COST ESTIMATION STUDY OF GAS PIPELINE NETWORK AND ALTERNATIVE SYSTEMS FOR HIGH-MOUNTAINOUS SETTLEMENTS OF GEORGIA USAID ENERGY PROGRAM

30 December 2019 This publication was produced for review by the United States Agency for International Development. It was prepared by Deloitte Consulting LLP. The author’s views expressed in this publication do not necessarily reflect the views of the United States Agency for International Development or the United States Government.

COST ESTIMATION STUDY OF GAS PIPELINE NETWORK AND ALTERNATIVE SYSTEMS FOR HIGH-MOUNTAINOUS SETTLEMENTS OF GEORGIA

USAID ENERGY PROGRAM CONTRACT NUMBER: AID-OAA-I-13-00018 DELOITTE CONSULTING LLP USAID | GEORGIA USAID CONTRACTING OFFICER’S REPRESENTATIVE: NICHOLAS OKRESHIDZE AUTHOR(S): GIORGI GIORGOBIANI, ALEKSI KOCHLASHVILI, GIORGI JANGVELADZE LANGUAGE: ENGLISH

30 DECEMBER 2019

DISCLAIMER: This publication was produced for review by the United States Agency for International Development. It was prepared by Deloitte Consulting LLP. The author’s views expressed in this publication do not necessarily reflect the views of the United States Agency for International Development or the United States Government.

USAID ENERGY PROGRAM Cost Estimation Study of Gas Pipeline Network and Alternative Systems for High-Mountainous Settlements of Georgia i

DATA

Reviewed by: Daniel Potash, Ivane Pirveli

Practice Area: Strategic Advisory Assistance to the GoG to Increase Energy Security

Key Words: Natural Gas, Alternative Energy Technologies, Cost Benefit Analysis, Life- Cycle Cost Analysis, High-mountainous Settlements of Georgia

USAID ENERGY PROGRAM Cost Estimation Study of Gas Pipeline Network and Alternative Systems for High-Mountainous Settlements of Georgia ii

ACRONYMS

BESS Battery Energy Storage System Cal Calorific Value of Natural Gas CBA Cost-Benefit Analysis CNG Compressed Natural Gas CoP Coefficient of Performance EU European Union GDP Gross Domestic Product GEL Georgian Lari GGTC Georgian Gas Transportation Company GHG Greenhouse Gas GJ Giga Joules GNERC Georgian National Energy and Water Supply Regulatory Commission GoG Government of Georgia IRR Internal Rate of Return J Joule KJ Kilo Joules kW Kilowatt kWh Kilowatt Hour kWp Kilowatt Peak LCC Life-Cycle Cost LCCA Life-Cycle Cost Analysis LEDS Low Emissions Development Strategy LPG Liquefied Petroleum Gas MJ Mega Joules MoESD Ministry of Economy and Sustainable Development of Georgia MRDI Ministry of Infrastructure and Regional Development of Georgia NPV Net Present Value O&M Operation and Maintenance PV Solar Photovoltaics SOCAR State Oil Company of Azerbaijan Republic UNFCCC United Nations Framework Convention on Climate Change USAID United States Agency for International Development USD U.S. Dollar VAT Value Added Tax WACC Weighted Average Cost of Capital Wh Watt Hour

USAID ENERGY PROGRAM Cost Estimation Study of Gas Pipeline Network and Alternative Systems for High-Mountainous Settlements of Georgia iii

CONTENTS

1. EXECUTIVE SUMMARY ...... 5

2. BACKGROUND ...... 7

3. METHODOLOGY ...... 10 3.1 Cost Benefit Analysis ...... 11 3.2 Life-Cycle Cost Analysis ...... 12 3.2.1 LCCA Model Inputs and Assumptions ...... 13

4. FINDINGS AND RECOMMENDATIONS ...... 22 4.1 CBA Findings ...... 22 Analysis of impacts on natural gas distribution tariffs for different scenarios ...... 25 4.2 LCCA Findings ...... 26

5. SUMMARY OF FINDINGS AND RECOMMENDATIONS ...... 30

ANNEX 1: SAMPLE COST-ESTIMATION STUDY FOR PIPELINE GAS ...... 31

ANNEX 2: LIST OF SETTLEMENTS ...... 36

ANNEX 3: ILLUSTRATIVE MAP OF SETTLEMENTS ...... 49

USAID ENERGY PROGRAM Cost Estimation Study of Gas Pipeline Network and Alternative Systems for High-Mountainous Settlements of Georgia iv

1. EXECUTIVE SUMMARY While urban areas in Georgia are adequately provided with necessary energy resources to meet the population’s household energy needs, many settlements in remote and high-mountainous areas are not, and some of them are still completely off-grid. The Government of Georgia (GoG) has been considering connecting all such settlements to natural gas network to meet their energy needs, specifically for heating, cooking and hot water. While natural gas is the most wide-spread source for the abovementioned uses in urban and suburban households, it is not given that natural gas will be the best way to meet energy demand of remote and high-mountainous settlements. Before moving forward with gasification1, the GoG will need to consider such crucial factors affecting economic viability of gasification, as settlements’ distance from gas mains, access roads and their condition, number of residents, willingness and ability to pay, etc. It is therefore essential to assess economic viability of gasification, as well as consider alternative energy sources though a comparative analysis in order to help GoG find an economically optimal solution. According to clause 4 of the Decree of the Government of Georgia #791 dated April 5, 2019 on Measures to be implemented during 2019-2021 in Support of Gasification of the Georgian Population, Georgian Gas Transportation Company (GGTC) was tasked to evaluate feasibility of gasification of those villages that are included in the List of High-Mountainous Villages defined in the GoG Decree #671. Ministry of Economy and Sustainable Development of Georgia (MoESD) addressed USAID Energy Program to assist them in developing a study that would group 966 villages into clusters according to an agreed-upon criteria, carry out Cost-Benefit Analysis (CBA) of gasification for each cluster, and provide recommendations on alternative energy sources for those clusters where gasification could not be economically justified due to a negative impact on tariffs, lack of profitability or some other reason. The settlements were grouped by municipality, therefore creating 38 distinctive clusters, and each cluster was analysed separately. The decision to cluster the settlements by municipalities was agreed with GGTC and was based on the rationale that it would be the optimal way to present the costs and it would be the easiest for the Government to carry out gasification (if decided) gradually or simultaneously in individual municipalities. In addition, since majority of information - number of customers, energy use trends, available resources, budgetary funds, etc. is available on municipal level, it was deemed most sensible to carry out cost-benefit analysis for individual municipalities. In order for USAID Energy Program to perform an accurate cost-benefit analysis, it was necessary to have an adequate estimation of gasification costs, including the cost of laying gas mains and building local networks for the selected settlements. For this purpose, USAID Energy Program engaged a Georgian gas pipeline and network design and engineering company to develop the estimates. The subcontractor provided schematic drawings of gas pipes including mains and local networks for the provided settlements; technical parameters of the pipes including length, diameter and material; and cost estimates for gasification of each cluster including mains, connection points and local network costs, detailed to each settlement. CBA was conducted for each cluster based on the provided cost estimates. The study showed that gasification costs vary significantly among clusters due to several factors, including distance from gas mains, geographical location, terrain, type of soil, etc. Therefore, a unified approach cannot be used for all clusters, and the decision on gasification or provision of energy through alternative sources should be made individually for each cluster. The alternative options overviewed in this report include: Table 1: Natural Gas Alternatives Electricity subsidies GoG could subsidize electricity for heating and cooking Biomass boilers have higher efficiency than traditional wood stoves and can operate on different types of biomass, Biomass including wood logs, wood chips, pellets, and plant-based biomass. Biomass can fully substitute natural gas usage

1 To avoid misunderstanding we note here that in standard engineering literature the term “gasification” has a different meaning, however in this report it describes delivery of natural gas through gas pipeline system and is established term in Georgia and neighboring countries.

USAID ENERGY PROGRAM Cost Estimation Study of Gas Pipeline Network and Alternative Systems for High-Mountainous Settlements of Georgia 5

Solar PV, solar-thermal, and/or solar-hybrid systems can be Solar Photovoltaics (PV) with Battery used either independently or in conjunction with other Energy Storage System (BESS) technologies, e.g. heat pumps to meet energy demand Heat pump A heat pump is a device that works on refrigeration cycle, • Grid connected transferring thermal energy from environment such as • Powered by PV+BESS ground, air and water reservoirs to a desired destination Wood stoves are traditionally used in Georgia for space and Wood Stoves water heating as well as cooking purposes Compressed Natural Gas (CNG) Transportation of natural gas in a compressed form and virtual pipeline distributing using a pipeline that’s not connected to the grid The above-listed alternatives were compared to natural gas through a comparative Life-Cycle Cost Analysis (LCCA) in order to capture all costs associated with each technology throughout the projection period – 35 years, including initial, replacement, maintenance and energy costs. When looking purely from cost standpoint, the analyses showed that gasification is not economically viable, failing to achieve a positive Net Present Value (NPV), or acceptable Internal Rate of Return (IRR) in any of the clusters. Despite this, gasification still is the most-cost efficient solution in a few municipalities as compared to most of the alternatives, with only the biomass-based technologies - biomass boilers and energy efficient (improved) wood stoves having lower Life-Cycle Cost (LCC) in all instances. Additionally, It is important to consider that alternatives, especially those that are not grid- connected will not create an upward pressure on natural gas tariffs, will not be dependent on imported energy resources and may therefore be a better solution when looking at other aspects besides cost, like energy security, environment and social welfare. The results of CBA and LCCA along with assumptions and inputs used for calculations are described in detail in Sections 3 and 4 below. This report provides an overview of the gas sector in Georgia as it relates to natural gas usage by households, describes the methodology applied to CBA and LCCA, and provides findings and recommendations towards decisions to be made with regards to gasification and alternative energy sources.

USAID ENERGY PROGRAM Cost Estimation Study of Gas Pipeline Network and Alternative Systems for High-Mountainous Settlements of Georgia 6

2. BACKGROUND Despite being almost completely dependent on imports (local production of natural gas accounts for only 0.36% of total national demand), natural gas is a major energy source for Georgia and accounts for approximately 33% of total energy consumption. Share of natural gas in total energy consumption is growing slowly but steadily: Figure 1: Energy Balance of Georgia2

Georgian population uses natural gas mainly for cooking, space and water heating purposes. The increase of natural gas consumption in the residential sector in recent years has been driven by the process of gasification as well as installation of higher capacity equipment (central water heaters) by population. While gasification process contributes to increase in consumption mainly in rural areas, increase in consumption in urban areas is mainly driven by the upgraded, higher capacity equipment. Recently introduced stricter safety regulations on natural gas equipment and proactive enforcement of these regulations by distribution companies will result in more consumers switching to central heating boilers, subsequently resulting in further increase in natural gas consumption. Natural gas consumption trends differ by urban and rural areas, as well as by regions. In rural areas, with few exceptions, firewood is still the main source for space and water heating, and cooking, therefore natural gas consumption is lower. Figure 2: Annual Natural Gas Consumption by Households in 20183

2 Source: GNERC Annual Report 2018 3 Source: GNERC Annual Report 2018

USAID ENERGY PROGRAM Cost Estimation Study of Gas Pipeline Network and Alternative Systems for High-Mountainous Settlements of Georgia 7

As shown in Figure 2, Mtskheta-Mtianeti and Adjara are exceptions. The reasons behind this in Mtskheta-Mtianeti is that natural gas cost is subsidized by GoG, as well as the cold-climate and scarcity of firewood. As for Adjara, developed tourism is the main reason. GoG has been moving the gasification process forward. In the last three years, number of households with access to natural gas has increased by 7.85% on average year-on-year, resulting in a total of 1,116,217 households with access to natural gas by 2018. Figure 3: Number of Households with Access to Natural Gas

1,250,000

1,200,000 7.23%

1,150,000 8.47% 1,100,000

1,050,000 1,196,926 1,000,000 1,116,217

950,000 1,021,621

900,000 2016 2017 2018

Households with natural gas access

This escalating trend will continue as approximately 74,000 additional customers will have access to natural gas within the 2019-2021 period, according to GGTC and as stipulated by GoG decree. As a result of GoG’s gasification efforts, Georgia has one of the highest levels of gasification in Europe. Table 2: Level of Gasification in Various Countries

Country Number of households Number of households with access to gas Gasification level % Georgia 1,235,000 1,116,217 90.3 Poland 14,465,800 7,000,000 48.4 Moldova 1,314,814 711,783 54.1 Ukraine 17,242,307 12,187,880 70.7 Slovenia 881,100 838,505 95.1 Turkey 2,3087,900 11,638,421 50.4 Romania 7,481,900 3,429,233 45.8 Latvia 850,100 443,600 52.2 Serbia 2,421,379 270,470 11.2

Despite the progressing gasification process, over 2,200 settlements in Georgia still do not have access to natural gas grids. GoG’s gasification efforts are motivated by the goal to provide access to reliable energy for all household throughout Georgia and alleviate energy poverty in the process, but other factors such as ability and willingness to pay hinder successful achievement of GoG’s goal in this regard. According to Georgian National Energy and Water Supply Regulatory Commission’s (GNERC) 2018 Annual Report, share of households with access to natural gas that do not consume it (non-active customers) is quite high:

USAID ENERGY PROGRAM Cost Estimation Study of Gas Pipeline Network and Alternative Systems for High-Mountainous Settlements of Georgia 8

Figure 4: Number of Active and Non-Active Customers in 20184

In addition to willingness and ability to pay, other factors such as abandoned and seasonal dwellings also contribute to the big number of non-active customers. This is an important issue that must be considered when making the decision on gasification and when considering alternatives. This negative statistic is further compounded by the fact that under current legislation, customers only pay when they consume and there is no fixed component in the tariff, therefore denying the distribution licensees the ability to fully recover their costs. Other important factor for consideration is environment - natural gas is a fossil fuel based energy carrier and has greater adverse impact on climate as compared to electricity derived from renewable sources, as is the case in Georgia, or other renewable sources like biomass, solar PV and heat pump. This point must also be taken into consideration when making the decision, as substituting fossil- based sources with renewable sources would be a positive step toward meeting Georgia’s international commitments to reducing Greenhouse Gas (GHG) emissions under the United Nations Framework Convention on Climate Change (UNFCCC) Paris Agreement, Low Emissions Development Strategy (LEDS), European Union’s (EU) Covenant of Mayors, etc. Increasing dependence on natural gas imports in a generally volatile region is another major issue worthy of consideration that directly relates to Georgia’s energy security. These issues, along with others, are the main reasons why GoG addressed USAID Energy Program to carry out CBA and provide analysis of alternative energy sources before moving forward with gasification of high-mountainous settlements.

4 Source: GNERC Annual Report 2018

USAID ENERGY PROGRAM Cost Estimation Study of Gas Pipeline Network and Alternative Systems for High-Mountainous Settlements of Georgia 9

3. METHODOLOGY Objective of this study, as set by MoESD was to carry out cost-benefit analysis of gasification for high- mountainous settlements (settlements) of Georgia, and where gasification was not deemed financially viable, propose alternatives. USAID Energy Program divided the analysis into two components: 1) Cost Benefit Analysis; and 2) Life-cycle Cost Analysis. The purpose of CBA was to evaluate financial viability of gasification through analysing such essential financial metrics as NPV, IRR and Payback Period (PB); potential impact on natural gas tariff was also evaluated. For the purpose of comparing alternatives, USAID Energy Program chose the LCCA method. LCCA allowed USAID Energy Program to capture all costs associated with installation and utilization of various technologies throughout the planning horizon, including cost of equipment with installation, replacement cost, operation and maintenance costs and energy costs required to run the equipment (if subsidization is required). The planning horizon was set at 35 years. Assumptions and inputs for CBA and LCCA are described in sub-chapters 3.1 and 3.2 of this section. As the first step, USAID Energy Program needed to determine baselines in terms of gasification cost and energy consumption. Adequate estimates of the gasification costs were necessary to carry out an accurate CBA; to this end, USAID Energy Program in consultation with GGTC selected and subcontracted a local firm – Tsisferi Ali (the contractor) specializing in natural gas pipeline and network design and cost estimation. USAID Energy Program, together with the contractor and GGTC grouped the 966 settlements into their respective municipalities, creating 38 clusters. Table 3 below provides the list of clusters, number of settlements and population within each cluster. Table 3: Municipal Clusters

Number of Number of Cluster Municipality Settlements Households 1 Dusheti 88 1,513 2 Mtskheta 6 186 3 Lentekhi 51 1,671 4 Oni 45 2,823 5 Aspindza 19 959 6 Ninotsminda 9 434 7 Dmanisi 20 718 8 Tetritskaro 35 1,563 9 Kaspi 10 831 10 Khashuri 6 69 11 Akhmeta 3 20 12 Ambrolauri 53 6,263 13 Marneuli 9 752 14 Tskaltubo 10 741 15 Gurjaani 3 37 16 Mestia 127 3,326 17 Sagarejo 11 385 18 Tianeti 37 818 19 Telavi 4 52 20 Kareli 7 192 21 Khulo 84 6,212 22 Tsageri 59 4,910 23 Gori 12 262 24 Kharagauli 9 847 25 Borjomi 5 595 26 Akhaltsikhe 18 1,280 27 Chiatura 13 3,352 Gasification 28 Kazbegi undergoing 29 Khoni 4 161 30 Tsalka 37 3446 31 Khelvachauri 11 536 32 Akhalkalaki 76 192 33 Adigeni 26 865 34 Shuakhevi 53 3,425 35 Keda 58 3,112 36 Bolnisi 1 44

USAID ENERGY PROGRAM Cost Estimation Study of Gas Pipeline Network and Alternative Systems for High-Mountainous Settlements of Georgia 10

Number of Number of Cluster Municipality Settlements Households 37 Chokhatauri 3 349 38 Bagdati 1 208 However, as the cost-estimation effort was underway Kazbegi was dropped from the list, as it became evident that there was only one settlement in this municipality, which was already gasified, therefore the analyses were conducted for 37 clusters. The nature of estimating gas pipeline and network costs dictated that, costs for other, non-high-mountainous settlements, which were on the way to, and in the vicinity of subject settlements also needed to be calculated in order to accurately estimate all costs associated with connecting the settlements to gas network. As a result, cost-estimation was done for 1,171 settlements. The cost-estimation study provided schematic drawings of gas pipes including mains and local networks; technical parameters of the pipes including length, diameter and material; and cost estimates for gasification of each cluster including mains, connection points and local network costs, detailed to each settlement. A sample cost-estimation study can be viewed in Annex 1. As for gas consumption numbers, they were derived from GNERC’s Annual Report from 2018 as shown in Figure 2 above, and CBA and LCCA calculations for each cluster were tailored according to the natural gas consumption figures in those regions where clusters are located. Table 4: Estimated Annual Consumption for Each Cluster

Kvemo Adjara 795 Guria 331 Imereti 350 489 618 Region - Average Annual Household Kakheti Kartli Consumption (m3) Khulo Chokhataur Tskaltubo Akhmeta Dmanisi Khelvachau Kharagauli Gurjaani Tetritskar Shuakhevi Chiatura Sagarejo Marneuli Clusters within the region Keda Khoni Telavi Tsalka Bagdati Bolnisi

Racha- Samegrelo- Mtskheta- Lechkhumi Samtskhe- Shida 1,247 400 Zemo 321 785 485 Mtianeti and Kvemo Javakheti Kartli Svaneti Svaneti Dusheti Lentekhi Mestia Aspindza Kaspi Mtskheta Oni Ninotsminda Khashuri Tianeti Ambrolauri Borjomi Kareli Tsageri Akhaltsikhe Gori Akhalkalaki Adigeni

3.1 COST BENEFIT ANALYSIS An accurate CBA study needed the estimation of a total annual consumption in each cluster. Therefore, in addition to per household consumption provided in Table 4, the study incorporated the number of active households in each cluster. Respective data was collected from various sources. Data obtained from the Ministry of Infrastructure and Regional Development of Georgia (MRDI) comprised of both high and low mountainous settlements in all municipalities. Energo-Pro Georgia provided data on active consumers in each low and high mountain settlements for the last 24 months. This piece of information contributed to classification of seasonal consumers from all settlements and enabled the accurate calculation of active number of consumers in each municipality. The two variables - average annual household consumption and the number of active consumers allowed the Program to calculate the expected gas consumption in all locations. The multiplication of the number of active consumers by the annual gas consumption of one household reveals the total gas consumption in meter cubes for that particular municipality. To identify the municipalities suitable for the gasification projects, both from the economic and financial perspectives, cost benefit analyses should be conducted for each location in view of installation cost (initial investment), cash inflows and outflows for each following year. Based on available studies, the lifespan of gas pipeline is 35 years, therefore this number has been applied in the calculations.

USAID ENERGY PROGRAM Cost Estimation Study of Gas Pipeline Network and Alternative Systems for High-Mountainous Settlements of Georgia 11

For the purpose of comparative analysis and consistent comparison of municipalities different financial indicators were used: IRR, NPV, cost per consumer and payback period in combination with various assumptions. The applied discount rate 13.5% was based on GNERC’s methodology for calculating the Weighted Average Cost of Capital (WACC) for gas projects; gas consumption for each municipality was calculated separately in line with the above provided methodology (consumption per household was taken from GNERC annual report which is different among municipalities and varies in the range of 321-1247 cubic meters per year); gasification tariff was taken 20 tetri for each cubic meter based on SOCAR Georgia and Saqorgaz tariffs, and we assumed the annual escalation of the tariff by 1%, maintenance cost per kilometre of gas pipeline per year was set at GEL 3,000 based on consultations with GNERC, natural gas demand annual growth rate was assumed at 5%, based on the approximate Gross Domestic Product (GDP) growth rate. Based on these assumptions IRR, NPV, cost per consumer and payback period were calculated for each municipality and compared, which enabled us to correctly asses each direction. The main limitation of the study is time constraint. High mountain settlements are spread among 37 different municipalities and due to diverse geographical location, nature and climate conditions, etc. the above discussed variables will vary in all 37 municipalities. However, the shortage of time does not allow conduct separate research for each municipality. Based on collected data the Program conducted cost benefit analysis separately for each municipality. The analysis process also included other villages located between high mountain settlements. In total 1,178 settlements were studied in which 973 are high mountain villages. There are 87,725 households in which 53,788 are from high mountain regions. We have different variables in our data: number of consumers, number of villages, instalment cost, length of the pipeline. All these variables were calculated separately for each municipality. The majority of variables are fixed, hence do not vary in municipalities: project duration, tariff, maintenance cost, discount rate, demand growth rate, tariff growth rate. Only gas consumption per household varies among municipalities due to climate conditions and other factors (in Mestia municipality electricity is free and in case of gasification demand on gas will be lower compared to other high mountainous parts of Georgia). For accurate evaluation of different municipalities, the Program compared separate key parameters for each destination. IRR was applied for each location to evaluate the profitability of the project. “IRR is a metric used in capital budgeting to estimate the profitability of potential investments”. Another pivotal aspect NPV aided in investment assessment. (NPV) is the difference between the present value of cash inflows and the present value of cash outflows over a period of time. The Program also reviewed the payback period to find the breakeven point for each location. “The payback period refers to the amount of time it takes to recover the cost of an investment. Simply put, the payback period is the length of time an investment reaches a breakeven point”. In addition to the key financial indicators, other basic variables have been applied in the study, since Gasification Study claims more comprehensive approach rather than sole focus on the financial ratios. Gasification of high mountain villages can be considered as a social project, with the focus on the number of consumers in each municipality, number of villages in each direction and an installation cost per consumer. The combination of all variables will serve as a valuable input for the accurate assessment of investments in each municipality.

3.2 LIFE-CYCLE COST ANALYSIS USAID Energy Program chose the LCCA method to compare cost-efficiency of various alternative energy sources to gasification. LCCA was deemed as the most suitable tool, as it enabled USAID Energy Program to capture all costs needed to purchase, own, operate, maintain and replace various technologies and/or services. Since the analysis was done at GoG’s request, all costs were analysed from GoG standpoint, i.e. how much would it cost the government to install, operate, maintain and replace the various alternatives over the 35-year period. The details of general assumptions based on which the LCCA model was built are described in section 3.2.1 below. The alternatives that were analysed are: • CNG Virtual Pipeline • Electricity Subsidies • Biomass

USAID ENERGY PROGRAM Cost Estimation Study of Gas Pipeline Network and Alternative Systems for High-Mountainous Settlements of Georgia 12

• Solar PV with BESS • Heat Pump o Grid-connected o Off-grid (powered by PV+BESS) • Wood stoves Description of each alternative, assumptions and calculations are provided in the respective sub- chapters of this chapter.

3.2.1 LCCA MODEL INPUTS AND ASSUMPTIONS As the first step, USAID Energy Program needed to establish a baseline volume of energy required by households to meet their cooking, space and water heating demand. For this purpose, USAID Energy Program used the average annual natural gas consumption numbers provided in Table 4. Efficiency factor of 75% was used to derive required energy from consumption numbers, meaning that from every cubic meter of natural gas consumed, the households receive 0.75 cubic meters of usable energy. This assumption was based on the efficiency factors of the most widely used heating devices in Georgia: “Karma” individual space heater, individual water heaters and gas stoves. Efficiency factors for these devices vary from 87 to 95%, and 75% was used for calculations to account for system losses and based on consultations with MoESD. USAID Energy Program then calculated average annual required energy (cubic meters of natural gas) per household for each cluster: Figure 5: Annual Energy Required per Household – M3

Region Required Energy - m3 of Natural Gas Adjara 596 Guria 248 Imereti 263 Kakheti 367 Kvemo Kartli 464 Mtskheta - Mtianeti 935 Racha-Lechkhumi and Kvemo Svaneti 300 Samegrelo-Zemo Svaneti 241 Samtskhe Javakheti 589 Shida Kartli 364 To make the process of comparing different technologies that use different sources of energy straightforward, USAID Energy Program converted the natural gas numbers into Kilowatt hours (kWh). The following coefficients were used to express one cubic meter of gas into kWh: 1 Cal = 4.19 J 1 Wh = 3,6 KJ 1 kWh = 3.6 MJ 1 MJ = 0.2778 kWh Where: • Cal = calorific value of m3 of natural gas • J = Joules • KJ = Kilo joules • MJ = Mega joules • kWh = Kilowatt hours From these coefficients it follows that one Kilocalorie (Kcal) of gas equals 4.19 KJ, and since average calorific value of m3 of natural gas in Georgia is 8,495.25 Kcal5, one m3 of natural gas equals 35,595.10 KJ and equals 9.89 kWh (35,595.10 / 3.6 /1,000).

5 Source: GNERC Annual Report 2018

USAID ENERGY PROGRAM Cost Estimation Study of Gas Pipeline Network and Alternative Systems for High-Mountainous Settlements of Georgia 13

Figure 6: Annual Energy Required per Household – kWh

Region Required Energy - kWh Adjara 5,897 Guria 2,455 Imereti 2,596 Kakheti 3,627 Kvemo Kartli 4,584 Mtskheta - Mtianeti 9,250 Racha-Lechkhumi and Kvemo Svaneti 2,967 Samegrelo-Zemo Svaneti 2,381 Samtskhe Javakheti 5,823 Shida Kartli 3,597 As USAID Energy Program established the baseline figures, additional general assumptions were made to generate the LCCA model. GENERAL ASSUMPTIONS All costs are calculated for the duration of planning Planning Horizon: 35 Years horizon

Used to calculate cost of various technologies, USD/GEL exchange rate: 2.95 where relevant prices in Georgian Lari were not available Energy carrier prices: Current SOCAR tariff. Since all settlements are in - Natural Gas 0.5694 GEL/m3 the regions SOCAR tariff was deemed most suitable.

Current Energo-Pro tariff. Since all settlements are 0.2273 - Electricity in the regions Energo-Pro tariff was deemed most GEL/kWh suitable.

Current market price of air-dried wood logs in - Biomass (wood logs) 100 GEL/m3 Georgia For base case, USAID Energy Program assumed that GoG will fully subsidize household energy costs, except for those cases where an off-grid technology is installed. This assumption was predicated on the fact that majority of the settlements are high-mountainous rural settlements, with very poor economic conditions. Employment rate amongst high-mountainous population is only 22%. Main income for households is pension and government subsidies. Maximum monthly income for 35% of households is up to GEL 2506. USAID Energy Program developed an additional scenario where GoG does not provide subsidies (Scenario 2). As for estimating the installation and maintenance cost of proposed alternatives, USAID Energy Program based them on local market prices, where available, and used international market prices, if the technologies were not available locally. The formula to calculate the life cycle cost of each alternative is as follows: LCC = Installed cost + Replacement cost + (Operation and Maintenance (O&M) Cost + Energy cost) x Number of years Where: Installed cost is the total GEL amount required to purchase and install the equipment; Replacement cost is the same as installed cost but is calculated only if useful life of a particular technology is less than the planning horizon. Replacement cost is proportioned to reflect the cost to be carried only within the planning horizon. For example, if a particular technology’s useful life is 20

6 Georgia’s High-mountainous Settlements Development Strategy 2019-2023

USAID ENERGY PROGRAM Cost Estimation Study of Gas Pipeline Network and Alternative Systems for High-Mountainous Settlements of Georgia 14

years, than replacement is required on the 21st year of utilization and the replacement cost is proportioned for the remaining years, in this case:15 (planning horizon – useful life, i.e. 35 – 20 = 15); O&M Cost is annual operation and maintenance costs required to keep the equipment fully operational; Energy cost is calculated only in case subsidization is required, i.e. if a particular alternative is either grid connected and requires subsidization of electricity, or if in case of biomass (Biomass boilers and woods stoves), GoG decides to cover the cost of the biomass itself, e.g. wood logs. If required, energy cost is calculated by multiplying the volume of required energy by the price of the respective energy carrier. Number of years is the planning horizon, in our case 35 years. The sum of annual O&M and Energy Costs is multiplied by the number of years in the planning horizon to get the full cost of operating and maintaining each alternative throughout 35 years. The LCCA model allows changing of each variable to be able to accommodate virtually unlimited number of assumptions and scenarios. USAID Energy Program made additional assumptions specific to each alternative, described below. COMPRESSED NATURAL GAS VIRTUAL PIPELINE CNG is natural gas stored and transported in a compressed form, that reduces the volume by 150- 300 times that of gas at atmospheric pressure. Figure 7: CNG Virtual Pipeline Scheme

The on-land transportation of CNG has been used for decades, and it consists of gas compression and truck loading at the location and truck offloading, heating, let-down and metering at the customer site. To calculate the LCC, USAID Energy Program asked SOCAR Gas Distribution Company to provide estimates for CNG virtual pipeline for three locations. SOCAR provided the following estimates: • Sakire: EUR 700,000 • Mestia: EUR 1,700,000 • Atskuri: EUR 700,000 According to SOCAR these estimates are very tentative and do not factor in several important points like O&M costs, access road conditions and difficulty, etc. Unfortunately, numbers provided by SOCAR lacked the level of detail required to calculate the LCC, therefore USAID Energy Program could not include CNG virtual pipeline in the comparative LCCA.

USAID ENERGY PROGRAM Cost Estimation Study of Gas Pipeline Network and Alternative Systems for High-Mountainous Settlements of Georgia 15

ELECTRICITY SUBSIDIES One of the widespread alternatives to natural gas for household consumption, is electricity. Even though electricity is more expensive to use for cooking, space and water heating purposes, it is more widely available throughout Georgia and will not require initial investment and time to cover the population’s energy needs. For the purpose of LCCA, USAID Energy Program assumed that instead of investing in gasification, GoG would fully subsidize the cost of electricity to households. To calculate the LCC, USAID Energy Program used the following assumptions and calculations: Energy cost was calculated by multiplying the required volume of energy in kWh as indicated in Figure 6 above by 0.2273 GEL/kWh tariff. Installed, replacement and O&M costs. Since electricity is accessible by majority of households, and it was assumed that GoG would not cover the cost of purchasing relevant household equipment, installed, replacement, and O&M costs were zeroed out. As a result, the LCC of this alternative was calculated by simply multiplying annual energy cost by 35 (planning horizon). Despite this, electricity subsidies still came out as a more expensive alternative to gasification in 57% of the clusters in Scenario 1 and 68% in scenario 2. BIOMASS BOILER Biomass boilers can run at efficiencies of 90% and are commonly used to meet households’ hot water and heating needs. Biomass boilers are much more efficient than traditional wood stoves and can be operated unaided for extended periods of time therefore making it a more sensible choice for households. Moreover, biomass boilers increase comfort-level of households by being able to power central space and water heating systems, as opposed to wood stoves. Biomass boilers can operate on all kinds of biomass. Biomass is any biological material that is used as fuel. Wood and its byproducts, leaves, plant-based biomass, agricultural waste and dried animal dung all belong to biomass fuels. Directly burning wood produces air polluting substances such as carbon dioxide and soot, therefore it is preferred to process biomass before burning it. There are different types of wood biomass products such as wood pellets, briquettes and wood chips which are pressed and given shape for easier transportation, storage and better heating qualities. For the purpose of LCCA, USAID Energy Program assumed that majority of households will be using most widely spread type of biomass in Georgia – wood logs. To calculate the LCC, USAID Energy Program used the following assumptions and calculations: Installed Cost was determined by calculating required installed capacity of the boiler (expressed in kW). To do so, USAID Energy Program analysed local and international cases: Department of Energy and Climate Change of UK completed an extensive survey of biomass boilers in the UK, and provided actual outputs of biomass boilers in various capacity bands: Table 5: Average Annual Output of Biomass Boilers Capacity Band (range) Boiler Installed Capacity (kW) Mean Annual Heat Output (kWh) Average output Per kW Installed (kWh) 1‐44 kW 30 34,136 1,138 101‐150 kW 132 157,248 1,191 151‐199 kW 191 313,848 1,643 200‐400 kW 326 349,724 1,073 401‐600 kW 510 945,816 1,855 601‐800 kW 746 1,120,844 1,502 801‐1000 kW 942 2,171,380 2,305 Overall average 1,530 The numbers in Table 5 above are actual produced energy documented through a survey in UK, therefore all system losses are considered. Although the overall average output per kW came out to 1,530 kWh, lower capacity boilers seem to be less efficient, therefore we used an average number of the 1-44 kW capacity band – 1,138 kWh per kW installed for our calculations. For additional certainty a biomass boiler installed in Georgia’s Pshaveli Village at local Kindergarten (a 600 m2 building) was analysed as well. In this case, claimed annual output of the installed 60 kW capacity boiler is 72,000 kWh, which comes out to an output of 1,200 kWh per installed kW and is in line with our assumption. The required energy for each cluster

USAID ENERGY PROGRAM Cost Estimation Study of Gas Pipeline Network and Alternative Systems for High-Mountainous Settlements of Georgia 16

(Figure 6) was then divided by this number to arrive at required installed capacity. e.g. for clusters within the Adjara Region the required installed capacity came out to 5.2 kW (5,897 kWh / 1,138 kWh). Further, to determine the cost, two local cases - Pshaveli case mentioned above and Natakhtari case were studied. Both cases were implemented by USAID funded projects. In Pshaveli’s case cost per kW installed equalled $255, and in Natakhtari’s case $187.50 per kW with the average of two prices being $221.25/kW. USAID Energy Program used $220/kW for calculating the Installed cost. So, in the example of Adjara region, total installed cost of the biomass boiler equals 5.2 kW x $220 = $1,140. Replacement Cost was proportioned for 15 years, since useful life of biomass boilers is estimated at 20 years. O&M Costs for biomass boilers are generally very low, requiring an annual visit of a technician to clean the system. Therefore GEL 100 per year was assumed. Energy Cost was estimated by determining the required volume of wood logs (m3) and multiplying the determined number by local prices per m3. As all calculations are done on a kWh basis it was necessary to determine the required energy input in kWh. Since average efficiency of biomass boilers is 90% as mentioned above, required energy input was calculated by dividing the required energy numbers from Figure 6 by the 90% efficiency factor. The resulting number was then converted into GJ using the 277.78 GJ to kWh ratio. Energy density of biomass in Georgia was determined through National Statistics Office of Georgia (Geostat) annual publication – Energy Balance of Georgia 2017. According to statistics provided in the report, average energy density of m3 of biomass, specifically wood logs was calculated at 7.8 GJ/m3. This coefficient allowed us to calculate annual total volume of wood logs in m3 required to run the biomass boiler of a determined capacity for each cluster. Average current cost of m3 of wood logs was estimated at GEL 100 based on online research. It is worth noting that biomass boilers cannot be used for cooking, therefore USAID Energy Program assumed that the households will continue using their current sources and appliances for cooking and will not require subsidies, since the energy cost for cooking alone, be it electricity, Liquefied Petroleum Gas (LPG), wood or other energy carriers, would be marginal. SOLAR PHOTOVOLTAICS COUPLED WITH BATTERY ENERGY STORAGE SYSTEMS Solar PV is a technology that produces electricity directly from sunlight. The electricity produced by PV can be used to charge batteries or to directly power household electrical devices with the help of an inverter, PVs can also be connected to electrical grids through a net metering arrangement. For our model, we calculated LCC of PVs in combination with BESS, since there is a limitation on a total combined capacity of grid-connected distributed generation systems within a distribution network. While it would be extremely cost-inefficient to power space and water heating devices exclusively through PVs, USAID Energy Program still calculated the cost of PVs for such applications for comparative analysis and for estimating the cost of PVs to consider coupling it with other technologies like heat pumps. To calculate the LCC of PVs USAID Energy Program used the following assumptions and calculations: Installed Cost was calculated by determining the required installed capacity of the PV and battery systems and multiplying it by the current cost of such systems locally. USAID Energy Program used the GoG’s ongoing “Solar PV for Off-grid Settlements” program as a reference to determine the costs. Since USAID Energy Program already estimated the required energy for each cluster, the required installed capacity was then calculated by using the following global formula: E = A x r x H x PR where: E = Energy (kWh) A = Total solar panel area (m²) r = solar panel yield (%) H = Annual average irradiation on tilted panels (shadings not included) (kwh/m2) PR = Performance ratio, coefficient for losses (range between 0.9 and 0.5). Since energy was our main, pre-determined variable, the formula was adjusted to calculate the area and from there the total required installed capacity expressed in Kilowatt peak (kWp). To calculate the kWp a simple formula of A x r is used. As for estimating other variables of the formula: solar panel

USAID ENERGY PROGRAM Cost Estimation Study of Gas Pipeline Network and Alternative Systems for High-Mountainous Settlements of Georgia 17

yield was estimated at 19% (referencing the GoG program mentioned above), Annual average irradiation was estimated for each cluster by referencing the irradiation map of Georgia: Figure 8: Irradiation Map of Georgia7

PR was estimated at 0.75 with details of estimated losses as follows: - Inverter losses: 8% - Temperature losses: 8% - DC cable losses: 2% - Ac cable losses: 2% - Shadings: 3% - Losses, weak irradiation: 3% - Losses, dust, snow: 2% With all variables in places, USAID Energy Program calculated total required installed capacity for each cluster and multiplied it by the price of $3,300 per installed kW of PV modules and BESS. As mentioned above the price was taken from GoG’s ongoing program, therefore it should be reflective of realistic and up to date prices of such systems locally. Replacement Cost was proportioned for 10 years, since useful life of PV system is estimated at 25 years. O&M Costs were set at zero, as USAID Energy Program assumed that households will be cleaning the PV modules themselves and will not encounter any breakdowns. Energy costs were also set at zero, as PV + BESS systems are autonomous off-grid systems and do not require energy input from outside sources to run. HEAT PUMP Heat Pump is a highly efficient device that works on refrigeration cycle to transfer thermal energy from environment such as ground, air and water to a desired destination. A simplified heat pump consists of a condenser, expansion valve, evaporator and a compressor. There are several types of heat

7 Source: Solargis.com

USAID ENERGY PROGRAM Cost Estimation Study of Gas Pipeline Network and Alternative Systems for High-Mountainous Settlements of Georgia 18

pumps that are mainly differentiated by the source where they take the heat from – the main types of heat pumps are air-source, geothermal (ground-source) and water source. For this study, USAID Energy Program concentrated on air-source heat pumps, specifically air to water type. Although ground and water-source heat pumps may be slightly more efficient in some cases, the cost of these type of heat pumps is very high, since their installation requires ground works, and therefore is very cost-inefficient for households. Air to water heat pumps take heat from the outside air and transfer it to a water-based system. The created heat can be used for space heating or as a hot water supply for the house. Air to water heat pumps are among the most efficient air source heat pumps on the market. Their Coefficient of Performance (CoP) ranges from 200% to 420%, meaning that for every 1 kW consumed the heat pump outputs anywhere from 2kW to 4.2 kW energy. This type of heat pump works best in moderate climates. The efficiency of an air to water heat pump is most optimal at 7°C, as opposed to dry and cold locations, where outside temperatures fall below -20°C. Keeping the working principles of an air to water heat pump in mind, the decline in temperatures will affect the coefficient of performance. USAID Energy Program considered two cases for heat pumps, grid connected, and PV powered. Grid connected heat pumps draw required power from electricity grids, whereas in case of PV-powered heat pumps PV modules and batteries will also be installed to power the heat pump. To calculate the LCC USAID Energy Program used the following assumptions and calculations: Installed Cost was calculated by determining the required energy output of heat pump systems and researching the cost of such systems locally. As mentioned above two cases were evaluated – 1) grid-connected and 2) PV powered. In the 1st case only the installed cost of heat pump was considered, and in the 2nd case installed cost of heat pump together with PV and battery modules was calculated. PV and battery installed costs were estimated using the same assumptions and calculations as for standalone PV and battery modules described above. As maximum required energy was estimated at 9,250 (for clusters in Mtskheta-Mtianeti Region), it was determined that a heat pump with maximum rated output capacity of 6 kW would be more than enough and could accommodate for decreased coefficient of performance in cases of extreme temperature variations. The cost of such heat pump was assumed at GEL 10,000 based on local market research. As for estimating the cost of PV modules, their installed capacity was determined based on energy required by heat pump for each cluster, estimated by looking at average annual temperatures in the region where cluster is located. After finding out the lowest average annual temperature in each region, coefficient of performance of heat pumps was adjusted accordingly, allowing Energy Program to establish volume of energy required to power the heat pump in clusters within different regions. For example, in Adjara region lowest average annual temperature is -6 C0 (Degrees Celsius). Figure 9: Average Annual Temperatures in Adjara Region - 2018

Heat Pump’s CoP was adjusted to 340% for all clusters within Adjara region according to the gradation scale shown in table below:

8 Source: https://www.ncdc.noaa.gov/

USAID ENERGY PROGRAM Cost Estimation Study of Gas Pipeline Network and Alternative Systems for High-Mountainous Settlements of Georgia 19

Table 6: Heat Pump CoP Scale

Coefficient of Performance Gradation Temperature (C0) CoP (%) -20 200 -19 210 -18 220 -17 230 -16 240 -15 250 -14 260 -13 270 -12 280 -11 290 -10 300 -9 310 -8 320 -7 330 -6 340 -5 350 -4 360 -3 370 -2 380 -1 390 0 400 1 410 2 420 Volume of energy required to power the heat pump was then established by dividing the required energy output – 5,897 kWh in Adjara’s case, by CoP – 340%, 5,897 / 340% = 1,734 kWh. This number was then used to size and price the PV and battery system for various clusters. Replacement Cost was proportioned for 10 years, since useful life of heat pump, as well as PV system is estimated at 25 years. O&M Costs for heat pump were set at annual GEL 30/kW (capacity), based on international experience. PV’s O&M costs were set at zero, as USAID Energy Program assumed that households will be cleaning the PV modules themselves and will not encounter any breakdowns. Energy cost was calculated by multiplying the required volume of energy in kWh as calculated for each cluster by 0.2273 GEL/kWh tariff. In case of PV powered heat pump energy cost was set at zero, as PV + BESS systems are autonomous off-grid systems and do not require energy input from outside sources to run. As in the case of biomass boilers, heat pump cannot be used for cooking, therefore USAID Energy Program assumed that the households will continue using their current sources and appliances for cooking and will not require subsidies. WOOD STOVES The current wood stoves available in Georgia are inefficient, poorly made, do not meet consumer desires, require continuous tending, and do not meet basic safety requirements. Moreover, because there are no other options, there is a significant amount of wood use in rural Georgia. Absolute majority of heating stoves used in rural Georgia are of the same basic design, and the estimated efficiency of these stoves is no more than 30 to 50%. Because of the relatively high costs for heating, there should be significant consumer interest in higher efficiency stoves. For LCCA, USAID Energy Program assumes that GoG will replace inefficient stoves with higher-efficiency wood stoves and subsidize the cost of fuelwood to the population. In ideal case, it would be best to install stoves with 75% efficiency, but since such stoves are not available on the local market, USAID Energy Program assumed that GoG will procure and install “Svanetian” type wood stoves at households, with estimated efficiency of 55%. USAID Energy Program used the following assumptions and calculations to calculate the LCC of woods stoves:

USAID ENERGY PROGRAM Cost Estimation Study of Gas Pipeline Network and Alternative Systems for High-Mountainous Settlements of Georgia 20

Installed Cost is the cost of procuring the Svanetian type wood stove. Online research of local market showed that such wood stoves cost GEL 450 on average. Replacement Cost was proportioned for 20 years, since useful life of a wood stove is estimated at 15 years. O&M Costs were set at zero, as wood stoves require almost no maintenance and rarely break down. Energy Cost was estimated by determining the required volume of wood logs (m3) and multiplying the determined number by local prices per m3. Same method was applied here as in the case of biomass boilers. Average current cost of m3 of wood logs was estimated at GEL 100 based on online research. It is worth noting that although wood stove is the lowest cost option, even if cost of fuelwood is fully subsidized by GoG, wood stove provides very low level of comfort, cannot be used to centrally heat space and water and is generally the least attractive option in terms of comfort and safety.

USAID ENERGY PROGRAM Cost Estimation Study of Gas Pipeline Network and Alternative Systems for High-Mountainous Settlements of Georgia 21

4. FINDINGS AND RECOMMENDATIONS Based on the assumptions and calculations described above, USAID Energy Program developed CBA and LCCA models. The results and findings of the analyses are provided below.

4.1 CBA FINDINGS The main purpose of this study was to conduct the cost-benefit analysis for high-mountainous settlements. Due to complex landscape of Georgia, there are many settlements located on the way to, or in the vicinity of high-mountainous settlements. The construction of gas pipeline in high mountainous settlements will require passage through certain low mountainous settlements as well. As noted above, Gasification project is of a social character, therefore avoidance of settlements located in the vicinity of high mountain villages is inappropriate. In addition, the gasification of low mountain villages is justified by cost benefit analysis. Data assessment showed that it will decrease the gasification cost per consumer in 29 municipalities (out of 37) and increases the IRR in 36 municipalities (out of 37). This study also calculated the NPVs for each municipality which remains negative in both cases of high and low mountainous settlements. It should be mentioned that a big portion of gasification cost is fixed, which includes the construction of the main pipeline directed to that municipality (In Mestia municipality cost of the building pipeline from Zugdidi to Mestia is 72% of the whole cost and in Tskaltubo municipality respective share of the cost is 80%) . An increased number of consumers within municipality decreases cost per consumer due to economies of scale and increases IRR of the project. Figure 10: NPV by Cluster

NPV in millions GEL

-34.7 Xaragauli -5.3 Xoni -28.3 Tskaltubo -16.2 Oni -21.6 Lentexi -4.2 Gori -41.8 Cageri -2.1 Bagdati -28.9 Ambrolauri -16.4 Tianeti -5.0 Kaspi -3.2 Qareli -2.8 Xashuri -11.2 Adigeni -106.4 Mestia -48.0 Xulo -25.5 Qeda -9.9 Xelvachauri -5.3 Sagarejo -5.1 Axmeta -35.7 Dusheti -34.4 Shuaxevi -23.3 Tetritskaro -26.5 Tsalka -2.1 Telavi -3.9 Ninotsminda -1.3 Mtskheta -6.7 Marneuli -13.5 Axalqalaqi -1.9 Gurjaani -9.9 Dmanisi -2.7 Choxatauri -22.4 Chiatura -4.8 Borjomi -9.9 Akhalcikhe -12.0 Aspindza -120.0 -100.0 -80.0 -60.0 -40.0 -20.0 -

USAID ENERGY PROGRAM Cost Estimation Study of Gas Pipeline Network and Alternative Systems for High-Mountainous Settlements of Georgia 22

The graph above demonstrates the NPVs of gasification projects which remain negative for all municipalities. On average NPV is minus GEL 18 million for one municipality, while for Mestia municipality, it accounts for -106.4 million and for Mtksheta -1.3 million. Based on the NPV analysis the project does not seem lucrative, unless the projects are separately considered as private investment projects. The results prove that the projects are not commercially viable and only in 7 municipalities investor will lose less than 5 million. Figure 11: IRR by Cluster

IRR

Oni 1.1% Lentexi -3.5% Cageri -0.4% Ambrolauri 2.6% Tianeti -2.8% Kaspi -4.1% Xashuri -8.6% Adigeni -1.0% Xulo -0.7% Qeda -1.6% Xelvachauri -2.1% Dusheti -2.8% Shuaxevi -0.6% Tetritskaro -6.3% Tsalka -1.4% Ninotsminda -3.4% Mtskheta 1.1% Marneuli -3.8% Axalqalaqi -8.5% Dmanisi -7.9% Chiatura -0.6% Borjomi 2.0% Akhalcikhe 4.6% Aspindza -3.5% -10.0% -8.0% -6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0%

The graph above shows the IRR analyses for each municipality. The gasification projects reveal similar negative NPVs for municipalities which discourages the comparison of IRRs as the negative NPVs is enough justification for arguing the economic inefficiency of the gas pipe construction in high mountainous municipalities. Only 5 municipalities have positive IRR. The highest observed IRR is in Akhaltsikhe municipality accounting for 4.6% and even in case of ignoring the negative NPV, it is not viable as 4.6% IRR means that it will be more profitable to put this money on a deposit in the commercial bank, because profitability of investment in this case will be definitely more.

USAID ENERGY PROGRAM Cost Estimation Study of Gas Pipeline Network and Alternative Systems for High-Mountainous Settlements of Georgia 23

Figure 12: Gasification Cost by Cluster

Cost of Per.Consumer in thousand Building cost of GELs Gas Pipeline in million GEL

-26.6 Xaragauli -4.2 Xoni Xaragauli 5.3 Tskaltubo Xoni 4.7 -25.9 Tskaltubo 17.3 -15.7 Oni Oni 5.5 -19.3 Lentexi Lentexi 11.5 -3.1 Gori Gori 8.6 -40.3 Cageri Cageri 8.2 -1.4 Bagdati Bagdati 5.8 -30.7 Ambrolauri Ambrolauri 4.9 -13.1 Tianeti Tianeti 10.2 -3.9 Kaspi Kaspi 4.6 -2.2 Qareli Qareli 7.2 -2.0 Xashuri Xashuri 5.4 -9.6 Adigeni Adigeni 5.8 -94.8 Mestia Mestia 28.5 -43.8 Xulo Xulo 7.1 -22.3 Qeda Qeda 7.2 -8.7 Xelvachauri Xelvachauri 8.2 -3.9 Sagarejo Sagarejo 8.9 -29.9 Dusheti Dusheti 12.0 -31.9 Shuaxevi Shuaxevi 7.3 -18.6 Tetritskaro Tetritskaro 8.0 -23.8 Tsalka Tsalka 6.0 Telavi Telavi 23.8 -1.4 Ninotsminda 6.3 -3.0 Ninotsminda Mtskheta 6.3 -1.2 Mtskheta Marneuli 6.6 -5.6 Marneuli Axalqalaqi 13.1 -10.9 Axalqalaqi Gurjaani 31.7 -1.2 Gurjaani Dmanisi 7.5 -7.4 Dmanisi Choxatauri 5.8 -2.0 Choxatauri Chiatura 2.9 -20.2 Chiatura Borjomi 4.4 -4.7 Borjomi Akhalcikhe 3.4 -11.6 Akhalcikhe Aspindza 8.1 -9.9 Aspindza - 20.0 40.0 -100.0 -80.0 -60.0 -40.0 -20.0 -

Two graphs above demonstrate the cost of gas pipeline construction in million GEL and the cost of gasification per consumer. The most expensive location is Mestia municipality and building pipeline to that direction costs 95 million Gel. Mestia is also the worst option based on the NPV indicators and in terms of cost per consumer (28,500 Gel). The right side of the graph shows the cost of building gas pipeline network per consumer, which differs significantly within municipalities max 31,700 Gel in Gurjaani caused by the low number of potential consumers (37 only) and minimum 2,900 Gel in Chiatura. Table 7: CBA Summary Variables Min Max Average NPV (106,442,812) (1,339,615) (17,110,111) IRR -11.7% 4.6% -3.0% Cost Per Consumer 2,903 31,730 13,914 Payback period 23 77 44 Length 32 738 244 Installation cost 1,173,274 94,763,010 15,504,572 Number of villages 3 128 33 Number of Consumers 20 6,962 1,998

USAID ENERGY PROGRAM Cost Estimation Study of Gas Pipeline Network and Alternative Systems for High-Mountainous Settlements of Georgia 24

The table above shows the summary of each variable for all 37 municipalities. The worst-case scenario is building the gas pipeline towards the Mestia municipality, with NPV negative 106.4 mln GEL. The best direction for building the gas pipeline is Mtskheta municipality with NPV 1.4 mln GEL. This is attributed to the lowest length of pipeline which might be built in Mtskheta Municipality and by the highest consumption of gas per consumer in this location (1247 cube meters per family during year). The IRR on average is negative 3% and even the highest IRR, positive 4.6% is not acceptable due to its low profitability. The Lowest cost per consumer is in Chiatura GEL 2,903, the shortest payback period is 23 year for Akhaltsikhe municipality, and the shortest length of building pipeline is in Telavi. It is evident from the graph, that we have municipalities with 128 settlements (Mestia) and municipalities with 3 villages (Gurjaani). This can be explained by the total absence of gas in Mestia. As for Gurjaani only three villages are left without gas, In Chiatura, Khulo and Ambrolauri have 6,962; 6,212 and 6,293 potential consumers while in Akhmeta there are only 20 households. As shown by the analysis, NPV is negative for each municipality and therefore gasification cannot be deemed as a viable project purely from economic and financial standpoint. When calculated based on SOCAR Georgia’s current distribution tariff of 20 Tetri/m3, annual revenue inflows are less than cash outflows (operational and maintenance expenses). Table 8 below shows distribution tariff at which NPV becomes zero for each municipality. Table 8: Distribution Tariff at Which NPV Becomes Zero Municipality Needed Tariff Municipality Needed Tariff Municipality Needed Tariff Aspindza 1.22 Tetritskaro 1.54 Tianeti 1.04 Akhaltsikhe 0.50 Shuakhevi 1.02 Ambrolauri 0.67 Borjomi 0.67 Dusheti 1.14 Bagdati 2.19 Chiatura 0.96 Akhmeta 43.0 Tsageri 1.08 Chokhatauri 2.12 Sagarejo 2.26 Gori 2.18 Dmanisi 1.52 Khelvachauri 1.17 Lentekhi 1.53 Gurjaani 8.64 Keda 1.05 Oni 0.79 Akhalkalaki 1.90 Khulo 1.00 Tskaltubo 4.63 Marneuli 1.26 Mestia 8.39 Khoni 1.63 Mtskheta 0.67 Adigeni 0.91 Kharagauli 1.84 Ninotsminda 1.05 Khashuri 1.46 Bolnisi 0.89 Telavi 5.98 Kareli 2.00 Tsalka 1.09 Kaspi 1.20 As Table 8 shows there are outlier municipalities where gas distribution tariff should equal 43 GEL/m3 (Akhmeta) and 8.64 GEL/m3 (Gurjaani). Best case scenario is Akhaltsikhe Municipality where tariff should increase to 50 Tetri/m3, but even in this case tariff increase constitutes 150% over the current tariff. Same analysis conducted cumulatively for all 37 municipalities, shows that gas distribution tariff which will make cumulative NPV equal to zero, and the gasification project for all 37 municipalities financially acceptable is 1.265 GEL instead of current 0.2 GEL (constituting a 533% tariff increase).

ANALYSIS OF IMPACTS ON NATURAL GAS DISTRIBUTION TARIFFS FOR DIFFERENT SCENARIOS Obtaining economic and technical data of high mountainous settlements without access to gas distribution made it possible to analyse different scenarios of impact on the current natural gas tariffs. Likely scenarios were provided by the MoESD, analysis about the impact was prepared by Georgian National Energy and Water Supply Regulatory Commission. Based on methodology of natural gas distribution approved by GNERC as well as “SOCAR Georgia Gas” Ltd and JSC “Saqorggas” tariffs information, it was possible to analyse 4 theoretical scenarios. All 4 scenarios consider transfer/sale of property with different conditions by “SOCAR Georgia Gas” Ltd and JSC “Saqorggas” to the high mountainous settlements. Brief description of each scenario and impact on natural gas distribution tariffs9 is provided below:

9 Weighted average tariff of SOCAR Georgia Gas and Saqorggas.

USAID ENERGY PROGRAM Cost Estimation Study of Gas Pipeline Network and Alternative Systems for High-Mountainous Settlements of Georgia 25

Scenario 1: In case “SOCAR Georgia Gas” Ltd and JSC “Saqorggas” were to receive constructed grid free of charge, natural gas distribution tariff would increase by approximately 2 tetri per 1 m3. Scenario 2: In case “SOCAR Georgia Gas” Ltd and JSC “Saqorggas” were to buy the grid (cost of 558 mil. Lari) natural gas distribution tariff in their licensing area would increase by approximately 14.7 tetri per 1 m3. Scenario 3: In case “SOCAR Georgia Gas” Ltd and JSC “Saqorggas” were to receive constructed grid with lease (14 mil. Lari per year, 40-year lease) natural gas distribution tariff in their licensing area would increase by approximately 4 tetri per 1 m3. Scenario 4: In case “SOCAR Georgia Gas” Ltd and JSC “Saqorggas” were to purchase the grid in portions (14 mil. Lari per year, within 40 years) natural gas distribution tariff in their licensing area would increase by approximately 2.4 tetri per 1 m3 for the first year, while increasing by 0.32 tetri per 1 m3 for each of the following years.

4.2 LCCA FINDINGS USAID Energy Program conducted LCCA for each municipality individually with the purpose of comparing LCC of each alternative to gasification. LCCA showed that in 100% of cases and in both scenarios, biomass-based technologies – biomass boilers and wood stoves are the cheapest alternatives. The tables provided below display summary of LCCA for each cluster. Tables 8 and 9 show LCC per household for each scenario, and Tables 10 and 11 provide total cost of each alternative per cluster. Table 9: 35-Year LCCA - Scenario 1

Summary of 35-Year Life-cycle Cost Analysis All Clusters All numbers per household Scenario 1 - 100% subsidization LCCA Results Technology Heat Pump Cluster Name Natural Gas Electricity Biomass Boiler PV+ BESS Heat Pump Wood Stove +PV+BESS Keda 33,216 46,913 19,886 82,864 34,098 37,306 18,400 Khelvachauri 40,997 46,913 19,886 82,864 34,098 37,306 18,400 Khulo 31,411 46,913 19,886 82,864 34,098 37,306 18,400 Shuakhevi 30,665 46,913 19,886 82,864 34,098 37,306 18,400 Chokhatauri 23,974 19,532 9,451 36,253 25,064 21,769 7,900 Bagdati 13,860 20,653 9,591 36,253 25,217 21,769 7,900 Chiatura 16,659 20,653 9,591 36,253 25,217 21,769 7,900 Kharagauli 29,597 20,653 9,591 36,253 25,217 21,769 7,900 Khoni 29,743 20,653 9,591 36,253 25,217 21,769 7,900 Tskaltubo 58,595 20,653 9,591 36,253 25,217 21,769 7,900 Sagarejo 37,951 28,856 14,120 46,611 27,894 26,948 11,400 Gurjaani 132,668 28,856 14,120 46,611 27,894 26,948 11,400 Akhmeta 541,916 28,856 14,120 46,611 27,894 26,948 11,400 Telavi 96,453 28,856 14,120 46,611 27,894 26,948 11,400 Bolnisi 27,452 36,468 15,075 59,559 29,897 29,537 14,900 Dmanisi 40,651 36,468 15,075 59,559 29,897 29,537 14,900 Marneuli 30,804 36,468 15,075 59,559 29,897 29,537 14,900 Tetritskaro 36,559 36,468 15,075 59,559 29,897 29,537 14,900 Tsalka 26,330 36,468 15,075 59,559 29,897 29,537 14,900 Dusheti 68,955 73,585 30,232 116,528 42,599 50,253 28,900 Mtskheta 43,594 73,585 30,232 116,528 42,599 50,253 28,900 Tianeti 64,404 73,585 30,232 116,528 42,599 50,253 28,900 Oni 21,498 23,604 13,461 41,432 29,742 29,537 7,900 Tsageri 24,897 23,604 13,461 41,432 29,742 29,537 7,900 Ambrolauri 18,373 23,604 13,461 41,432 29,742 29,537 7,900 Lentekhi 33,403 23,604 13,461 41,432 29,742 29,537 7,900 Mestia 53,810 18,942 9,377 33,664 26,219 24,358 7,900 Adigeni 37,736 46,323 19,812 75,096 35,741 39,895 18,400 Akhalkalaki 49,064 46,323 19,812 75,096 35,741 39,895 18,400 Akhaltsikhe 29,073 46,323 19,812 75,096 35,741 39,895 18,400 Aspindza 36,856 46,323 19,812 75,096 35,741 39,895 18,400 Borjomi 25,135 46,323 19,812 75,096 35,741 39,895 18,400 Ninotsminda 35,114 46,323 19,812 75,096 35,741 39,895 18,400 Gori 43,341 28,620 14,091 46,611 28,477 26,948 11,400 Kareli 44,175 28,620 14,091 46,611 28,477 26,948 11,400 Kaspi 23,219 28,620 14,091 46,611 28,477 26,948 11,400 Khashuri 62,305 28,620 14,091 46,611 28,477 26,948 11,400

USAID ENERGY PROGRAM Cost Estimation Study of Gas Pipeline Network and Alternative Systems for High-Mountainous Settlements of Georgia 26

Table 10: 35-Year LCCA - Scenario 1

Summary of 35-Year Life-cycle Cost Analysis All Clusters All numbers per household Scenario 2 - No Subsidization LCCA Results Technology Heat Pump Cluster Name Natural Gas Electricity Biomass Boiler PV+ BESS Heat Pump Wood Stove +PV+BESS Keda 21,333 46,913 9,386 82,864 20,300 37,306 900 Khelvachauri 29,114 46,913 9,386 82,864 20,300 37,306 900 Khulo 19,528 46,913 9,386 82,864 20,300 37,306 900 Shuakhevi 18,782 46,913 9,386 82,864 20,300 37,306 900 Chokhatauri 19,027 19,532 5,951 36,253 20,300 21,769 900 Bagdati 8,628 20,653 6,091 36,253 20,300 21,769 900 Chiatura 11,428 20,653 6,091 36,253 20,300 21,769 900 Kharagauli 24,366 20,653 6,091 36,253 20,300 21,769 900 Khoni 24,512 20,653 6,091 36,253 20,300 21,769 900 Tskaltubo 53,364 20,653 6,091 36,253 20,300 21,769 900 Sagarejo 30,642 28,856 7,120 46,611 20,300 26,948 900 Gurjaani 125,359 28,856 7,120 46,611 20,300 26,948 900 Akhmeta 534,607 28,856 7,120 46,611 20,300 26,948 900 Telavi 89,144 28,856 7,120 46,611 20,300 26,948 900 Bolnisi 18,215 36,468 8,075 59,559 20,300 29,537 900 Dmanisi 31,414 36,468 8,075 59,559 20,300 29,537 900 Marneuli 21,567 36,468 8,075 59,559 20,300 29,537 900 Tetritskaro 27,322 36,468 8,075 59,559 20,300 29,537 900 Tsalka 17,093 36,468 8,075 59,559 20,300 29,537 900 Dusheti 50,316 73,585 12,732 116,528 20,300 50,253 900 Mtskheta 24,955 73,585 12,732 116,528 20,300 50,253 900 Tianeti 45,766 73,585 12,732 116,528 20,300 50,253 900 Oni 15,519 23,604 6,461 41,432 20,300 29,537 900 Tsageri 18,918 23,604 6,461 41,432 20,300 29,537 900 Ambrolauri 12,395 23,604 6,461 41,432 20,300 29,537 900 Lentekhi 27,424 23,604 6,461 41,432 20,300 29,537 900 Mestia 49,012 18,942 5,877 33,664 20,300 24,358 900 Adigeni 26,003 46,323 9,312 75,096 20,300 39,895 900 Akhalkalaki 37,331 46,323 9,312 75,096 20,300 39,895 900 Akhaltsikhe 17,340 46,323 9,312 75,096 20,300 39,895 900 Aspindza 25,123 46,323 9,312 75,096 20,300 39,895 900 Borjomi 13,402 46,323 9,312 75,096 20,300 39,895 900 Ninotsminda 23,381 46,323 9,312 75,096 20,300 39,895 900 Gori 36,092 28,620 7,091 46,611 20,300 26,948 900 Kareli 36,926 28,620 7,091 46,611 20,300 26,948 900 Kaspi 15,970 28,620 7,091 46,611 20,300 26,948 900 Khashuri 55,056 28,620 7,091 46,611 20,300 26,948 900 As mentioned above costs of alternatives are compared against the cost of gasification. The cells highlighted in green mean that these alternatives have lower LCC, i.e. are more cost efficient than gasification in respective municipalities. Biomass-based technologies are more cost-efficient in 100% of cases. Even such relatively expensive technologies as PV and battery storage proved to be a better option in several instances. Heat pumps, both grid-connected and PV powered also proved to be a cost-efficient option in multiple instances, specifically in 65% of municipalities for grid-connected heat pumps and 57% of municipalities for PV-powered heat pumps in Scenario 1. Numbers are similar in scenario 2, where grid-connected heat pumps are more cost efficient in 65% of municipalities and PV-powered heat pumps in 35% of municipalities. Tables 10 and 11 below provide summed up LCC of gasification and alternatives for each municipality to help put things in perspective:

USAID ENERGY PROGRAM Cost Estimation Study of Gas Pipeline Network and Alternative Systems for High-Mountainous Settlements of Georgia 27

Table 11: Total Cost of Alternatives - Scenario 1

Summary of 35-Year Life-cycle Cost Analysis All Clusters Total LCC Scenario 1 - 100% subsidization LCCA Results Technology Heat Pump Cluster Name Natural Gas Electricity Biomass Boiler PV+ BESS Heat Pump Wood Stove +PV+BESS Keda 103,366,744 145,992,906 61,885,055 257,873,764 106,112,690 116,094,996 57,260,800 Khelvachauri 21,974,435 25,145,308 10,658,865 44,415,276 18,276,479 19,995,796 9,862,400 Khulo 195,124,122 291,422,856 123,531,478 514,753,156 211,816,205 231,742,325 114,300,800 Shuakhevi 105,026,434 160,676,639 68,109,355 283,810,296 116,785,335 127,771,646 63,020,000 Chokhatauri 8,367,017 6,816,767 3,298,268 12,652,346 8,747,326 7,597,217 2,757,100 Bagdati 2,882,842 4,295,922 1,994,989 7,540,653 5,245,239 4,527,854 1,643,200 Chiatura 55,842,514 69,230,440 32,150,023 121,520,525 84,529,038 72,968,113 26,480,800 Kharagauli 25,068,774 17,493,491 8,123,827 30,706,410 21,359,217 18,437,945 6,691,300 Khoni 4,788,648 3,325,209 1,544,199 5,836,756 4,060,016 3,504,733 1,271,900 Tskaltubo 43,419,242 15,304,223 7,107,150 26,863,577 18,686,163 16,130,481 5,853,900 Sagarejo 14,611,216 11,109,503 5,436,358 17,945,304 10,739,053 10,374,807 4,389,000 Gurjaani 4,908,706 1,067,667 522,455 1,724,614 1,032,065 997,059 421,800 Akhmeta 10,838,321 577,117 282,408 932,224 557,873 538,951 228,000 Telavi 5,015,540 1,500,504 734,261 2,423,781 1,450,470 1,401,273 592,800 Bolnisi 1,207,895 1,604,598 663,321 2,620,584 1,315,463 1,299,631 655,600 Dmanisi 29,187,479 26,184,118 10,824,200 42,763,168 21,465,957 21,207,609 10,698,200 Marneuli 23,164,653 27,424,035 11,336,767 44,788,165 22,482,451 22,211,869 11,204,800 Tetritskaro 57,141,748 56,999,689 23,562,987 93,090,295 46,728,818 46,166,425 23,288,700 Tsalka 90,734,868 125,669,181 51,950,131 205,239,384 103,024,637 101,784,709 51,345,400 Dusheti 104,328,512 111,334,668 45,741,646 176,306,788 64,451,678 76,033,001 43,725,700 Mtskheta 8,108,501 13,686,879 5,623,229 21,674,199 7,923,339 9,347,084 5,375,400 Tianeti 52,682,874 60,192,834 24,730,117 95,319,863 34,845,653 41,107,069 23,640,200 Oni 60,687,523 66,634,003 38,001,760 116,962,988 83,960,501 83,383,120 22,301,700 Tsageri 122,241,868 115,895,485 66,095,871 203,431,906 146,031,194 145,026,965 38,789,000 Ambrolauri 115,072,797 147,831,655 84,309,254 259,489,618 186,271,562 184,990,607 49,477,700 Lentekhi 55,816,152 39,442,231 22,494,134 69,233,139 49,698,193 49,356,427 13,200,900 Mestia 178,970,848 63,001,706 31,186,533 111,965,233 87,205,833 81,014,841 26,275,400 Adigeni 32,641,390 40,069,212 17,137,299 64,957,858 30,915,904 34,509,262 15,916,000 Akhalkalaki 40,772,085 38,494,237 16,463,694 62,404,601 29,700,712 33,152,828 15,290,400 Akhaltsikhe 37,213,537 59,293,169 25,359,240 96,122,611 45,748,390 51,065,728 23,552,000 Aspindza 35,345,149 44,423,554 18,999,618 72,016,863 34,275,551 38,259,401 17,645,600 Borjomi 14,955,384 27,562,059 11,788,084 44,681,995 21,265,853 23,737,585 10,948,000 Ninotsminda 15,239,607 20,104,090 8,598,367 32,591,573 15,511,563 17,314,473 7,985,600 Gori 11,355,444 7,498,391 3,691,788 12,212,129 7,460,997 7,060,258 2,986,800 Kareli 8,481,649 5,495,004 2,705,433 8,949,347 5,467,601 5,173,930 2,188,800 Kaspi 19,294,842 23,783,064 11,709,451 38,733,891 23,664,461 22,393,414 9,473,400 Khashuri 4,299,064 1,974,767 972,265 3,216,171 1,964,919 1,859,381 786,600 Total 1,720,178,424 1,878,557,180 859,323,882 3,207,771,050 1,680,778,400 1,729,538,811 721,525,700 As we can see, in Scenario 1, total LCC of gasification is GEL 1,720,178,424, whereas total LCC of biomass alternative is 859,323,882 – 51% less.

USAID ENERGY PROGRAM Cost Estimation Study of Gas Pipeline Network and Alternative Systems for High-Mountainous Settlements of Georgia 28

Table 12: Total Cost of Alternatives - Scenario 2

Summary of 35-Year Life-cycle Cost Analysis All Clusters Total LCC Scenario 1 - 100% subsidization LCCA Results Technology Heat Pump Cluster Name Natural Gas Electricity Biomass Boiler PV+ BESS Heat Pump Wood Stove +PV+BESS Keda 66,387,887 145,992,906 29,209,055 257,873,764 63,173,600 116,094,996 2,800,800 Khelvachauri 15,605,326 25,145,308 5,030,865 44,415,276 10,880,800 19,995,796 482,400 Khulo 121,308,999 291,422,856 58,305,478 514,753,156 126,103,600 231,742,325 5,590,800 Shuakhevi 64,328,302 160,676,639 32,146,855 283,810,296 69,527,500 127,771,646 3,082,500 Chokhatauri 6,640,383 6,816,767 2,076,768 12,652,346 7,084,700 7,597,217 314,100 Bagdati 1,794,719 4,295,922 1,266,989 7,540,653 4,222,400 4,527,854 187,200 Chiatura 38,306,987 69,230,440 20,418,023 121,520,525 68,045,600 72,968,113 3,016,800 Kharagauli 20,637,810 17,493,491 5,159,327 30,706,410 17,194,100 18,437,945 762,300 Khoni 3,946,399 3,325,209 980,699 5,836,756 3,268,300 3,504,733 144,900 Tskaltubo 39,542,802 15,304,223 4,513,650 26,863,577 15,042,300 16,130,481 666,900 Sagarejo 11,797,266 11,109,503 2,741,358 17,945,304 7,815,500 10,374,807 346,500 Gurjaani 4,638,274 1,067,667 263,455 1,724,614 751,100 997,059 33,300 Akhmeta 10,692,142 577,117 142,408 932,224 406,000 538,951 18,000 Telavi 4,635,474 1,500,504 370,261 2,423,781 1,055,600 1,401,273 46,800 Bolnisi 801,463 1,604,598 355,321 2,620,584 893,200 1,299,631 39,600 Dmanisi 22,555,247 26,184,118 5,798,200 42,763,168 14,575,400 21,207,609 646,200 Marneuli 16,218,360 27,424,035 6,072,767 44,788,165 15,265,600 22,211,869 676,800 Tetritskaro 42,704,174 56,999,689 12,621,987 93,090,295 31,728,900 46,166,425 1,406,700 Tsalka 58,903,851 125,669,181 27,828,131 205,239,384 69,953,800 101,784,709 3,101,400 Dusheti 76,128,314 111,334,668 19,264,146 176,306,788 30,713,900 76,033,001 1,361,700 Mtskheta 4,641,722 13,686,879 2,368,229 21,674,199 3,775,800 9,347,084 167,400 Tianeti 37,436,501 60,192,834 10,415,117 95,319,863 16,605,400 41,107,069 736,200 Oni 43,809,653 66,634,003 18,240,760 116,962,988 57,306,900 83,383,120 2,540,700 Tsageri 92,886,451 115,895,485 31,725,871 203,431,906 99,673,000 145,026,965 4,419,000 Ambrolauri 77,628,199 147,831,655 40,468,254 259,489,618 127,138,900 184,990,607 5,636,700 Lentekhi 45,825,744 39,442,231 10,797,134 69,233,139 33,921,300 49,356,427 1,503,900 Mestia 163,013,010 63,001,706 19,545,533 111,965,233 67,517,800 81,014,841 2,993,400 Adigeni 22,492,173 40,069,212 8,054,799 64,957,858 17,559,500 34,509,262 778,500 Akhalkalaki 31,021,797 38,494,237 7,738,194 62,404,601 16,869,300 33,152,828 747,900 Akhaltsikhe 22,195,043 59,293,169 11,919,240 96,122,611 25,984,000 51,065,728 1,152,000 Aspindza 24,093,011 44,423,554 8,930,118 72,016,863 19,467,700 38,259,401 863,100 Borjomi 7,974,131 27,562,059 5,540,584 44,681,995 12,078,500 23,737,585 535,500 Ninotsminda 10,147,399 20,104,090 4,041,367 32,591,573 8,810,200 17,314,473 390,600 Gori 9,456,160 7,498,391 1,857,788 12,212,129 5,318,600 7,060,258 235,800 Kareli 7,089,808 5,495,004 1,361,433 8,949,347 3,897,600 5,173,930 172,800 Kaspi 13,270,779 23,783,064 5,892,451 38,733,891 16,869,300 22,393,414 747,900 Khashuri 3,798,871 1,974,767 489,265 3,216,171 1,400,700 1,859,381 62,100 Total 1,244,354,631 1,878,557,180 423,951,882 3,207,771,050 1,091,896,400 1,729,538,811 48,409,200 In Scenario 2, where the subsidization factor is removed, the difference between LCC of gasification and biomass alternative is even more drastic, with biomass being 65% more cost-efficient than gas.

USAID ENERGY PROGRAM Cost Estimation Study of Gas Pipeline Network and Alternative Systems for High-Mountainous Settlements of Georgia 29

5. SUMMARY OF FINDINGS AND RECOMMENDATIONS The analyses demonstrated that gasification of high-mountainous settlements is not economically viable and is less cost efficient than most of the alternatives assessed in this report. So, one can conclude that purely based on numbers, gasification of high-mountainous villages should not be undertaken. However, based on the partially social nature of the project and the goal of the government to provide access to energy to the Georgian population, it is anticipated that decisions will be made in favour of gasification in several locations. This report provides detailed CBA and LCCA for each subject municipality, and hence presents an opportunity for GoG to minimize losses and optimize its decisions if it decides to go ahead with gasification in some municipalities. In case GoG decides to proceed with one or several of the alternatives, the LCCA showed that biomass-based technologies: biomass boilers and wood stoves would be the most cost-efficient alternatives followed by heat pumps. However, as already mentioned, wood stoves cannot provide nearly the level of comfort other technologies can, since they cannot be used for central space and water heating. Therefore, biomass boilers are the best alternative in terms of cost and energy efficiency, the level of comfort they can provide and with respect to other important factors like energy security and environment. Yet, biomass has its limitations that must be taken into consideration, the most notable one of them being the availability (or lack thereof) of biomass resources in individual municipalities. USAID Energy Program estimated the volume of biomass that would be required to operate the biomass boilers in all settlements. At current levels of consumption total required annual volume of fuelwood for all clusters would be 124,312 m3, and if we apply an annual 5% consumption escalator, total annual volume of fuelwood consumption would equal 685,707 m3 of firewood by the end of planning horizon. Table 13: Estimated Volume of Fuelwood Consumption Annual M3 of Fuelwood at Annual M3 of Fuelwood at Region Current Levels of Escalated Levels of Consumption Consumption Adjara 39,855 219,841 Guria 524 2,888 Imereti 7,964 43,927 Kakheti 988 5,450 Kvemo Kartli 16,308 89,952 Mtskheta-Mtianeti 12,585 69,419 Racha-Lechkhumi-Kvemo Svaneti 23,501 129,629 Samegrelo-Zemo Svaneti 4,989 27,519 Samtskhe- Javakheti 14,892 82,145 Shida Kartli 2,708 14,937 Total 124,312 685,707 Based on National Statistics Office of Georgia, total annual firewood production in 2017 was 1.938 million cubic meters of firewood. Considering that estimated escalated annual consumption for 4% of households in Georgia represents 35% of the total existing production, it becomes evident that volume of biomass may not be sufficient to fuel biomass boilers in all subject settlements. Therefore, it is essential that further detailed studies be conducted to realistically assess biomass potential for each region before making the final decision. USAID Energy Program also recommends conducting a cost-estimation study for CNG virtual pipeline, similar to the study conducted for pipeline natural gas systems by USAID Energy Program. To summarize, the underlying report provides detailed cost-benefit analysis of gasification, comparative life-cycle cost analysis for several alternatives and equips GoG with the necessary information to make decisions on whether to proceed with pipeline gas construction for high- mountainous villages or opt for alternative solutions.

USAID ENERGY PROGRAM Cost Estimation Study of Gas Pipeline Network and Alternative Systems for High-Mountainous Settlements of Georgia 30

ANNEX 1: SAMPLE COST-ESTIMATION STUDY FOR PIPELINE GAS Explanatory Notes – Akhalkalaki Municipality The following estimation has been developed by Ltd “Tsisferi Ali”. The chart accounts gasification of the villages of Akhalkalaki municipality which are not connected to the gas grid: Gogasheni, Apnia, Karcebi, Azmana, Okami, Erenji, Davnia, Khavati, Miasnikiani, Suldi, Philipovka, Kartsakhi, Buzaveti, Takhcha, Abuli, Modegi, Didi Samsara, Patara Samsara and Dadeshi. The chart was developed upon assignment by Deloitte Consulting Overseas Projects LLP. The goal of the project is to calculate approximate cost of construction of gasification systems in villages with no access to gas grid, guiding with the presented scheme. This project is based on the following initial data and materials: • Situational plans for gas pipelines passing between settlements and through villages. • Information about number of households in villages that are being studied. • Construction norms and rules 2.04.08-87*. • Construction norms and rules 2.04.08.86. • Norms and rules 01.05-08 “„Building Climatology” approved under the order of the Minister of Economic Development of Georgia 25.08.08 N1-1/1743. • Different data and references. The project envisages the use of natural gas for the household and sanitary-hygienic needs of the population, as well as providing gas for heating households and public buildings. The schemes contain probable gas pipeline networks between source of gas to the territory of the settlements as well as pipeline connections for customers in the villages. Diameters of pipelines are determined based on hydraulic calculations. Hydraulic calculations are carried out based on estimated hourly gas consumption. Estimated hourly gas consumption for sanitary-hygienic needs of the population were determined according to chart N4 in construction norms and rules 2.04.08-87*. Estimated hourly gas consumption for heating 1m2 area of a household is determined according to construction norms and rules 2.04.07-86 “Heating Networks” taking into account outdoor air temperature. Outdoor air temperature is used from 01.05.08 “Building Climatology” approved under the order of the Minister of Economic Development of Georgia 25.08.08 N1-1/1743. The average heating area of residential houses per household was calculated to be equal to 40 m2. Average gas consumption for heating public buildings was calculated using same method as for calculating household consumption, but the average area was 4 m2 per household. Final calculations show that estimated hourly gas consumption per household, considering the need for heating public buildings, is Q=1,28 m3/ hr. Ltd „Tsisferi Ali“ studied the existing gas pipeline system in Akhalkalaki municipality and concluded that villages of Gogasheni, Apnia, Karcebi, Azmana, Okami, Erenji, Davnia, Khavati, Miasnikiani, Suldi, Philipovka and Kartsakhi can only be supplied with gas from automated gas distribution station with average pressure pipeline in the city of Akhalkalaki. Pipeline that will deliver gas to villages, must be connected to the source of gas near the distribution station. Pressure of gas in the connection point must be 2,0 kg/cm2. Located in Akhalkalaki municipality, village of Kartikami with an average pressure polyethylene pipeline, with d=90mm is taken as the source of gas for village of Buzaveti. Gas pressure in point of connection is 0,5kg/cm2. Source of gas for villages of Tachkha and Abuli, was pipeline passing through village of Toria in Akhalkalaki municipality, which is polyethylene d=75mm average pressure pipeline. Pressure in the point of connection is 2,1kg/cm2. Source of gas for village Modegi, was pipeline passing through Ghado in Akhalkalaki municipality, which is polyethylene d=90mm average pressure pipeline. Pressure in the point of connection is 0,8kg/cm2. Source of gas for villages of Didi samsara and Patara Samsara, was pipeline passing

USAID ENERGY PROGRAM Cost Estimation Study of Gas Pipeline Network and Alternative Systems for High-Mountainous Settlements of Georgia 31

through village of Merenia in Akhalkalaki municipality, which is polyethylene d=63mm average pressure pipeline. Pressure in the point of connection is 1,2kg/cm2. Source of gas for village Dadashi, was pipeline passing through Patara Gondrio in Akhalkalaki municipality, which is polyethylene d=75mm average pressure pipeline. Pressure in the point of connection is 1,5kg/cm2. For supplying gas to the villages from all sources, intervillage average pressure gas pipelines were also considered. Using average pressure gas pipelines, every consumer in the village is supplied with gas. Consumers are supplied with gas from average pressure pipeline using individual small-scale gas pressure regulators. These regulators reduce average pressure to low pressure. Following chart provides information about gas pipeline needed for interconnections between villages in Akhalkalaki municipality. Gas pipeline is taken account as being fully constructed from PE100 SDR17 polyethylene pipes. Diameter of pipe mm 160 140 125 90 63 In total Length of pipeline m. 25020 23775 2620 17074 22835 91324 The explanatory note also contains pipeline interconnections between studied villages as well as gas grid inside said villages-gas supply grid scheme, gas consumption for each village, diameters of pipelines and gas pressure in points of connection. Village of Gogasheni Pipeline from Gas

pressure Station to Village grid total customer the village Pipeline diameter mm 160 63 40 Length of pipeline km 23.100 6.500 29.600 63 Cost estimate thou. Lari 2198.843 265.728 2464.571

Village of Apnia total customer Road from village Gas grid in village Gogasheni to Apnia Pipeline diameter mm 160 63 40 Length of pipeline km 1.920 2.500 4.420 30 Cost estimate thou. Lari 182.761 102.063 284.824

Village of Karcebi Road from village Apnia Gas grid in village total customer to village Karcebi Pipeline diameter mm 140 63 40 Length of pipeline km 5.095 3.000 8.095 18 Cost estimate thou. Lari 425.473 123.203 548.676

Village of Azmania Road from village Distance from custome Karcebi to village the turn to Gas grid in village total r Azmania turn village Azmania Pipeline diameter mm 140 90 63 40 Length of pipeline km 1.043 1.647 3.000 5.690 22 Cost estimate thou. Lari 87.098 84.083 123.203 294.384

Village of Okami Distance from Amani custome Gas grid in village total turn to village Okami r Pipeline diameter mm 140 90 63 40 Length of pipeline km 3.340 8.000 11.340 73 Cost estimate thou. Lari 278.916 357.283 636.199

USAID ENERGY PROGRAM Cost Estimation Study of Gas Pipeline Network and Alternative Systems for High-Mountainous Settlements of Georgia 32

Village of Misikiani Road from village Distance from Gas grid in custome Okami to village turn to village total village r Misikiani turn Misikiani Pipeline diameter mm 140 140 63 40 Length of pipeline km 3.257 2.130 2.000 7.387 4 Cost estimate thou. Lari 271.985 177.872 80.924 530.781

Village of Sulda Road from village

misikiani to village Gas grid in village total customer Sulda Pipeline diameter mm 140 110 90 63 40 Length of pipeline km 2.445 13.000 15.445 154 Cost estimate thou. Lari 204.177 651.868 856.045

Village of Bozali Road from village Sulda Gas grid in village total customer to village Bozali Pipeline diameter mm 140 63 40 Length of pipeline km 1.825 4.500 6.325 6 Cost estimate thou. Lari 152.402 184.805 337.207

Village of Philipovka Road form village Distance from Gas grid Bozali to village turn to village in village total customer Philipovka turn Philipovka 4 Pipeline diameter mm 140 63 63 0 Length of pipeline km 4.640 1.660 1.000 7.300 9 Cost estimate thou. Lari 387.477 70.183 40.462 498.122

Village of Kartsakhi Road from village

Philipovka turn to Gas grid in village total customer village Kartsakhi Pipeline diameter mm 125 110 90 63 40 Length of pipeline km 2.620 12.000 14.620 115 Cost estimate thou. Lari 188.742 579.111 767.853

Village of Erinja Road from village

Misinianka turn to village Gas grid in village total customer Erinja Pipeline diameter mm 90 63 40 Length of pipeline km 3.750 2.000 5.750 1 Cost estimate thou. Lari 191.445 80.924 272.369

Village of Davnia Road from village Erinja to Gas grid in total customer village Davnia village Pipeline diameter mm 90 63 40 Length of pipeline km 2.562 2.000 4.562 1 211.71 Cost estimate thou. Lari 130.795 80.924 9

Village of Khaverti Road from Davnia to Gas grid in village total customer village Khaverti Pipeline diameter mm 63 63 40 Length of pipeline km 1.420 5.500 6.920 38 Cost estimate thou. Lari 60.036 227.084 287.120

USAID ENERGY PROGRAM Cost Estimation Study of Gas Pipeline Network and Alternative Systems for High-Mountainous Settlements of Georgia 33

Village of Buzaveti Road from village Kartikami to Gas grid in total customer village Buzaveti village Pipeline diameter mm 63 40 Length of pipeline km 3.285 3.000 6.285 12 Cost estimate thou. Lari 138,886 115,935 254,821

Village of Takhcha Road from village Toria to Gas grid in total customer village Takhcha village Pipeline diameter mm 90 63 40 Length of pipeline km 9.115 2.500 11.615 5 Cost estimate thou. Lari 465,338 100,246 565,584

Village of Abuli Road from village Gas grid in village total customer Takhcha to village Abuli Pipeline diameter mm 63 63 40 Length of pipeline km 3.925 7.000 10.925 74 Cost estimate thou. Lari 165,945 288,685 454,630

Village of Modega Road from village Ghado Gas grid in village total customer to village Modega Pipeline diameter mm 63 63 40 Length of pipeline km 4.270 3.200 7.470 30 Cost estimate thou. Lari 180,531 130,932 311,463

Village of Didi Samsari Road from village

Mereniada to village Didi Gas grid in village total customer Samsari Pipeline diameter mm 63 63 40 Length of pipeline km 5.200 3.800 9.000 12 Cost estimate thou. Lari 219,850 154,119 373,969

Village of Patara Samsari Road from village Didi Samsari to Gas grid in total customer village Patara Samsari village Pipeline diameter mm 63 63 40 Length of pipeline km 3.075 6.500 9.575 54 397,55 Cost estimate thou. Lari 130,008 267,546 4

Village of Dadeshi Road from village Patara Gondrio Gas grid in total customer to village Dadeshi village Pipeline diameter mm 63 63 40 Length of pipeline km 2.870 9.500 12,370 110 513,90 Cost estimate thou. Lari 121.341 392.565 6 According to results of Ltd „Tsisferi Ali” “geological engineering research, Akhalkalaki municipality gas pipeline soil in terms of processing is category IV. According to information gathered by specialists, during gas pipeline construction inert material (sand and gravel) quarry is located 50 km away, where price of sand is 22 Lari including Value Added Tax (VAT), and price for gravel is 22 Lari including VAT. 1km gas pipeline cost thou. Lari 160 140 125 110 90 63 40 Diameter of pipeline mm SDR17 SDR17 SDR17 SDR17 SDR17 SDR17 SDR17 1 km pipeline cost thou. Lari 95.188 83.508 72.039 63.985 51.052 42.279 38.645

USAID ENERGY PROGRAM Cost Estimation Study of Gas Pipeline Network and Alternative Systems for High-Mountainous Settlements of Georgia 34

Unit valuation on building materials, is taken from association of construction cost assessment specialist’s publication „Building Resource Prices“, year 2019, III Q, in accordance with market prices. კ=4.6 workforce per meter, კ=6,0 კ=7,8 კ=3.2 on machinery and materials Following costs are taken for construction of1km gas pipeline: Overhead expenses 10% Estimated profit 8% Temporary buildings -1,5% Work during winter periods -0,6% Author’s supervision -0,2% Unforeseen work -3% Value added tax VAT-18% Distance of road from Automated gas distribution station to the village Pipeline diameter mm 160 140 125 90 63 Total Length of pipeline km 25.020 23.775 2.620 17.074 25,705 94,194 Cost estimate thou. Lari 2381.604 1985.403 188.742 871,661 1086.781 6514.191

Pipeline grid in the village Pipeline diameter mm 110 90 63 40 Total Length of pipeline km 7.000 8.000 51,500 34.000 100.500 Cost estimate thou. Lari 447.895 408.416 2177.368 1313.930 4347.609

USAID ENERGY PROGRAM Cost Estimation Study of Gas Pipeline Network and Alternative Systems for High-Mountainous Settlements of Georgia 35

ANNEX 2: LIST OF SETTLEMENTS

Adjara Khulo Khelvachauri Shuakhevi Keda Chao Mirveti Akhaldaba Dologani Dzmagula Machakhlis Piri Ternali Chinkadzeebi Tago Kirnati Chala Kveda Bzubzu Cheri Zemo Kirnati Takidzeebi Zeda Bzubzu Gurdzaula Gvara Tsivadzeebi Uchkhiti Fachkha Kobaleti Tskarota Milisi Khinchauli Maradidi Chvana Namlisevi Tsablana Dzablaveti Varjanauli Kosopeli Kvatia Sindieti Zemo khevi Chalakhmela Vernebi Ketkedi Brili Kveda Makhuntseti Makhalakuri Sgushaneti Tskhemlisi Zundagi Oshanakhevi Adjaris Aghmarti Tsekva Zeda Makhuntseti Pushrukauli Avjanda Khabelashvilebi Pirveli Maisi Rakvata Skurdidi Janivri Kveda Agara Nadaburi Tskhemlara Tskhliskari Zeda Agara Khikhadziri Kveda Chkhutuneti Intskirveti Tskhemna Kalota Zeda Chkhutuneti Nagomari Koromkheti Akhalsheni Chikuneti Tsatskhvnari Kolotauri Skvana Zemo Kokoleti Naghvarebi Dzeltsmani Mtisubani Kvemo Kokoleti Gorikuli Arsenauli Zemo Tkhinvala Gorkhanauli Orcva Kveda Tkhinvala Dabadzveli Shavaburi Bako Beselashvilebi Agota Zemo Vashlovani Kldisubani Oktomberi Tkhiladziri Shuakhevi Medzibna Kvemo Vashlovani Chanachkhalo Gogonidzeebi Skhandara Skhepi Kuchula Daba khulo Opanakhevi Inasharidzeebi Kedlebi Gomarduli Sikhalidzeebi Dekanashvilebi Baratauri Gundauri Shurmuli Vani Chalati Ganakhleba Nigazeuli Merisi Elellidzeebi Zamaleti Silibauri Godgadzeebi Buturauli Namonastrevi Diakonidzeebi Nenia Akutsa Shantadzeebi Mchedluri Zvare Okruashvilebi Purtio Zesopeli Zeda Dekanashvilebi Okropilauri Vaio Duadzeebi Tsinareti Kvashta Dzirkvadzeebi Kviriauli Tibeta Uchkho Jabnidzeebi Sirabidzeebi

USAID ENERGY PROGRAM Cost Estimation Study of Gas Pipeline Network and Alternative Systems for High-Mountainous Settlements of Georgia 36

Adjara Gudasakho Kikinidzeebi Kantauri Didachara Laklaketi Abuketi Iremadzeebi Samoleti Tskhmorisi Akhali Ubani Moprineti Kokotauri Gobadzeebi Tsablana Varjanisi Kurduli Tbeti Tsoniarisi Kurckhali Gogadzeebi Chetkidzeebi Tunadzeebi Gundauri Gobroneti Tsintskalashvilebi Makhe Arkho Stepanashvilebi Momtsvari Gegelidzeebi Ghorjomi Lomanauri Gogiashvilebi Adadzeebi Dghvani Mosiashvilebi Labaidzeebi Goginauri Takidzeebi Gorgadzeebi Kviakhidzeebi Dandalo Chakhauri Karapeti Jalabashvilebi Merchkheti Matkhvalta Kharaula Boghauri Gori Baladzeebi Vashakhmadzeebi Paposhvilebi Mintadzeebi Makhalakidzeebi Mekeidzeebi Oladauri Mekhelvashvilebi Kobalta Agara Kutatauri Vanadzeebi Shubani Satsikhuri Iakobauri Namonastrevi Darchidzeebi Pantnari Tomasheti Gulaura Tselati Rikheti Guladzeebi Taksadzeebi Kortokhi Ghorjomeladzeebi Ghruta Iakobadzeebi Maniaketi Dioknisi Jvariketi Tabakhmela Godzauri Shuasopeli Rikheti Beghleti Danisparauli

USAID ENERGY PROGRAM Cost Estimation Study of Gas Pipeline Network and Alternative Systems for High-Mountainous Settlements of Georgia 37

Imereti Tskaltubo Kharagauli Chiatura Khoni Bagdati Sagandzile Sukhcha Alismereti Gumbati Zarani Khidi Kakaskhidi Opuchkheti Vani Gaghmanogha Khani Joneti Skhliti Gamoghmanogha Zekari Sakire Didvake Kvedagordi Venakhchala Namokhvani Vegvana Bangveti Kershaveti Bentkoula Marelisi Zedagordi Kveda Oncheishi Patara Sakhvlari Satsiqvili Zeda Oncheishi Zedubani Rondishi Derchi Serbaisi Kveda Kinchkha Chaleshi Vakhani Kinchkhaperdi Dgnorisa Babi Zeda Kinchkha Sachkheuri Kvebi Lekhidristavi Chartali Mekvena Moliti Vanischala Deesi Nebodziri Chrdili Zvare Gagatubani Nunisi Bejatubani Golatubani Tsipa Pona Tsitskiuri Nadaburi Didi Golisi Grigaleti Khevi Tsakva Khunevi Gedsamania Vertkvilchala Bjinevi Sakasria Cikhisdziri Vashlevi Boriti Ereta Makatubani Ubisa Kvesrevi

USAID ENERGY PROGRAM Cost Estimation Study of Gas Pipeline Network and Alternative Systems for High-Mountainous Settlements of Georgia 38

Imereti Amashuketi Ghoresha

Kakheti Akhmeta Gurjaani Sagarejo Telavi

Khevischala Pkhoveli Antoki Tetritsklebi Vedzebi Ziari Mariamjvari Nadikvari Bochorma Cheremi Mukhrovani Kobadze Paldo Serodani Otaraani Pantiani Askilauri Gombori Verona Rusiani Gorana Ikvliv gorana Ochbaani Vashliani

Kvemo Kartli Dmanisi Tetritskaro Marneuli Tsalka Bolnisi Dalari Zirbiti Burdadzori Dashbashi Bertakari Ukangora Sapudzvrebi Khudro Kokhta Angrevani Akhalsopeli Sioni Khareba Kariani Gokhnari Tseraqvi Chrdilisubani Sakire Jvriskhevi Jankhoshi Beshtasheni Guguti Shekhvetila Khojorni Samadlo Gora Kodistskharo Khokhmeli Akhalsheni Kamishlo Namtvriani Opreti Chivt-Kilisa Lokchandari Arkhoti Chanakhchi Kharaba Bakhchalari Chinchriani Akhkerpi Kaburi Ormasheni Napilnari Khachkovi Khizilajlo Algeti Imera Saja Didi Toneti Bareti Dzveli godagdagi Mokhisi Sabechisi Akhali Godagdagi Toneti Tejisi Sugutlo Didgori Ar-Sarvani Useikendi Dre Godaklari Mamishlari Shamata livadi Pirveli Salamaleiki Vaneti Choliani Meore Salamaleiki Ghvevi Aiazma Mamulo Kvemo Tskhruleti Sakhdrioni Sarkineti ZemoTskhruleti Gantiadi

USAID ENERGY PROGRAM Cost Estimation Study of Gas Pipeline Network and Alternative Systems for High-Mountainous Settlements of Georgia 39

Kvemo Kartli Ganakhleba Gholovani Darakovi Velispiri Orbeti Tsintskharo Akha Akhali Zirbiti Santa Pantiani Nadrevani Tsveri Kushi Tskhrakudaani Artsivani Patara Toneti Berta Abrameti Burnasheti Amlevi Ozni Tbisi Izil-Kilisa Abeliani Avranlo Khopisi Gumbati Ksovreti Ashkala Gudarekhi Rekha Vake Khando Chivchavi Trialeti Ivanovka Kavta Ipari Khramesi Samghereti Bediani Kvemo Akhalsheni Shikhilo Lipi Didi Iraga Jigrasheni Patara Iraga Dumanisi Alekseevka Navtiani Menkalisi Didi Kldisi

Mtskheta-Mtianeti Dusheti Mtskheta Tianeti Keriaantkari Bevreti Churchelauri Akhali Osebi Tabaruki Mamadaanebi Mtsiturebi Temazi Lisho Lapanaantkari Kevliani Bodakheva Dzveli Osebi(Nokorna) Skhaltba Tetraulebi Khiznebi Mshralkhevi Kvemo artani Davati Zemo artani Kvemo Gharistskali Ghorgha Kenchaklde Akhalsopeli Satskhatlo Chabano Kheobis chiaura Tsiteli Klde Gojiaanebi Varcla Duluzaurebi Dolosha Kvernaura

USAID ENERGY PROGRAM Cost Estimation Study of Gas Pipeline Network and Alternative Systems for High-Mountainous Settlements of Georgia 40

Mtskheta-Mtianeti Akhali toncha sxlovani Javakhiaantkari Tetrakhevi Arghuni Bokoni Dudaurebi paloti Kvemo Ashi Chekuraant Gori Akhalani Evjeneti Kerani Melias khevi Veltuatrtkari Tolenji Vedzartkhevi Tsalughelaantkari Iori Simoniant Khevi Chilurti Gorana Ebnisi Nadorka Karkushaani Siontgori Milekiani Balebis Khevi Akhalai Berghuli Kvernauli Dzveli Berghuli Kviriaskhevi Petriani Khevturtsopeli Tsikhisubani Devenaant Khevi Kedeloba Sakdrioni Tsigriaantkari Vedzatkheva Toncha Zurabebi Tsitsamuri, Kvemo Shuakhevi Doreuli Zemo Shuakhevi Kvemo Nakalakari Kvitkiristskaro Zemo Nakalakari Chivilianebi Magraneti Bantsuraantkari Trani Tandilaantkari Tokholcha Kadoeti Khadoelebi Pavleuri Tskarotubani Tsivtskharo Gudanelebi Dgnali Toladsopeli Tsinamkhari Ghulelebi Veshagurni Orkhevi Ukanamkhare Betsentsurebi Tskhvedieti Sajinibo Dikhcho Badaani Bakhani Khudro Makareti Pichviani Lutkhubi Bochorma Torelaani Omaraane Pakhviji Grdzelvelebi Totiaurni Bakurkhvi Kitokhi Zanduki Gamsi Chokha Dumatskho Jijoni Tsipori Khevsha Kharkheti Sepa Gvidaqe Lakatkhevi

USAID ENERGY PROGRAM Cost Estimation Study of Gas Pipeline Network and Alternative Systems for High-Mountainous Settlements of Georgia 41

Mtskheta-Mtianeti Khvelaani Salajuri Manaseurni Bodavi Khartisho Gudrukhi Tvalivi Stsrofavi Nedzikhi Lausha Sondisveli Kvemo Khorkhi Zemo Khorkhi Kvemo Sharakhevi Sharakhevi Tsipnari Kanatia Kuchecha Magharoskari Khiliani Gometsari Kalilo Chargali Migriaulta Gudarakhi Katsalkhevi Khomi Apsho Udzilauri Tkhiliani Shuapkho Muko Khorasha Akhadi Ukanapshavi Datvisi Gveleti Barisakho Korsha Roshka Gudani Biso Khakhmati Shatili Mutso

Racha-Lechkhumi and Kvemo Svaneti Lentekhi Oni Ambrolauri Tsageri Doghurashi Mukhli Zeda Tlughi Korenishi Naghomari Santisi Kveda Tlughi Tvishi Rckhmeluri Kvemobari Ukeshi Orkhvi Kvedreshi Zemobari Agara Lakhepa Lagharvashi Mravaldzali Cheliaghele Alpana Gvimbrala Chibrevi Kachaeti Achara Tsiplakakia Kheiti Nikortsminda Zeda Sairme

USAID ENERGY PROGRAM Cost Estimation Study of Gas Pipeline Network and Alternative Systems for High-Mountainous Settlements of Georgia 42

Racha-Lechkhumi and Kvemo Svaneti Khopuri Zvareti Kharistvala Kveda Sairme Nanari Bokhva Tskadisi Zogishi Mazashi Usholta Skhvartali Tsagera Lamanashauri Shkmeri Kviriketsminda Kveda Ghvirishi Pakhi Kharistvali Velevi Zeda Ghvirishi Lesema Komandeli Betlevi Nasperi Tsanashi Kristesi Shkhivana Sanorchi Kheledi Khikhonisi Khotevi Utskheri Khacheshi Skheiri Akhalsopeli Usakhelo Mananuri Korta Kvemo Krikhi Khoji Bavari Tsola Zemo Krikhi Spatagori Lentekhi Somitso Shua Krikhi Leshkeda Laskadura Papileti Shua Skhvava Lacoria Kakhura Jashkva Zemo skhvava Gagulechi Leksura Onchvi Putieti Surmushi Karishi Kvedrula Khimshi Lailashi Melaura Kvedi Likheti Tabori Gulida Tsedisi Abari Ghu Babili Iri Uravi Tskhukusheri Matskhvarlamezuri Sorgiti Sakecia Nakuraleshi Durashi Ghunda Jvrisa Zeda Aghvi Saydari Ckhmori Kedis Ubani Kenashi Chvelieri Psori Khonchiori Shua Aghvi Tekali Bajiskhevi Namanevi Kveda Aghvi Mutsdi Lagvanta Shavra Makhashi Tvibi Borco Tkhmori Lasuriashi Mami Saakao Znakva Dekhviri Leusheri Majieti Motkhiari Lesindi Panaga Khideshlebi Didi Chorjo Tsilamieri Chvelpi nakieti Patara Chorjo Orbeli Luji Chinchvisi Bugeuri Lajana SasaShi Gomi Abanoeti Kurcovi Mebetsi Nigavzebi Gorisubani Chkumi Lekosandi Paravneshi Kveda Shavra Kulbaki Jakhunderi Utsera Ghadishi Zubi Chukuli Glola Bareuli Isunderi Lemzagori Chiora Baji Makhura Chikhareshi Ghebi Patara oni Okhureshi Shkedi Patara Ghebi Tbeti Opitara Mele Kvemo Joshkha Larchvali Makheshi Zemo Joshkha Tsiperchi Magvishi Gendushi Bardnala Natsuli Kveda Chvishi Kveda Lukhvano Zeda Chvishi Zaragula Kveda Ghvardia Zeda Lukhvano Zeda Ghvardia Chalistavi Gogolati Kveda Tsageri Tsakhi Gveso

USAID ENERGY PROGRAM Cost Estimation Study of Gas Pipeline Network and Alternative Systems for High-Mountainous Settlements of Georgia 43

Samegrelo-Zemo Svaneti Mestia

Narkorvali Tsitskhvari Idliani Leburtskhila Nashikhvi Naki Zeda Khaishi Skormeti Gaghma Khaishi Shgedi Kvemo Tsvirnindi Nankhburi Kvemo Vendi Khaishi Tobari Lukhi Lakhami Letsperi Devra Khari Larilari Kveda Marghi Lekulmakhi Zeda Marghi Sgurishi Tita Jorkvali Kveda Ipari Khelra Dizi Shdikhiri Anili Nakra Kvitsani Lekvanshi Gentsvishi Tsaleri Lotsomba Nodashi Lakhamula Kveda Luha Khosrari

USAID ENERGY PROGRAM Cost Estimation Study of Gas Pipeline Network and Alternative Systems for High-Mountainous Settlements of Georgia 44

Samegrelo-Zemo Svaneti Gheshderi Zeda Luha Lamkheri Zagari Pari Katskhi Svipi Landreri Lashkhreri Lanteli Tsalnari Khuteri Iskari Kurashi Barshi Cheriri Kalashi Ughvashi Ebuti Lankhvari Kartvani Doli Dolasvipi Chkhidanari Ushkhvanari Galashi Nashtkoli Chokhuldi Bagvdnari Mazeri Tvebishi Tskhekvani Magardeli Labskhaldi Tviberi Lezgara Svipi Ghvebaldi Matskhvarishi Shkhaleri Lankhva-Zagrali Ipkhi Leshukvi Lelbagi

USAID ENERGY PROGRAM Cost Estimation Study of Gas Pipeline Network and Alternative Systems for High-Mountainous Settlements of Georgia 45

Samegrelo-Zemo Svaneti Kvanchianari Ienashi Lakhushdi Soli Kaeri Kashveti Lemsia Lashtkhveri Mezguni Mestia Lamjurishi Heshkiri Ieli Ghvebra Zardalashi Artskheli Musrshkeli Lakhiri Jhaamushi Cholashi Majvdieri Chvabiani Tsaladashi Jabeshi Askarti Tsvirmi Chobani Nakipari Zegani Adishi Bogreshi Vichnashi Khe Lalkhorali Iprari Khalde Davberi Murkhmeli Chajashi Chvibiani Jibiani

USAID ENERGY PROGRAM Cost Estimation Study of Gas Pipeline Network and Alternative Systems for High-Mountainous Settlements of Georgia 46

Samtskhe-Javakheti Aspindza Ninotsminda Borjomi Akhaltsikhe Akhalkalaki Adigeni Idumala Orlovka Libani Anda Gogasheni Tsakhani Oshora Gorelovka Patara Mitarbi Andriatsminda Apnia Tsakhnistskharo Ota Epremovka Didi Mitarbi Muskhi Kartsebi Kikineti Rustavi Jdanovi Tori Tskhordza Azmana Nakurdevi Sakhudabeli Sameba Chitakhevi Uraveli Okami Shoraveli Orgora Rodinovka Chobiskhevi Kheoti Miasnikiani Kvemo Enteli Dzveli Akhali sulgumo Larebi Klde Sulda Zemo Enteli Chobareti Tambovka Kvabiskhevi Boga Bozali Pkheri Iveria Vladimerovka Dviri Sviri Pilipovka Shokha Kumca Aspara Dgvari Tatanisi Kartsakhi Bolajuri Atskhvita Sakire Chvinta Erinja Patara Samada Toloshi Tadzrisi Eliatsminda Davnia Didid Samada Gulsunda Kartubani Khaveti Chorchani Pia Ani Buzaveti Didi Zanavi Khertvisi Tsira Takhcha Patara Zanavi Nakalakevi Mikeltsminda Abuli Gomaro Tmogvi Tskhurta Modegami Tsre Zemo da Kvemo Vardzia Tsnisi Didi Samsari Zarzma Apnia Giorgitsminda Dadeshi Utkhisubani Mirashkhani Mugareti Patara Samsari Mlashe Nijgori Zikilisi Plate Toki Sakhuneti Arzne Vargavi Agara Sairme Tsinubani Chela Gurkeli Chechla Atskhuri Kekhovani Tkhemlana Apieti Tiseli Ghortubani Khaki Zedubani Cikhisubani Namniauri Mokhe Delceli Kikibo

Shida Kartli Kaspi Khashuri Kareli Gori Akhaltsikhe Damchkhreula Kldu Bobnevi Noste Rbona Khintsvisi Biisi Mtiultubani Kriskhevi Zghuderi Ormoci Tskhaveri Ghrata Imerckhvi Kvemo Boshuri Goste Saratkhela Msukaantubani Zemo Boshuri Ertatsminda Mitsobi Okrosopeli Tursevi

USAID ENERGY PROGRAM Cost Estimation Study of Gas Pipeline Network and Alternative Systems for High-Mountainous Settlements of Georgia 47

Shida Kartli Chachubeti Tsromi Tsitelsopeli Khvelaantubani Rkoni Nadarbazevi Ortubani Gagluaantubani Kaprashiani I,merliantkari Elbakiantkari Levitana Chkhopiani Didi Khavleti Gverdzineti Tsedisi Varjani Patara Kheleti Bnavisi Didi Kheleti Olozi Ghvarevi

Guria Chokhatauri Kvabgha Chkhakoura Zoti

USAID ENERGY PROGRAM Cost Estimation Study of Gas Pipeline Network and Alternative Systems for High-Mountainous Settlements of Georgia 48

ANNEX 3: ILLUSTRATIVE MAP OF SETTLEMENTS

USAID ENERGY PROGRAM Cost Estimation Study of Gas Pipeline Network and Alternative Systems for High-Mountainous Settlements of Georgia 49

USAID Energy Program Deloitte Consulting Overseas Projects LLP Address: 29 I. Chavchavadze Ave.,0179, Tbilisi, Georgia Phone: +(995) 595 062505 E-mail: [email protected]