ALBANIAN HYDRO CAPACITY AND MARKET PERSPECTIVES

WITHIN EU POLICIES OF 2020 AND 2030

ALBANIAN RENEWABLE ENERGY ASSOCIATION - AREA

Key Note Speech kept at HydroTech Albania 2016

DR LORENC GORDANI

Director of Legal Office AREA and Professor at Polis University

Albanian Hydro Capacity and Market

Perspectives within EU Policies of 2020

and 2030

Key Note Speech

THE MAIN BULLET POINTS COVER:

I. Regulation on the Promotion of Res in Albania

II. State of Implementation of Renewable Resources

III. Hydropower Deployment Scenarios in Albania

IV. Financial Effort Scenarios Run by Type of Technology

V. Revenues allocation form hydro-energy sector in State Budget

VI. Forecast on the Res-E Sector of Renewable Resource

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INTRODUCTION ON ALBANIAN RENEWABLE ENERGY ASSOCIATION -

AREA

AREA is the main professional non-profit association, dedicate to the development of

the renewable energy sector in Albania. Our association brings together the producers

of energy from renewable sources build by concession up to 15 MW in Albania. The

Area members represent more than 200 MW installed capacities with more than 400

Million Euro investments and the numbers is in grow cause of new memberships.

AREA mission aim to promote and develop the renewable energy sector in Albania. The

here purpose would help to reduce the pressure on the finite energy sources, providing

a basis for meeting future energy demand, stabilizing of energy prices, and combating

climate change as well as increasing the energy security. In the here above aim our focus

look forward the integrate of Albanian energy sector in the regional and European

market of energy.

For more visit the Official Website of ACERC | Shoqata Shqiptare e Energjisë se

Rinovueshme – AREA Group in LinkedIn

CONTACT INFORMATION ALBANIAN RENEWABLE ENERGY ASSOCIATION - AREA

POST ADDRESS | PJETER BOGDANI, P. TEUTA KATI 2, AP. 11,

TIRANA (TR) ALBANIA

MOB | +355 699532443

PHONE | +355 42245199

E-MAIL | INFO@ALBANIAENERGY.ORG

WEB | WWW.AREA-AL.ORG

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ALBANIAN

HYDRO

CAPACITY AND

MARKET

PERSPECTIVES

WITHIN EU

POLICIES OF 2020

AND 2030 KEY NOTE SPEECH KEPT 2ND HYDROTECH

ALBANIA CONFERENCE AND EXHIBITION

ON 10-11 FEBRUARY 2016 IN TIRANA

BUSINESS PARK

“AREA mission

aim to promote

and develop the

renewable

energy sector in

Albania”

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Abstract

The purpose to get an overview on the development of today renewable energy sector

makes inevitable the in-depth analyses and projections of the hydropower resources. In

the last period, the strategic development of sector is rising up a complex

interdisciplinary debate. This time it corresponds to the upcoming choices – that have

to keep in eyes the paradigm of the climate goal and the reaching of the renewables

national target – within the long-time effect of the strategic development of the Albanian

energy market in the WBs.

In summary the here paper is part of overall research study that search to offer an general

outlook of the regulatory framework and the contemplation of the national projections

target regard the use of renewable resources in the energy production (RES-E), heating

and cooling (RES-R&R) and transportation (RES-T) in Albania. The all following up

with presentation of the scenarios of the new installed capacity of electricity from water

sources, solar, wind, and biomass within 2020, 2025 and 2030.

In regard, followed with quantitative estimation, using a Levelised Cost of Electricity -

LCOE per unit of energy produced, of the public budget as well as the economic burdens

for each end-user consumer. An analyses completed with a summary of the measures

foreseen, to be introduced, as a part also of the process of EU integration, in the pursue

of the specific objectives putted by the progress of the Action Plan on RES, in the comply

with the efforts of the Directive 2009/28/EU to achieve the objectives of the national

consumption by 38% within 2020.

The here paper is part of a wide research work, overtake within the objectives of working

programme of the AREA with purpose to give a qualified contribute to the market

liberalisation and regional integration as well as the build-up of sustainable model of the

energy market. It is becoming part of presentation in many national and international

seminars, workshops and conferences. In regard, all the interest parties to the directly

involvement with analyses or any other form of support and partnership, are welcome

to contact.

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Introduction on the promotion of the investments in the Energy

Markets

The offering of an overview about the future of Albanian energy market and

investments capacity in HPP makes inevitable the analyses on the risks and the

perspectives of the market of reference. Then, guided by an economic approach,

it is necessary to

remind that generally

the prediction on the

energy sector stand

among the dilemmas

about the costs of own

production and the

imports of electricity.

In more, Albania

depend on completely

sui generis causes, such as that of the strong volatility of the influx of annual

rainfalls. An "uncertainty” that have to enter to a certain target goals of Res set

by international commitments such as those related to the EU Policies of 2020

and 2030.

I. Regulation on the Promotion of Renewable Resources in

Albania

The Secretariat of the Energy Community (ECS) following the Decision

2012/04/MC-EnC started the transposition of Directive 2009/28/EU at the

national level for all the Contracting Parties (CP). Directive imposed all

members the required targets on the implementation of renewable resources to

be reached by 2020. In this regard, Albania has been committed to a binding

target of 38% energy from renewable sources in gross final energy consumption

(GFEC) within 2020, starting by 29.8% of 2009.

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The Directive 2009/28/UE was adopted in May 2013 through the enacted of the

Law 138/2013 on Renewable Energy. The focus of the intervention stands at the

adopted mechanism of promotional tariffs (called feed in tariff [FIT]). The new

regulation, up to now has consider only the support schemes (feed-in) for new

and existing small hydropower plants with a capacity up to 15 MW. However,

not only the missing of support schemes for the others Res other than hydro,

but a lot of problems raised regard the determination of the tariff methodology,

has made evident the problems post by the partially transposition of the RED.

II. State of Implementation of Renewable Resources

Notwithstanding the partial implementation of Law 138/2013, a high interest for

the investments in energy sector has been focused in small hydro plants.

Nerveless, the upgrade overtake in the sector of hydropower production there

is still a lot of potential to be deployment in the way to come at a satisfactory

results regard the objectives of sustainable development in charge of RES, as

referred by the table built on the Instat data, which takes as starting point for

the national target the 2009 with a share of renewable energy amounted to

29.8%, where the GFEC was 2,104 ktoe.

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Table 1 - State of Implementation of Renewable Resources (RES)

ktoe 2009 2010 2011 2012 2013 2014

Res-R&R 219.7 211.7 219.7 218.3 213.4 205.3

Res-E 408.0 413.6 337.6 406.3 598.2 390.5

Res-T - - - - 8.1 10.5

Res Total 627.6 625.3 557.3 624.6 819.7 606.3

GFEC 2,103.9 2,105.5 2,161.8 2,014.2 2,345.9 2,339.8

Res % 29.8% 29.7% 25.8% 31.0% 34.9% 25.9%

Source: INSTAT

A calculation of the national objective that over the years 2009-2014 has been

rather unstable, passing from the minimum values of 25.8% (2011) to the

maximum values 34.9% of 2013 with an average of Res 29,5%. These figures,

apparently contradictory for who do not have familiarity with the Albanian

market, is due to the fact of the structure of the market mainly based on

hydroelectricity, whose

the variable production

transfer all its impact to

the volatility of the

national renewables

targets of energy.

However, there is

evident that despite the

progress in increasing

of the newly added

generation capacities of

the last years, the data shows a remained non-complaints uptake of energy from

renewable sources.

III. Hydropower Deployment Scenarios in Albania

Despite the drawbacks verified among the end of years 2013 and the 2014, the

adoption of the Law on Energy Sector in April 2015, it has been consider from

many to be a turning point for the renewable sector with the adoption of

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measures necessary (through NREAP). Indeed, a National Renewable Energy

Action Plan (NREAP) required for the setting out of the necessary measures to

reach the target of 38%, presented to the Energy Community Secretariat (ECS)

since December 2014, has been adopted only recently, at the end of the January

2016.

Then, now for the period 2012-2030, it can refer not only to the most recent

studies but also to the now adopted NREAP projections. However, here in this

brief presentation it is chosen in particular the Support for Low-Emission

Development in South East Europe (SLED). The SLED assessments based for

modelling up to period 2020 to the NREAP and for the rest a study of USAID

on Assessment of Energy Developments in Albania 2015. A study that present

three scenarios called scenery of Reference - REF, Currently Planned Policies -

CPP and Ambitious Scenario - AMB.

Table 2 - Prevision on New RES-E by Ambitious Scenario - AMB (MW)

AMB Scenario 2015 2016 2017 2018 2019 2020 2025 2030

Hydro* 1 801 1 894 1 941 1 991 2 264 2 324 3 179 3 869

Pumped storage 0 0 0 0 0 0 0 0

Geothermal 0 0 0 0 0 0 0 0

Solar 2 5 10 16 24 32 120 220

Wind 0 0 4 10 20 30 160 310

Biomass 5 5 5 5 5 5 80 80

Source: Sled

In all the three scenarios, hydroelectric production is dominant: growing quite

significantly (more than double of the 2015 level) in the AMB scenario of 2030.

Apart of massive hydro capacity expansion, the interest for the other renewable

resources assumes only a moderate increase. It remains below 20% of the total

of Res even in the most ambitious scenario. Instead, in the two other scenarios

reach respectively the 50%, and 25% of ambitious scenario.

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IV. Financial Effort Scenarios Run by Type of Technology

The explanation of above result can be find in only one simple key data that of

the economical fundaments. Indeed the final costs of each technology used by

EEMM model runs by Sled, based on Levelised Cost of Electricity (LCOE), per

unit of energy give the following benchmark:

55 €/MWh for energy production from hydro;

90 €/MWh for energy production from wind;

105 €/MWh for energy production from solar PV;

110 €/MWh for energy production from biomass.

Fig 1 - Annual budget for the support of RES (m€)

Source: Sled

In this regard, as seen in the above picture, the FIT effort of support level for

new hydro capacities will be minimal to cover hydro technology. Instead, for

the other RES technologies, the effort of support level FIT rise significantly up

to the double of the reference price of import. In more, the peak of the support

budget will be around 2020 for the REF and CPP scenarios, after the financing

becomes less costly in overall terms. A similar trend of the overall RES-E budget

applies to the fees that each end user has to pay to their consumption.

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V. Revenues allocation form the hydro-energy sector in the State

Budget

The Albanian Government receives its share of the value created from the

extractive industry through: taxation of activities, tariffs and fees and dividends

or profit from direct domestic investments in hydropower sector. In specific the

main revenue streams contributed by the hydropower sector are regroup in

three categories:

I. Income from concessions, investments and privatizations

In regard, the more relevant of the first category are the Concession fee paid to

the contracting authority as a percentage of the value of annual power output

generated from the HPP. Other incomes came from the penalties for non-

compliance with concession and PPP agreement as well as income from

investments and the eventually privatization of state-owned companies.

II. Fiscal revenue

regime

Tax on profit: Up to

December 2013,

charged at 10% on

net profit. Starting

from 1 January 2014

profit tax rate

increased to 15% of

the company’s net

profit. Value added tax (VAT) applies at 20% of the power supply and services

related to power transmission and distribution. Tax on infrastructure impact:

according to law on infrastructure impact is applied at the rate from 2 to 4

percent of the value of the new investment for constructions in Tirana and from

1 to 3 percent for constructions in other districts.

Taxes on occupation of public spaces: according to law the municipal council

decides on the level of fee for the use of public space for business purposes.

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Other taxes are that of local government units in accordance with law on the

local tax system. In more the social insurance and personal income tax

III. Other tariffs derived from services and regulation of the sector

Tariffs for licensing and regulation of the power sector in the amount of Lek

10,000. Penalties for non-compliance with ERE rules and guidelines range from

0.1% to 3% of annual income. Service tariffs for technical evaluation: AKBN

collects fees for the technical evaluation services on the study fees for the design,

supervision and acceptance of construction works. Tariffs for ATRAKO’s

services: until February of 2012, a fee ranging from 1% to 2% of the investment

value.

VI. Forecast on the hydropower of the Res-E sector

As reported, notwithstanding the adequate support mechanisms for energy

from renewable sources like wind, biomass, solar PV as well as for energy from

renewable sources used for heating and cooling and transport are foreseen to be

adopted by ERE within the implementation process of the revised law on

renewable energy, and the economic reason facilitate the until now the matured

technologies to the production of electricity from hydropower plants.

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Table 3 - NREAP Prevision for Each Sector of RES 2015 - 2020

Additional RES

According to

Technology 2015-2020

Quantity Generation Installation

ktoe GWh MW

RE

S-E

SHPP up 10 MW 200 2,326 744.3

Wind 20 233 97.7

PV 50 582 116.3

Total 1 270 3,140 958

% ne GFEC 29%

RE

S-N

&F

Biomass 52 800 279

Total 2 52

% GFEC 10%

RE

S-T

Biofuel (FAME) 85 -

Total 3 85

% ne GFEC 3%

RE

S Total 1+2+3 634

% GFEC 38%

Source: MEI

In these regard, bearing in mind the provisions settle by the Directive

2009/28/EU, in specific for the reaching of the indications of 38% on the GFEC

within 2020, there are foreseen the intervention regard renewable energy for

electricity generation (RES-E) to provide the consumption needs at least 29%. It

means a further increase in the amount of electricity consumed from renewable

sources by at least 270 ktoe (3,140 GWh). This means an increase in the average

size of the generation of electricity from renewable sources than as it is expected

mostly from hydro to 958 MW installed capacity with the factor of 20-35%.

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Conclusion

In the here conclusion it is useful to be remind again that there is a need of smart

regulatory framework that facilitate the most profitable investments and the

contemplation with the Directive 2009/28/EU in the efforts to achieves the

objectives of the national consumption of 38%. In regard, we see as fundamental

that NREAP drew choices guided by thinking with quantitative estimation, using

a Levelised Cost of Electricity - LCOE to get the less economic impact for the

public budget and the burdens for each consumer in Albania.

In the here above

interest as AREA we

remain confident that

both the Albanian

Government and the

independent

institutions that

regulate the energy

sector will cooperate

successfully to the support the investments made and the further development

of the sector, encouraging the implementation of methods that guide to the

support schemes related to the EU policies of 2020 and 2030 and other

international treaties accepted by our country (Albania).

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Dr Lorenc Gordani

Director of Legal Office AREA

Professor at Polis University

The main activities areas covers the legal strategic expertise, the

applied research and the academic didactics in EU and Albania

energy law and policy for government, international institution, industry and interest

groups with particular focus on market design and related policy issues, concerning the

promotion of a sustainable integration of energy market in the Western Balkans.

The education has taken place in Italy, Germany, France, as well as Netherlands,

Belgium, Sweden, Poland, etc., and has seen the reaches of a PhD level with topic on

market liberalisation and regional integration. In above framework it has worked as

researcher and professor of the Labour Law, Roman Private Law, Public Economic Law,

Administrative Law, EU Law, Public and Regional Law, Environmental Law, etc., in

several universities in Albania and abroad and as expert and trainer at national and

international institutions and engagement as leader legal advisor to several

international companies and organisations.

The intense activity has been accompanied with publication of an extensively

bibliography on acquis implementation and particularly on energy law and policy.

Activity accompanied with frequent participation as speaker at international high-level

meetings and conferences. An activity that has been accompany also with the

involvement as a consultant to several different working groups of national public

authorities and international institution.

For more find at the Official Website of ACERC | Lorenc Gordani in LinkedIn

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ACERC network of the partners, supporters and sponsors include among others