Black Sea Transmission Line redraws Europe’s energy map

Black Sea Transmission Line redraws Europe’s energy map

The Black Sea Energy Transmission Line is making the long cherished vision of the free flow of energy across the borders of a wider Europe a reality.

The line, which runs between the east and west of Georgia and connects to the north-east of Turkey via a high-voltage substation, is one of the largest infrastructure projects in Georgia in decades, and a major investment by the EBRD, the European Investment Bank (EIB), the German development bank KfW, and the Georgian government.

Today's announcement of an IFC, ADB and EBRD financing package for the Shuakhevi hydropower plant is only the latest example of multilateral efforts to encourage energy trading across national boundaries bearing fruit. The plant is being built by a joint venture between India's Tata Power, Norway's Clean Energy Invest and IFC.

The 315 km high-voltage Black Sea line - the first major interconnector between the Caucasus and Western grid - has already enabled cross-border trade, improved the reliability of power supply, strengthened regional energy security and brought unprecedented investment into the renewable energy industry.

Thanks to the opening of the Turkish market with its higher wholesale prices, coupled with the wealth of Georgia's hydropower resources, a number of private sector investors, big and small, have started building new hydropower plants in Georgia.

Many of them have been co-financed by the EBRD, the largest renewable energy investor in its region.

"It is particularly fulfilling to see private investment in energy generation projects stimulated by EBRD's initial investment in the Georgia-Turkey cross-border transmission line,"Nandita Parshad, EBRD Director for Power and Energy, said of the Shuakhevi project.

"It is a prime example of how the EBRD facilitates private sector investment as part of its mandate to help countries transition to open market economies."

The first of the hydropower plants, the 87 MW Paravani HPP, was built by the Turkish Anadolu Group with the help of US$ 49 million of EBRD financing and came on-stream at the end of 2014.

"The launch of Paravani gave a strong signal to foreign investors, especially in Turkey," said the CEO of Anadolu in Georgia, Marat Kucuk. "We enjoy very strong support from the government which is of course every investor's dream!"

Another hydropower plant, the 108 MW Dariali HPP for which the EBRD arranged a syndicated loan of US$ 80 million, was the first infrastructure project in Georgia to be structured as a private-public partnership.

"It took us a year of negotiations with many investors to work out a structure, and EBRD lawyers found innovative solutions that were not obvious," said the CEO of Dariali Energy, the Georgian investor Zurab Alavidze.

"But in the end we created a successful model which can be used for any infrastructure project, involving investors, IFIs and the government."

The success story is only beginning, Mr Alavidze added. "As we generate more power we will need more connecting lines with Turkey and other neighbours. We are talking about big investments, billions of dollars."

As other countries and regions search for new energy partnerships of their own - from Moldova where work has already started on a similar line, to the Baltic states which intend to synchronise their grids with the EU - the Black Sea Transmission Line will serve as a blueprint for a more secure and open energy market far beyond the Black Sea itself.
"Georgia's ambitious goal to become a regional energy hub seemed unachievable just a decade ago but it is now becoming a reality," said the EBRD's David Managadze.

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