Wind energy deployment potential offered by market opening

Wind energy deployment potential offered by market opening

Analysis by Dr Lorenc Gordani,

Legal Advisor in Albanian Energy Market,

Professor in the Department of Justice at the UMB

Edited by Irsida Sheshi, M.A. in Public Administration

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Albania is a small country in South-Eastern Europe with high potential in natural resources, including the possibility to produce abundant electric energy from wind power. Although wind energy technology, as an energy resource, is distributed throughout the country, with total licenses amounting to approximately 2548 MW and generation potential around 5.7 TWh/year, yet no wind farm projects have been completed or are currently in the pipeline. Therefore, fundamental become the face of the main challenges that obstruct the wind energy deployment in Albania and the implementation options that are offering in practice by the transformation of the energy market in Albania.

In fact, the energy from the wind has been used in centuries for pumping water, windmills, and in recent decades, the focus has shifted to the production of electricity. Today, the winding machinery for energy operate successfully in isolated areas with capacity varying from several kW to more than 7 MW. Most often, they can be quickly installed and occupied only a small portion of land. However, in most countries, these installations face a common fundamental concern, such as the lack of continuous measurements of wind velocity spanning several years.

The above is inevitable also in Albania energy market — where like in many developing countries, the issue lies in the lack of continuous long-lasting measurements of the local wind speeds. Thus, notwithstanding that approximately two-thirds of the whole of its territory is hilly and mountainous (from north to the southeast of the country), and the coastline is in the direction of North-South, various companies interested to invest in this sector have found it difficult to decide whether it is worth to follow with such projects without the right estimations.

Therefore, even without being conservative, there are some issues, such since there are not data gathered with the specific purpose the wind energy potential remains uncertain. However, the historical records obtained from different meteorological stations in Albania shows an average annual wind speed of 6-8 m/s and an energy density up to 250-600 W/m2. Then, as identified by the Albanian Investment Development Agency (AIDA), there is an untapped wind power potential for at least 20 wind electricity power plants, especially along the Adriatic coast.

Nevertheless, the aforementioned limitations and accuracy of the above, there are already several domestic and foreign licensed investors exploring wind power production in Albania. According to the Albanian Ministry of Energy and Infrastructure, a series of zones have been identified with high, wind energy potential. An interest that up to 2015 is followed by a relevant proposed number of big projects from investors, reaching an approximate capacity of 2548 MW in Albania.

The first tranche of big projects, which came in early 2009, saw a significant number of total licensed windmills released to the capacity of 1367 MW. Technical studies showed promising potential between 5.8 m/s to 7 m/s with a load factor typically varying from 22% to 25%. This positive outcome brought a continued licenses-granting process during the 2009-2015 period in Albania. The results of the above, based on the information provided by the Albanian Ministry of Energy and Industry, showed roughly a total amount of 2548 MW with a generation potential close to 6 TWh/year (that is approximately the annual energy consumption of Albania).

Notwithstanding the above several plans for big wind projects in Albania, a further obstacle has been the intake of the energy produced. Since wind is an intermittent source, there is a need to consider load balancing for the system. The data from the Ministry of Energy and Industry in Albania, referring to the period indicated, and based on the grid structure, showed that the capacity of the Albanian power system to absorb and dispatch wind energy was only about 180-200 MW.

However, the situation is in a strong accelerated change due to big investments made, influenced by being part of an integrated European network as well as the development of power exchange options. Another aspect of interest for the investors is related to the openness of the market and the possibility offered today to adopt a balanced approach at a regional level since wind is an energy resource of low predictability. Another even more lucrative option is to integrate with the larger hydropower resources offered by the national market as an excellent balancer of wind power plants.

The opening of the Albanian market has brought also the possibility of reform on the remuneration mechanism. Until recently, Albania lacked a supportive regulatory framework for the deployment of renewable energy resources other than hydropower. However, the situation has changed over the past two years with the introduction of feed-in tariffs for projects up to three MW (or three pillars) in Albania.

The feed-in tariffs that are aligned with the Renewable Energy (RE) target of Albania set out in the National Renewable Energy Action Plan adopted in January 2016 and further reviewed in 2018. For the contract subscribed up to now, there are in place tariffs of 76 Eur/MWh. Each company can have more than one project, for a total of 70 MW. In addition, after public notice made along the Energy Charter Conference in Tirana by the Minister of Energy Belinda Balluku, it is already started with the presentations of first wind projects.

Further, on June 2019, Albania’s Ministry of Infrastructure and Energy Ms Balluku along a meeting conference made public online with the interested stockholders announced also the final approval of a net metering scheme for renewable energy. The scheme, open to renewable energy systems, includes wind and solar projects that do not exceed 500 kW in capacity.

Moreover, in the Albanian energy market are also introduced feed-in premium tariffs through the Contract-for-Difference (CFD) for renewable projects. The tariffs, tested up to now in large PV (the first auction for a 50 MW solar photovoltaic (PV) plant was launched in August 2018 with the support of the Energy Community Secretariat and European Bank for Reconstruction and Development (EBRD)) are granted by a competitive auction process (more than 40 companies expressed interest and three developers were shortlisted with the contract awarded to India Power Corporation Limited) and tariffs will have a duration of 15 years.

Additional support mechanisms for renewable energy producers in Albania with an installed capacity higher than 0,5 MW consist of customs duty exemptions for machineries and equipment used for the construction of new capacities. Based on this scheme, the developers are also entitled to benefit from tax exemptions from excise products (used in the build of the project).

Finally yet importantly, after the first energy project nominate a relevant contribution comes by the possibility to get the land with a symbolic price of 1 euro. As well as a support can come within the framework of procedures offered for the strategic investment but also the upgrade of structure for the e-licenses or the competence of the National Business Centre, which aims to operate as a one-stop-shop for shortening procedures and increasing the transparency of the licensing process. However, in this regard, there are still several administrative steps, which have yet to be integrated.

Notwithstanding the presence of all the above development, the most fundamental part is the opening of the energy market and its integration with the regional one. This makes possible to be open to other options that make feasible, renewable energy projects even without direct incentives. When calculating the “spread” among the cost of the development of energy production in Albania and the EU, as well as the high profitability by combining it with hydropower potential, Albanian potential offers a “surplus” value to energy markets, which makes it competitive, especially if combined with upcoming possibilities of green certificate schemes.

Therefore, Albania energy market offers a very attractive wind energy potential for its investors and energy market operator. The last development related to the opening of the power exchange and the approval of tariffs offers a possibility for further studies to enhance the available data, which could result in opportunities for comprehensive wind potential studies, at least those regarding the most promising sites. Nonetheless, considering the continuous reduction in the cost of available preliminary studies from international organisations, such as International Renewable Energy Agency (IRENA) — the untapped cost-competitive potential for the deployment of wind energy is calculated to be 987-2,153 MW in 2016, 5,201-6,990 MW in 2030 and 7,238-7,414 MW in 2050.

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 “lorenc_gordani@albaniaenergy.org”.

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