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ALBANIAN ELECTRICITY MARKET AT A CROSSROAD: LATEST
DEVELOPMENT ON LIBERALIZATION PROCESS
EN.TRADING 016 SEMINAR: “UNDERSTANDING SEE POWER MARKET”
21 APRIL 2016, ROGNER HOTEL, TIRANA, ALBANIA
DR LORENC GORDANI
DIRECTOR OF LEGAL OFFICE ALBANIAN RENEWABLE ENERGY
ASSOCIATION - AREA
Albanian Electricity Market at a
Crossroad: Latest Development on
Liberalisation Process
Key Note Speech
THE MAIN BULLET POINTS COVER:
I. EU Forward Looking to the Renewables Investments
II. Assessment on the state of art in the RE in Albania
III. Legislation in the Promotion of Renewable in Albania
IV. Projection on RES Deployment Policy in Albania
V. Our Position on the RES Draft Law in Preparation
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ABOUT US
Albanian Renewable Energy Association (AREA) is the unique professional non-profit
organization, based in Tirana, capital of Albania. AREA represent the investors of the
RES in Albania gathering actually 53 producers of energy from hydropower plants,
build by concession up to 15 MW. Investments that already rise to more than 440 MW
installed for more than 550 Million Euro and the numbers are always in growth because
the new enters in the energy market.
AREA within its institutional framework function as promoter of the renewable energy
sector, contribute to the better assess of the state of art of the renewable energy source in
Albania, helping to identify the market barriers, mitigate the investments risk and the
breaches of the regulatory framework, by setting up policies guidelines based on EU best
practices on the implementation of renewables regulatory framework to the promotion
of energy from renewable sources in the Albania.
In the regional context of European market of energy, beyond the above, Area is
committed to support the build-up of a sustainable regional market through the give of
the contribute on the improve the energy markets, strengthen of NRA’s role as
independent authorities, the enforcement of dispute settlement on the improve of the
investment climate, the involvement of the civil society in energy governance to the
expand of pan-European single energy market.
For more visit the Official Website of AREA | 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 | [email protected] WEB | WWW.AREASSO.ORG
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ALBANIAN
ELECTRICITY
MARKET AT A
CROSSROAD:
LATEST
DEVELOPMENT ON
LIBERALISATION
PROCESS KEY NOTE SPEECH KEPT AT EN.TRADING
016 SEMINAR: “UNDERSTANDING SEE
POWER MARKET”, 21 APRIL 2016, ROGNER
HOTEL, TIRANA, ALBANIA
«Pure competition means
compensation to those who
provide the best goods at
the lowest price. It provides
an immediate and natural
reward that a crowd of
rivals is anxious to opt, and
acts with greater
effectiveness of a distant
punishment, from which
each anyone can hope to
escape». Adam Smith,
Wealth of Nations, 1776
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Abstract
The purpose to get an overview on the development of upcoming Albanian Power
Exchanges (APE) makes inevitable the in-depth analyses and projections on renewable
energy sector. In the last period, the strategic development of sector is rising up a
complex interdisciplinary debate. This time it corresponds to the upcoming new
challenges – regard the paradigm of the climate goal and the reaches of the renewables
national target – within the long-time effect to the strategic development of the Albanian
energy market in the WBs.
In summary, the here presentation, aim to integrate the latest update on legal framework
related with the issues on the trading and power market exchanges with the regularly
reports and analyses of the organisation that regulate the sector (DG Ener, EnC, ACER,
ERE, AKBN, etc.). A paper that reflect the last development in act, based on the concrete
daily concerns faced by AREA, concluding with a summary of the overall evaluation in
the interest of investment made in renewable sectors in the towards last developments.
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 promote of the
renewable sector and the market liberalisation and regional integration with the propose
to the build-up of sustainable model of the energy market. A presentation that it is
becoming part of presentation in many national and international seminars, workshops
and conferences.
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EU Forward Looking to the Renewables Investments
Today EU electricity sector is in drastically changing: the renewable are taking
control while decarbonisation is progressing at full speed. Speaking in Brussels
on 18 February, Miguel Arias Cañete, Commissioner for Climate Action and
Energy, said: “our challenge ahead is to make Europe number one in renewables. We
must prepare for an energy system in which more than half of electricity consumption
is powered by renewables.” Indeed the energy transition is unprecedented and
opens for new brand of ranges in innovate models.
In this new world, the
core question is
“which is the right
design to our
electricity market?”
Today the EU it is in
the search to the
appropriate ones that
can deliver on
European energy policy goals of 2020-2030, competitiveness and security of
supply. It is thus high time to decide on a future-proof electricity market design
that function with high shares of renewables in national level. The market has
to integrate all players and provide them with a level playing field. Then we
need a “Re-powering Markets” which can be done in several ways depends by
the starting point.
Assessment on the state of art in the RE in Albania
The Law on Renewable Energy was adopted in May 2013. Notwithstanding, the
legal obligation to issues by-laws within six months, since March 2014, key
articles of the Law, namely the adoption of a National Renewable Energy Action
Plan (NREAP) and support schemes, have been suspended with the intention
to be harmonised with the Law on Power Sector. Due to the failure to submit
the NREAP by the deadline of 30 June 2013, the Secretariat has referred the
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pending infringement case against Albania to the Ministerial Council of 15th
October 2015.
In the practical field, the historic development of the gross final energy
consumption (GFEC) with the planned trajectory has been constantly widened.
ENC Annual Implementation Report 2015, state that according to the modelling
results with current policy initiatives (CPI) and planned policy initiatives
(CPI+PPI), Albania will not meet the renewable energy target for 2020 by
approx. 8% if the measures described in the draft NREAP will not be revised.
Source Study on the Assessment of the NREAP and the Progress in Promotion
of Renewable Energy in the EnC, by ECN et all, 2015
In last, the Report of the Secretariat to the Ministerial Council on the Progress in
the Promotion of Renewable Energy in the Energy Community (Annex 05a/13th
MC/05-10-2015), indicates that with the currently implemented and planned
policy measures the country would fail to meet the 2020 targets if no alternative
policies are implemented in the coming years.
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Source: EnC - Expected RE share in 2020 according to distinct policy
pathways (Green-X scenarios) vs. 2020 renewable energy binding target (%)
Despite the above assessments trend, on 21 Mar 2016, we got the notice that
Albania's NREAP was formally submitted to the ECS. An adaptation of NREAP
that came without public consultation with stakeholders as normally required
by law no. 146/2014 of 30 October 2014 "On Public Notification and
Consultation" in Albania. Nerveless the above infringement of internal
procedure the adoption and submission of NREAP is a useful tool to ensure
transparency towards the investors in renewable energy on the policy objectives
to reach the 2020 renewable energy targets.
The problem stand in the concerns on the verifies of the data reported about the
factual deployment and forecast share of energy from renewable energy
sources, taking into consideration that contradictory statistic are referend along
all this years from different sources in Albania. In more, following the
introduction of 10 year moratorium about forest protection which cover around
the 10% of final consumption there is a need to a further assessment of the
submitted NREAPs regard the biomass consumption.
Then it is hope that the Secretariat (ECS) have already evaluate the adequacy of
the measures envisaged by the Albania in accordance with Article 3(2) and has
issued related recommendation. Actually, we are looking forward to have the
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assessment made on the above submission, which has to comply with the
template in the presentation of national renewable energy action plans. The all
has to enter to the Eurostat statistics (Regulation (EC) No 1099/2008) and will be
keep continuously on eyes regard the accomplishment of the above
commitments.
Legislation in the Promotion of Renewable in Albania
Then, Albania, as all WB6 countries, enter now in the most critical phase when
need to act decisively to complete the overdue national tasks if it want to reach
the fixed targets. Despite the commitments taken, and the significant renewable
energy potential,
the country is
hesitant in
opening the
energy markets
and removing
non-cost barriers
to attract
investments in
renewable energy
projects. The
progress in
adoption of new legislation or amending the existing frameworks is very slow
and often delayed by the institutions in charge.
Non-discriminatory treatment of investors is not fully ensured and
transparency needs to be further improved. Administrative procedures for
permitting, authorisation and connection to the grids have to be simplified,
coordinated and streamlined to a greater degree. Due to the relatively high
political risk in the region and incomplete regulatory frameworks, access to
finance remains challenging.
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Seen the limit time here in availability, in following it is going to focus in
particularly detail only to support schemes. The Law on Renewable Energy
adopted in May 2013, establish that the amount of support for new small
hydropower plants
has to be calculated
yearly by ERE based
on a methodology,
which was included in
the now Law 138/2013
on Renewable Energy.
In above situation
AREA after exhausted
the administrative
procedure has open a cases law in the administrative court for the a temporary
and definitive ERE Decision on the Energy Fixed Tariff, to be paid to the
producers of the electricity from hydro power plants for the year 2016. Now we
are close in appeal to the constitutional court, and in short to address (already
requested thought ERE) an official request for asking the interpretation of the
Energy Community Secretariat. Before ECS it is already open e preliminary
procedure with assignment the official case number ECS-01/16.
Specifically, based on the Consolidated Rules of the Procedure of Dispute
Settlement under the Treaty of the Energy Community, adopted on 16 October
2015, our request consist in an assessment of the compliance with the acquis
communautaire of the situation when a law of renewable resources in force (e.g.
as the L. 138/2013) issued to align the internal framework to the Directive
2009/28/EC, establish the procedure for determining the tariffs for the producers
every year for a period of 15 years, is bypassed repeatedly:
(1) with a decision on the tariffs came in violation of the methodology procedure
assigned by prescription of the renewable energy law (Article 15, para. 1) to be
decide in virtue of its independence to the ERE;
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(2) in more the Albanian Government (a party direct in conflict of interest as a
shareholder of 100% of all the incumbent public companies i.e. KESH, OST,
OSHEE) has decide the above formula making use of ones not foreseen by the
Law no. 138/2013 "On Sources of Renewable Energy”.
In regard, the crosscutting measures in the liberalization request the
independence of national energy regulatory authorities based on pre-defined
indicators (January 2016). The Third Package compliant independence
requirements have been transposed by the Power Sector Law, but no progress
has been made. In more, Albania is expected to apply for observer status in
ACER based on a positive opinion of the European Commission (July 2016). As
a prerequisite, regulatory independence needs to be ensured and all secondary
legislation needs to be adopted.
Projection on RES Deployment Policy in Albania
The RES policy projection and the related regulatory framework, foreseen after
the finalization of the NREAP, the propose by MEI of the new draft law on RES
(Recast of 138/2013). In regard of the support mechanism, the new draft law on
RES foresee that the support granted to producers based on power-purchase
agreements concluded before the entry into force of the new law shall not be
affected but there will be the right to switch to the new support scheme for the
rest of the contract period. Renewable Energy Producers with power-purchase
agreements concluded before the entry into force of this law will get fixed feed
in tariffs for the rest of the contract period.
The levels of the fixed feed in tariffs are derived on Article 40 of the German
RES Law 2014 regarding hydropower: 6.31 cents per kilowatt-hour up to and
including an installed capacity of 5 megawatts per company; 5.54 cent per
kilowatt-hour up to and including an installed capacity of 10 megawatts per
company; 5.34 cents per kilowatt-hour up to and including an installed capacity
of 15 megawatts per company. In regard are forgotten tariffs applying for
capacity under 0.5 MW go to 125.2 €/MWh and for capacities 0.5 - 2 MW to 825
€/MWh as well as the financial support is guaranteed to all receivers for a 20
years duration period.
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Our Position on the RES Draft Law in Preparation
Without prejudice to the individual rights of each affected Small Producer, the
investors are interested in finding a forward-looking solution that will bring
stability to their existing investments and enables them to commercially operate
the facilities and pay of their debts. Historically, the purchase price for electricity
produced by small hydropower plants had been calculated on the basis of the
formula PU = PI * 1.1 * REX. It take into account the average price of electricity
imported by KESH in the previous year, a co-efficiency bonus and the average
exchange rate Eur/ALL for the previous year.
The application of this formula prior the intervention of 2014 resulted in the
purchase prices of up to All 9,3/kWh (approximately c€6.6/kWh). This has
actually produced prices that benchmarked against both nascent renewable
energy support schemes in the Balkan region as well as more mature support
schemes in other European countries with comparable resource proficiency and
investment environment, are lower to mid-section of support prices. By way,
the following four country examples epitomise this:
Country
Price for small-scale hydroelectric power plants (currency
conversion valid from 31/03/2015)
Installed capacity:
Standardised
grouping
Installed capacity:
Country-specific
grouping
Price (c€ / kWh)
Cro
atia
< 2 MW < 0.3 MW
0.3 - 2 MW
14.001
12.16
2 - 5 MW > 2 MW 11.51
5 - 10 MW > 2 MW 11.51
10 - 15 MW > 2 MW 11.51
5 - 10 MW > 5 MW 6.93
10 - 15 MW > 5 MW 6.93
1Conversion on 31/03/2015, 1 HRK = 0.130782 EUR
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Ser
bia
< 2 MW < 0.5 MW
0.2 - 0.5 MW
0.5 - 1 MW
1 - 10 MW
12.40
13.727 - 6.633*P2
10.41
10.747 - 3.37*P
2 - 5 MW 1 - 10 MW 10.747 - 0.337*P
5 - 10 MW 1 - 10 MW 10.747 - 0.337*P
10 - 15 MW 10 - 30 MW 7.38
Ger
man
y
< 2 MW < 0.5 MW
0.5 - 2 MW
12.52
8.25
2 - 5 MW 2 - 5 MW 6.31
5 - 10 MW 5 - 10 MW 5.54
10 - 15 MW 10 - 20 MW 5.34
Un
ited
Kin
gd
om
< 2 MW < 0.015 MW
0.015 - 0.1 MW
0.1 - 0.5 MW
0.5 - 2 MW
29.163(FiT)
27.23
21.52
16.81
5 - 10 MW > 5 MW 13.81 (strike price
under CfD)
10 - 15 MW > 5 MW 13.81 (strike price
under CfD)
Considering by one side the above uncertain and discriminatory situation and
by the other side the contracts concluded between KESH and the Existing Small
Producers (the PPAs), the structural elements of the renewable energy support,
and the aforementioned treaty obligations as regards investment protection,
have the following implications in relation to the New Law project proposal on
renewable energy:
(i) the historical fixed price equal to ALL 9.3/kWh (approximately c€6.6/kWh)
was reasonable when benchmarked both against comparable nascent markets,
2P = installed power of plant
3 Conversion on 31/03/2015, 1 GBP = 1.38091 EUR
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countries in the region and mature markets with comparable resource
conditions;
(ii) the historical price formula considered elements of market price for an "all-
in" electricity import price, a mark-up for the additionality of renewable energy
generation, and a stabilisation of investment through an exchange rate
adjustment;
(iii) the implementation of an electricity exchange based price for the Small
Producers, which is not "all-in" but only reflects conventional power generation
prices in a market other than Albania (which are further depressed by the
impact of priority dispatched renewable generation on conventional generation
offered via the exchange), would lead to a breach of the investment protection
criteria;
(iv) any other solution of the New Law would lead to a state intervention which
would not meet the investment protection criteria of the Energy Charter Treaty,
the Energy Community Treaty and the Bilateral Investment Treaties.
(v) The weighted end-user price method resulted in a price of c€ 6.75, calculated
using c€ 7.5 as taken from official sources and reduced by 10% as the profit
between wholesale and retail
In the light of the above, AREA have proposed the followings:
(i) The New Law shall include a transition framework for existing hydro
installations. The transitory dispositions shall determine a fixed historical price
(feed in) equal to ALL 9.3/kWh (approximately c€6.6 /kWh) for the remainder of
the existing PPAs timeframe (for a period of 15-20 years which ensures return
on investment). The existing PPAs should be amended as well, in accordance
with the transitory dispositions, to reflect the historical fixed price equal to All
9.3/kWh (approximately c€6.6 /kWh) indexed for inflation and exchange rate
fluctuations;
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(ii) The New Law shall restate clearly the current principle that no use of system,
transmission loss and imbalance charges for small-scale generation from
hydropower will weigh on the Small Existing Producers;
(iii) Furthermore, in relation to the New Small Producers, the New Law, in spite
of the scheme that will be proposed by the authorities, it shall determine a
subvention level to the New Small Producers, that will guarantee coverage to
all investment costs, exploitations costs and a reasonable rate of return on
investment. The Albanian authorities may propose a different support scheme
from the actual feed in tariffs system, after the energy exchange spot market
commences operation4.
Conclusion
In the here conclusion it is seen 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 in most
sustainable way 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 above interest in AREA we remain confident that in the last all the
interested parties as the independent institutions will cooperate successfully to
the support the investments made and the further development of the sector,
4 In regard, AREA will reserve the rights to further detail to its propose system for the New
Small Producers in due course, depending on the Market Model and the energy exchange model
that will be proposed.
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encouraging the implementation of methods that guide to schemes related to
the EU policies of 2020 and 2030 and the other related international treaties.
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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 energy market regulatory issues
and related policy, 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 International Law, 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 engaged 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 at national public
authorities and international institution.
For more visit Official Website of ACERC | Lorenc Gordani in LinkedIn
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ACERC network of the partners, supporters and sponsors include among others