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• |Albania
• |Energy Sources

Electricity

The Albanian electricity market regime is based on a Power Sector Law which came into force on May 23 2003 (amended in June 2008), with the aim to restructure the Albanian Power Sector. The regulatory framework attempts to promote competition in electrical energy production and supply. Up to now the only one player in Albanian power sector is KESH (with total installed capacity about 1660 MW) and some very few small hydro power plants (with total installed capacity about 14 MW).

Electricity Generation

The total installed power generation capacity in 2010 of 1659 MW is 86% hydroelectric, with most of the remainder being produced from diesel power plants. Hydroelectricity is produced by three main power plants located in the north of the country on the Drin River. Koman (600MW), Fierze (500MW) and Vau i Dejes (250 MW). As the Vlora oil-fired power plant (97MW) was commissioned in late December 2009, almost all the power sold on the grid was generated by hydropower plants.

Following a period of rapid growth that lasted until 1996 (+11%/year on average), electricity production fell until 2002 (-7.6%/year on average). However, in 2005 and 2006 it nearly reached 1996 levels (5.6 TWh). The electricity production fell sharply in 2007 (2.9 TWh) but reached its average level in 2009 at 5.2 TWh.

The country's electricity capacities have greatly deteriorated, making it difficult to meet the level of demand. Consequently, the hydroelectric facilities are very much in demand, yet they are exposed to the variations in the water levels, which fell sharply between 2000 and 2002.

Electricity Network and Interconnections, Trade and Transit

To cover its needs, Albania imports electricity from Greece and Serbia. For 20 years now Albania has been interconnected with Greece (Elbasan-Kardia line of 400 kV with a capacity of 300 MW and Bistrice-1-Myrtos 220 kV line), and since 1991 with Kosovo (Fierza-Prizren line of 220 kV and 250 MW) and Montenegro (Vau Dejes-Podgorica line of 220 kV, with an effective import capacity of 200 MW and an effective export capacity of 100 MW). In 2007, the imports soared in order to cover the needs (2.8 TWh in 2007 compared to 0.6 TWh in 2006 and 0.4 TWh in 2005). Imports have progressively dropped (from 2.8 TWh in 2007 to 1.8 TWh in 2009) following the increase in power generation. With the decrease in import prices (€48.7/MWh in 2009 compared to €79/MWh in 2008 and €69/MWh in 2007) the import bill dropped from €195m in 2007 to €191m in 2008 and to €92m in 2009.

The overall transmission network is 2,500 km long and includes 120 km of 400 kV lines, 1128 km of 220 kV lines, 35 km of 150 kV lines and 1216 km of 110 kV lines (2009).

The rehabilitation work carried out on the transport-distribution networks has significantly reduced electricity losses. In 2009, the network losses amounted to 35%. Losses lead to very high additional costs for KESH as well as for the consumers who pay their bills (76% of the consumers in 2009). In 2010, the cost of distribution losses reached 28% of the retail price of electricity (45% in 2008).

As a general observation, Albania has historically experienced an abnormally high growth rate of electrical consumption.  A large part of that growth has been artificially stimulated by extraordinarily high rates of electricity theft, nonpayment of electric bills and tariff rates well below cost.  Consumers have failed to conserve electricity or to make adequate use of alternative fuels for the past decade.  The artificially high electricity consumption, particularly for electric space heating, has diverted a valuable resource away from commercial and industrial uses that would otherwise create jobs and contribute to economic growth. 

[Enerdata, EBRD, KESH]

Electricity Prices

The transmission tariff approved by the ERE is a postage stamp tariff including any reasonable incurred cost of OST for providing all transmission services, which is applicable to all transmission system users. The transmission tariff for 2010 is set at 0.6 lek/kWh.

The distribution tariff methodology provides for different distribution tariffs for different categories of customers connected at different voltage levels. However, due to inability of OSSH to allocate the expenses according to the categories of customers, the ERE for 2010 has approved a distribution tariff applicable for all distribution network user. The ERE and OSSH have agreed that for 2011, the company shall propose differentiated distribution tariffs for different categories of customers reflecting their respective cost of the service.

Taking into account the power sector law and the tariff methodologies provide for that no cross-subsidies should be allowed among different categories of customers, last years radical tariff reform has been undertaken by ERE to bring the tariffs in compliance with this important principle. However, it should be mentioned that while there are no cross-subsidizes among categories of customers, still the actual approved tariffs do allow some small subsidizes among different customer classes within a category of customers. 

According to DSO reports the rate of collection of bills for the time period January 2009 -November 2009 was 77.09%. The Regulatory Statement which was approved by ERE and has set a target to increase the collection rate by 1 % for each year in the next five years. Depending on the results during next 5 years, ERE may set much more aggressive targets for reducing the non-payment in future years.

Electricity tariffs for the year 2011

[ERE, KESH]

Oil and Natural Gas

Oil

Oil production is limited (0.6 Mt in 2009). Oil production halved between 1990 and 1992, fell by an average of 7%/year between 1992 and 2001, and is now stable. Armo owns the two refineries located in Ballshi and Fier, which have refining capacities of 17 800 bbl/d and 8 500 bbl/d, respectively. Due to technical problems they operate at just 30% of their nominal capacity. Because of the low production of oil the country is unable to meet the demand and is obliged to import nearly 70% of its needs, whereas 15 years ago it was nearly self-sufficient.

The country has two deteriorated pipelines. The first one has a capacity of 15 000 t and connects the oil fields to the storage terminal of Vlora and the two refineries (162 km). The second one is used for imports and exports, connecting the refinery of Ballshi to Vlora (52 km).

Gas

Activities of production and transportation of the natural gas in Albania is carried out by Albpetrol. As gas consumption remains marginal (9 mcm in 2009), the legal framework on gas matters is limited (no transmission system operator, no plan for the development of gas infrastructures). In June 2008, a law 'On the Natural Gas Sector' was passed to start regulating the gas business in Albania. 

The natural gas which was production declined from 206 ktoe in 1990 to 7.1 ktoe in 2008. Contribution of natural gas declined to 0.31% in 2008 compared to 10% in 1990, due to a number of factors:

• Existing natural gas fields are in their last production period,
• Researches for new resources have not been successful so far.

[Enerdata]

Natural Gas Resources

Gas resources in Albania have incurred drastic decline since 1985, reaching the minimum after ‘90 as a consequence of the lack of investments in the existing gas fields and non-discovering of new reserves. Below is shown an estimation of gas reserves in the natural gas resources, gas condensate (in Delvina well) and associated gas. In recent years, the exploration of new gas fields was limited on a small number of gas fields and are concentrated mainly on the Divjaka region and less on that of Frakulla. Reduction of exploration activities is caused by the high costs of well drillings and increase of difficulties to discover new commercial gas reserves.

Summarizing, the total proven reserves of natural gas in the country are some 57 million m3N. Drilling in the Mesiniani-Tortoniani deposits guaranties the needs of Ballsh refinery and Albpetrol self-consumption. Delvina is another very effective gas field to continue drillings and to produce associated gas.

There are no imports.

Gas Prices

Actually there is almost no gas consumption in Albania, so there is not any gas tariff system established so far.

Coal and Lignite

Supply and use of coal has declined from approximately 644.5 ktoe or 22 % of the supply with primary energy sources in 1990 to 24 ktoe in 2008. Coal contribution in the Albanian energy market has declined due to the following reasons:

• Coal extraction technology is very old,
• Our domestic coals are of lignite type with low calorific values, high content of sulphur, humidity and ashes. The characteristic of indigenous coal sources is that they are extracted from 200 m depth with a lower thickness of layer of 70 –100 cm,
• Extraction and enrichment costs are very high,
• High content of sulphur and ashes would need environmental protection plants that mean a bigger pollution and a higher cost for a generated energy unit.

After a peak of 2.2 Mt in 1989, production fell quickly until 2001, down to 0.02 Mt. In 2009, lignite production amounted to 0.12 Mt. The lignite is produced from 8 mines (Memaliaj, Mborje-Drenove, Gore, Verdove, Alarup, Krabe, Mushqeta and Priske). Albania does not import coal. Important losses are incurred because of the fact that the facilities used to extract lignite are outdated.

[Enderdata]

Renewable Energy

The major renewable energy source used in Albania is hydro-power. Due to this abundance of hydro-power with very good conditions, the promotion of other renewable energy sources was neglected in the past. NAE/AKE and the Albanian-EU Energy Centre are quite active in promoting promising options. The options of interest are discussed in the following sections. Albania has a major hydropower potential of which only 35 % so far is being exploited, leaving additional estimated resources of around 2000 MW for a total potential generation of 6.5 TWh. Beyond the need for rehabilitation and new investments, hydropower remains highly dependent on hydrology and has, in some years, been affected by drought/dry periods.

In the Albanian energy balance, the consumption of fuel wood is quite significant. Wood is especially used in the countryside and in the mountainous areas of the country. Wood is also used by small and medium scale industries. In many mountainous regions the use of wood is quite common.  Decline of fuel wood had a positive effect on the reduction of wood cutting for energy scope but on the other side affected negatively by shifting the load on the electricity, especially in the residential sector. Forests cover a large part of Albania's territory with proven reserves of fuelwood estimated at 125 to 250 Mcm (or 6 Mtoe). 

Penetration norms of solar panels have been selected based on the experience of neighbour countries such as Greece and Turkey, which after 30 years of experience have managed to provide domestic hot water produced by solar panels at the national level in values of 80-85%. The utilisation of solar panels results by saving electricity, environmental protection and economic profitability in household and service sector. Investment costs will be shared between state budget (for hospitals, kindergartens, schools, etc) and private subjects (households). Some of main directions of the energy policy making possible the spread out of penetration of solar panels are:

1. Continuing of the so far steps as regards payment of the electricity bills.
2. Continuing of the tariff reform toward a higher electricity prices.
3. Necessarily installation of solar panels in tourist hotels

Enforcement of the law on fiscal facilities would be a valuable measure to enhance the use of renewable sources. NANR (AKBN) and EEC should undertake awareness campaigns to present the advantages of these sources.

[seenergy, IEA]

Hydroelectric Resources

Albania is known for its enormous hydropower potential. So far, the country has exploited only 35 percent of the total potential. The average output from hydropower is 4,169 GWh. Total hydropower reserves are estimated at around 2000 MW. Potential annual generation may reach up to 10 TWh. New plants in the southern part of Albania (Vjosa and Devoll) have been successful in exploiting nearby rivers.

The Albanian Power System (APS) was created in 1957, but its origins come long before. The total installed capacity is about 1,650 MW from which 1,446 MW (87.2 %) are HPP-s providing more than 95 % of total energy supply. Three HPP-s constructed on Drini River (north of Albania) compose 80 % of the country's installed capacity. The annual generation capacity of the country has been approx. 3,300 – 3,500 GWh, reaching 5,800 GWh in 1996. With an average rainfall of 1,500 mm and an average available head of about 600 m, there is still an enormous potential to be developed.

The energy production is highly dependent on the hydrological situation. The system faces great difficulties in dry years. KESH, the operator of the APS, is also encountering problems with the technical and "non-technical" losses. The electricity demand has increased considerably over the last 10 years. The residential sector consumes over 60 % of electricity production. Most heating systems are run by electricity. Through insulation of buildings about one third of energy for heating could be saved.

There will be a big impact on investment on SHPPs after the National Strategy for Energy will be adopted. Apparently 20 million Euro of investment for each year for the next 15 years. This will give very big impetus for the economical development of remote areas where those resources are located.

Based on the whole list of SHPPs, which already have received concessions, it is possible to know their annual full load in terms of hours.  In addition, based on this it is possible to calculate the annual electricity generation from SHPPs.
It is estimated, that in 2025 SHPPs will contribute approximately 1163 GWh/year - this equals 8.9% of total electricity demand based on the scenario presented in the National Strategy of Energy for Albania. The rehabilitation/upgrading/construction of Small HPP will bring a number of positive impacts to the economy of Albania:

•    Activation of national and international private economic recourses: Professionals and foreign companies, together with Albanian subcontractors may realise the planning of rehabilitation or upgrading and construction of new HPP. This will means additional employment for a considerable number of persons in the rural regions of Albania, where the unemployment rate is very high. Only electro-mechanical and hydro-mechanical equipment needs to be imported.

•    Use of local renewable energy resources and reduce electricity imports: At present, Albania is importing annually from 2500 GWh to 3500 GWh to meet its demand for the period 2006-2010 (up to the moment of the construction Vlora CCGT).

•    Security of Electricity Supply: Albania is facing great problem for securing the electricity import from the Balkan Electricity Market. Bulgaria was the main exporting country, but due to the closing of one nuclear power plant the whole region is facing additional difficulties in securing their electricity supply. This should serve as a great incentive for the  promotion of new or the rehabilitation of existing of SHPPs.

•    Supplying electricity for a sustainable environment: SHPP operation avoids green house gas and as well as other emissions caused by thermal generation. It is estimated, that the construction and operation of SHPPs could reduce the green house gas emissions by 0.49 ton/MWh. Considering a capacity of 100 MW with a generation of 500 GWh/year the reduction will be  about 245000 tons of CO2 equivalents. These reductions of green house gases could be used in the context of the Clean Development Mechanism (CMD) of the Kyoto Protocol.

•    Reduction of transmission and distribution losses: The generation of electricity near the consumer, reduces the transmission and distribution losses in the electrical network in Albania. Actual transmission and distribution losses in Albania are 25%.

•    Improvement of electricity supply in remote areas (regions): Many remote areas of Albania have to deal with the absence of electricity for about 1-2 hours/day, especially in winter time. There are a lot of interruptions of the electricity supply in these regions, because of non-efficient network, high cost of supplying and off-standard levels of pressure. SHPP that will be constructed and rehabilitated will improve dramatically the electricity supply in those regions.

Wind Energy

There is potential to tap wind energy on the Adriatic coast. However, it has not been studied in detail due to a lack of reliable data. The current instability of Albania's electricity grid would be an obstacle to connecting windmills.

Data is only available for the following areas of Durres, Kryevidh, Xarre, Bulqize and Milot. The EU objectives for the next 20 years, is to secure 20% of the electricity supply from wind. In Albania conditions, it is estimated that by 2020, only 4% of the generated power can come from wind energy (some 400 GWh/year). This implies to give priority to the construction of 20 windmills nearby 20 pumping stations that are situated along the Adriatic cost safeguarding the land from floods. Based on some studies carried out by the NAE, in the costal lowland nearby pumping stations (which demand from the power system around 30 GWh/year or 0.7% of the actual domestic power generation), interesting zones from the viewpoint of wind potential are identified. In these zones average speed of wind, throughout the year, is around 4-6 m/s (10 m height), and the average annual energy density of 150 W/m2.

There are major plans for developing wind energy in Albania in the next few years with significant investment in a proposed 1300MW new generation capacity from wind. It's an ambitious goal, because at present there are no wind projects in the country. Albania is also proposing to become a wind power exporter agreeing to export surplus wind energy to Italy via a planned undersea power cable.

[EBRD, IEA]

Solar Energy

Solar water heaters are proved technologies to supply domestic hot water to the service sector (e.g. hospitals and hotels), industry and households. However, low electricity prices and non-payments are obstacles to their widespread installation and use.

Solar panels are available on the market and significant volumes have been installed. In 2005, a total of 6700 m2 were installed (60% by services, 40% by households). This is three times the 2002 figure and brings total installations to 32000 m2 (equivalent to around 50 GWh per year or 1% of electricity consumed by households in 2005). Using the equipment rate in Greece, it is estimated that Albania's total potential for solar panels is 125 MW (or 1.8 million m2), which would justify the development of local manufacturing to substitute imported equipment. UNDP is supporting a programme (2007-2012) to install 50000 m2 of solar panels based on grants and fiscal incentives.

The largest solar thermal heating system currently operating in Albania consists of three sets of solar panels totaling 48 m2 that are installed from Center of Energy Efficiency (founded by EU and National Energy Agency).

Albania belongs to the sub-tropical belt (zone) as well as the Mediterranean climatic zone.  Overall, the country has a hot, dry summer and a relatively short and mild winter.

[IEA, EBRD]

Geothermal Energy

There are many thermal springs and wells in Albania, which represent a potential for geothermal energy.  Currently, steam and hot water from geothermal sources gross approximately 84 TJ of energy.

The geothermal situation in Albania offers two directions for exploitation of geothermal energy:

·          The use of thermal water springs and wells of low enthalpy, which covers a wide territory from South, near the Albanian-Greek border to the Northeast districts in Diber region. The water temperatures reach values of up to 600C.

·          The use of hot thermal waters, brought out from deep abandoned oil and gas wells and single wells, for geothermal energy in a form of a "Vertical Earth Heat Probe."  At 2000 m depth the water temperature reaches a value of about 48°C.

In many deep oil and gas wells there are thermal water fountain outputs with a temperature that varies from 32 to 65.5 °C. These waters are from different depth levels (800-3000 m) of limestone reservoirs and sandstone reservoirs.

The thermal springs and wells in Albania are located in three areas:

·          Kruja geothermal area - a zone that has the largest geothermal resources in Albania, with a length of 180 km and a width of 4-5 km. It starts on the Adriatic coast, north of Rodoni Cape in Ishmi region, and continues from Tirana, Elbasani up to southeastern Albanian-Greek border and extends to the Konica district in Greece.

·          Ardenica geothermal area- Located 40 km North of Vlora. The area extends on the part of peri-Adriatic Depression where the Vlora-Elbasan-Diber transverse passes.

·          Peshkopia geothermal area- Situated in northeastern Albania, in the Korabi hydrogeologic zone.

Thus, Albania has geothermal energy resources, which can be direct use as alternative, environmental friendly energy.

Resources of the geothermal energy in Albania are:
• Natural springs and deep wells with thermal water, of a temperature up to 65.5°C.
• Heat of subsurface ground, with an average temperature of 16.4oC and depth Earth Heat Flow.

The construction of the space-heating system, based on direct use of ground heat, by using of the shallow borehole heat exchanger (BHE)-Heat Pumps systems, is actually the most important direction of the use of geothermal energy in Albania.

[Frasheri, 2010]

Biomass Resources

Data on forest resources are based on inventories done every 10 years from the Forestry Directorate subordinated to the Ministry of Agriculture. Forests are classified in these major categories:

• High forests which represent 47-50 % of the total wood resources,
• Copses which are 29-30 % of total resources, and
• Bushes, which are 24-25 % of total wood resources.

Biomass energy could be important in Albania’s future, consisting of the following four main resources: urban wastes, agricultural residues, forest residues, and animal wastes. The potential of Urban wastes from the main Albanian cities was calculated as approximately 405615 Toe-ton oil equivalent, predicted for the year 2010.

The energy potential from agricultural residues was calculated at approximately 43,000 GW.  Forestry biomass resources were calculated to be approximately 460 million GJ in 1995. The energy potential from animal residue's was calculated at approximately 12,700 GJ in 1995 with a trend to be increased in the future.  These numbers should be considered estimates; a more comprehensive study should be carried out for real validation.

[EBRD]

Support Mechanisms and feed-in conditions for electricity from renewable energy sources

Current Feed-in Tariffs Regime

A draft specific law on renewables (not only on hydro resources) is needed and has been in a drafting stage since November 2009. The new law should address the barriers arising from existing legislation, including the creation of a more stable climate for private investors. The Albanian Policy Reform needs to consider:
•    The tariff structure and pricing system.
•    Administrative procedures.
•    Deployment of a new technology.

1. Tariff structure and pricing system
Up to now, the tariffs for existing and new SHPP have been based on different formulas. For existing SHPPs, the ERE`s decision No. 5, dated 26.01.2007 applies the following formula for tariff calculation: PU = (PR-PT) * (1-LD%)
where: PU – Standard price for producers with installed capacity up to 15 MW; PR – Average retail price of electricity for tariff customers; PT-Transmission service tariff approved by the ERE; LD – percentage of technical losses in the distributionnetwork accepted by the ERE for the purpose of calculation of the unified price according to this formula.

For new SHPP, Government Decree No. 27, dated 19.01.2007 applies. The Ministry of Economy, Trade and Energy (METE) developed a tariff formula to be applicable for new SHPP Concessions granted under the Concession Law of December 2006. For these new SHPPs, the Government Decree No.27, stipulates that the ERE shall approve a unified tariff for all SHPPs given through concessions. The FiT is based on the import price pf electricity for the previous year as follows: 
PU (lek/kWh) – Weighting Average Price of Imports for preceding year in €ct/kWh * Coefficient 1.1 (to take into account avoided losses) * Average Exchange Rate of Euro/lek for preceding year.

This method is based on a simple formula and may be preferable for the regulator. Moreover, in taking into consideration the import price of electricity it links the tariff to avoided cost, which limits the cost to consumers. The average import price of electricity in the last six years has been volatile. The volatility has tended to deter banks which are expected to finance about 60% of the capital new investments. Imports over the last 8 years has been increased for the period 2002-2008 from 30.18 Euro/MWh up to 79 Euro/MWh and than on 2009 has been dropped to 41.15 Euro/MWh. It is worth noting that the import price grew continuously between 2002 and 2008 but fell significantly in 2009. This decline was related to the fall in demand in the whole Balkan region in the wake of the global financial crisis but was also affected by a very good hydro year in Albania and other Balkan countries. However, that significant decline in import price coincided with the analysis phase for several small hydro projects to which Albanian banks had considered offering loans. This price uncertainty is behind the relatively high requirement for equity share (40 %) in funding schemes for projects as well as higher loan interest rates. In the First Draft Law on Renewable Energy Sources (RES), only one formula will apply for existing and new SHPP:
PU = PR * (1 – LD%) * Z
where: PU – Standard price for producers with installed capacity up to 15 MW; PR – Average retail price of electricity for tariff customers; LD – Percentage of technical losses in the distribution network accepted by the ERE for the purpose of calculation of the unified price according to this formula; Z – A coefficient higher than 1, set by the ERE according to the type of renewable energy used and considering also climate change aspects.

The application of the above formula for both new and existing SHPPs means that the import price will cease to be relevant; the FiT will depend instead on the retail price of electricity and the technical losses in the distribution network. The transmission fee will not be considered anymore. The Z factor will increase the FiT according to the renewable energy source used. The following are the implications of the new formulation:

•    Domestic electricity price: This is currently below cost and can be expected to increase in future years, raising revenue for RES projects.
•    Technical losses: These are currently high and can be expected to reduce in future years, which will raise the feed-in tariff paid.

[The Energy in Albania Newsletter, June 2011]