Dariali Hydropower Plant

Dariali Hydropower Plant, referred to as Dariali HPP, is currently being constructed at the territory of Kazbegi Municipality in close vicinity of Russian-Georgian border on the right slope of the Tergi River 160 km away from Tbilisi.^[1] The project envisages the construction of a run-of-the-river hydroelectric plant with installed capacity of 108 MW.^[2]

According to the environmental and social policies of the European Bank for Reconstruction and Development (EBRD), the project was awarded the “A” category. The categorization is based largely on the specific location of the proposed project and sensitive environment connected to the development of hydropower plants in Georgia, in general. The construction of the project lasts 4 years and after entering an operational period the expected life-span of the project is 40 years. Preliminary commencement of the Dariali HPP is planned for spring 2016.

Dariali Hydropower Plant by the amount of generated energy is the fourth hydropower plant in Georgia. It will make annually a contribution to the local budget in kind of the property tax. The developed layout proposes the substation of Dariali HPP will be connected to the National Grid via Dariali 110kV transmission overhead line. The agreement on construction was signed between the Government of Georgia and the company Dariali Energy JSC on May 19, 2011.^[3] Before EBRD loan approval the company had actively used the domestic (more expensive) resource to boost the project development as much as possible. The company is supported by a top European project engineering conglomerate (Landsvirkjun Power & Verkis) (Iceland) which provides the project’s engineering supervision and preparation and implementation of the construction project. Construction and electromechanical contracts have been executed according to FIDIC standards, which makes the employer-contractor relationship the most transparent and effective.

Total cost of the project is estimated at USD 120 million.^[1] On August 2014, the company Dariali Energy JSC and European Bank for Reconstruction and Development signed loan agreement for up to US 80 million for the financing of the development, construction and operation of Dariali HPP, which comprises the first project financing and first successful public private partnership project in energy sector of Georgia.This project is one of the first energy projects in Georgia to rely on limited recourse to the Sponsors and, under an A/B loan syndication structure, could provide a demonstration of new financing methods to other project developers in the market. EMEA Finance’s Project Finance Awards 2014 awarded Dariali Energy JSC for the Best water project in Central and Eastern Europe.^[4]

The Project has the potential to be the first energy project to deliver carbon neutral construction in Georgia. It includes a reforestation component which would target the full compensation of all greenhouse gas emissions associated with the project over its lifecycle (construction and operation), through the capture of carbon in vegetation. The Dariali hydropower plant will cause the reduction of more than 250,000 tons of greenhouse gas annually.

Importance of Dariali for Georgia's energy production

Electricity demand in Georgia has been on the rise since 2009 and investments in new generation capacity are lagging behind.^[5] Georgia has about 40 billion kwt/h of potential electricity and only 18-20% is utilized by today. The Dariali HPP generated electricity will be consumed in winter locally and exported in summer. There are plans to export the electricity to Turkey, Syria, Iraq and Balkan countries, but if Georgia’s economy develops further, it will be used to cover domestic needs.

According to the EBRD the project will strengthen the private energy sector in Georgia where state owned generators account for 45% of electricity consumption.Construction of Dariali HPP aimed at developing the hydroelectric potential of the Tergi River. Dariali HPP will be built as a one-step, run-of-the-river power plant. Such structure negates the need of flooding the upper part of the river and reduces associated construction magnitude, thus drastically decreasing the environmental impact of the project both in short and long term perspectives. It also has the potential to be constructed carbon neutrally, since it includes reforestation which will compensate for all greenhouse gas emissions caused by the project over its lifecycle.^[2]

The favorable impact of local population employment is noteworthy. Following the HPP has been launched the power system will get extra energy, which is extremely important for the country’s independence with respect to power resources. Income growth of Kazbegi municipality and the whole region is also expected, which will be a positive impact in terms of social and economic development. At the construction stage 300 people are given jobs, while on operation stage 50 people will be employed.

The project is in full compliance with EC European Energy Policy adopted in 2007 and the UN Framework Convention on Climate Change (enacted by Kyoto Protocol in 2005), which appeals to all states to concentrate efforts towards increasing of energy consumption efficiency through increased utilization of renewable energy sources and decrease of environmental degradation.

The Company is doing its best efforts to minimize the environment impact risk and has involved foreign consultants in this area. Dariali HPP will have a fish path, which should create close to natural conditions to the local river ichtyofauna (namely brown trout). The Company is committed to maintain the biodiversity and for this purpose the Aquatic Biodiversity Action Plan by the Blue Rivers^TM Environmental Consulting company has been developed.

The company is involved in various social activities (for example, it sponsors the children’s rugby team in Kazbegi).

Opposition

The critique focuses on the fact that the project will divert about 90% of Tergi’s water leaving an approximate 8 km section of the Tergi River with minimum environmental flow only.

That is particularly problematic since the HPP borders with the territory of the Kazbegi National park. At present the possible impact on biodiversity especially brown trout listed in the Georgia Red List is being investigated and if any, relevant mitigation measures will be developed. The landscape on this section of the gorge will also change.

One of the more known Georgian NGOs, Green Alternative, has warned already in 2012 about the increased risk of natural disasters due to inadequate analysis of the hydrological regime of the Tergi river and its tributaries, glacial rivers with large fall of stream, significant sedimentation drift and mudflow currents during heavy rain and snowmelt periods.^[6] It has filed a complaint against the company Dariali Energy,^[7] but it failed to win the cases. There was a case landslide already (in May 2014), when around 1,5 million cubic metres of landmass crashed down the mountainside and deposited in Tergi River, causing human deaths and destroying of the roads. However, there is no confirmation of the contribution of the Dariali HPP construction to this dangerous natural phenomenon.

References