Energy Community: TAP pipeline to boost Albania’s energy sector

The potential arrival of gas and the abundance of renewable energy make Albania an interesting destination in terms of energy, says the report.
TIRANA, Oct. 8 – Albania is at a crucial point of development of its energy sector, which has been seriously neglected over the last years. “The recent settlement of the investment dispute with CEZ and the selection of Trans Adriatic Pipeline (TAP) as the pipeline opening the Southern Corridor are two important milestones which could and should turn into real game-changers,” says the Vienna-based Energy Community Secretariat in its annual report on Albania.
The potential arrival of gas and the abundance of renewable energy make Albania an interesting destination in terms of energy. “In order to take advantage of that, the sector needs to be completely rebooted. This, in turn, requires designing a compliant legal framework essentially from scratch, improving the financial situation of the state-owned companies, curbing the unsustainably high share of unpaid electricity and establishing truly independent and proactive enforcement authorities,” says the Energy Community.
A recent United Nations report says that in Albania, the Trans-Adriatic pipeline bringing Caspian gas to Europe will generate one of that country’s largest FDI projects, with important benefits for a number of industries, including manufacturing, utilities and transport.
Findings by Oxford Economics study show that during its four years of construction (2015-18), inclusive of direct, indirect and induced effects, TAP will contribute a total of Euro 370 million to Albanian GDP, create an average of 9,900 jobs per year and generate Euro 90 million for the Albanian treasury.
Albanian experts have described TAP as an opportunity that would benefit Albania both economically and politically, making the country an important hub of the international gas pipeline for the Western Balkans.
TAP is scheduled to start construction in 2015 and carry the first gas by 2019. The pipeline will transport natural gas from the giant Shah Deniz II development in Azerbaijan through Greece and Albania to Italy, from which it can be transported farther into Western and Central Europe.
The largely non-compliant legal framework, the unsustainable volumes of unpaid electricity as well as the critical financial situation of the power companies remain problems of serious concern, says the Energy Community.
Bringing the power sector law in line with the acquis, including the Third Package, needs to be achieved urgently. “This needs to go hand-in-hand with the design of a new market structure.
Among other things, this design must allow for spot-trading (i.e. day-ahead and intra-day markets) and market-based balancing structures. The generation price needs to be deregulated. Furthermore, OST transmission operator and OSHEE distribution operator, former CEZ, must be given the possibility to pass on the costs of their losses in an adequate and cost-reflective manner. ”
When reforming the electricity market model to allow for opening of the market, Albania needs to focus not only on the supply side but also on generation, as a precondition to attract further investments in renewable energy, suggests the report.
The current difficult financial situation of the electricity sector caused by high energy losses, accumulated bad debts and reduced collection rates create high risks also for new investments made in renewable energy projects.
“Adopting the new law on energy efficiency would be of essential importance for the further development of the legislative framework and for the implementation of energy efficiency measures foreseen for the achievement of energy efficiency targets,” suggests the Energy Community.