Challenges on build-up a sustainable energy sector in Albania

Challenges on build-up a sustainable energy sector in Albania

Analyse by Adv. Lorenc Gordani, PhD

1. Drives shaping the future of energy in Albania

1.1 Rebalance of the energy paradigm

Today the forces shaping the future of energy based to the drives of European integration process. So, Albania even without being part of the EU, regard the energy sector, due to its involvement in the Energy Community Treaty (EnCT) and global agreements in climate changes, has adopted already the legal framework, is strengthening the institutional participation, and have to work more on enforce the putting in practice the engagements taken at international level.

Notwithstanding, this “nobles” drives, the create of an internal market of energy for the MS putted in act from a ‘92, has taken a long time and is currently underway at different speeds in all EU countries. Instead, the deregulation started first in England since the early 1980s, rather than the integration itself, to which this country has always been reticent, has seen the main driver to the opening up of the opportunities for private capital and increasing competition and innovation for the final consumer.

Then despite the above-mentioned political commitments, it has to be highlight that the liberalisation and sustainable development (i.e. renewable resources, energy efficiency, etc.) has the potential itself to bring benefits to consumers, directly reducing emissions and increasing supply security. Policies that are also related to the improving of the competitiveness, the innovation, the comfort living, and the employment, providing further incentives at regional, national and local levels.

Indeed, since mid-2000, all the drives have converged toward the energy trilemma: economic growth, affordability and security of supply. In this regard, if we referee to the last report of the World Energy Council, the current generation structure in Albania, based entirely on hydropower sources, ranking us 20th on environmental sustainability, but regard the two other pillars of security and energy affordability positioned at the 76th and 90th among the 125 countries examined. A weakness that in fact is not necessary to be find out from international institutions, as drought or cold weather has systematically highlighted as an issue to be addressed as soon as possible.

1.2 Disruptive force shaping the future of energy

The forces that drive change in the energy industry have shifted over time. For decades, finding affordable energy sources to meet a growing demand has been the key force in the industry. After the oil crisis in the 1970s, security of supply started to play a vital role. Today the energy word is in a strong change and the focus is shift towards sustainability.

Accelerated urbanization will have a major impact of energy demand on the urban areas that are becoming more and more the bigger consumer, shaping the future of energy through the distribute resources, energy efficiency solutions, smart cities, etc. In specific, in Albania one third of the total number of consumers is located in the capital and the rest in the largest urban and rural areas of the western lowland with high solar radiation.

Climate change and technological breakthroughs are the most relevant megatrends shaping the future of energy. Changing that influence policies and regulation, investment decisions and consumption behaviour. Technological and economic changes in the energy industry which will be reverberate through the entire economy. Then to assure the catch of tomorrow trend we have to invest in the today education of new generation and young energy professionals.

1.3 Albania plans on energy efficiency and the boost of pilot projects

Actually, the energy intensity in Albania, similar to other WBs economies, is very high compared to the average of the EU. The country remain 3 times more energy intensive than the EU 28 at large and 1.6 times more than new member states from Central and Eastern Europe. A situation that make the energy efficiency to be considered as the biggest energy resource – as it is cost effective and widely available! In more, energy efficiency may also enhance energy security, while at the same time decrease the emissions.

On above, the residential and transport sectors represent the largest components of total final energy consumption, accounting up to 70% of the total. Cutting it will contribute towards much-needed economic growth and reduce reliance on imported hydrocarbons. In more, delivering such savings would have a significant impact on trade balances, and public and household budgets, as well as protect against energy tariffs adjustments, contributing in final to the economic growth.

Then, Albania as the others Energy Community member have already formally adopted three Directives, on Energy Efficiency, Energy Performance of Buildings, and Energy Labelling of Products. Notwithstanding the above adopting, putting the energy efficiency rules, norms and standards in practice it was shown a tough challenges. A process thought to be kick-off by mandatory audit for large energy consumers, new facilities or existing buildings subject to substantial reconstruction, or all entities applying for a funded program from the Energy Efficiency Fund.

The implements process, have seen in the last months the adaptation of the 2nd and the 3rd Energy Efficiency Action Plan (EEAP). Then, in this stage essential will be the speedy adoption of the set of by-laws to implement the new legislation by Albania’s, as well as the setting up of a dedicated energy efficiency fund, the launch of the process for licensing the auditors and the complete of local energy plans, which will enable the effective financing of measures and projects in the field of energy efficiency.

1.4 Albania Commitments on Climate Change

Albania’s contribution to the global greenhouse gas emissions is relatively low, estimated at an average of 9,4 million ton/year of CO2 eqv. This is because over 99 percent of Albania’s electricity is produced from hydro sources and high-energy intensity industries are no longer operating.

However, the country was been part of both the United Nations Framework Convention on Climate Change (UNFCCC), and subsequently the Kyoto Protocol. The above is also complete by the engagement taken within Energy Community Treaty, and based on signed the Paris Agreement on 22 April 2016. Following which, in line with the EU 20-20-20 objectives, Albania has presented the Intended Nationally Determined Contribution in September 2016 meeting held in New York, aiming a reducing CO2 emissions compared to the baseline scenario of the 2016 by 11.5% reduction in 2030.

Then, it is followed with the preparation of the draft law on “Climate Change” and the draft DCM for “Monitoring and reporting of greenhouse gas emissions” in conformity with the National Mitigation Strategy & National Mitigation Action Plan supported by the European Union Delegation through the IBECA.

The above level of targets that will be further elaborated under the Integrated Energy and Climate Plan along 2018. This would mean that Albania’s greenhouse gas emissions allows to have a smooth trend of achieving 2 tons of greenhouse gas emissions per capita by 2050, which is been taken as a target for global contraction convergence on greenhouse gas emissions.


2. Dilemmas on the future scenarios of the energy

2.1 The need for new power resources

The developments of Albanian economy, is continually rising the demand of the energy consumption. Historically it is faced by the inadequacy of production from national sources. Since 1999, with few exceptions (only 2010 and 2016), the country has had a deficit in covering the demand for electricity, transforming it into a large net importer from the countries of the region. This was reflected in the high financial costs that have frequently undermined the Albanian electricity system and the state budget finances.

As for the future, by 2030 the demand for electricity, based to the Regulatory Authority of Energy (ERE) estimation with an expected growth rate of 1.5%, and the regional study “Sled SEE 2016” of 3%, is forecast to pass from currently 7.1 TWh to 10.8-13 TWh. A substantial increase that make mandatory the build of new generation power plants.

Following the up to now policy the new resources expected to come from sources based on low costs (LCOE) such as the up to now hydroelectric using a potential of over 41 billion m3 of water from an average height of 750 m. Factors that has attracted many local and foreign companies, with international reputation, to see with interest the invest in the hydroelectric sector. And the lately, the favourable provision of new res policy and law, have create a tendency of the rise of interest of many local companies always with some connection with international photovoltaics company.

2.2 Strategy outlined on base line scenario

Following a long process last several years, Albania finally on 26 march 2018 launched a new energy strategy by 2030. A strategy prepared in framework of USAID programme to provide technical assistance to support a Long-term Low Emission Development Strategy. This strategy, based on an updated LEAP (Long-range Energy Alternatives Planning System) model for Albania.

Then by first, a baseline scenario was established, which represents the most likely evolution of the Albanian energy sector. Next, a set of scenarios were developed that represent alternative approaches to achieving the strategic goals for the country. Further, there are develop the main matrix to quantify the impacts of alternative energy policies and strategies, making use LEAP modelling, and based to baseline scenario, calibrated to the 2014 official energy balance and extended to 2030.

2.3 Energy strategy alternative scenarios

Then, based to the baseline scenario have been outline five possible scenarios for the future of energy. First, the Renewable Energy Scenario is based upon Albania’s obligations as a Contracting Parties to the Energy Community Treaty to transpose and comply with the EU Directives on the promotion of the use of energy from renewable sources. One of the requirements of this Directive is the preparation and adoption of a National Renewable Energy Plan (NREAP), adopted by the GoA in 2016 and update in the beginning of 2018, which sets a binding national target of 38% of renewables in the final total energy consumption of the country in the year 2020.

The Energy Efficiency Scenario is also based upon the country’s commitments under the Energy Community Treaty, the new law on Energy Efficiency No. 124, dated 12.11.2015, and the new law on Energy Performance in Buildings, No. 116, dated 20.11.2016, etc. Specific measures was been developed from the 2nd and 3rd drafts of the National Energy Efficiency Action Plan (NEEAP) finalised at December 2017.

A Natural Gas Promotion Scenario is designed to calculate the amount of the natural gas, which can penetrate in the different demand sectors (residential, service, industry, transport and agriculture) as well as power generation from the fuel coming from the Trans Adriatic Natural Gas Pipeline. In last, a Combined Scenario was prepared that analyses the implementation of EE measures, the RES technologies, and the penetration of natural gas as strategic fuel. In addition, the Albania-Kosovo Coupling Scenario examines an integrated operation of the Albania and Kosovo electricity generating plants.

2.4 Strategic metrics of Albanian energy sector scenarios

2.4.1 Improve reliability and security of energy supply

To help the guide the development of the Albania energy sector, the strategy have been further developed, conform the three criteria of trilemma reported in begin, calculation the overall impact (costs and benefits) of the various policy scenarios related to achieving those objectives. Metrics (or quantitative measure) are carried out for the five core Albania scenarios: Baseline, EE, Gas Promotion, RES and Combined, plus where comparison can be made, the impact of coupling the Albania and Kosovo scenarios.

One of the key metrics associated with security of supply goal includes reducing imports of electricity and oil products. Figure shows the percentage of all energy imports as a function of the total primary energy supply (TPES). The EE scenario is clearly the driver for reductions in imports, and the Albania-Kosovo coupling scenario shows a dramatic improvement in import dependence (24% in 2030). The RES scenario does not affect imports, and the Gas promotion scenario significantly increases import dependence. However, the combined scenario shows the greatest reduction in imports (32% in 2030) compared to the Baseline.

Another metric associated with this goal is to improve energy efficiency, including achieving the targets according to the third NEEAP. The RES scenario shows a small improvement in final energy use, but the Gas Promotion scenario increases final energy use as gas largely replaces electricity from hydropower. Consider the quantity of energy need to be generate figure shows that the EE scenario keeps electricity consumption flat between 2020 and 2030. The Combined scenario has lower electricity generation than even the EE scenario.

A further metric under security of supply is the utilization of renewable energy by meeting the RES targets according to approved NREAP.  Figure shows the percentage of RES reduce dramatically on Gas Promotion scenario that displace hydropower generation used for building heating.

2.4.2 Improve cost-effectiveness of energy supply systems

Figure shows that the greatest improvement in energy intensity of GDP, which is an overall measure of energy sector cost-effectiveness, improves most significantly for the EE scenario, and that the Combined scenario also shows important improvements, as well as the Albania-Kosovo coupling scenario address this metric. The greatest financial benefits result from the integrated Albania-Kosovo power system scenario, with a net financial benefit for both systems averages 75 million euros annually between 2017 and 2030.

2.4.3 Achieve INDC targets for GHG emission reductions

The sustainable metric for the energy strategy see it how the scenario contributes to reaching a GHG reduction target of 11.5% below the baseline in 2030. As shown in figure the EE scenario achieves a 27% reduction in emissions relative to the Baseline scenario. The RES scenario achieves a 9% reduction, but the Gas Promotion scenario increases emissions by 34%.

Thus, in conclusion, as seen by the above, in the energy world, there is always more than one solution. In this fluid framework, it is important the find out a right balance. In regard, if we want a change happen we need to start with the paradigm that transformation come not by the need (i.e. EU integration process), but by taking a guiding role through the prospect opportunity of sustainable development. To make it possible qualitative steps are required, that will make possible that a series of conventions, strategies, and laws not remain in theory or be limited by approximation of legislation, but go directly into the putting them into practice.

Disclaimer: The ownership and the opinion expressed pertain to their authors. While all the effort are made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations may differ and should be discussed with an expert. For any specific technical or legal advice on the information provided and related topics, contact us through “”.

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