5 Conclusions and Recommendations The electricity sectors of Georgia and Armenia are under­going significant transformations amidst the global shift toward low-carbon energy systems. Georgia, in particular, has substantial untapped renewable energy potential – most notably in hydropower, wind, and solar – which re­mains underutilised due to grid constraints, seasonal im­balances, and outdated infrastructure. Armenia, while facing its own challenges, has similar ambitions to ex­pand domestic electricity production and strengthen en­ergy security, not only through the expansion of renewa­bles, but also by eventually constructing a new nuclear power plant to replace the current one. Both countries recognise the value of regional collaboration, particularly in enhancing resilience, managing electricity supply vari­ability, and aligning with the European Union’s energy and climate goals. Cross-border cooperation offers significant benefits, in­cluding improved access to operational reserves, better utilisation of generation diversity, and facilitation of re­newable energy integration. The Black Sea Submarine Electricity Cable project(connecting Georgia with Roma­nia) can be a key enabler of this integration. This infra­structure project supports the transit of clean electricity from the South Caucasus to the EU, opening export op­portunities and encouraging investment in renewables and grid modernisation. Furthermore, the Turkish mar­ket has become a strategic outlet for Georgian electrici­ty, with infrastructure like the HVDC back-to-back sta­tion in Akhaltsikhe strengthening trade links; similarly, Iran has become a major export market for Armenian electricity. Despite the clear benefits of cross-border energy integra­tion, several challenges persist. Regulatory and market differences between Georgia and its neighbours, particu­larly Armenia, hinder smooth cooperation. Incompatible technical standards, grid codes, and operational practices further complicate system alignment. Geopolitical ten­sions and political instability in the South Caucasus add uncertainty, while limited interconnection capacity and outdated infrastructure constrain electricity exchange. Moreover, inconsistencies in energy pricing, tariffs, and subsidies create economic barriers to investment. Over­coming these issues requires coordinated policies and joint strategic efforts to unlock the full potential of re­gional energy integration; delaying market integration may result in additional costs due to semi-isolated devel­opment of electricity mixes. A key starting point for regional energy integration is iden­tifying common drivers and synergies that can support col­laboration among South Caucasus countries. Integration offers strategic benefits, particularly by strengthening ener­gy security, improving system reliability, and enabling mu­tual support during supply fluctuations. The complemen­tary energy profiles of Georgia, Armenia, and Azerbaijan create opportunities for electricity-balancing and reserve-­­sharing. Joint development of renewable resources and ­interconnected infrastructure would facilitate integration with EU markets and advance regional decarbonisation goals. Moreover, energy cooperation can promote peace-­building and trust, while digitalisation and the green tran­sition add momentum to coordinated regional action. Un­locking these synergies is essential to building a resilient, sustainable, and interconnected energy future. Policy Recommendations 1. Electricity Market Integration and Regulatory ­Harmonisation → Georgia and Armenia should accelerate electricity market reforms by adopting compatible regulatory frameworks and technical standards. Aligning with the EU’s electricity market rules, including market ­liberalisation and the introduction of balancing and day-ahead markets, is essential to enable efficient cross-border trade. → Establishment of regional energy coordination bodies or task forces under the auspices of the Energy Com­munity can foster regulatory dialogue and technical alignment. 2. Infrastructure Development for Cross-Border Trade of Renewable and Clean Electricity → Prioritise the completion of key infrastructure projects such as the Marneuli–Ayrum 500 kV transmission line and Armenia’s planned HVDC back-to-back station. These will significantly increase cross-border transfer capacity and grid reliability. → Mobilise EU and international financing(e. g., through the EBRD, EIB, or Green Climate Fund) to modernise aging infrastructure and expand interconnections. Conclusions and Recommendations 17