Albania electricity market opening too slow – Statkraft

Irina Peltegova

17-Oct-2014

The liberalisation and integration of the Albanian electricity market has been slower than expected, according to Norwegian energy producer Statkraft which is a major investor in the country. However, the government is committed to take the necessary steps to improve market conditions.

Statkraft’s 256MW Devoll river hydro power project, currently in construction, is expected to increase Albania’s generation by 17%.

The first of the two plants – 70MW Banja HPP – is set to start commercial operation in the second half of 2016, producing 254GWh annually, the project’s director of governmental affairs Agnar Aas said during a presentation at an industry event on Tirana on Wednesday.

The second one, 186MW Moglice, will follow in 2018, generating some 473GWh per year.

This is in line with previous deadline set by Statkraft ( see EDEM 4 April 2014 ).

“The investment decision for Statkraft entering market was [made] some years ago and those who went for [investing] €535m in Devoll believed that this journey of the [Albanian] market would go a little bit faster. We are concerned about the development of the market, it is moving slower than we were hoping for,” Aas said.

Nevertheless, Statkraft is committed to the Devoll project.

The company will apply for a trading licence in Albania by the end of this year or beginning of next year.

Aas added that the Balkan region as a whole was not showing enough progress.

“Our view as a big producer is that the steps taken by each country in the region are not very well coordinated, the steps are too slow and too small to reach a fully integrated market solution in due time,” he said.


Financial obstacles

Albania’s state owned incumbent KESH is facing debts of millions of euros for failing to pay for delivered electricity by both foreign and local companies which produce hydro power and sell it to KESH at set feed-in tariffs, it emerged during the conference discussions. Some of them have not received any payments in a year.

This is largely due to the fact that Albania recently settled a long standing dispute with Czech utility CEZ and the state will have to pay almost €100m by 2018 as compensations ( see EDEM 24 June 2014 ).

“KESH was delaying payments to companies because of the CEZ problem but we are trying to pay back the debts. […] we need to find a solution. Please bear with us, we will have a plan very soon,” said deputy energy and industry minister Dorian Ducka during the conference.

In addition, Albania is having issues with unpaid end-user electricity bills as well as electricity thefts.


Changes on the way

Despite the difficult situation the government is working on a new energy law which is expected to be adopted by the end of the year and come into force from 1 January 2015.

The law is in a consultation phase and Ducka invited all interested parties to come forward with feedback.

Albania’s market is still heavily regulated with only high voltage customers sourcing its electricity from the open market. This means that 7% of the electricity is produced for the free market, according to Sokol Spahiu, origination manager for Albania and Kosovo at Slovenian energy company GEN-I.

The new law should include rules which will avoid cross-subsidies and will remove the €4.65/MWh transmission fee which is paid when electricity is being exported and essentially acts as an export tariff, Spahiu said.

He added that the government needs to also grant incentives for small hydro power plants to start selling on the free market. These currently rely only on feed-in tariffs. Irina Peltegova

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