonstrating the feasibility and practical arrangements of realising such a rehabilitation and/or construction project.

2. Supportive legal and institutional framework put in place for developing SHP resources.

3. Supportive financing mechanism put in place, enabling SHP investments with reasonable terms, and thus reducing the risk of potential investors and financial organisations to finance the development of SHP resources in Georgia.

4. Local stakeholders trained in project management and business skills.

5. Ultimately, all the above should lead to a direct increase in power generation from Georgia’s SHP plants and thereby improve electricity supply especially in remote areas.