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• |Albania
• |Energy Policy

Energy Policy

Albania had its National Strategy for Energy approved by the Government in June 2003, and after three years the Action plan for implementation to was updated in June 2007. In this Strategy three main issues are analysed:

1. energy demand-supply situation until 2015,
2. restructuring the energy sector and
3. preparation of an investment package for the implementation of all energy efficiency measures and all master plans based on recommendations of the National Strategy on Energy.

The scope of the National Energy Strategy is to develop an effective energy sector that:

• guarantees the security of energy supply in general, and electricity in particular
• enhances an efficient and economic use of energy, with minimal environmental impacts, in order to support the sustainable development of all economic sectors

The primary objective of the National Energy Strategy is to restructure the energy sector based on market economy principles and develop a modern energy policy. Specific objectives of the National Energy Strategy are:

1. Establish an efficient energy sector concerning both financial and technical aspects;
2. Establish an effective institutional and regulatory framework;
3. Increase the security and reliability of the energy supply in general, and electricity in particular, on national and regional levels;
4. Increase the energy efficiency in the generation and use of energy sources, aiming at minimal environmental pollution;
5. Optimization of the supply system with energy resources based on the least cost planning principle and minimal environmental pollution;
6. Completion of restructuring process of energy companies;
7. Considerably increase the investments in the energy sector through capital enhancement by International Financial Institutions and private capital;

Moreover, another specific objective it the establishment of a competitive electricity market according to EU requirements for the electricity sector reforms (Directive 2003/54 EU) and Albania obligations under the Energy Community Treaty (October 25, 2005) to support the energy sector integration into the Southeast Europe Regional Electricity Market and the interconnection with UCTE network.

Two scenarios of the Albanian Energy System development are anticipated. According to the first, passive scenario, the Action Plan is implemented inadequately which may lead to the total collapse of the energy system. The second, active scenario foresees implementation of additional measures, such as increasing energy efficiency and introducing alternative energy sources.

[ Albanian National Strategy of Energy ]

In the recent EU Albania Progress Report it is acknowledged that Albania has undertaken some bold steps to restructure and liberalise the energy sector. However, more has to be done, to overcome the current energy crises; e.g. the recent government decision to introduce electricity rationing as a result of power shortages.

Albania has also played an active role in the establishment of the Energy Community Treaty for South East Europe. Albania has signed the Treaty as one of the first countries on October 25, 2005 which is aimed at creating a regionally integrated energy market for electricity and natural gas as part of the wider EU market.

[ EU Progress Report ]

Legislative Background

Albania signed the Energy Charter Treaty in December 1994, which will serve as the legal basis for co-operation between the signatory countries in the energy field.

The most relevant are:

• Law on Competition (1995)
• Environmental Protection Law (1992)
• Mining Law (1995)
• Petroleum Law (1993)
• Foreign Investment Law (1993)
• Concessions Law (1995)
• Restructuring Power Sector (May 2003)
• Promotion Energy Efficiency and Renewable Energy Sources (April 2005)
• Law on the Purchase and Sale of Urban Land (1995).

[ BSREC ]

Law "On Electrical Power"

The purpose of this law is to enhance economic effectiveness and the quality service in the sphere of generation, transmission and distribution of electricity ensuring the public interest. It regulates the conditions of activity in the sector of electrical power, the rights and duties of the physical and juridical persons, as well as of the state administration.

[ ERRA ]

Law "On Mining"

The management of solid fuels and mineral resources in Albania is governed by the Mining Law Nr. 7491/1994 and supported by the Law on the Privatization of Commercial Entities Operating in the Mining Sector, Nr. 8026/1995.

The Law on Privatization allows the privatization of all state entities operating in the mineral sector. There is no restriction as to the nationality of the "strategic investor", although that term is not properly defined.

Important Contracts between Austria and Albania Concerning Energy Issues

The existing country programme for Albania is being continued, thus the Austrian Cooperation with Eastern Europe/NIS focuses its activities on the fields of environment, in particular energy generation by means of hydropower plants, water supply and sanitation. The Austrian Development Agency is going to finance a six month project for establishing institutional framework regarding CDM of the Kyoto Protocol.

[ Austrian Ministry of Foreign Affairs ]

Energy Related Funds and Programmes

World Bank Currently three World Bank projects are ongoing in the energy sector, with a total loan of 122 million US dollars (up to the end of 2005):

• Power Sector Rehabilitation & Restructuring Project
• Power Sector Generation & Restructuring Project
• Energy Community of South East Europe (ECSEE Apl 2-Albania)

The goal of the Power Sector Rehabilitation & Restructuring Project is to improve the operational capacity and effectiveness of the power sector. The project has three components,1) rehabilitation and strengthening of the transmission and distribution systems in Durres, Elbasan and Kuciova regions, 2) provision and installation of secure boxes containing meters, to be installed in single-family dwelling units and apartment buildings, 3) technical assistance, to support power sector reforms.

The project on Power Sector Generation & Restructuring aims to achieve significant improvement in power system performance. The measures to achieve this include: encouragement of investment, to increase domestic thermal generation and sectoral and institutional reforms. Under this project technical assistance to KESH for the bid preparation and evaluation is provided.

The ECSEE-2 project aims to replace high-voltage equipment in six transmission substations and provide both investment support and technical assistance for project implementation.

ECSEE-2-Albania makes part of a bigger project, aiming to improve the performance of the energy sector in South East Europe (SEE). This is a result of the "Athens Memorandum", signed in December 2003 by the governments of the SEE countries and the European Commission.

World Bank study calculations show that the total investments that should be done in the transmission network are estimated US$ 204 million. Investments include the construction of 400 kV line Elbasan-Podgorice, including the 400/220/110 kV substation of Kashar. In addition, the total includes US$ 47.7 million for 400 kV interconnection line Podgorica-Kashar-Elbasan (23% of total cost). Although it was decided that approx. 62% of total investments will be commissioned during the period 2002-2005, only 38% have been commissioned by the end of 2005.

The rehabilitation and expansion plan was prepared on case-by-case basis in order to analyze the required measures to reduce the technical losses and meet the demand till 2015. In the framework of Korporata Elektroenergjetike Shqiptare (KESH – Albanian Power Corporation) action plan 2003-2005, a number of measures started in 2001 are under implementation. In the following list there are same important measures undertaken by KESH Distribution Division for the short term investment program for the period 2003-2005:

• Installation of electric meters for all consumers categories,
• Construction of 20 kV voltage distribution lines in some of the main cities of the country,
• Implementation of "March 2000" Project, financed by Italian Cooperation,
• Implementation of Distribution-Transmission Rehabilitation project, financed by a donor group,
• Elimination of illegal connections in zones close to big cities.

For the reasons stated above, significant generation competition is unlikely to develop in Albania in the near future. Opportunities for limited development, however, do exist with respect to Independent Power Producers (IPP’s). The Albanian Power Sector Reform Law effective in August of 2003, provides for expedited procedures to facilitate the key elements of IPP development: (1) licensing of construction and operation; (2) transmission access; and (3) power sale arrangements. IPP development is an important means of introducing competitive sellers into the national market and should be encouraged to increase the number and experience of market participants.

[ World Bank ]

Energy Community South East Europe

In October 2005, the Treaty on Creation of the Energy Community, integrating South East Europe in to the EU internal energy market was signed, therefore concluding the abovementioned Athens Process.

[ seenergy, Stability Pact ]