Energy Policy, Legislative Background, Funds and Programmes
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:
- energy demand-supply situation until 2015,
- restructuring the energy sector and
- 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:
- Establish an efficient energy sector concerning both financial and technical aspects;
- Establish an effective institutional and regulatory framework;
- Increase the security and reliability of the energy supply in general, and electricity in particular, on national and regional levels;
- Increase the energy efficiency in the generation and use of energy sources, aiming at minimal environmental pollution;
- Optimization of the supply system with energy resources based on the least cost planning principle and minimal environmental pollution;
- Completion of restructuring process of energy companies;
- 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.
Draft Renewable Energy Sources Target
The primary purpose of the new EU Directive is to set binding targets for the increased use of energy from renewable sources. The Directive sets an overall target of 20% for the EU and individual targets for Member States based on their existing level of renewable energy and their level of economic development. Within the overall energy target there is a specific obligation to meet 10% of energy used in transport from renewable sources. The calculated targets (rounded to the nearest percentage point as was the approach for the EU) for Albania are summarized in Table below:
RES indicators | 2005 GFEC, ktoe | RES Share 2005 | Flate Rate Increase | Forecast 2020; GFEC, ktoe | Residual Effort; 2020 Share | 2020 RES Target |
|---|---|---|---|---|---|---|
Albania | 2,054 | 29.3% | 5.5% | 3,308 | 1.4% | 36% |
Albania’s main energy resource is hydro. However, it is estimated that only 35% of Albania’s hydropower potential is currently being exploited. In terms of other renewable energy resources, the technical potential for solar and biomass is high. High costs prevent the exploitation of solar energy; the technical potential for biomass has been estimated at 17.5 TWhth /year.
Hydroelectric power plants (HPPs) account for 100% of the installed electricity generation capacity in Albania, with three large HPPs on the Drin River producing 88% of the country’s total electricity generation capacity of 1,446 MW. Average output is 4,162GWh. There is one diesel thermal power plant (TPP Fier) but it has been out of operation since 2007. In addition, the Vlora TPP with an installed capacity of 97 MW as Combined Cycle Gas and Steam Turbines Power Plant is in the final stage of the commissioning.
Albanian Energy Efficiency Action Plan
The National Energy Efficiency Action Plan (NEEAP) of Albania tries to be in compliance with the Directive 2006/32/EC, April, 5, 2006 on “energy efficiency end use and energy services”, directive 2002/91/EC “on energy performance building ” (recast 2010/31/EP), directive 92/75/EC (recast 2010/30/EP).
The NEEAP contains a description of measures to improve the energy efficiency in Albania which are planned in order to achieve the indicative targets for 2010 –2018. Improved energy efficiency in all sectors is one of the main goals defined in the Albanian National Strategy of Energy. This Action Plan will enable a more focused implementation of energy efficiency policies and better monitoring of its success in the next three years for the short term until 2012 and long term until 2018.
The final energy consumption within the scope of the Energy Services Directive (ESD) in Albania in 2008 is equal to 1841 ktoe. Within the scope of the ESD, the contributions on consumption among the sectors are as follows: 23% residential, 44% transport, 13% industry, 10% services, 10% agriculture.
The leading sector into the electricity consumption is the Residential Sector with 49% for 2009. Besides the high amount of electricity consumption, the residential sector consumes 83.7% of the of the fuel wood amount, and 3.8% of the oil by-products. Albania cannot facilitate the development of a natural gas system in short terms because it has almost negligible endogenous natural gas production and at the same time is not connected with the European Gas Networks. Therefore, as described by the circumstances elaborated above, almost all energy services (space heating, cooking, and domestic hot water) for the Residential and Service Sectors is covered either by electricity, fuel wood, and oil by products and specifically LPG.
Albania has not yet established nor implemented the EU Emission Trading Scheme (ETS). The national indicative Energy Efficiency Improvement (EEI) target is calculated based on the methodology provided in Annex I of the Directive. For that purpose, the data on final energy consumption during the period of 2004-2008 are used as a forecast up to 2018 for energy savings.
The first NEEAP provides a package of measures for the most important final energy consumption sectors: Residential, Services, Industry and Transport and some estimation for energy savings in Agricultural.
The NEEAP contains measures which are supposed to be implemented the coming three-year period and will, for the most part, continue to be implemented until 2018.
The implementation of the first NEEAP in Albania actually is the initial phase of the implementation of national energy efficiency policy. Certainly, in this period the remaining gaps in legislative and institutional framework for EE must be overcome and be eliminated.
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 no.7746, dated 28.07.1993 "On hydrocarbons (exploration and production)" | The law no.7746, dated 28.07.1993 "On hydrocarbons (exploration and production)" created space and a bigger security for foreign investors in the exploration and production activities of hydrocarbons. The law recognizes the sovereignty of Albanian state over hydrocarbons reserves, which remain property of Albanian state. |
|---|---|
Law no.7811 "On the fiscal system of hydrocarbons sector". | In 1994, the Parliament approved the law no.7811 "On the fiscal system of hydrocarbons sector". This law, which is a specific one applied only to the contractors operating in the exploration and production activities of hydrocarbons, created a greater security for private investors because, based on that, all contractors were exempted from taxes and other fiscal duties imposed by Albanian state, and they would be subject only of the profit tax. |
The law no.8450, dated 24.02.1999 "On processing, transportation and trading of oil, gas and their by-products" | The law no.8450, dated 24.02.1999 "On processing, transportation and trading of oil, gas and their by-products" established the necessary legal bases for governing the abovementioned activities. Law envisages the full liberalization of activities from export-import point of view and the wholesale or retail prices of oil by-products except specific situation of the market when the Council of Ministers may impose temporary restrictions for wholesale and retail prices. |
The law no.7962, dated 13.07.1995 "On electric power" and the law no.7970, dated 20.07.1995 "On regulation of power sector". | The law no.7962, dated 13.07.1995 "On electric power" and the law no.7970, dated 20.07.1995 "On regulation of power sector". The law on electrical power had as the objective the enhancement and promotion of economic effectiveness as well as the service quality in the activities of generation, transmission and distribution of electricity. |
Decree no.171, dated 19.04.2002 the Power Sector Policy Statement, | Decree no.171, dated 19.04.2002 the Power Sector Policy Statement, which constitutes a basic document for the reforms undertaken by the Albanian Government in this sector. According to this document, the objective of the government policy in the power sector is to develop an electricity market that provides for reliable, safe, and adequate electric supply at reasonable prices in an economically and environmentally sound manner and in accordance with accepted commercial and market principles and the rule of law. |
The new Law "On Power Sector" is approved on May 23, 2003. (Amended in June 2008) | Law "On Power Sector" is to ensure the conditions for a safe and reliable electricity supply through an efficiently functioning power market, expanding and strengthening the activity of the ERE, defining the functions, obligations and rights of the ERE and persons engaged in power sector activities and the development of competition, taking into consideration the protection of consumers’ interest, cost minimization in providing electric power service and its compatibility with the environment. The law was amended in June 2008 to improve the regulation of the electricity sector. |
Law no.8937, date 12.09.2002 "On heat conservation in buildings". | law no.8937, date 12.09.2002 "On heat conservation in buildings". The aim of this law was to establish the necessary legal basis for setting up the rules and making mandatory actions for conservation of heat in buildings of whatever purpose they are build. According to this law, all buildings to be constructed after this law enters in force, shall observe the normative volumetrically coefficient of thermal losses (Gv), as well as provide for a thermal installation for central or district heating. |
Law "On Electrical Power"
the law on electricity was passed by the Parliament in May 2003. 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.
The law was amended in June 2008 to improve the regulation of the electricity sector. A new law on the power sector, based on the EU Third Legislative package, is in 2011 under preparation.
[ERE]
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
- Power Sector Rehabilitation & Restructuring Projects
- Power Sector Generation & Restructuring Projecst
- Energy Community of South East Europe
The goal of the Power Sector Rehabilitation & Restructuring Projects 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 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 2003-2012:
- 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 above mentioned Athens Process.
