TIRANA, Dec. 21 – Albania has concluded legal changes paving the way for a Tirana-based joint Albania-Kosovo power exchange that will help the two neighboring countries integrate their complementary electricity markets and increase transparency in energy investment and trading.
In a draft law that has already received the Albanian government’s approval and is pending the final okay by Parliament, Albanian authorities argue the power exchange, set to be launched next year, is very important for the country’s current wholly hydro-dependent domestic electricity sector and the need for a transparent day-ahead market.
“The establishment of the power exchange is important because of the characteristics of electricity generation in Albania which is 100 percent hydroelectricity reliant. In this aspect, in order to optimize and clearly define the financial value of this basic asset, an hour-based short-term electricity market is required,” says a report on the draft law.
“The establishment of the power exchange is the starting point for the liberalization of the electricity market. The goal is to provide a flexible and valuable future solution for Albania which will enable links to other parts of Europe,” it adds.
Kosovo’s state-run transmission operator, KOSTT, is expected to join Albania’s OST operator as a shareholder of the power exchange integrating Albania’s hydro-dependent electricity production with Kosovo’s lignite-fired power plants at a time when an Albania-Kosovo power interconnector has already been built but is being held back by Serbia-Kosovo dispute.
“Kosovo will be part of the power exchange. The Kosovo transmission operator will be a shareholder in the Albanian power exchange,” Kosovo’s Economic Development Minister Valdrin Lluka confirmed in a meeting with Albanian Energy Minister Damian Gjiknuri last October ahead of the fourth Albania-Kosovo joint government meeting.
A dispute between Serbia and its former breakaway province Kosovo over a long-standing electricity transmission issue has been holding back the operation of a newly built €70 million German-funded Albania-Kosovo interconnection line since mid-2016.
The deadlock, which Germany is trying to mediate, is causing both countries huge amount in missed earnings, especially Kosovo whose transmission operator does not receive compensation for transmission going through its network and is barred from allocating transmission capacity on interconnectors in neighboring Albania, Macedonia and Montenegro.
However, cooperation prospects are optimistic as Kosovo plans to build a new major thermal power plant after finalizing a long-awaited deal with American power generator ContourGlobal this week. The major investment will be a €1.3 billion 500 MW coal-fired thermal power plant that should be completed by 2023 and have a life expectancy of four decades.
In addition to helping integrate the Albania-Kosovo electricity markets, the power exchange is also expected to improve domestic investment climate on new energy projects and boost transparency and financial discipline among state-run operators in their electricity trade operations.
Entela Cipa, an energy advisor to minister Damian Gjiknuri, says the Albanian Power Exchange will serve as one-stop-shop for the wholesale electricity trade and all procedures and transactions which are currently conducted by several operators including electricity imports by OSHEE distribution operator and KESH power utility.
The power exchange also paves the way for the liberalization of the electricity market as big and medium-sized electricity are no longer provided electricity by OSHEE state-run electricity operator and have to obtain electricity by private operators.
Due to one of the worst droughts in decades paralyzing domestic production, Albania imported electricity worth about €200 million in the past six months, a situation which placed state-run operators and the Albanian government in financial difficulty.
The situation has considerably improved following heavy rainfall and flooding in early December, allowing KESH power utility to resume electricity exports.
In a bid to diversify domestic electricity generation, the Albanian government has recently offered incentives for liquid gas-fired thermal power plants as the major Trans Adriatic Pipeline bringing Caspian gas nears completion.
The government has also urged investors to consider untapped potentials in solar and wind energy following a boom in the construction of small and medium-sized hydropower plants built under concession contracts in the past decade, currently producing about a quarter of domestic electricity, but being at risk of adverse weather conditions such as this year’s prolonged drought.
Albania purchases electricity from more than a hundred local small and medium-sized hydropower plants built during the past decade based on the Hungarian Power Exchange average prices.
With about three quarters of domestic electricity produced by state-run KESH utility through its major three HPPs on the Drin cascade, private and concession HPPs are set to further increase their share as the major Devoll Hydropower project by Norway’s Statkraft completes by 2018.
