TIRANA, Oct. 26 – About a dozen companies, mostly Albanian ones, have expressed interest to develop small solar power projects following an appeal by the Albanian government offering incentives to develop renewable energy sources in a bid to diversify the country’s current wholly hydro-reliant domestic electricity generation.
Speaking at a workshop with potential investors this week, Albania’s Energy Minister Damian Gjiknuri described solar energy as a great potential for Albania, considering the country’s favorable geographical position and Mediterranean climate with plenty of sunshine.
“The promotion of these investments becomes a necessity considering the fact that currently we are 100 percent dependent on hydro-electricity. The law on renewable energy and the government’s national plan on the promotion of these resources is already on its first steps, developing the legal operational platform to complete the first investments,” minister Gjiknuri said.
Support to small solar power projects of up to 2 MW is being provided in cooperation with London-based European Bank for Reconstruction and Development, one of the country’s main private sector financiers, through an auction-based system, in accordance with international best practice.
Under a deal signed last May, the Albanian government and the EBRD have been cooperating in developing and implementing a framework for the allocation, through a competitive bidding process for private investors in the building, owning and operating of solar power projects in Albania with a total combined capacity of 50 MW.
“In our first step we chose to promote 50 MW of solar energy which could be a small amount at the beginning, but enough and sustainable for the tariffs currently in force,” said Gjiknuri.
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 new projects initiated in 2017. The prices are considerably more favorable compared to the average €55/MWh tariff the state-run OSHEE distribution operator buys electricity from private and concession small and medium-sized hydropower plants and €60-70 MWh Albania imported electricity this year.
Government financial support to solar energy producers will be provided for 15 years until developers meet their investment costs.
The energy ministry says the expected establishment of the Albania Power Exchange will create an open, transparent and competitive market and provide all energy producers with the opportunity to participate in the local and regional markets.
The power exchange has been held back by a Serbia-Kosovo dispute over the ownership of transmission assets in Kosovo territory preventing the operation of a newly built Albania-Kosovo interconnection line. Inaugurated in mid-2016, the €70 million German-funded interconnector has also halted plans to set up a joint energy market and a power exchange helping Kosovo’s lignite-fired power plants and Albania’s hydro-dependent electricity system exchange electricity during their peak production levels, reducing dependency on costly imports.
Sporadic rainfall following one of the driest summers on record continues to negatively affect Albania’s wholly hydro-dependent domestic electricity generation, putting state-run electricity generation and distribution companies in dire financial straits and almost paralyzing much-needed investment in the distribution grid.
State-run KESH power utility and OSHEE distribution operator have already spent about €100 million in costly electricity imports in the past four months and are due to spend another €30 million until the end of the year unless rainfall considerably increases.
The situation also remains critical for about 150 private and concession hydropower plants, the majority of which small and medium-sized ones and producing about a quarter of domestic electricity generation. Their 2016 income reached a record high of €80 million, triggered by favorable weather conditions and the launch of new HPPs, including the Banja HPP built by Norway’s Statkraft as part of its major Devoll Hydropower project that is expected to conclude by late 2018 with the completion of a bigger HPP.
During the past decade, Albania has been promoting concession hydropower plants, providing incentives and favourable purchase prices. Projects to develop new big HPPs along Vjosa and Valbona, two of Europe’s last wild rivers, have been strongly opposed by environmentalists, also drawing international support to stop the projects.
Solar/wind energy potential
With domestic electricity generation currently wholly reliant on hydroelectricity, Albania has large untapped wind and solar energy potential that can be cost-competitive, UAE-based International Renewable Energy Agency (IRENA) has unveiled in a South East Europe report
“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 the report, adding that low temperatures of geothermal reservoirs make geothermal power generation an unlikely option in Albania.
The renewables can already be considered viable alternatives in designing actions aimed at achieving the 2020 and other future renewable energy targets.
Hydropower is still considered the cheapest renewable energy option in Albania which has large, additional cost-competitive hydro potential of more than 2 GW, available on the Drin and Vjosa, but also on many smaller rivers, notes the report exploring cost-competitive renewable power generation and their potential across South East Europe.
The IRENA report says wind and solar photovoltaic power plants in Albania could already generate electricity with levelised cost of electricity, LCOEs, of less than EUR 50/MWh for wind and slightly above EUR 70/MWh for solar.
Despite interest by several international companies, no wind or solar energy projects are currently being implemented in Albania where there is no comprehensive and supportive regulatory framework for the deployment of renewable energy sources other than hydropower yet.
The Albanian government has also awarded several licences on wind energy development in the past decade, but no project has been completed to date.
Earlier this year, Albanian-owned Alb-Building company was awarded a 25-year licence to build a small wind farm in Tepelena, southern Albania, at a 4.5 hectare area. The 12 MW plant is a €13 million investment with six wind towers of up to 92 meters high that is expected to produce about 26,000 MWh/a year, says the energy ministry.
Experts say the main issue wind energy investors face in Albania is lack of long-term measurement of wind speed and having to carry out the tests on their own which considerably delays investment projects, often leading to their abandonment.
“Albania has untapped wind power potential, in particular along the Adriatic coast but does not have any wind power production facility yet. A number of areas with high wind energy potential with the average annual wind speed of 6-8 m/s and energy density of 250-600 W/m2 have already been identified. At least, 20 potential wind farms can be constructed in these areas,” says the Albanian Investment Development Agency.
Albanian households and businesses are already shifting to solar panels to reduce electricity bills.
