Levan Davitashvili: “The exports of electricity surpassed imports by nearly double in 2023.”

Verdict: FactCheck concludes that Levan Davitashvili’s statement is MOSTLY TRUE.

The imports of electricity totalled 790 million kWh whilst exports reached 1.5 billion kWh in 2023. Furthermore, the monetary difference was even more substantial. The country received USD 95 million from electricity exports revenues but incurred USD 1.1 million as expenditure for imports. A total of 787 million kWh out of the aforementioned 790 million kWh was imported from Russia, potentially for the occupied region of Abkhazia, hence explaining the special price of USD 0.13 per kWh.

Although the volume of export exceeded import by 86%, the positive trade balance was primarily due to lower demand rather than an increase in production. Georgia used 1.1 billion kWh less electricity in 2023 as compared to 2022. The decline is attributed to the decrease in direct users (predominantly ferroalloy producers and crypto mining companies) and the decrease in demand from the occupied Abkhazia.

Whilst the decrease in demand for electricity was not caused by an economic recession (as the GDP increased by 7.5% in 2023), omitting it and emphasising increased exports may potentially lead to false impressions about increased generation. Thus, considering the above, FactCheck concludes that Levan Davitashvili’s statement is MOSTLY TRUE.

Analysis

Levan Davitashvili, the Minister of Economy and Sustainable Development, discussed the energy market during the Minister’s Hour in the Parliament, claiming (from 5:43): “The consumption of imported electricity has substantially decreased; furthermore, the figure of exports surpassed imports by nearly double in 2023.”

The necessity of electricity exports and imports are determined by the volume of electricity produced domestically, consumption rates and losses. Particularly, if all else remain constant and generation of electricity increases, exports are likely to increase as well; or if consumption increases, then a necessity for imports may arise. The approach works in reverse as well: a decrease in generation generally leads to increased imports whereas reduced consumption can result in increased exports.

Graph 1: Electricity Balance (million kWh)

Source: Georgian State Electrosystem

Exports surged by 51% in 2023 as compared to 2022 and whilst it increased by nearly double as compared to imports, electricity generation only witnessed a mere increase of 1% (by 149 kWh) during the same period whereas consumption declined by a significant 7.9% (by 1.1 billion kWh). Moreover, the increase in network and station losses was marginal, rising from 644 million kWh to 663 million kWh.

The economy experienced an expansion of 11% in 2022 and a subsequent increase of 7.5% in 2023. However, despite the aforementioned statistics, electricity consumption dropped even lower in 2023 as compared to the rates recorded in 2021. The seemingly counterintuitive occurrence can be explained by reduced consumption by some of the larger industrial facilities.

Whilst detailed data on electricity consumption of households, municipalities or commercial organisations are not publicly available, the Electricity Market Operator (ESCO) provides insights into the usage patterns of some of the largest consumers. These include large industrial facilities which collectively utilised over 3.7 billion kWh in 2022 and 25% less in 2023 – 2.8 billion kWh.

Graph 2: Consumed Electricity (million kWh)

Source: Electricity Market Operator (ESCO)

The decrease in electricity usage amongst direct consumers totalled 946 million kWh in 2023 as compared to 2022. Furthermore, seven largest companies amongst the aforementioned consumed 805 million kWh less.

Notably, the consumption of ferroalloy factories experienced the largest decline, constituting 234 million kWh. Several factors contributed to this decline, including decreases in exports (a monetary decline of 61% from USD 460 million to USD 181 million), tonnage (31% - from 229 thousand to 157 thousand tonnes) and export price per tonne (43% - from USD 2000 to USD 1150). Russalloys, another ferroalloy producer, reduced its electricity consumption four-fold.

Moreover, the consumption of large companies, such as BFDC, IT Corp and others, either reached zero or nearly zero levels. Information on the aforementioned companies, excluding ferroalloy factory and Rustavi Poladi, is hard to attain. However, it is known that BFDC, IT Corp and Protect Corporation operate in the free industrial zone, meaning that the companies do not pay VAT for consumed electricity. However, despite this exemption, they still had to halt production.

For the first time in the recent history, the consumption of the occupied Abkhazia decreased from 3 to 2.7 billion kWh despite previous rapid increases. Georgia’s total consumption increased by 19% from 11.9 billion kWh to 14.2 billion kWh in 2017-2022, including Abkhazia’s 50% surge from 2 billion kWh to 3 billion kWh. This drop in Abkhazia's consumption was likely due to a decline in crypto mining activity.

Considering the experiences of large companies, it can be inferred that other small enterprises and households similarly halted mining as well.

Considering the electricity trade balance in monetary terms, the difference is even higher. The country received USD 95 million from electricity exports whilst incurring USD 1.1 million as expenditure for imports in 2023. A total of 787 million kWh out of the aforementioned 790 million kWh was imported from Russia, potentially for the occupied region of Abkhazia, hence explaining the special price of USD 0.13 per kWh.

Graph 3: Electricity Trade (USD million)

Source: National Statistics Office of Georgia

Electricity exports exceeded imports by 86% in terms of kWh calculations which could be described as a “nearly double surpassing.” The difference in monetary terms was even more substantial as exports surpassed imports by 90 times. Notably, the increase in exports was primarily due to a substantial decrease in consumption rather than an increase in generation. Despite the reduction in electricity consumption not being caused by an economic recession, failing to mention this fact, and solely emphasising the increase in exports could potentially lead to false impressions regarding production increases. Considering all of the above, FactCheck concludes that Levan Davitashvili’s statement is MOSTLY TRUE.