Georgia’s Power Reforms Support Economic Growth - ADB Report

Georgia’s power sector reforms over the past two decades have resulted in a dramatic turnaround in service and efficiency, which has helped support a resurgence of economic growth, says a new Asian Development Bank (ADB) report.

“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,” said Kathie Julian, Country Director from ADB’s Georgia Resident Mission. “However 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.”

The country report Assessment of Power Sector Reforms in Georgia, prepared by ADB’s Economic Research and Regional Cooperation Department, was launched today in the capital, Tbilisi.

Since 1995, sweeping reforms have been carried out to the power sector to improve the regulatory environment, to boost efficiency, and to encourage competition. This 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.

Collectively these measures have sharply improved the power system’s efficiency, benefitting the government and industry participants, while households now have reliable power supplies and almost no total blackouts occurred in recent years.

The sector reforms, 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% 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.

ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration.

Established in 1966, it is owned by 67 members – 48 from the region. In 2014, ADB assistance totaled $22.9 billion, including cofinancing of $9.2 billion. ADB has supported Georgia since 2007. As of end 2014, the ADB-approved assistance to Georgia totaled more than $1.6 billion, including $259 million in approved loans and technical assistance grants in 2014.