By Ervin Lisaku
TIRANA, Jan. 14 – A prolonged drought that Albania has been facing since mid-2018 has forced the country’s hydro-dependent state-run operators to switch to compulsory costly electricity imports in a situation that could have severe consequences for the 2019 public finances and planned investment in the outdated electricity grid.
Water levels at the state-run Drin Cascade, northern Albania, where the country’s three largest hydropower plants operate, are at almost record lows and recent snowfall has not helped improve the situation, although water flows are expected to considerably increase once snow melts.
With state-run operators currently covering only about a third of the country’s electricity needs, the OSHEE electricity distribution operators says it has purchased around €30 million in costly electricity imports for the first 17 days of January 2019 and that huge amounts could be needed unless the hydro-situation improves.
Prices have ranged from €74 to €103/MWh, according to local Klan TV, much higher compared to cheap electricity produced by state-run operators and the average €68/MWh regulated price set to local HPPs with a capacity of 15MW.
Albania handled 2018 pretty well as heavy rainfall in early 2018 filled the almost empty reservoirs of state-run and private hydropower plants, guaranteeing the country’s domestic electricity needs.
State-run power utility KESH also exported electricity worth around €60 million for the first half of 2018, in weather-related exports that also had a key impact on Albania’s exports increasing by around 15 percent last year despite the Euro’s free fall against the Albanian lek hitting Eurozone-dominated exports by reducing profits for local producers.
Albania’s current sole reliance on hydropower is considered one of the top threats to the country’s economy, especially in case of adverse weather conditions, increasing the need for costly electricity imports.
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 through budget cuts and paralyzing much-needed investment in the dilapidated distribution system where losses still account for a fifth of electricity fed into grid.
Little rainfall during the second half of the 2018, and the country meeting all of its needs through domestic electricity generation, including the peak tourist season until last December, could mean trouble for the country’s economy in early 2019, increasing the country’s trade gap and placing public finances in trouble.
Water levels at the country’s largest Fierza hydropower plant, dropped to around 268 meters in December 2018, down from a peak level of 296 meters last July, but are yet about 28 meters above the HPP’s stoppage point, according to KESH, the state-run power utility that manages three HPPs producing around two-thirds of the country’s electricity.
Albania has more than 100 other smaller private and concession hydropower plants from which state-run-operators buy electricity at regulated prices based on the Hungarian Power Exchange average prices.
Norway’s Statkraft is also expected to launch its second larger Moglice HPP in the country this year, completing its €535 million Devoll Hydropower project with a capacity of 256MW in the most important electricity generation investment in the past three decades.
Albania has been trying to diversify its wholly hydro-dependent domestic electricity generation system through the launch of a major solar power plant and the re-activation of a thermal power plant built a decade by converting it into a natural gas-fired plant by linking it with the under-construction Albanian section of the Trans Adriatic Pipeline ahead of first Caspian gas flows by 2020.
Last November, Albania 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.
International financial institutions such as the World Bank and the International Monetary Fund expect Albania’s growth to slow down to 3.5 to 3.7 percent this year, down from an expected 4.2 percent last year on the back of lower foreign direct investment and a series of internal and external factors expected to have a negative effect on the country’s economy.
