A brief overview of the dependence of the citizens of Georgia on food self-sufficiency
Throughout Georgia, the food supply is heavily dependent on the population’s ability to supply itself with agricultural products and sell them (cf. Caucasus Barometer 2019). For various reasons, the state is only able to provide a small amount of social compensation, which means that significant parts of the population are not regularly able to buy food (cf. Caucasus Barometer 2019). In particular, those population groups who do not have their own land resources, i.e. land on which they can run a small garden or farm, are at risk of poverty. It must also be taken into account that only a few people in Georgia have a regular income from a permanent job; in 2019, this was just 40% of the working population (cf. Caucasusbarometer 2019). Far more than half of the population has to cultivate their own land or farmyard area and use it for meat production due to low or no income. Infrastructure projects that require the consumption of large areas of land, such as hydroelectric power plants, therefore pose a direct threat to the livelihoods of the local population in Georgia. For Svaneti alone, a total of 35 hydropower projects are planned or under construction. For this reason, they are perceived by the local population more as a threat than as a modernisation project.
Impact of the Nenskra-Nakra project on the inhabitants of the villages
On the way from Zugdidi to Mestia, after the village of Khaishi, one reaches one of the larger bridges over the Enguri. There a road on the left side leads up to the village of Chuberi. Since 2017, the inhabitants of Chuberi have been fighting against the largest of the hydropower projects that are to be implemented or have already been implemented in Svaneti in the coming years. This struggle is being fought by the people of many villages and village communities in both Upper and Lower Svaneti. However, the Nenskra-Nakra project is the best known Georgian dam construction project in the world due to its dimensions and the extensive support of residents by non-governmental organizations. The implementation of another large dam construction project in Kudoni, a village below Khaishi, would mean that even Khaishi would have to disappear into a reservoir.
For the inhabitants of the villages in the Nenskra valley, a dam initially means a reduction in the water flow of 90-95%, which has a direct effect on agriculture and the water supply of the population. In any case, for some years now, as a result of climate change, there has been a significant decrease in the rainfall in Svaneti. Since the inflow to the Nenskra River is not sufficient to fill such a large dam, a continuous underground tunnel with a cross-section of 4.5 m has to be bored through the mountains to transfer the water from the parallel Nakra Valley to the reservoir.
This has the same negative impact on the inhabitants of the village community of Nakra. For example, the traditional mills that still exist in both valleys could no longer be operated, which is a restriction for the families that still grow grain and grind flour locally. The social problems in the Nenskra valley are exacerbated by the fact that several families live there who had had to flee from the neighbouring Kodori corridor in Abkhazia in the early 1990s and have struggled for years to build a new life. Above all, local residents are afraid of a sudden breach of the dam, as the construction work is taking place in a seismically unstable region. So many will inevitably prefer to emigrate rather than remain on their family estates. The Georgian governments have not yet submitted any proposals for resettlement and land compensation for the period between 2017 and 2020.
Impact of the Nenskra-Nakra project on the natural environment and tourism
The two valley communities had hoped to benefit from the growing tourism in Svaneti in the foreseeable future, as they are located in one of the best-preserved and thus most valuable natural areas of the Caucasus. The region alone is home to over 20 endemic plant species and stable populations of Caucasian ibex, lynx, wolf and brown bear. This is why the region has been a candidate for inclusion as a protected area under the Convention on the Conservation of European Wildlife and Natural Habitats (Bern Convention) since 2016. The responsible authorities were all the more shocked when Georgia suddenly drastically reduced the planned protected area in 2017 in order to implement the Nenskra-Nakra project. In both valleys, the consequences of the preparatory work can already be seen in the widening of access roads for trucks and the work to straighten the lower reaches of Nenskra and Nakra. Construction work on the weir in the Nakra valley and the dam in Nenskra valley was halted in 2019 and 2020 because the Georgian companies carrying out the work withdrew, while the project costs continued to rise – accordingly, there is new hope among the population.
Evaluation of the profitability of the Nenskra-Nakra project based on the available coverage in the Georgian press and the World Bank analysis
The largest of all hydropower projects in Georgia in the valleys of Nenskra and Nakra is supported by the European Bank for Reconstruction and Development (ENWE) and thus by several EU states as shareholders. Since the collapse of the Soviet Union and the Eastern Bloc as an economic community, the Bank’s objective is to support transformation processes in Central and Eastern Europe towards stabilisation of the economy and democracy in the countries concerned.
The economic and, as a result, the social benefits of the Nenskra-Nakra hydroelectric power project, which should be able to cover 14% of the country’s electricity needs, are actually obvious. Accordingly, the promotion of the Nenskra-Nakra project by a European institution would be apparent. But why is there so much resistance to it? Apart from the direct ecological and social consequences (change in the regional climate, destruction of natural areas worthy of protection, impairment of the social fabric of human communities and discrimination through the deterioration of their earning opportunities, cf. Bankwatch, undated), it is mainly economic reasons that speak against the Nenskra Nakra project and many other hydroelectric power projects in Svaneti and other high mountain regions of Georgia (including the Pankisi valley in the north-east of the country). None of the projects is accompanied by a Georgian company in the technology sector. These focus on construction activities such as concrete work, which may be simple but are often responsible for serious mistakes. The construction sector in Georgia is also highly susceptible to corruption, which is why the work plans on the construction sites of many projects in recent years have been postponed and the costs on the Georgian side have increased (cf. Lombadze 2020). The technology partners are either companies from Turkey, which itself has an important electricity requirement.
In the long term, they can, therefore, claim the largest share of electricity production for themselves. In other words, Turkey will be able to purchase the electricity produced over long periods at contractually fixed prices that are significantly below the market value in Georgia.
The fiscal cost from Nenskra HPP is the largest followed by Namakhvani HPP (part of the Namakhvani cascade) and Koromkheti HPPs. Nenskra HPP has the largest impact because it has the highest indicative Power Purchase Agreement (PPA) tariff starting at 7.55 USc/kWh with 3% annual escalation, off-take liability of 34 years, and estimated annual generation of 1.2 billion kWh per year, which is 9 percent of projected total domestic demand in 2023.”World Bank 2020
The Georgian state will thus always bear the difference, regardless of its economic situation, without being able to make a profit from the business, because many regions of Georgia are de facto insolvent as far as electricity and water supplies are concerned (cf. World Bank 2018, p.6). In the case of the Nenskra-Nakra project, the state undertakes to purchase 100% of all electricity from the South Korean operator K1 over 36 years, with electricity costs being contractually fixed in advance and rising over the negotiated period. Only after 36 years will the power plant become the property of Georgia. This also means that the state is responsible for the risks of the available water capacity (cf. Bacheva-McGrath 2020). So, if the power plant delivers less than the contractually agreed 1.1 billion kilowatt-hours in years when there is less precipitation, the Georgian state will compensate the South Korean operator for the resulting loss of earnings.
The fiscal cost may be reduced to GEL611 million (US$247 million) in present value terms, through exports of electricity (assuming that the surplus energy is exported at 85 percent of the prevailing market price in Turkey). However, the fiscal cost cannot be eliminated entirely because the average wholesale electricity market price in Turkey is about 4.5 USc/kWh whereas the Power Purchase Agreement (PPA) tariffs for these projects are higher (starting from 6.2 USc/kWh).”Wolrd Bank 2020
Even the World Bank and the International Monetary Fund came to the conclusion, in the course of many years of research and complaints by local people and non-governmental organisations, that the Nenskra-Nakra project would not be profitable and could even lead to an increase in electricity prices in the country (cf. World Bank 2018, Bacheva-McGrath 2020).
Due to the lack of profitability of the project, severe allegations of corruption are being made against members of the government and companies closely associated with them who benefit from the project (cf. Lombadze 2020). So the question is not so much whether traditional ideas about life are an obstacle to modern developments, but rather that of whether those affected can participate fairly in modernisation projects. So far, the government seems to have taken a rather hard line in its approach to the local population. The loss of confidence in the transparency of democratic decision-making processes is correspondingly high (cf. Chubabria 2017, OC-Media 2018, 2019 a, b).
Text: © Stefan Applis (2020)
Photography: © Stefan Applis (2019)
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