Op-ed: Abkhazia will have to transfer its power system to Russia or live without electricity
Cryptomining, equipment wear and tear and non-payment are the three main reasons why Abkhazia’s energy sector is in a deep crisis.
And the only way out, apparently, is the transfer of the entire Abkhaz energy sector to Russian companies.
From mid-November 2020, rolling power outages have been in effect throughout the territory. Which in practice means that most of the day people live without power.
The only power plant that feeds Abkhazia, the Ingur hydroelectric station, is located in the zone of the Georgian-Abkhaz conflict. The parties jointly manage the station and share electricity according to the scheme: 40 percent Abkhaz and 60 percent Georgian.
The Abkhaz share of generation for 2020 ended at the end of October. And from January 2021, the station will stop for repairs for at least four months.
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Cryptomining eats up a third of all electricity
The acute shortage of electricity in both the government and the expert community is associated primarily with cryptomining.
In December 2018, when Abkhazia experienced the first large-scale electricity crisis, the government banned mining. But at the same time, it did not introduce a parallel ban on the import of crypto equipment into the republic.
As a result, this business not only did not disappear, but ended up in a ‘most favored nation regime’. All this time, there were no proper sanctions, and mining grew to catastrophic sizes for the Abkhaz energy sector.
Now it is eating up almost a third of all the energy consumed by the republic.
In September 2020, the government decided to change the tactics – it allowed mining, but at a special increased tariff of 1.5 rubles [about $ 0.020].
Also, the import of equipment for crypto farms was temporarily prohibited.
The government explained the initiative as follows: mining companies will come out of the shadows and will work under strict government control.
But again, nothing happened with this control. Only 20% of crypto farms have been officially legalized.
The first week, the electricity was cut off for six hours. Then the schedule was lowered to four hours, and by the end of November the republic was de-energized for only two hours a day.
But that’s the official line. In reality, it turns out the power is off for much longer stints, since every day accidents occur on the lines due to overload.
Old equipment and non-payments
For many years, the deterioration of the networks has been a huge problem in the Abkhaz energy sector.
Abkhazia is 80 percent powered by a single high-voltage line, which is called a “radial circuit”. It runs from the differential HPP-1 in the Gal district to the border with Russia.
And it has been so worn out in recent years, this highway is heavily overloaded, including due to mining.
The construction of a new transmission line requires 3.5 to 4 billion rubles [about $66 million]. The state company Chernomorenergo, which is in charge of the entire energy sector of Abkhazia, has no such money.
Chernomorenergo has long been considered a company operating with losses.
On the one hand, in Abkhazia one of the lowest tariffs for consumed energy in the entire post-Soviet space is 40 kopeks per kW for individuals [about $0.005] and 85 kopecks per kW for legal entities [about $0.01].
But even with such a minimum price, collection rates have always been extremely low. In recent years, it has not exceeded 30%.
The consumer debt to Chernomorenergo has already exceeded the level of two billion rubles [about $26.5 million].
Russian business will provide electricity – but many will still not have electricity, since they will not be able to pay for it
Based on the current situation, a new line may nevertheless appear in Abkhazia in the near future. It will be built by a Russian company.
It is impossible to do this according to the existing law. However, in the recently published program of harmonization of the legislation of the Republics of Abkhazia and the Russian Federation, one of the points suggests the denationalization of the Abkhaz energy sector.
This includes transmission networks and the admission of Russian business to this market.
The possible privatization of energy facilities by Russian companies has always been painfully perceived in Abkhaz society.
The main reason for concern lies in the tariff. If privatization proceeds, then we will have to say goodbye to the low tariff, it will certainly increase, and it is possible that up to the Russian parameters, that is, at least six to seven times at once.
Moscow has long persistently offered Abkhazia to allow Russian companies into the local energy sector, but the Abkhaz authorities did not agree for a long time.
But now the energy economy of Abkhazia is already in complete decline. In addition to the worn-out lines in the last two years, the shortage of electricity itself has been added, since in 2020 alone, the demand for energy increased by 20 percent.
The situation is rendered hopeless by the forthcoming repair of the Ingur HPP derivation tunnel, which will last from February to mid-May.
All this period, Abkhazia will be supplied with electricity by Russia. In the previous two years, in a similar situation, electricity was supplied at a price of 2.6 rubles per kW [about $0.035].
If the tariff for the current flow, which already starts in early December, is the same, then, according to the calculations of power engineers, Abkhazia will have to pay four billion rubles [about $53 million].
President Aslan Bzhania, however, said that the amount would be less – taking into account the past debts of 600 million rubles, it would be two billion [about $26.5 million].
But this difference is not so important – both amounts are absolutely unaffordable for Abkhazia.
So now Abkhazia is ready for change – by paying off its debts to Moscow with its energy sector.
