Indian-led consortium to build first major solar plant in Albania

Tirana Times
By Tirana Times November 12, 2018 11:37

Indian-led consortium to build first major solar plant in Albania

Story Highlights

  • The project would also mark the first investment by India, Asia’s third largest economy at a time when Asian investment in the country has received a significant boost with China’s 2016 acquisition of two major assets such as Albania’s sole international airport and the country’s largest oil producer

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By Ervin Lisaku

TIRANA, Nov. 12 – Albania has selected an Asian consortium led by India Power Corporation Ltd to build the country’s first major solar power plant in a bid to diversify current wholly hydro-dependent domestic electricity generation that often puts the country’s public finances in trouble in cases of prolonged droughts.

The country’s energy ministry says the 100 MW solar plant will be a private investment of €70 million in return for government commitment to buy electricity at a fixed price for a capacity of 50 MW for 15 years and allow investors to freely trade the remaining electricity in what would apparently pave the way for the Albanian energy market and the establishment of a long-awaited power exchange.

The winning consortium is led by India Power Corporation Ltd, one of the leading power generation and utility companies in India, which the Albanian government describes as guarantee for the project’s success. The project would also mark the first investment by India, Asia’s third largest economy at a time when Asian investment in the country has received a significant boost with China’s 2016 acquisition of two major assets such as Albania’s sole international airport and the country’s largest oil producer.

UAE-based Mining Resources FZE and Hong-Kong-based Midami Limited are also part of the winning consortium out of a mid-September tender when six bids were submitted, says the energy ministry.

Albanian authorities say the state-run distribution operator OSHEE will buy electricity at €59.9/MWh for 15 years for a capacity of 50MW and allow investors to freely trade production from the remaining 50MW capacity.

The energy ministry says the agreed €59.9/MWh fee for the next 15 years is one of the region’s lowest for solar energy, “lower compared to Greece’s €63/MWh and Turkey’s €62/MWh and much lower compared to average fees for electricity imports,” in what authorities say “confirms confidence in the development of the Albanian electricity market.”

Once contract negotiations successfully conclude, the plant is expected to be built in 18 months at the Akerni salty lands of Vlora, some 130 km south of Tirana, where the Albanian government is also planning to build a new airport.

“The €70 million project will also create a lot of employment opportunities. This project will be an important step for the diversification of the electricity resources in Albania and pave the way for Albania turning into a solar energy hub in the region,” says Energy Minister Damian Gjiknuri in a statement.

The Albanian energy regulator, ERE, has set a €100/MWh price on the electricity produced by small solar energy plants of up to 2 MW and €76/MWh tariff on wind energy plants with a capacity of up to 3 MW for projects initiated in 2017 as part of efforts to diversify domestic electricity generation, currently wholly hydro-dependent, with two-thirds generated by state-run hydropower plants in the northern Albanian Drin Cascade, built under communism in the 1970s and 80s.

The solar power project comes as hydropower continues to dominate electricity investment in Albania with the Devoll Hydropower project, a €535 million investment with a capacity of 256MW by Norway’s Statkraft as the most important electricity generation investment in the past three decades. The project is already in its final construction stage with a new larger power plant under way after having already made operational its first plant.

The Albanian government already offers support to more than a 100 small and medium-sized hydropower plants built under concession contracts, purchasing electricity at regulated prices based on the Hungarian Power Exchange average prices.

State-run power utility KESH says it is also planning to build the country’s first floating solar power plant on the northern Drin River cascade where it generates about two-thirds of the country’s domestic electricity from three hydropower plants built in the 1970s and 80s under communism.

KESH says the more efficient plant will be an 118,000m2 floating system with a capacity of 12.9 MWp that will be built on the Vau i Dejes reservoir where the country’s third largest hydropower plant is situated.

Because of the country’s favorable geographical position and Mediterranean climate with plenty of sunshine, Albania’s is advantaged in solar energy production, but has no major such plant yet. However, solar panels are being increasingly used by households and businesses to meet part of their own needs and cut huge electricity costs.

“Due to the very good solar resource and relatively satisfactory wind speeds (3.3-9.6 m/s), there is high, untapped potential for the deployment of solar PV (up to 1.9 GW) and wind (987-2 153 MW),” says UAE-based International Renewable Energy Agency (IRENA) in a South East Europe report.

Much cheaper Caspian natural gas expected to flow by 2020 from the under construction Trans Adriatic Pipeline is another opportunity to diversify Albania’s domestic electricity generation and reactivate the Vlora thermal power plant, a costly World Bank-funded 2011 investment of $112 million that has been unavailable for use due to high costs of operating on fuel, problems in its cooling system and a legal dispute with an Italian company that built it.

A prolonged drought cost the Albanian government about €200 million in costly electricity imports in 2017 when Albania faced one of the worst droughts in decades, putting public finances at risk.

Access to electricity in the country has considerably improved in the past few years following nationwide campaigns to collect huge accumulated unpaid debts and cut off illegal connections, but losses in the distribution grid still remain high at about a quarter of electricity fed into grid and huge investment is needed to upgrade infrastructure often dating back to the 1960s and 1970s when the country was fully electrified.

Albania ranked 140th out of 190th countries in the latest World Bank Doing Business, worse than regional competitors, with poor reliability of supply and transparency of tariff index.

 

Tirana Times
By Tirana Times November 12, 2018 11:37