S6. georgian industrial group conference oecd

1. MAIN OBSTACELS FOR RES IN GEORIGA

2. 2
THE CONTENT
Threats and Weaknesses
Local Component
Requirement
LCOE of Wind PP GIG Case Study

3. 3
TREAT:
Policy Uncertainty
Lack of long-term policy in Georgia
for spurring investor confidence.
There is no differentiation between
Hydro and non-Hydro Renewables.
Currently, there is a cap for PPA
tariffs introduced under the
memorandum with IMF: 6 USDc, 8
Months.
TWO PRIMARY PROBLMS with NON-HYDRO RENEWABLES
High Initial Cost, Low Capacity Factor, Policy Uncertainty
WEAKNESS:
High Cost
By and large, RES have a high
installation cost amplified by a low
capacity factor that makes them
less competitive in countries with a
high discount rate. Although the
current WACC equals to 13.75%, it
is anticipated that for the year 2017
Georgia’s WACC will be in range
14-17%

4. 4
• Capital Cost (Grid Connection included) – 1300 - 1700 USD/MW
• O&M - 0.6 - 1.2 USDc/kWh
• Capacity Factor – 35% - 45%
• Degradation Rate - 0.3% per annum
• Discounting Factor, WACC - 14.3%, 15.8%, 17.8% (Energy Regulators Regional Association, February
2017)
• WPP Life time- 20 years
LEVELIZED COST OF ELECTRICITY for WIND in
Georgia
INPUT PARAMETERS
Levelized Cost of Electricity =
∑
𝑪𝑪𝑪𝑪𝑪𝑪𝑪𝑪𝑪𝑪 +𝑮𝑮𝑮𝑮𝑮𝑮 𝑮𝑮 𝑪𝑪𝑪𝑪𝑪𝑪𝑪𝑪𝑪𝑪𝑪𝑪𝑪𝑪𝑪𝑪𝑪𝑪 𝑪𝑪 +𝑶𝑶&𝑴𝑴+𝑭𝑭𝑭𝑭𝑭𝑭𝑭𝑭
𝟏𝟏+𝒓𝒓 𝒕𝒕
∑
𝑬𝑬𝑬𝑬𝑬𝑬𝑬𝑬𝑬𝑬𝑬𝑬𝑬𝑬𝑬𝑬𝑬𝑬𝑬𝑬𝑬𝑬 𝑶𝑶𝑶𝑶𝑶𝑶𝑶𝑶𝑶𝑶𝑶𝑶∗ 𝟏𝟏−𝑫𝑫𝑫𝑫 𝒕𝒕
𝟏𝟏+𝒓𝒓 𝒕𝒕

5. 5
LEVELIZED COST OF ELECTRICITY for WIND in GEORGIA
Results of Stochastic Sensitivity Analysis
WACC=14.3% WACC=15.8% WACC=17.8%
LCOE = 6.11 USDc LCOE = 6.52 USDc LCOE = 7.08 USDc
LCOE,
Stochastic Sensitivity Analysis with r=14.3%
LCOE
Density
0.050 0.055 0.060 0.065 0.070 0.075 0.080
0102030405060
Mean LCOE, 6.11 USDc
Kernel Density
LCOE,
Stochastic Sensitivity Analysis with r=15.8%
LCOE
Density
0.050 0.055 0.060 0.065 0.070 0.075 0.080 0.085
0102030405060
Mean LCOE, 6.52 USDc
Kernel Density
LCOE,
Stochastic Sensitivity Analysis with r=17.8%
LCOE
Density
0.06 0.07 0.08 0.09
01020304050
Mean LCOE, 7.08 USDc
Kernel Density

6. 6
MICRO POWER PLANT
Net Metering
Micro Power Plant with Install
Capacity under 100 KW (Law on
Electricity and Natural Gas)
• The owner of photovoltaic panels can supply generated electricity to the system, and purchase power
from the system.
• In cases when the monthly balance (electricity produced minus electricity consumed) is negative, the
household pays for the net amount of electricity consumed.
• In the opposite case, when the monthly balance is positive, the household is paid by Utility Company.

7. 7
GIG CASE STUDY
100 KW Roof Solar Panels
• Cost (Including roof preparation works) ≈
2.2 USDc per Watt, 100KW ≈ 220,000USD
• Simulated Production: 172.6 MWh/year
• Year 10: Inventor Outlay, 45,000USD
• O&M: 2400 USD per Annum
• Tariff: 10 USDc ≈ 24 Tetri

8. 8
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
-200000-150000-100000-500000
0 20 40 60 80 100
-150000-100000-500000
i%
NPV
1.06
The law was adopted in April, 2016.
Only 8 micro generation PP have
been registered in GNERC so far.
GIG CASE STUDY
Results
IRR = 1.06% (!)
Payback = 21 years
NPV (i=10%), = -104671.1 (!)

9. 9
LOCAL CONTEN REQUIREMENT: Developing Green
Economy in Georgia
Employment, Taxes, Technology Transfer
Employment Gains
By requiring enterprises to use a certain proportion of inputs from local
industries, proponents argue that employment will certainly increase
Increased Tax Base
LCR will lead to an increased tax base for governments because of a
larger local manufacturing industry. This would allow countries to have
more income, while developing a new industry
Transfer of Technology and Knowledge
Technology transfer as a result of LCR comes from learning-by-doing
and capacity building in domestic supply. Although it is not patent-
related, this knowledge of technology and how to operate it is an
important component in reaching global green industrial growth.
Local content requirements (LCR) are policy measures that
require foreign or domestic investors to source a certain
percentage of intermediate goods from local manufacturers
or producers.

10. 10
Feed in Tariff plus LC
The Ministry of Energy and Natural Resources determined the baseline feed-in
tariff for wind energy at 7.3 USD cent/ kWh with an extra bonus for locally
manufactured component which is an extra 3.7 USD cent/ kWh:
• Bonus for Blade 0.8 USD cent/ kWh,
• Bonus for Generator/ Power Electronics 1 USD cent/ kWh,
• Bonus for Turbine tower 0.6 USD cent/ kWh,
• Bonus for all mechanical equipment in rotor and nacelle is 1.3 USD cent/
kWh.
Tender with LCR
The Ministry of Energy and Natural Resources invited interested and eligible parties
for tender on the construction of 1 GW installed capacities of Wind PPs with 65% LC
including all nececcary row materials. The tariff should be below 7 USDc, however
15 years power purchasing is guaranteed.
LCR in Turkey: Case
FiT plus LC Bonus, Tendering with LCR

11. 11
LCR in Georgia
Spare Capacity at KAMP
GIG Spare Capacity at Kutaisi Auto
Mechanical Plant
 60 000 sq. meter
under the single roof;
 Experienced
workers;
 Not far from Black
Sea ports.

12. 12