Sluggish liberalisation harms investment in Albanian electricity market

Delays to the liberalisation of the Albanian electricity market has harmed investment in new generation capacity, according to an Albanian energy expert.

Some 1.37GW of new hydropower plants are in the pipeline in Albania, according to ICIS data.

However, so far only Norwegian energy giant Statkraft has confirmed a commitment to invest in 243MW of power plants on the Devoll river which are expected to come online steadily between 2016-2018 ( see EDEM 18 June 2013 ).

Last week Statkraft confirmed to ICIS that the project is on track to meet deadlines and furthermore the company has secured the right to chose whether to sell the produced electricity in Albania or export it abroad.

However, according to Lorenc Gordani, legal energy market advisor and project manager at the Albanian Centre for Energy Regulation and Conservation (ACERC), Statkraft is one of only a few investors that is sticking to its construction intentions, while the rest are no more than projects “on paper”.

On one hand Albania does not have the money to build power plants on its own, while delays to market liberalisation have meant that more “serious” investors haven’t been attracted, Gordani said.

Last May Albania’s government announced plans to give concessions to build 660MW of hydroelectric power generation capacity by 2020, as well as 397MW of thermal capacity and 200MW combined of solar and wind capacity ( see EDEM 14 May 2013 ).

Liberalisation

Albania has been taking steps towards opening its market but the process has been slow. “The Albanian market is only 8% liberalised. Prices of power are not market prices,” Gordani said.

“Politicians are making commitments [to liberalise] but the economy needs time to recover. Countries like Albania, Montenegro, Macedonia, they don’t have the financial and human capacity to liberalise the markets yet,” he added.

As in other Balkan countries Albania has been struggling to fight financial deficits on the supply side of its electricity market created by regulated power prices.

However, the country has been on the right track and is expected to adopt the directives of the third energy package into its national legislation by the end of this year.

According to Gordani, Albania should meet the deadline as its legal framework is at the draft stage. However, putting the directives into practice is another issue. “The fact is [an] open market comes in only when it is ready,” he remarked.

Exports

The investment climate in Albania has improved, according to one electricity trader active in the Balkan region.

He noted that while big investors like Czech utility CEZ have faced difficulties in the past – CEZ has been involved in a dispute with Albania’s government after its Albanian subsidiary CEZ Shperndarje’s licence to operate in Albania was revoked at the beginning of 2013 ( see EDEM 22 October 2013 ) – a new wave of foreign investors was coming to Albania with the country holding great potential for exports once new power plants come online.

The country has interconnectors linking to Montenegro and Greece and is involved in projects to build cables with Kosovo and Macedonia.

Furthermore, with the approval of the Trans Adriatic Pipeline (TAP) Albania has discussed the possibility of constructing a subsea electricity cable to Italy in parallel with the gas pipeline.

A cable connecting Montenegro and Italy is expected to start commercial operation in 2017.

Integration

Albania and Kosovo are also planning to merge their electricity markets by 2016 in a bid to improve security of supply for both countries ( see EDEM 31 March 2014 ).

The Albanian electricity system relies almost entirely on hydro to cover its electricity demand with 1.7GW of hydropower capacity installed, according to information from the Energy Community.

With Kosovo having a lignite-based electricity generation system the two countries are considered extremely compatible. Irina Peltegova