Annalise by Dr Lorenc Gordani
Legal Adviser in Albania Energy Market
At the begin of February 2017, the Parliament of Albania passed the Law on Promotion of the Use of Energy from Renewable Sources. A new legal framework that has been strongly supported by the Secretariat of Energy Community, with the aim to positively affect legal framework to improve both compliances with the acquis and investor confidence.
In the framework of the WB6 Sustainability Charter, the country has agreed to step-up the ongoing efforts to reform and integrate electricity markets and to become a part of the global response to climate change. The status in promotion of renewable energy, as included in the implementation reports, shows that the transposition and implementation of the Renewable Energy Directive 2009/28/EC is still a priority.
Hydropower has long provided energy as power generation in Albania. Today the country is committed to the deployment of 640 MW among PV and Wind to reach the binding targets of 38% within 2020. Notwithstanding implemented to a full extent yet lags behind, due to insufficient administrative capacity, limited capacity in the transmission and distribution, systems impede the provision of priority access for renewable energy to the grid (this last already reviewed in the begin of December 2019), etc. Besides, several challenges exist raises the transaction costs for businesses.
Administrative barriers that lead to a long project development period and a higher perceived risk. Then, with the introduction of the new law, it is hoping the establishment of a one-stop-shop office able to lead to any game-changing benefits for project developers. Most countries in the region are still working to pursue this path. However, access to the market is partly reported to work for international investors only with the help of local partners who are aware of the context and have better access to local institutions and procedures.
The new PPA was adopted in June 2016 in accordance with the association of priority small producer. Notwithstanding, a lot of improvements and even today (pre-)PPA awarded cannot address entirely the bankability issues. Especially it is the need of particular care on providing technical expertise and advisory support for the pre-feasibility study or business plans that reduce the investment risk and guaranteed stable future revenues earlier in the development process. Consequently, even the interest costs and in general, the WACC index will be aligned to that of the EU countries.
However, the auction process is waiting to stabilise the investment context and address major hurdles to renewable expansion. Support schemes across are now been revised to comply better with the new EU state aid guidelines, which provide for the gradual introduction of competitive bidding processes for allocating public support (e.g. PV Akerni project). The current feed-in-tariffs (FIT) for small hydro systems will be maintained for the installed capacity up to 2MW, and for PV and wind respectively with capacity up to 2 MW and 3 MW.
To improve the investment framework and tackle the significant challenges hindering a more accelerated renewables deployment has introduced more market-based support schemes, moving from FITs to feed-in-premium (FIP) systems for larger installations. The allocation of FIP tariffs shall be determined via a competitive, non-discriminatory bidding process (auction). Due to limited competition in the energy markets and the early stage of renewable energy development, there are, however, concerns about the auction scheme being a suitable model in every process.
In last, the overall ability to balance the system by hydro capacity is foreseen as an asset to mitigate the issues of integration of renewable. However, inevitable problems of the grid exist in the period of intensive use of it (i.e. strong rainfall) that a part of damages cause an increase of energy putting in grid in same time by small priority producer and request that grid operator to be restrictive regarding the amount of renewable energy that may be integrated into the grid. An aspect that part millions of investment put every year to physical infrastructure needs the increase of the capacity in the management of the network.
Disclaimer: All opinions expressed pertain to the author. While all efforts 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 its related topics, may contact us through “firstname.lastname@example.org”.
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