Policy Paper
Khudoni Hydro Power Plant
Giorgi sakhokia
2016 1
13 November, 2016
Dear Mr. Ilia Beroshvili
First of all, congratulations on your appointment as Minister of Energy of
Georgia, considering the great importance of energy sector for the state, I hope your
term will be successful in every aspect.
In this letter, I would like to introduce my Policy paper about Khudoni Hydro
Power Plant. With this Policy paper, I want to deliver current issues related to Khudoni
HPP project. Also, I want to introduce recommendations of our organization and offer
alternatives and solutions. We hope our suggestions will be taken into consideration in
project implementation process.
Respectfully,
Giorgi Sakhokia
G.Sakhokia
“Georgian Green Heritage”
2016 2
Table of contents
The Executive Summary 4
Introduction and Background 5
Purpose of paper and Roadmap 7
Problem Description/Analysis 8
Current Issues overview 8
Environmental impact 8
Social issues 8
Cultural Heritage 8
Threats 9
Decision-making procedure 10
Problems with the implementation of the project 10
Law related issues 10
Alternatives 11
recommendations 13
Bibliography 14
2016 3
The Executive Summary
This paper argues that the Khudoni Hydro Power Plant is not a decent
solution for the Georgian energy sector, through an examination of alternatives,
considering the various impacts of dam construction on the environment, local
people and cultural heritage.
Our organizational goal is to secure environment of Georgia, as well as,
cultural heritage and social development. This projected dam poses threats to
the environment, can cause social dangers, also destroys a lot of cultural
monuments. For these and other reasons we would like to introduce you to our
policy paper which defines threats, outline the problems and discuss solutions
and alternatives.
I want to offer other projects which can be supplementary and doesn’t have
same adverse consequences, for example, Khaishi HPP, Tobari HPP, and Pari
HPP. These and other alternatives should be considered as a substitute for
Khudoni HPP.
Depending on the research, I suggest canceling the contract, Because the
company (LTD “Trans Electrica Georgia”) is not fulfilling its obligations, and there
are a lot of law related issues. Georgian Government should stop Khudoni HPP
project because there are a lot of internal and external risks. Also, we have to
take into the consideration that flood of 500 hectares of sub-alpine forests will
dramatically change the climate in East Georgia, as well as in the whole country.
Besides the destruction of the flora, there will be the massive loss of the fauna of
this region and it will negatively affect the country’s environment. First and the
foremost, we recommend to cancel the project, consider alternatives to this
project, and to provide high involvement of the local population and nongovernmental
organizations in the decision-making process.
2016 4
Introduction and Background
Water and water resources are the one of the biggest among the natural riches of
Georgia. The hydro-energetic potential of Georgia (rivers, lakes, water reservoirs, ices,
underground waters) is on one of the first places in the world . Nowadays Hydro Power1
Plants provides nearly 80 percent of all Georgia’s electricity, which is only 25 percent of
country’s Hydropower potential. Georgia can’t produce a sufficient amount of electricity,
especially in winter, and has to buy natural gas from neighbors. Energy dependence on
Russia was a bad experience for the country, in 2007, they cut the supply of gas in
winter and country had literally frozen. Meanwhile, Azerbaijan is reliable partner and
supplier, but it is better to ensure energy security with own resources. Considering that
in Georgia there is no oil and gas production, the primary source of electricity is
Hydroelectric power stations. The Georgian government is planning to construct 35
Hydro Power plants in Upper Svaneti to gain energy independence.
*Enguri Hydro Power Plant Cascade System Project
On 29 June 2007, was signed a Memorandum of understanding between the
Government of Georgia and the Continental Energy LTD.
On April 2011, was signed an Agreement between the Government of Georgia, “Trans
Electrica Limited,” “Trans Electrica Georgia,” LTD ” Energotrans” and LTD "Electricity
http://www.energy.gov.ge/energy.php?lang=eng&id_pages=541
2016 5
System Commercial Operator" on the necessary future stage of the implementation of
the activities of the project.2
Khudoni HPP is the biggest project and most complaining one in the Enguri Cascade
System, because it is located in Upper Svaneti national park . Also, there are many
other controversial issues related to this project. Khudoni Hydro Power Plant should be
the second biggest HPP in Georgia, with power of 702 MW (estimated annual
generation of 1,500 million kW) and the third largest HPP in region followed by Engird
HPP(Georgia) and Chirkey HPP (Russian Federation)
http://www.energy.gov.ge/projects/pdf/pages/2
Khudonis%20Hidroelektrosadguri%2043%20geo.pdf
2016 6
HPPs in Caucasus Region
Installed capacity (MW)
0
350
700
1050
1400
Engury HPP(Georgia) Chirkey HPP (Russia) Khudoni HPP (Georgia) Mingachevir HPP (Azerbaijan) Gyumush HPP (Armenia)
Major parameters of Khudoni HPP3
Purpose of paper and Roadmap
HydroEnergy is a substantial topic for Georgia, On the one hand, we have to ensure
energy security of the state, and the government decided that this project was the right
solution. On the other hand, this Hydro Power Plant project is the very controversial
topic, and it is associated with many important issues. The aim of the Policy Paper is to
identify threats and opportunities, to determine advantages and disadvantages of
Khudoni HPP project and analyze current issues from multiple perspective.
In my Policy Paper, I would like to introduce you to the most important issues around
this project. Firstly, I will overview current issues(environmental, cultural, social) relating
to the construction of the Khudoni HPP; Secondly, I will examine project implementation
problems, law-related problems; then I will offer some alternatives of Khudoni HPP and
talk about solutions and recommendations.
http://bankwatch.org/documents/khudoni_dam_study.pdf3
2016 7
Problem Description/Analysis
Nowadays Khudoni project is one of the main topic of discussion in Georgia. It is
associated with a number of controversial issues and attracts public attention. The rush
to build hydropower plants in Georgia is understandable for our organization, it is an
issue of National Energy Security, and country want to ensure it with its resources, but
unfortunately this project is not backed by any energy strategy and without regard for
environmental consequences, social and cultural impacts. Khudoni HPP project is
related to resettlement of 2000 inhabitants, requires flooding of a number of unique
villages, will negatively impact on the environment and destroy a lot of cultural
monuments, furthermore, there is no final version of Environmental Impact Assessment,
as well as resettlement plan.
Current Issues overview
Environmental impact
Environmental costs of Khudoni HPP is very high. Projected dam in the Upper Svaneti
region will cause a lot of negative impact on the environment. Cutting and flooding of
vast forests, where there are many unique species of animals, will lead to change
climate and cause a lot of environmental problems.
Social issues
Khudoni HPP Project will cause a high impact on the population, during the project
implementation, the village of Khaishi and a number of other small settlements would be
forced to resettle. In total, about 2000 people(up to 256 households) are expected to be
relocated. This process will notable reduce the population of Upper Svaneti region. That
is a significant number for the region with the population of 11000 people. The reresettlement
is painful and unacceptable for local villagers; People from around villages
and from the whole region are against of the Khudoni HPP and resettlement of local
residents.
Cultural Heritage
Zemo Svaneti is one of the most beautiful parts of Georgia, where is preserved ancient
traditions and culture. There are a lot of cultural monuments and historical museums,
Upper Svaneti is very rich with cultural heritage, with centuries old Georgian type
houses it represents the history of Georgia. Upper Svaneti region is one of the most
attractive place for tourists, with its sightseeings, a lot of nature reserve and protected
areas with rich wildlife, flora and fauna. Khudoni Hydro Power Plant will flood significant
part of Zemo svaneti, which has been a UNESCO World Heritage Site area since 1996.4
http://whc.unesco.org/en/list/7094
2016 8
Threats
The projected Khudoni HPP is located in an active seismic area and earthquakes with
magnitudes from 5 to 7 have been recorded many times. Considering that into couple
hundreds of meters downstream there is Enguri HPP(biggest HPP in Georgia), some
unexpected event can cause serious problems for Western Georgia.
Beside internal risks, there are some external threats. Khudoni HPP is located very
closely to the occupation line, as well as to the border of Russian Federation
Georgia is in a state of war with Russia, and the Autonomous Republic of Abkhazia is
occupied by Russia, there are a lot of possibility of terrorist attacks to damage Khudoni
dam, which will cause a lot of danger for the state. Same risks were during the August
war in 2008 when Russia invaded in Samegrelo and Upper Svaneti Region.
2016 9
Decision-making procedure
Georgian government allowed to build Khudoni Power plant, but it is not backed up by
any energy strategy. The document does not provide requirements of the local
population and is maximally adjusted on the company needs, but they are not fulfilling
their obligations. The Georgian Government changed a contract twice for further
adjustment on the company requirements and extended deadliness. This approach
leads to a reasonable suspicion in society; they see elements of corruption and doubt
transparency and fairness of the decision-making process. Also, the biggest concern of
the local people of Upper Svaneti is, that they did not participate in the discussions
about Khudoni HPP project.
Problems with the implementation of the project
Initially, the agreement (28.04.2011), the company should have started construction
within 12 months from the signing of the contract, that is, on April 28, 2012 . However,5
Because the company failed to fulfill the promise, on 23 May 2012 by the amendment to
the agreement, the deadline has been postponed until September 1, 2012. The final
date of the construction starts was postponed again by new amendment on May 28,
2013; The company was obliged to take up the construction permit until March 1, 2014.
The company failed again; they couldn’t even pass early stages for getting the
construction permit, determined by law.
The company still has not published resettlement plan or resettlement policy framework,
which was obliged by agreement.
Law related issues
First of all, this project in its initial stage was illegal . According to the order of the6
President of Georgia, on 11 January 2012, a purchase agreement was concluded
between the Ministry of Environment and Natural Resources Protection of Georgia and
Ltd. Trans Electrica Georgia. According to mentioned agreement, "Project Development
Company gained the ownership the property (141 sites, in total 11 940 529 m2) in
http://www.energy.gov.ge/projects/pdf/pages/Tsvlileba%2028052013%2046%20geo.pdf5
According to the article 4.15 of the agreement concluded between the investor and the6
Government of Georgia, if the “government” or a relevant State Office receives a capital of the
“Project Performance Company” in possession by expropriation, nationalization or other
mandatory means, the actives of the company implementing the project shall be refunded totally
or partially, according to the present market value. http://www.ombudsman.ge/en/
recommendations-Proposal/rekomendaciebi/xudonhesis-msheneblobis-kanoniereba.page
2016 10
Mestia Registration zone for symbolic one US dollar” . This territory includes more than7
250 houses of local people, and the decision was made without their involvement in the
decision-making process.
Secondly, with the agreement (28.04.2011) State is obliged to purchase electricity
during the winter season from Ltd. “Trans Electrica Georgia”(5.84 US cents per 1 kW/h).
This statement is against the requirements of European Energy Union. Georgia has
already taken this obligations with the signature of European Union Association
Agreement. The main requirements of European Energy legislation are market demonopolization,
based on fair competition and transparent market principles and to
eliminate opportunities for corruption.
Alternatives
Potential HydroEnergy recourses of River Enguri considered as 21,000 million kW.
Nowadays, only 5,500 million kW/H is produced by Enguri HPP and Vardnili HPP
cascades. There are many other alternatives of Khudoni in the Upper Svaneti region,
which doesn’t have a same negative outcome and can produce almost same
electricity(more in the combine). Especially upstream of Khudony HPP, there are a lot of
locations for potential HPP_s which can supply a lot of energy and can help Georgia to
ensure energy security without expensive costs.
http://www.ombudsman.ge/en/recommendations-Proposal/rekomendaciebi/xudonhesis-7
msheneblobis-kanoniereba.page
2016 11
Khaisi HPP is one of the best alternatives for Khudoni HPP; it is projected to locate just
above of Khudoni HPP, which should have installed capacity of 670 MW, and can be the
substitute of Khudoni HPP, considering that this project is not related the same amount
of issues. Estimated annual generation of Khaishi HPP should be 1,450 million
kW(Khudoni HPP 1,500 Million kW).
Tobari Hydro Power Plant project with the 173-meter high arch dam, in Upper Svaneti
region, should have installed capacity of 250 MW and estimated annual generation of
1,450 million kW(Khudoni HPP 1,500 M/kW). Tobari HPP can be a good project,
considering that it requires to flood much less territory and doesn’t require resettlement
of local people.
Tobari HPP alongside with Pari HPP, with projected 230 MW (in total 480 MW) will fill
20% gap, and Georgia should be producing 100% of electricity by HydroEnergy
Sources and will ensure Energy Independence without expensive environmental costs.
HydroEnergy potential of Georgia is enormous. Khudoni HPP can be substituted by
other small Hydro Power Plants. There are number of alternatives in different parts of
Georgia (Especially in Racha-Lechkhumi Region ) which should be examined and8
considered.
Also, I must mention that in Georgia, other Renewable resources are not used to
produce energy. In consideration that renewable energy market is growing very fast,
I suggest, that Georgian Government should examine the opportunities of other
renewable sources. Georgian government should invest in other renewable resources
(solar, wind).
http://www.energy.gov.ge/projects/pdf/pages/8
Brdzaneba%2096%2015092014%20Sakartveloshi%20Asashenebeli%20Potentsiuri%20Elektro
sadgurebis%20Nuskhis%20Damtkitsebis%20Taobaze%201055%20geo.pdf
2016 12
recommendations
• Government should start process of agreement cancellation, based on the
fact that Company (“Trans Electrica Georgia”) isn’t fulfilling its obligations; also
agreement contains a lot of controversies to European Energy Law.
• Order of the President of Georgia, (11 January 2012) should be revoked, As it
is inconsistent with the legislation of Georgia.
• Georgian government should develop energy security strategy
• The government should be abandon the Khudoni HPP project because it
contains a lot of risks, and issues negative impact on environment, social and
cultural heritage.
• Ministry of Energy of Georgia should examine alternatives
• NGOs and local people should be involved in decision-making process
Conclusion
Khudoni Hydro Power Plant is one of the biggest projects in the Caucasus
Region. It can bring a lot of profit for the country, can produce a lot of electricity,
especially during winter. Khudoni HPP should ensure energy stability and energy
independence for Georgia. Georgian Government considers this project as
crucial and believes that it is the right choice. They allowed project company to
start building of Khudoni HPP, but
To sum up, our position is that we understand that country needs to create new
power plants and has to use its energy potential, but we want to take into
consideration environmental, social, cultural aspects.
Our recommendation is to abandon the project, Firstly, because of legislative
issues. Secondly, this project does have expensive environmental, social and
cultural costs. Thirdly, We want to find and discuss other alternatives which are
not as harmful and produces same capacity provided by Georgias Hydropower
potential and will ensure energy security of Georgia.
2016 13
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2016 14
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2016 15