Located in the South Caucasus region at the crossroads of Western Asia and Eastern Europe, Georgia is bounded on the west by the Black Sea, on the north by the Russian Federation (hereafter “Russia”), on the south by Türkiye and Armenia, and on the southeast by Azerbaijan. Being on the shortest route between Europe and Asia, Georgia’s transport system is a key link in the historic Silk Road trade network. Tbilisi is Georgia’s capital and largest city, and the country covers a territory of 69 700 square kilometres (km²) with a population of 3.7 million. It is a unitary semi-presidential republic, with the government elected through a system of representative democracy.

Georgia’s overall economic policy has been focused on creating a liberalised economic environment through minimal state interference, deregulation, privatisation, reduced and simplified licensing and taxation, and free trade. It has therefore been pursuing westward-oriented political, economic and foreign policies, and signed an association agreement (including assent to the Deep and Comprehensive Free Trade Area) with the European Union in June 2014. The European Parliament ratified the Association Agreement in December 2014, and in October 2016 the Georgian Ministry of Energy signed an Accession Protocol to the Energy Community Treaty, ratified by the parliament in April 2017. The country has been a signatory to the Energy Charter Treaty since 1995 and a member of the World Trade Organization since 2000. The reforms that followed have included adoption of the Law on Energy and Water Supply and the Law on Support of the Renewable Energy Sources in December 2019. Laws on Energy Efficiency and Energy Performance of Buildings were adopted on 21 May 2020.

Average annual economic growth of 3.6% between 2017 and 2021 was achieved through structural reforms that stimulated capital inflows and investment, but it was seriously hampered by the Covid-19 crisis. Reforms improved the business environment, strengthened public finances, upgraded infrastructure facilities and liberalised trade. Growth was also supported by increased foreign direct investment (FDI) and was driven by capital accumulation and the sound use of excess capacity rather than by net job creation, with productivity gains concentrated mainly in the non‑tradeable sectors. Gross domestic product (GDP) per capita (in current prices) increased from USD 920 in 2003 to USD 5 015 in 2021.1

Georgia has developed a stable and reliable energy sector that has been largely unbundled since the mid-1990s; its primary domestic energy sources are hydropower and fuelwood. The government is focused on securing private investment to construct new hydropower stations, increase thermal generation efficiency and diversify fossil fuel supply sources and routes, but further efforts are required to improve efficiency in domestic energy use and to capitalise on the country’s ample renewable energy potential.

TES: 4.94 Mtoe (natural gas 47.1%; oil and oil products 26.6%; hydro 14.4%; coal 4.3%; bioenergy 4.6%; other renewables 0.5%), +58.3% since 2010.

TES per capita: 1.33 toe/cap (world average: 1.80 toe/cap)

TES per unit of GDP: 99 toe/2015 USD million PPP (world average: 113 toe/USD million PPP)

Energy production: 1.04 Mtoe (hydro 68.0%; bioenergy 21.8%; coal 3.9%; oil 3.0%; other renewables 2.5%; natural gas 0.7%), -20.5% since 2010.

• Georgia’s energy production covers about one-fifth of its energy demand (21.1% in 2020).
• Most of Georgia’s domestic energy production (1.043 Mtoe in 2020) comes from hydro (0.709 Mtoe) and bioenergy (0.227 Mtoe).
• Fossil fuel production exists but is very limited (40.3 ktoe of lignite, 31.8 ktoe of crude oil and 7.7 ktoe of natural gas in 2020).  2
  

• Georgia depends on imports for all its natural gas (2.7 bcm in 2020) and most of its oil products (1.33 Mt in 2020).
• Oil is imported mainly in the form of refined oil products (42.1% diesel and 40.4% gasoline).
  

• Georgia’s final energy consumption was 4.49 Mtoe in 2020.
• From 2000 to 2020, both final energy demand and electricity consumption per capita more than doubled, and are very close to global averages.
• The final energy mix is relatively diverse compared with other countries in the region. In 2020, natural gas was the first fuel in the mix (38.5%), followed by oil products (29.3%) and electricity (22.0%). The remainder is covered by renewables (5.5%) and coal (4.7%).
• About 80% of Georgia’s electricity generation comes from hydro resources (80.5% in 2021), with the remainder produced from natural gas and from a 20.7‑megawatt (MW) wind power plant (83.4 GWh in 2020).
• The residential sector has the largest share of final energy consumption (1.41 Mtoe in 2020), followed closely by transport (1.34 Mtoe in 2020). Although the transport sector has historically claimed the highest share, Covid-19 lockdowns reversed this trend.
  

The share of renewables in Georgia’s electricity mix is among the highest in the world (81.1% in 2021). 

Georgia’s energy-policy aim is to raise the country’s energy security, guaranteeing an uninterruptable supply of various energy products of acceptable quantity, quality and price to support national interests.

As a net oil and gas importer, Georgia relies heavily on imports of natural gas, oil products and hard coal to meet most of its energy needs. In fact, net imports in total energy supply (TES) rose from 47% in 2002 to 81.4% in 2020 to meet rising energy demand. After the energy crisis of 2006, the country began reducing imports from Russia and increasing those from Azerbaijan, with 84.1% of natural gas and 17.9% of oil consumption now imported from Azerbaijan. Gas imports are highest during the winter months when there is a greater need for heating and less hydropower capacity is available for electricity generation.

Interconnected with Russia, Azerbaijan, Armenia and Türkiye, Georgia exports its seasonal excesses of electricity from hydropower, but it has registered negative net electricity exports since 2012 (except in 2016). Since 2016, Azerbaijan has been
 

transiting its electricity to Türkiye via Georgia. Transits from neighbouring countries peaked in 2021 at 1.18 TWh, of which nearly 61% was transited from Azerbaijan to Türkiye.

Because of Georgia’s substantial rise in domestic energy demand and the seasonality of hydropower generation, the government is exploring all avenues to diversify oil and natural gas supply sources at the same time as aggressively promoting further hydropower development. It is also co‑operating closely with neighbouring economies to develop projects for transiting energy through its territory to secure additional natural gas supply sources.

Crucial to its energy security, Georgia is trying to develop its own gas storage to hold strategic volumes of gas stocks and to regulate seasonal imbalances in supply and consumption. An underground option with an active gas volume capacity of 210‑280 mcm has been studied extensively, but the final decision is still pending.

Fuelwood, the main fuel source for space heating in rural areas, accounts for 21.6% of energy produced from domestic sources. Most wood for fuel is harvested unsustainably and used inefficiently, which has led to forest depletion and related environmental problems. While extending gas access to rural areas has significantly reduced fuelwood consumption, it is still more than double the level of sustainable use. To remedy this situation, the state is introducing new forest management practices and supporting the production and use of upgraded modern biofuels made from waste biomass.

As the body tasked with governing the energy sector, the Ministry of Economy and Sustainable Development (MoESD) is responsible for state policy in the energy sector as well as policies related to sustainable development of the country’s economy.3 It leads energy sector reforms to implement the relevant EU directives and regulations in compliance with Energy Community membership. It took over the responsibilities of the former Ministry of Energy in 2017 and can adopt secondary legislation related to the energy sector (through ministerial orders).

To ensure sustainable resource development and protection of the environment, the Ministry of Environment Protection and Agriculture (MEPA) develops national policies and strategies on environmental and natural resource protection and engages in forest and waste management, in addition to other activities.

The Georgian Energy Development Fund is a state-owned joint-stock company (JSC) created in 2010 and reporting to the MoESD. Its mission is to develop Georgia’s renewable energy potential by identifying promising renewable energy projects and supporting their development through pre-feasibility studies and preliminary environmental impact assessments, and by finding investors.

The Public-Private Partnership Agency was created following adoption of the Law on Public-Private Partnerships in May 2018. The agency’s mandate is to lead the development and implementation of public-private co‑operation projects.

Georgian State Electrosystem (GSE) is an electricity transmission system operator. The company owns and operates 3 550 km of transmission lines and 93 substations spread throughout the country. The National Dispatch Centre manages the transmission network, and three regional networks (East, West and Kakheti) provide technical maintenance. GSE also manages the cross-border transmission lines interconnecting Georgia with Russia, Türkiye, Armenia and Azerbaijan.

Georgia’s Electricity Market Operator (ESCO) exclusively oversees electricity balancing and guaranteed capacity trading, manages seasonal electricity imports/exports and inspects the wholesale metering nodes.

Georgian Oil and Gas Corporation (GOGC) owns the main gas pipeline system and ensures the unimpeded operation of transboundary oil and gas transportation systems on Georgia’s territory. It also develops and operates gas-fired power plants.

Georgian Energy Exchange (GENEX) is a JSC established in 2019 by GSE and ESCO to function as a market operator. GENEX’s main tasks include operating the day-ahead market, the intraday market and the bilateral contracts market. It also manages the financial clearing system for the day-ahead and intraday markets.

The Constitution lays out the legislative process for introducing primary legislation in the energy sector. Legislative initiative is the prerogative of the government, ministries (initiating laws through the government), parliamentary committees, groups or individual members of parliament, and citizens when an initiative has at least 30 000 supporters. By default, laws are adopted in three hearings by the parliament and enter into force 15 days after publication.

Regulations and secondary legislation are also initiated and passed by the Georgian National Energy and Water Supply Regulatory Commission (GNERC) and the MoESD (through ministerial orders). GNERC does not have the right to initiate primary legislation and its regulations cannot come into force until at least 21 days after initiation, but the time frame for ministerial orders is not regulated.

The parliamentary Committee on Sectoral Economy and Economic Policy oversees energy sector developments through regular or topical hearings with the participation of the MoESD and other stakeholders. The parliamentary Environmental Committee is concerned with the environmental impact of energy projects as well as forestry reform, which may influence the use of biomass as a fuel.

GNERC resolves disputes among regulated market participants or between consumers and service providers in the energy sector. Cases are resolved in open hearings, but if parties disagree with the GNERC decision they are authorised to take their case to the general courts.

Among the cases that have been taken to the Constitutional Court, one initiated in 2002 questioned the new tariff adjustment and amendments to the Electricity and Natural Gas Law and the ministerial order related to communal metering.

GNERC, Georgia’s independent energy and water supply regulator, was established in 1997 and its responsibilities include: regulating the activities of importers and exporters and of the market operator/supplier (ESCO); monitoring the electricity market and approving market rules; licensing electricity generation, transmission, dispatch and distribution; licensing natural gas transportation and distribution; regulating electricity generation, transmission, distribution and end-user tariffs and import prices; resolving disputes; developing metering, billing and collection services; and approving grid codes. GNERC also sets caps on wholesale prices for existing plants based on their costs, except for small and medium-sized hydropower plants (HPPs) developed since 2008. GNERC also does not regulate power purchase agreement prices for new HPPs under development.

The State Agency for Oil and Gas was established in 1999 as an independent regulatory body under the Oil and Gas Law, to oversee and regulate oil and gas exploration and production activities. Since 2013, the State Agency for Oil and Gas has been a legal entity under public law within the Ministry of Energy (currently the MoESD) and is responsible for regulating oil and gas operations, oil refining, gas processing, and/or transportation activities in Georgia according to Oil and Gas Law Amendment No. 467 of 25 March 2013.

The new Law on Energy and Water Supply, approved by Georgia’s parliament in 2019, was developed in co‑operation with the Energy Community to transpose the requirements of key electricity and gas directives into Georgian legislation. The law creates the legal framework to develop a more independent, competitive and liquid market by unbundling and granting certification to transmission and distribution system operators.

In 2019-2020, the Parliament approved the Law on Energy Efficiency, the Law on Energy Efficiency of Buildings, the Law on the Promotion of Production and Use of Energy from Renewable Sources, and the Energy Labelling Law. However, a system of secondary legislation needs to be developed for effective implementation of these laws. This process is ongoing.

According to the Energy Efficiency Law, state policy on energy efficiency aims to create a legal framework for energy efficiency, define a national energy efficiency target and eliminate barriers hindering energy efficiency development. On 23 December 2019, the government of Georgia approved the National Energy Efficiency Action Plan 2019-2020 for implementation of the energy efficiency policy by Decree N2680. Since the beginning of 2021, the MoESD has been working on an integrated National Energy and Climate Plan (NECP) for 2030 covering the five priority areas of a possible energy union:

• energy security
• the internal energy market
• energy efficiency
• decarbonisation and renewable energy sources
• research, innovation and competitiveness.

The draft NECP must be approved by parliament as part of the country’s National Energy Policy and submitted to Energy Community Secretariat in the summer of 2023.

Previously, in December 2019 Georgia’s government adopted a National Renewable Energy Action Plan (NREAP), but its activities covered 2019-2021 only. While the NREAP dictated that support schemes for small-scale heating and cooling from renewable energy sources should not yet be implemented but instead be reflected in bylaws, measures for developing renewable energy are now included in the NECP to be approved in the spring of 2023.

The Law on Energy and Water Supply provides the legal basis for power-related secondary legislation, the main pieces of which are the Electricity Market Model Concept and the Electricity Market Rules. By Decree No. 246 of 16 April 2020, the government of Georgia adopted the Electricity Market Model Concept, which introduces general organisational principles for the wholesale electricity trade market:

• Competitive, transparent and free trade on electricity markets.
• Avoidance of conflicts of interest and discrimination.
• Sale of electricity on the wholesale market by means of a competitive market, particularly through bilateral agreements and/or on organised electricity markets, including day-ahead intraday and balancing markets.
• Trade of electricity on organised markets only, by public energy enterprises and service providers using the facilitation mechanism/scheme envisaged under the Law on Facilitation of Production and Use of Renewable Energy.
• Determination of hourly generation and consumption schedules, means of electricity generation/consumption, and loading capacity by the responsible persons (self-dispatching).
• Hourly trade on organised markets and, accordingly, liability of market participants for hourly imbalances.
• Purchase of electricity only on day-ahead and intraday markets to reimburse losses.
• Allocation of cross-border capacities in accordance with transparent and fair rules.

In 2019, the first Energy Exchange was established in Georgia. The Energy Exchange is a neutral, unbiased and transparent organisation that, upon obtaining appropriate licences, will act as an operator of organised electricity markets. The Exchange will ensure the introduction and operation of day-ahead and daily markets through the software services of Nord Pool Consulting. It will apply the Electricity Supply and Consumption Rules and the Electricity (Capacity) Market Rules (2006; amended in 2010 and since), which outline the electricity and natural gas tariff methodology and conditions for retail and power supply markets. In 2013, the government approved Resolution No. 214 on the Approval of Rules for Expression of Interest in Conducting Technical and Economic Feasibility Studies for the Construction, Ownership and Operation of Power Plants in Georgia.

The Law on Oil and Natural Gas (1999) created a unified legal framework for state regulation, supervision, control and development of oil and gas resources and oil refining, gas processing and transportation, and for pursuing a unified national policy in these fields. It also made the Oil and Gas Agency responsible for regulating the subsector.

The main directions of the draft National Energy Policy (NEP) are:

• Diversification of external energy supply sources.
• Increased energy sector resilience throughout the country.
• Greater renewable energy resource use, to become a regional leader in clean energy production and trade.
• Development of fossil energy resources for greater energy security.
• Increased energy supply and consumption efficiency.
• International energy co‑operation, including regional energy trade development.
• Co‑operation through an energy union and with the ENTSO‑E Continental Europe Synchronous Area.
• Energy market reform and establishment of a competitive market.
• Reduced environmental impact.
• Climate change mitigation and adaptation.
• Better service quality and protection of customer interests.
• Elimination of energy poverty and help for vulnerable consumers.
• Research, innovation and technological development.

The National Integrated Energy and Climate Plan, which forms the appendix of the NEP, formulates the concrete state policies and measures of these directions in detail.

Meanwhile, GSE prepared its Ten-Year Network Development Plan of Georgia for 2021-2031 and the MoESD approved it on 17 February 2021 by Order No. 1-1/42, and the GOGC Board of Directors has approved the Ten-Year Development Plan for Georgian Gas Transmission Infrastructure 2021-2030.

As a participant of COP21 and a signatory to the Paris Agreement, Georgia submitted an Intended Nationally Determined Contribution (INDC) to the United Nations Framework Convention on Climate Change (UNFCCC). Then, in 2021 the Ministry of Environmental Protection and Agriculture, with technical assistance from GIZ, developed and submitted a more ambitious Nationally Determined Contribution (NDC) with its Climate Action Plan 2021-2030.

Launched in 2019 and funded through the European Union’s EU4Climate programme, Georgia’s Low Emission Development Strategy (LEDS) aims to develop a gender-sensitive emissions-reduction strategy by mid-century to help Georgia fulfil its Paris Agreement commitments. The LEDS is also meant to be used as a foundation for environmentally sound long-term planning in several sectors: energy; buildings; industry; transport; agriculture; land use, land-use change and forestry (LULUCF); and waste. The draft was submitted in 2022. 

Official energy statistics are the responsibility of the National Statistics Office of Georgia (Geostat). Seven staff members dedicate part of their time to compiling energy statistics in addition to industry and construction statistics.

Energy data are collected annually through a set of questionnaires sent to all sectors of the economy (services are surveyed every five years). Since 2015, enterprises have been obligated by law to reply to surveys and may do so through online forms, but in-person interviews are conducted for households. Geostat aims to increase the use of administrative data for source data or for data-checking.

The main energy publication is the Energy Balance of Georgia. It contains annual supply and demand data for all fuels, in physical and energy units broken down by sector, as well as information on power plant capacities. The underlying data can be downloaded from the Geostat website in Excel format.

Official annual data are shared with the United Nations Statistics Division (UNSD) and the International Energy Agency (IEA) through five joint IEA/Eurostat/UN Economic Commission for Europe (UNECE) questionnaires. Monthly oil and gas data are also collected and transmitted to the UNSD for publication through the Joint Organisations Data Initiative (JODI). In 2016, when Georgia became an Energy Community member, additional indicators for energy statistics were required in accordance with European Parliament and Council regulations. To fulfil these reporting obligations, Geostat submits annual energy questionnaire responses to the IEA and Eurostat (for coal, electricity, renewables, oil and gas).4 Since 2018, Geostat has also been publishing monthly oil and gas data as well as electricity and gas prices.

Geostat has an active institutional co‑operation policy and holds regular meetings with its main data providers and users, such as the Ministry of Energy (now the MoESD), the GOGC and GNERC. It also leads an informal national energy statistics consulting group that serves as a platform for dialogue and information-sharing among national data providers and users. Geostat’s official energy statistics are openly accessible in the public domain.5

Since 2014, Geostat has been responsible for compiling the official Energy Balance of Georgia and published the first one in that year (2013 data). To achieve this, it was necessary to introduce new data collection to obtain information on the final consumption of energy resources, and at the same time Geostat adopted international standards and a methodology for collecting and compiling energy data (solid biomass data are considered representative).6 Energy consumption data do not include end-use data from Abkhazia and South Ossetia, however.

Furthermore, Geostat conducted a household survey in 2017 to collect information on end uses of energy (e.g. for space heating and cooking), establishing a basis for the government to formulate energy efficiency indicators.7 The survey is to be conducted every five years, and with IEA support Geostat has also begun compiling datasets for the industry and residential sectors. The next household energy consumption survey was conducted in the summer of 2022 and the results will be published before the end of the year.

The MoESD is among the main users of Geostat’s energy data. The energy module of the national greenhouse gas (GHG) inventory, prepared by the Ministry of Environmental Protection and Agriculture, is based mostly on the official energy balance. Although available energy data could be used to improve energy planning, including through long-term energy modelling, this potential is currently being realised to only a limited extent.

Geostat’s medium-term strategy therefore also includes the compilation of energy efficiency data.8