Reducing energy costs of small food producing and processing businesses in rural areas of Georgia

• Reducing energy consumption can be achieved by improving efficiency of food production value chain. A joint project of UNECE, UNDP, FAO, ILO and UN Georgia recommended measures for application by Georgian food sector companies to decrease their energy consumption and environmental footprint, and raise their level of competitiveness.

UNECE, jointly with UNDP (lead agency), FAO, ILO, and the UN Resident Coordinator in Georgia (overall coordination), is implementing the project “Response to the global crisis on food, energy, finance in Georgia” under the Joint SDG Fund Development Emergency Modality to support energy efficiency (EE) and renewable energy (RE) development in Georgia and improve food production efficiency in rural areas. The project addresses food, energy and finance interlinkages and contributes to the implementation of SDG 7 (targets 7.1, 7.2, 7.3, and 7.A) and supports SDGs 1, 2, 10, and 13.

Background

In Georgia, which has a diverse energy mix, including imported natural gas and oil (representing around 68 percent of total primary energy supply), hydropower, renewables, and coal, over 99 per cent of households have access to electricity, with a clear trend since 2000 towards increased primary reliance on clean fuels and technologies that reached 89 per cent in 2020.12

12 “Clean” is defined by the emission rate targets and specific fuel recommendations as provided by the WHO guidelines for indoor air quality: household fuel combustion. See metadata for indicator 7.1.2 in the United Nations SDG indicators metadata repository.

Figure 11

Proportion of population with primary reliance on clean fuels and technology in Georgia,
2000-2020, per cent

Support to clean energy research and development and RE production in Georgia totalled 625 million United States dollars over 2001–2019, of which almost $417 million (66.7 per cent) were allocated to hydropower development.

Energy consumption by agriculture and food sector in Georgia

As Georgia plans to seek self-sufficiency of domestic food production to meet anticipated food demand growth by 2050 (estimated to grow by 60 per cent compared to 2006–2007 levels according to FAO), access to affordable, reliable, sustainable, and modern energy plays a crucial role in boosting agricultural productivity and food security. At the same time, energy price increases are having a negative impact on production capabilities and costs for producers, especially from rural areas, and may result in their lower competitiveness and higher vulnerability.

Figure 12

International financial flows to Georgia in support of clean energy research and development and renewable energy production, millions of United States dollars

Figure 13

Share of cumulative financial inflow by technology, 2001–2019, per cent

The analysis suggests that there is a lack of education, information and technical expertise, insufficiency of trained personnel – especially in rural areas – for installation, operation and maintenance of RE and EE equipment, limited capacity of local research institutions, and lack of strategies and policies for EE projects. Georgian businesses, largely motivated by productivity, have minimal understanding or awareness of energy-saving measures and techniques.

Efforts on EE and RE development are still insufficient, constrained, and connected to specific clean energy projects that benefit from dedicated but insufficient credit lines, including subsidized loans and technical assistance in project development. This is due to commercial banks’ lack of experience in financing EE and RE projects, not considering their possible economic and environmental benefits. This is compounded by the absence of fiscal and tax incentives of innovative financial instruments, especially for small businesses, making
scaling up not feasible.

Recommendations on optimizing energy consumption and reducing energy costs for small agricultural and food sector businesses

Reducing energy consumption can be achieved by improving efficiency of food production value chain. Food producers and processors can ensure food safety while being energy-wise and reducing their carbon footprint. EE can be implemented in different agricultural subsectors and in various ways: by introducing energy-efficient processes and technologies and their regular maintenance (steam generation and distribution, pumping and lighting systems, industrial refrigeration and cooling and furnaces, kilns and ovens); by saving energy in lighting, air-conditioning, and heating; and by changing behaviours and practices, e.g. composting instead of largely relying on inorganic fertilizers and using residues generated from crop production and livestock as a source of bioenergy.

The measures outlined in Table 1 could be recommended for application in the sector to enable Georgian companies to decrease energy consumption and their environmental footprint, raising the level of competitiveness of local businesses in domestic and international markets.

The analysis conducted also suggests actions on:

• Auditing and assessment of EE potential of small businesses, implement procurement of energy-efficient equipment, and assist in the definition of concrete measures to improve energy and environmental performance.

• Data collection mechanism for the assessment of EE potential of the components of various food production value chains, create sub-sector energy performance benchmark indicators to define appropriate support mechanisms.

• A platform for knowledge sharing and information exchange among experts,
  small business owners, and sector associations, including training and coaching.

Table 1

Energy efficiency practices applicable to field crop production