Enhancing Energy Security through Power Interconnection and Renewable Energy Program

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BackgroundThe Black Sea Submarine Cable (BSSC) Project represents one of the most strategic and ambitious energy and digital connectivity initiatives in the South Caucasus and Southeast Europe. The proposed BSSC Project would include parallel electricity and fiber-optic submarine cable interconnections across the Black Sea, with landing points in Georgia and Romania. Increased electricity trade through the electricity interconnection is expected to enable renewable energy (RE) development in the South Caucasus and contribute to the decarbonization of energy supply, enhanced energy security, and electricity supply reliability on both sides of the interconnection. The digital interconnection would reduce internet connection costs, improve bandwidth, and build redundancy for international digital connectivity across the Black Sea. Besides Georgia and Romania, Hungary, Azerbaijan, and potentially other countries in the South Caucasus and Southeast Europe are expected to participate in the financing of the BSSC Project.With the proposed Enhancing Energy Security through Power Interconnection and Renewable Energy (ESPIRE) Multiphase Programmatic Approach (MPA) Program, the World Bank will support the preparatory activities for the BSSC Project (Phase 1), enabling on-land infrastructure (Phase 2), as well as the BSSC Project itself (Phase 3). The Bank’s involvement would provide systematic, multi-year support under the MPA framework to help improve the quality of preparation of the BSSC Project and increase its like likelihood of success. Phase 1 would enhance the technical, commercial, institutional, social and environmental framework of the BSSC Project through preparatory studies, capacity building and technical assistance, including the establishment of adequate institutional mechanisms for intergovernmental coordination and decision-making; Phase 2 would finance on-land transmission grid strengthening in Georgia (and in other countries, if requested by the respective governments) to enable electricity exchanges through the submarine cable system; and Phase 3 would finance, together with other financiers, the eventual construction of the submarine cable system (the BSSC Project itself) if it goes ahead. The financing for the fiber-optic cable component in the same seabed corridor is expected to attract significant private sector investment. Georgia would be the Borrower for Phase 1 and 2, while other participating countries may be supported in Phases 2 and 3.MPA FrameworkThe MPA will be structured as a simultaneous MPA with partially overlapping phases supporting a clearly defined overall MPA Program scope. This will provide the ability for the phases to adapt to reflect overall progress and timelines, as well as structuring and financing decisions for the BSSC Project. A description of the activities expected in each phase is summarized below:a. Phase 1: Preparatory activities for the BSSC project including technical assistance and capacity building (US$35 million IBRD loan). This phase would finance: (i) the geophysical and geotechnical investigations of the Black Sea seabed to identify a corridor for the power and fiber-optic cable system (the two key technical studies that still need to be carried out as part of the feasibility study process), and (ii) legal and financial advisory, TA, capacity building, and knowledge transfer to support financial negotiations, institutional strengthening and stakeholder engagement at both the Georgian and intergovernmental levels, and preparatory technical and Environmental and Social (E&S) studies. More details on Phase 1 are provided in the Section II (Project Description). The borrower will be Georgia, while the implementing agency will be GSE.b. Phase 2: On-land transmission grid strengthening. The second phase would finance investments required to strengthen the Georgian transmission network to interconnect and transmit power through the BSSC. These investments would include an overhead transmission line (OHL) connecting the site of the new converter station at the landing point of the BSSC (near Anaklia, on the Black Sea coast) to Georgia’s backbone high-voltage transmission network. The expected connection points with Georgia’s transmission network would be the Jvari substation (approximately 40 km of OHL) and/or the Tskaltubo substation (approximately 75 km), but the exact routing of the OHL is still under consideration. Procurement for the construction of the OHL would start early enough to be ready for construction immediately after the final investment decision (FID) of the BSSC is taken. The borrower would be Georgia, while the implementing agency would be GSE. Phase 2 would also include a comprehensive TA component to support fulfilment of the pre-conditions to proceed with Phase 3 as well as, inter alia, the development of a roadmap for ENTSO-E integration and continued support for the cooperation and coordination among the countries involved in the Project.c. Phase 3 (BSSC Project): Submarine cable system including converter stations (estimated IBRD financing envelope of up to US$420 million). The interconnection would stretch for an estimated 1,200 km, of which about 1,100 km would be via a submarine cable system at a depth of up to 2,200 m. The overall cost estimate for the BSSC and the two associated converter stations (in Georgia and Romania) is in the range of US$3.1-3.7 billion, depending among other things on the capacity of the interconnection. While the evaluation of project structuring and financing options is still ongoing as part of the feasibility study, the government of Georgia expects a substantial share of public financing to be needed to build the project. Substantial leveraging of public and private financing from a range of investors and financiers is expected as part of the overall project structure. Private financing is expected especially for the fiber-optic cable portion, to be confirmed by market sounding. Phase 3 would provide financing for a share of Georgia’s public borrowing for the BSSC, as well as TA. The implementing agency would be the BSSC Project company.Detailed Description of Phase 1(i) Component 1: Geophysical and geotechnical surveys of the Black Sea seabed (US$30 million)This component would finance (i) the surveys of the Black Sea seabed (“seabed surveys”), (ii) the supervision of the two studies, and (iii) capacity building and knowledge transfer to support GSE and the government of Georgia in designing, procuring, and executing them. The seabed survey corridor is based on the geological investigation, which is part of the scope of the ongoing feasibility study and recommended a corridor for the interconnector routing based on all applicable guidelines and laws, available knowledge of the geological and geotechnical aspects of the Black Sea, existing subsea infrastructure, fishing locations, shipping routes, environmental aspects, and other constraints that may impact the installation and maintenance of the interconnector. The seabed surveys consist of geotechnical and geophysical investigations of the seabed corridor and an unexploded ordinance (UXO) survey. Besides financing the investigations, this component will finance the supervision contract for the two studies and will offer GSE and the government capacity building for the definition of the technical design of the studies, their procurement process, and their implementation.(ii) Component 2: Legal and financial advisory and technical assistance (US$5 million)This component would finance advisory and TA activities to support the preparation of the BSSC Project:• Institutional, legal, and financial advisory. This activity would provide: (i) capacity building to the government for the establishment and operationalization of the IWG, and (ii) legal and financial advice to it on the most relevant tasks needed for the successful preparation and implementation of the BSSC Project, including the structurin