Free Market Supplier activity in Albania

Free Market Supplier activity in Albania

Analysis by Dr Lorenc Gordani

Head of the Department of Professional Masters

Tirana Business University (TBU)

Free Market Supplier; international donors; power reform in Albania; Energy Regulatory Authority; unregulated market; public supply company; free market; Distribution System Operator

This short analysis aims to summarise the first activities of Free Market Supplier (FTL) and the generous loans offered by international donors to support the power reform in Albania.

The Free Market Supplier started the electricity trading activity a few months ago by the Energy Regulatory Authority, which conditioned the start of the sale of surplus energy in the unregulated market.

Referring to the legislation in force, the public supply company in the free market should purchase electricity from renewable energy sources. Initially, this energy is traded to cover the losses of the Distribution System Operator at the same price at which it buys this energy from the priority producers of electricity. In the case of created surpluses, they are traded in an unregulated market.

While according to official data, through the procedures carried out during April and May, about 4.3 million euros of electricity have been secured. In total, for the period April 24 to May 21, 77,600 MWh of energy were sold at an average price of 56.5 euros/MWh.

Further, the arrival of summer and the lack of rainfall have restored electricity purchases from the Free Market Supplier (FTL). According to official data, for the month of July, FTL has spent about 4.8 million euros on energy purchases, while compared to July last year, there is an increase of 1.8 million euros in costs. In July 2020, the purchase of energy cost about 3 million euros.

The increase in these costs seems to be influenced by the high energy price in Albania and Europe this year. According to official data, the average price at which power was purchased for July is around 106 euros/MWh, while in some purchase procedures it reached the high level of 129.95 euros/MWh and 134.91 euros/month paid.

Compared to July last year, this price is many times higher, given that last year the energy purchased for July cost an average of 40.85 euros/MWh.

Meanwhile, the Free Market Supplier has opened a procedure for purchasing energy for the month of August, 72 power selling auctions were successfully organized in unregulated (free market) during the first half of 2021. As a result, the total capacity traded has been reached the record level of 1250 GWh at a value of 57 million/Eur.

Intensified free-market activities, now also by the Free Market Supplier (FTL), have been identified as the best option to increase competition and reduce its procurement costs, supported by substantial loans to meet energy reform target in Albania.

To the above reforms, the fulfil has seen to be completed about 78 per cent of the $ 126 million available by June 30, 2021. However, according to the published data of the World Bank released, the still unspent $ 25.23 million will be impossible to be reallocated.

Meanwhile, the European Bank for Reconstruction and Development (EBRD) has recently approved the € 70 million loan that the Electricity Distribution Operator (OSHEE) requested.

The status on the EBRD website has been updated from “passed the final review pending approval” to “approved” which means that for the public power distribution company, a new project is launched after the closure of the recovery supported by the World Bank.

The project will support OSHEE with technical assistance to improve anti-corruption processes and governance, improve and strengthen health and safety procedures and management systems, enhance technical skills through training, and prepare an OSHEE intelligent network guide.

Further, the loan disbursement of 100 million euros, which will implement the reform in the electricity sector, will have to be done within March 2022.

The law on the approval of the loan agreement determined that its purpose is to support reforms of the Government of Albania in the energy sector. According to the published document, Ministry of Infrastructure and Energy and KFW will determine the details of the Program with a special agreement to be signed between them.

Along the discussed in parliamentary committees, the Deputy Minister of Infrastructure and Energy, Ilir Bejtja, informed that 75% of the components of the reform in the electricity sector had been implemented.

Meanwhile, representatives of the Ministry of Finance and Economic provided that this amount is expected to finance some components of the reform, such as the unbundling of the Electricity Distribution Operator, establishing the power, creating a retail energy market, etc.

Disclaimer: All opinions expressed pertain to the author. While all efforts are made to ensure this publication’s accuracy, 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, you can contact us through “lorenc_gordani@albaniaenergy.org”.

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