Approach to develop sustainable projects in Albania

Approach to develop sustainable projects in Albania by Lorenc Gordani

Analysis by Dr Lorenc Gordani

Head of the Department of Professional Masters

Tirana Business University (TBU)

auction; wind project; EBRD; power exchange; Investments Arbitration; Albanian Judicial System; Concessions Awarded; Long-term Partnership

The World Economic Forum’s Energy Transition Index 2021 has recently ranked Albania as the best in the Western Balkan region for res investments, taking the 25th spot. Indeed, with twenty new plants entered production over the last year, out of which 18 in hydro and two photovoltaic, the progress is impressive for a total installed capacity estimated at 227 megawatts (MW).

Today, the total installed capacity of private generation power plants has reached over 1058 MW. Albania was the first country in the Western Balkans to introduce an auction for renewable energy with the support of the ECS and the European Bank for Reconstruction and Development (EBRD). A new framework that sees the engagements for developing around 700 MW capacity in alternative renewables within 2020.

The first contract was awarded to the French renewables company Voltalia to build the large-scale 140 MW Power Plant Photovoltaic of Karavasta, which started the construction in February 2021. In March, Voltalia has also won the contract to construct and operate a 100 MW solar plant located in Spitalla, Durrës. Meanwhile, the Albanian Power Corporation KESH has started installing a photovoltaic plant on the dam by 5.14 megawatts-peak (MWp). Soon, a competition will be opened to construct a floating photovoltaic plant by 12.9 MW at the Vau i Dejes Hydropower Plant. The EBRD has extended a 9.1 million euro loan to KESH.

The deployment of alternative renewable resources has become a vital priority for Albania. As a result, the country has adopted the most favourable net-metering option regime, fully operating from June 2019. The Agency for Energy Efficiency (AEE) has issued the first energy performance certificate in February 2021. The AEE announced on May 2021, that it aims to reach 4360 Energy Performance Certificates in Buildings in less than three months.

In April, the Albanian Parliament approved the law on a particular procedure for negotiating with Bechtel International to design and construct the regional strategic Skavica Hydropower Plant.

At the end of 2020, in June Albania has announced the launching of the country’s first hybrid auction for utility-scale onshore wind power plants. The auction is prepared with the support of EBRD and is expected to bring a build of a total capacity project by 150 MW with support measures.

Many new pipeline projects, even of regional interest such as IAP and terminal LNG, extend the CCGT Vlora with two new blocks, and options of supply, are opening a golden age of gas in Albania, bust by the Memorandum of Understanding (MoU) reached among ExxonMobil, Excelerate Energy and the Ministry of Infrastructure and Energy in Woodlands, Texas, on 12 March 2021. In this context, another MoU, this time for the Underground Natural Gas Storage Project in the Dumrea area was signed on 3 March 2021, by the Minister of Infrastructure and Energy with the Italian company SNAM.

Overall, the above summary presents itself as one of the most favourable frameworks for foreign investors in the region. As a developing country, of course, there are concerns related to public policy and legal framework frequent reviews. However, its trend is a consolidation toward harmonisation with that of the EU.

The legal framework has been up to here in full advantage of investors, and an investor does not have to worry about the changes because, in any case, the rule among parties are the technical studies and contractual agreements (means investor rule the destiny of its investment).

However, the energy issues are complex and in continuous transformation and luckily, for their nature of investments, in-depth analyses are needed. On the contrary, the above flexibility offers excellent opportunities for investors if accompanied by appropriate due diligence and expertise.

The investment is not only building something but operate, deliver energy, offering service and so on. Then essential is the understanding that this process (referring to the preparing the technical studies) is an opportunity to consider and resolve the deployment of electricity issued from any aspect they may test in practice in the upcoming liberalise and integrate market. Then, the investment decision to be made is typical to be judged about the return of investment (e.g. based on IRR, NVP and similar). In substance, it means based on the LCOE, or the cost of a unit of energy produced, that generally is found in the cost/value (mainly investment, operation, taxes) and output (quantity of energy produced and price sold).

The investment is a kind of partnership with both public authorities and financial stakeholders. All have to be followed in parallel contacts with local developers and companies, investing in the company’s presentation and transparency of projects, even through a company’s web page. A more suitable situation for this is opening at least a representation and participates actively in all related to energy word in Albania.

Then all the above work will be translated in capacity to the investor to be part of the energy system in Albania. But in the last, the project’s success is not only mitigating the cost but also on the increase in the outcomes. Closely ALPEX, established in October 2020, will be liquid and part of regional ones, including the options of coupling with region and Italy.

This is because the electricity will follow the signal of prices, and the interest is catching the peak periods, and delivering the energy directly to the final consumer. To do such, the investor can benefit from the possibility of storage offered by hydro in Albania, making it competitive in any market of reference.

After the successful finalisation of an international auction, all projects are now prepared in a package (which removes any investor burden). In addition, at least for some strategic sectors and smaller size deployment (followed with authorisation procedure), Albania’s investments are still guided by the investor, and the authorities are interested in proposing.

High consideration should be based on the country’s strongly oriented diversification, based on the integration of hydro with PV, wind, biomass and natural gas and other local particularity. In addition, the government is opening toward the distribute resources and the energy efficiency that made primary the management and the qualified human resources.

Finally, concluding with a simple example, it is always advised to go head with preliminary and small steps before aiming for a big project. Then, notwithstanding the success in other experiences, a must is to take some action to test the reality directly and see if Albanian is prominent for its specific capacities. To be more concrete, consider as very close the opening of a big tender up to 150 MW in the wind, within the short term available it will be challenging to present a realistic offer. Then, it is recommended to consider starting with a small project, such as the project by 3 MW. A size that can benefits from a feed-in tariff of 75.64 euro/MWh without disbalances offering a significant advantage.

Then, the company has to use the experiences created up to now in loco and create the ones itself with persistent approach, always using the long term European and industry standards, tested from different perspectives and involved in various activities.

auction; wind project; EBRD; power exchange; Investments Arbitration; Albanian Judicial System; Concessions Awarded; Long-term Partnership

The here opinion editorial (Op-ed “Approach to develop sustainable projects in Albania”, Ceenergy News, 15 Qershor 2021) has been prepared and published earlier for the niche media Ceenergy News, dedicated to energy in CEE. To each, I was invited to briefly discuss sustainable energy in Albania, focusing on renewable projects and the challenges to overcome for foreign investors in terms of the regulatory environment, state support schemes, etc.

Infinitely more, of course, it remains to be said and we often the opportunity to address them is presented across the various subjects in the master department run by me at TBU University of Business, and develop as a guest lecturer at the Metropolitan University of Tirana (UMT) and Barleti University (UB), Public University of Shkodra “Luigj Gurakuqi” etc., including ongoing activities with AFD/Gas Suez, IRENA, European Delegation, 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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