The sector is suffering annual losses of about Euro 160-200 million on distribution losses and needed power imports.
TIRANA, April 8 – Albania’s electricity sector is facing a number of systemic and increasingly difficult challenges that leave the country vulnerable to supply disruptions and mounting contingent liabilities, warns the World Bank in its latest program snapshot in April 2014.
The combination of total dependence on hydropower generation, and its vulnerability to weather patterns, the lack of self-generation capacity, and the extremely high level of distribution losses that require significant power imports, is adding financial stress to the sector and the economy, says the World Bank.
“Furthermore, retail tariffs do not fully reflect the sector cost structure, which, combined with high poor collection rates/high arrears, have meant that the power sector is not able to be financially self-sustaining. The sector is suffering annual losses of about Euro 160-200 million on distribution losses and needed power imports.”
Security of supply remains an issue, as demand increases and weather patterns and rain levels vary from one season and/or one year to the next.
Efficiency improvements in the distribution sector remain a key challenge. In 2008, the government embarked on a major reform of the power sector, including unbundling the state-owned electricity company (separating the generation, transmission, and distribution companies), establishing market principles, and privatizing the distribution and retail supply activity, with support from the World Bank and IFC, its private sector arm. Although this reform helped rationalize the sector, gains in the efficiency of the distribution sectors (a reduction of losses and bad debt in 2009-10) were not consolidated and losses and bad debt levels increased in 2011-13, leading to further financial deterioration in the sector.
Further efforts are needed to restore the sector’s financial viability, and to ensure that losses, arrears and bad debt are diminished to sustainable levels, not only to reduce pressures on the budget, but also to enable a higher security of supply, says the World Bank.
Another challenge is diversifying the sources of energy supply and reducing the sector’s vulnerability to climate change and variations in weather patterns. Albania depends on hydropower to meet domestic electricity generation, which is thus highly dependent on regional weather patterns and level of rainfall.
Speaking this week in a meeting with energy donors, Energy Minister Damian Gjiknuri described energy as the sector which has turned into the worst performers of the Albanian economy, continuously affecting the state budget through subsidies to KESH power corporation.
