Research conducted by: Manana Kochladze, CEE Bankwatch Network Rezo Getiashvili, Green Alternative The authors of this publication owe credit to Petr Hlobil (CEE Bankwatch Network) for the much appreciated comments during the writing of the reports. Published by CEE Bankwatch Network Jicinska 8, Praha 3, 130 00 Czech Republic Tel: +32 2 542 01 88V Fax: +32 2 537 55 96 Email: [email protected] www.bankwatch.org Green Alternative Kipshidze str 5a, 1062, Tbilisi Georgia Tel: +99532 221604 Fax: +99532 22 38 74 Email:[email protected] www.greenalt.org Editing: Greig Aitken, David Hoffman , CEE Bankwatch Network Design and layout: M.Chavchanidze Photos: The archives of CEE Bankwatch Network and Green Alternative Cover image: Rezo Getiashvili © 2007 CEE Bankwatch Network, Green Alternative We would like to acknowledge ongoing support of Europian Commission, DG Enviroment and Global Green Grants Fund. Content 1. Executive summary............................................................................................................2 2. Introduction.........................................................................................................................4 3. Khudoni Dam......................................................................................................................6 3.1. Some facts about the Khudoni dam...........................................................................6 3.2. The World Bank’s involvement..................................................................................9 3.3. A never-ending story: the fears and hopes of local people....................................10 3.3.1. Devastation in Khaishi.........................................................................................10 3.3.2. Resettlement.........................................................................................................12 3.3.3. Corruption............................................................................................................13 3.3.4. The decision-making process.............................................................................14 3.3.5. Environmental impacts........................................................................................15 4. The Khudoni dam and energy security in Georgia.......................................................16 5. Why Khudoni is not an option?......................................................................................18 6. Alternatives to Khudoni...................................................................................................20 6.1. Rehabilitation of existing hydro capacities in Georgia..........................................20 6.2. Construction of new small hydros and wind farms................................................22 6.3. Energy efficiency........................................................................................................24 7. Conclusions and recommendations................................................................................24 Annex 1. Statement of Khaishi villagers 2007....................................................................25 Annex 2. Statement of Khaishi Villagers 2006....................................................................25 Annex 3. Enguri dam............................................................................................................26 Annex.4. List of small HPPs to be rehabilitated in Georgia.............................................27 1. Executive summary This report contends that the Khudoni dam is not a proper solution for the Georgian energy sector, through an analysis of the multifarious impacts of dam construction on ordinary people in the Georgian highlands. The report offers solutions by exploring alternatives and potentials for developing other sustainable energy resources. The proposed 170 metre Khudoni HPP is planned in Upper Svanetia, an area of unique beauty and history, on the River Enguri. Construction of the dam will require the flooding of a number of unique villages (including Khaishi) and the resettlement of around 2000 Svans since ancient time.1 It will also accelerate the devastation of the region, through the destruction of sub-alpine forests, meadows and wildlife habitat, the loss of river species populations and the degradation of upstream catchments areas owing to the flooding of the reser- voir area in one of the most amazing highland regions of Georgia. The upper part of the River Enguri basin combines sub-alpine forests and meadows, rocks and alpine tundra, the area well known for its endemic wildlife – birds, mammals and amphibians. The social impacts of the Khudoni dam construction will also be significant. Preserved by its long isolation, the Upper Svaneti region of the Caucasus Svan Types, 1881 is an exceptional example of mountain scenery with medieval-type villages and tower-houses, where people still continue to live based on mixture of ancient traditions and Christianity. The Svans, an ethnographic group of the Georgian people, are a race apart: the pace of life is different there, they have their own language and traditions, their own architectural styles, and for them ancient customs are still very much a part of everyday life. The financing of the Khudoni dam – or any other large dam – does not represent effective investment for the Georgian power sector; rather it would lead its development along an unsustainable path. Due to the huge investments it will require a significant increase of tariffs if it will be used for domestic purpose, while for the majority of the Georgian population (around 50%) high electricity prices are already unaffordable. This has a direct impact on the health of the people, as it increases indoor pollution and drastically restricts the development of small enterprises. 1Archaeological, toponymic and linguistic evidence indicate that the ancestors of the Georgian people have inhabited the west-central part of the southern Caucasus region for at least 5,000 years and probably much longer. In the third millenium B.C. one group of Kartvelians migrated to the northwest, reaching the east coast of the Black Sea. Place- names believed to be of Svanetian origin are found in this area. Somewhat later, these ancestors of the Svans moved upland into what is now Svaneti. Axes and other artifacts—as well as the ruins of foundries for the production of bronze and iron—dating to the early Bronze Era have been discovered in Svaneti. This indicates that the local population was engaged in metalworking in the second and first millenia B.C. The Greek geographer Strabo (end of the first century B.C.) describes the Svans as a fierce, warlike mountain people, ruled by a king and a council of 300 elders and capable of fielding an army of 200,000. (This figure may be an exaggeration, or perhaps Strabo was including other Kartvelians under the designation “Svan.”) Svans History and Cultural Relations, http:// www.everyculture.com/Russia-Eurasia-China/Svans-History-and-Cultural-Relations.html 2 Khudoni construction would also significantly reduce the opportunities for critical evaluation of other investments for rehabilitation and construction of small- and medium-size HPPs, as all government focus would switch towards securing funds to complete Khudoni. as “The Main Directions of Georgian State Energy Policy”2 and other strategic documents underline Georgia’s potential to become an energy-exporting country and desires to construct huge HPPs directly connected to export possibilities, rather than for the satisfaction of local needs. Furthermore if Georgia becomes an energy-exporting country it does not ensure automatic energy security. Even if Georgia were to export huge amounts of electricity and, in the best case scenario, it would support to generate high levels of income for the state budget, the majority of the population would continue to live in poverty and have limited access to electricity. Ancient Svanetian Towers, X-XII century Additionally, energy exporters would favour artificially high domestic energy prices that, while generating more revenues for exporters, would make energy availability for local populations prohibitively costly. This practice is not uncommon in the world, especially within poor countries. Thus the main focus for the further development of the Georgian energy sector should be to provide and satisfy the demands of local populations as a way to ensure poverty eradication and economic development in Georgia. In line with the above-mentioned, the government of Georgia, as well as the international financial institutions, should ensure the sustainability of the power sector’s development path through the attraction of investments for the rehabilitation of existing generating capacities, energy efficiency and the development of small local renewable (hydro, wind, solar) resources. This can be done through: 1)conducting of a comprehensive Strategic Impact Assessment that would address the ways how to satisfy existing electricity demand in Georgia, with existing potentials and alternatives; 2)updating the “least cost development plan“ for the Georgia Power sector, as well as study the accessibility to electricity for ordinary people and local industry; 3)developing and implementing a comprehensive energy efficiency development plan; 4)attracting investments for small hydro and wind through improved legislation and economic incentives. 2 Published in May, 2006 www.min.energy.ge, and adopted June 7, 2006 by the Georgian