On the path to Europe and energy independence: KfW supports Georgia’s energy sector reform

• Another EUR 27 million to create an electricity market based on market and competition principles
• Promotion of energy efficiency in the building sector – more than 60% savings potential
• Sending a signal for investments in renewable energy sources and energy efficiency

On behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ), KfW today signed a budget loan with the Georgian Ministry of Finance for EUR 27 million for the fifth phase of the energy sector reform programme for transformative climate financing. One of the aims is to create a transparent electricity market based on market and competition principles following the model of the EU. The intent is to move from the post-Soviet system with fixed and non-cost-covering prices to an electricity market where the electricity price is established through supply and demand. There are also plans to promote energy efficiency, particularly in the building sector, which accounts for around 40% of energy consumption and where there is a savings potential of 60% of energy costs. Georgia follows European standards here too, and is well on its way to being able to calculate the energy requirements of buildings and to introduce an energy certificate like the one used in Germany.

“Georgia is aiming for an accelerated rapprochement with the EU and the European energy community in the face of the war in Ukraine and its own conflict with Russia over South Ossetia and Abkhazia. We support the country in achieving its energy independence through comprehensive reforms of the energy sector and in preparing for integration into the European electricity market. At the same time, the reforms are a strong signal for investments in renewable energies and energy efficiency,” said Christiane Laibach, Member of the Executive Board of KfW Group.

The funds are disbursed to the Georgian government budget on an annual basis once concrete reform measures have been implemented, which are agreed prior to the start of each programme phase.

So far, it has been possible to adopt key laws as well as specific legislation and legal provisions for energy efficiency, such as the anchoring of energy efficiency in government procurement within the scope of the programme.

The programme also takes into account the Just Transition approach. The aim was to adopt a mechanism for compensating low-income population groups. Since 2018, a total of EUR 564.5 million has already been committed in the first four phases of the project, of which EUR 207.5 million was committed by KfW. The project involves co-financing with the Agence Française de Développement (AFD) and an EU mandate executed by KfW.

Information about KfW Development Bank is available at:
www.kfw-entwicklungsbank.de