Generation
The electricity generation sector in Georgia is characterized by a high percentage of (80%) of hydropower, this hydropower capacity can be divided into two groups. First, there are the regulating generators. These are existing Hydro Power Plants (HHPs) which have storage capacity in the form of large reservoirs. Second there are seasonal HPPs. These are HPPs which have no or limited storage capacity. These HPPs are often referred to as run-of-the-river power plants. The seasonal fluctuations in water supply are caused by an abundance of water in summer caused by melting water and rain and a shortage of water in winter by a lack of both aforementioned factors.
Given the limited storage capacity of the seasonal HHPs, thermal power plants are turned on during winter months when there is limited hydro power available. During these winter months there is also import of electricity of from Russia.
During the summer months, when there is a surplus of electricity in Georgia, there is export of electricity to Turkey (see figure$) .
“What distinguishes the Georgian hydro generation system from those of many other European countries with a large share of hydro in the generation mix that the system has been developed with relatively little reservoir capacity. While a country like Norway has reservoir capacity to approximately 70% of annual generation and both Sweden, Finland and Switzerland have a storage capacity of more than 25% of annual generation, Georgia’s storage capacity is approximately 10%. One of the results is a lot of spill of water in the spring and summer months when supply outstrips demand (spill of water)”.
“If the Georgian government intends to meet its target of a 100% hydro power electricity system, there is a clearly a need to build more large hydro with significant reservoir storage. Of the new HPP projects planned in Georgia only the Upper Mtkvari project with a reservoir storage capacity of 36% of annual generation will provide significant additional dispatch flexibility in the Georgian electricity system. “
Generation Tariff
The generation tariff for the Guaranteed Capacity is discussed in chapter $. Furthermore the generation tariffs for the remaining generation capacity – which constitutes only out of hydro energy – are twofold. First there are deregulated HPPs. This deregulated tariffs are a result of the Renewable Energy Act designed to further liberalize the electricity generation sector. The act states that HHPs build after 2008 have fully deregulated tariffs and are allowed to sell electricity in Georgia and abroad to the highest bidder, under certain conditions like availability of grid capacity. Also small hydro power plants (<13 MW) had from that year on deregulated tariffs. Hydro power plants with a capacity larger than 13 MW or thermal power plants kept regulated tariffs. These tariffs are set by the GNWRC and are determined on the basis of ‘full-cost recovery’. This means that the costs of generation and losses in transmission and distribution shall be fully internalized in the regulated tariffs.

Electricity System Commercial Operator (ESCO)
The Georgian electricity trading system is a combination of both a power pool and bilateral contracts (LAW article 22 par. 1). The ESCO is the Electricity System Commercial Operator and is established in 2006 after the Georgian Wholesale Electricity Market (GWEM) was declared bankrupt. The GWEM was the only market operator (mandatory power pool) in Georgia but in 2006 direct contracting between generating entities and purchasers became possible. After that much less electricity was sold through the ESCO (15% in 2009). ESCO buys and sells balancing electricity and reserve capacity in order to meet the actual and forecasted demand of eligible enterprises. It buys this electricity according to the least-cost principle The next functions and responsibilities were assigned to ESCO according to the Georgian Electricity and Gas law:

Mandatory buying and purchasing to the ESCO??
Transmission
There are three companies in Georgia delivering electricity transmission services. These are the Georgian State Electrosystem (GSE), Energo Pro and the Joint Stock Company (JSC) Sakrusenergo. GSE is the so called dispatch licensee and is therefore responsible for the dispatch services in Georgia. Transmission tariffs are set by the regulator, the so called GNEWRC. There is no capacity tariff but a tariff per kWh transferred (postage stamp principle).
Balancing of supply and demand (rules article 31)
As a dispatch licensee, GSE is responsible for balancing the supply and demand in the electricity system. The Qualified Enterprises therefore need to submit supply and demand applications – similar to the energy programs in the Netherlands – on an monthly and daily/hourly basis. However, since it is not possible to forecast supply and demand exactly on every moment of the day, GSE has the availability of balancing power. This balancing power comes in two forms: load reserve and guaranteed capacity. The load is comparable to the Dutch ‘balancing market’, see$. It is basically the amount of electricity which is consumed less by the buyer than the amount of electricity to be purchased on the Direct Contract. The seller of that electricity is then deemed, by the standard terms of the directed contract registered by the ESCO with the Dispatch Licensee, to sell this electricity as balance electricity to ESCO.
This also holds the other way around, when a buyer consumes more electricity within a settlement period then is soled based on the Direct Contract, the electricity buying entity is deed to buy balancing electricity from ESCO.
$ Balancing price article 14 rules
The guaranteed capacity consists out of thermal power plants (generation licensees) ($see document government) which are entitled as Guaranteed Capacity Sources (see article 2). These plants are in standby mode, and are capable of synchronization with the energy system. These power plants receive a capacity payment and a fixed price for each kWh generated. These prices are set by the GNEWRC and are determined on the basis of (article 49 law).

Capturing the seasonal fluctuations
Hier die 20% of die 3 dagen.

Distribution and use
Two main customer groups for distributed electricity can be identified, these are the distribution companies and direct customers. There are currently four distribution companies in Georgia: Kakheti Distribution Company, Energo-Pro Georgia, Abkhazia Energy Company and Telasi. These distribution companies each have their own geographical market, there is no retail competition. All distribution companies have long term agreements with the power producers.
Direct customers are companies which are allowed to purchase electricity (bilaterally) directly from the producers. This because they have an annual demand exceeding $$ threshold.
The retail tariffs for electricity are regulated. A relatively high part of these retail tariffs flow to the distribution companies (approximately 60% in 2009). This is because historically there are high losses in the Georgian distribution grid and the GNEWRC allowed distribution companies to make large investments in the distribution network to improve its quality. Also the fact that old HHPs have very low marginal cost reduces the share of generation in the total costs.

Geopolicitcal problems??

Summary/conclusion