Smarter tariffs for a greener future: Georgia’s renewable energy policy toolbox

As Georgia continues its clean energy transition, the structure of its renewable energy support schemes will be pivotal in determining whether it achieves its climate and investment targets—or falls short.

International experience shows that “smart tariff” mechanisms not only drive market growth but also enhance policy credibility. For Georgia, a carefully balanced mix of incentives—rooted in competition, legal clarity, and market integration—is essential to unlocking its renewable energy potential and securing its place in the region’s green economy.

Global playbook: tariff-based mechanisms that work

Governments around the world rely on a variety of tariff tools to promote renewable energy. The most effective mechanisms offer long-term revenue visibility, cost efficiency, and support the seamless integration of renewables into the market. Common tools include:

• Feed-in Tariffs (FiTs): Provide long-term, fixed-price payments for each kilowatt-hour (kWh) of renewable electricity fed into the grid. Effective for launching markets but potentially costly without phaseout mechanisms.
• Contracts for Difference (CfDs): Guarantee a fixed “strike price.” If market prices fall below this, the government pays the difference; if prices rise above it, the generator returns the surplus.
• Feed-in Premiums (FiPs): Offer a premium on top of the market price, allowing renewable energy producers to participate in wholesale markets with added support. Useful for gradual integration.
• Green Certificates: Tradable instruments that verify the renewable origin of electricity. These help meet consumer and supplier obligations and drive demand for green energy.
• Net Metering/Billing: Enable consumers to offset their energy use by exporting surplus electricity to the grid. Net billing ties compensation to real-time market prices or avoided costs.
• Competitive Auctions: Allocate support to projects offering the lowest cost per renewable unit, driving prices down and encouraging efficiency.
• Investment Grants and Tax Breaks: Provide upfront capital or tax relief, easing financial barriers for small investors and newcomers.
• Time-of-Use (ToU) Pricing: Charges vary based on time of day, encouraging electricity use during periods when renewable generation is abundant (e.g., midday solar).

Ensuring fair play

As Georgia refines its renewable energy strategy, embedding competitive safeguards from the outset is critical. Doing so enhances legal certainty, attracts higher-quality investors, and levels the playing field as the market evolves. Compliance with competition law is not just a regulatory formality—it’s a strategic foundation for smart, sustainable policy.

This balance between renewable energy support and state aid regulation requires close coordination between the Ministry of Economy and Sustainable Development (which designs support mechanisms) and Georgia’s state aid authority (which ensures compliance). Mechanisms such as CfDs and FiPs must be structured to foster—not stifle—competition.

Legal requirements emphasize proportionality, necessity, and non-discrimination. For example, investment aid should only fill financing gaps that markets cannot bridge. Tax incentives and premium tariffs must apply equally to all eligible producers and be limited in both scope and duration. Green certificate systems should be transparent, technology-neutral, and fairly administered.

Under Georgian law, support instruments—including grants, tax breaks, and green certificates—qualify as forms of state aid. Poorly designed schemes risk distorting the market, discouraging private capital, or dampening innovation. But when aligned with competition principles, these tools can enhance market efficiency and accelerate renewable deployment.

Importantly, Georgian legislation already requires that all renewable energy support schemes undergo state aid authority review before government approval—signaling alignment with EU norms and strengthening investor confidence.

Where Georgia stands

The Law on “Promoting the Generation and Consumption of Energy from Renewable Energy Sources” provides the legal foundation for tariff-based support. It defines support schemes broadly, covering instruments that lower costs, increase market prices, or expand renewable energy consumption. Eligible tools include investment aid, tax incentives, premium tariffs, green certificates, and CfDs.

At present, Georgia uses three key support mechanisms: the premium tariff, a special green tariff, and Contracts for Difference. Though progress is evident, the policy framework is still evolving.

Georgia first experimented with renewable energy auctions over 15 years ago, primarily to attract early-stage private investment. These early auctions typically offered partial Power Purchase Agreements (PPAs)—covering only a portion of output or limited timeframes. Given the limited regulatory capacity at the time, this approach offered a pragmatic compromise: it provided developers with some revenue predictability while minimizing long-term obligations for the state.

However, as Georgia’s market has matured and investor expectations have become more sophisticated, such limited agreements no longer offer the stability needed to support large-scale renewable energy development. With Georgia’s solar and wind potential gaining strategic relevance, relying solely on partial PPAs is insufficient. Modern markets require more robust, long-term support mechanisms that are bankable and capable of addressing the scale, intermittency, and financing needs of renewable energy projects.

Guarantees of Origin: unlocking export potential

Georgia is working to operationalize a Guarantees of Origin (GoO) system for renewable electricity, heating, and cooling, as mandated by its national renewable energy law. The Georgian National Energy and Water Supply Regulatory Commission (GNERC) established GoO procedures in Resolution N58 (Dec. 23, 2021), later amended for improved implementation.

While the legal groundwork is in place, the system’s functionality—especially its alignment with international standards—remains a work in progress. Launching a digital registry and ensuring compatibility with European Energy Community rules will be key steps toward enabling Georgian GoOs to be traded in premium EU markets.

Why does this matter? GoOs are essential for allowing Georgian renewable electricity to compete in European markets, where buyers increasingly require certified proof of renewable origin under EU regulations and corporate sustainability goals. Without full compatibility with international systems, Georgian producers risk missing out on high-value trading opportunities and long-term power purchase agreements. Advancing GoO implementation will boost export opportunities, increase investor trust, and further align Georgia with European energy frameworks.

CfDs: Georgia’s new standard

In July 2020, Georgia introduced Feed-in Premiums (FiPs), offering a fixed $0.015/kWh premium for 10 years starting at plant commissioning. But by December 2022, the government shifted course, adopting Contracts for Difference (CfDs) through Decree N556. This marked a move toward a more market-based, competitive model and suspended all pending FiP applications.

Though the legislative rationale for this shift wasn’t clearly stated, the decision mirrors international best practices and European trends. CfDs, by offsetting the volatility of market prices, offer a stable and predictable framework attractive to investors.

Since adopting CfDs, Georgia has held two CfD auctions and one open competition—signaling early momentum. However, as winning projects are still under development, it remains too early to judge the model’s financial or operational impact. Future performance will reveal whether CfDs provide the needed stability and market integration for Georgia’s renewables sector.

What’s missing? A smarter tariff toolbox

Despite recent advances, Georgia still lacks several key support mechanisms that could enhance investment readiness and regional integration. Addressing these gaps is critical for scaling up renewable capacity and positioning the country as a credible green energy exporter. These reforms could help:

1. Introduce Time-of-Use (ToU) tariffs. Static pricing fails to reflect the variability of solar and wind output. Introducing dynamic pricing would incentivize consumers to shift demand to periods when renewables are most abundant—improving grid efficiency and renewable integration.

2. Offer fiscal incentives and investment grants. Unlike many peer countries, Georgia currently offers no tax-based support or grants for renewable energy. Tools such as VAT exemptions, capital subsidies, and accelerated depreciation could significantly reduce upfront costs and attract small- to medium-scale investors.

3. Operationalize the GoO system. Until Georgia’s GoO registry is fully functional and internationally recognized, local producers will remain cut off from premium green electricity markets in the EU. Prioritizing this system is essential to expanding export opportunities and credibility.

Together, these changes will increase investor confidence, ensure regulatory clarity, and position Georgia as a forward-thinking energy innovator for energy-hungry European markets.

Georgia has laid the groundwork for renewable energy expansion, but without a robust, investor-friendly tariff framework, its goal to become a regional green energy hub may remain out of reach. The lack of key tools, such as ToU pricing and fiscal support, limits the country’s ability to attract capital, integrate renewables and meet demand.

But by strengthening its tariff toolbox—through smart pricing, fiscal incentives, and internationally compatible certification—it can enhance regulatory predictability, attract private capital, and align Georgia more closely with EU energy market standards. With strategic reforms and decisive action, Georgia can turn renewable potential into performance.

Levan Kokaia is a strategic legal advisor in renewable energy and a lawyer for the Georgian Renewable Energy Development Association (GREDA)