Albania Seeks Investment to Support Existing Hydropower

Albania, a country of about 2.9 million people, is a net importer of electricity, and power supply security is a major challenge for the country, which is situated north of Greece and borders the Adriatic and Ionian seas. Albania’s domestic generation is almost entirely dependent on hydropower, because the country’s only thermal facility—the 98-MW Vlora Power Plant, designed to be fueled by oil and owned by KESH, the Albanian Power Corp.—has not operated since its construction in 2011 due to a failure in its cooling system.

The European Commission last year urged the country to diversity its power portfolio, saying its dependence on hydropower could have severe consequences for the power supply during times of drought. Belinda Balluku, Albania’s minister of Infrastructure and Energy, met with U.S. Energy Secretary Dan Brouillette in early February in Washington, D.C., and the two discussed strengthening a U.S.-Albania partnership through American investments in Albanian infrastructure.

“With Secretary Brouillette in Washington, we discussed future plans for energy development in the country, the support that the Department of Energy [DOE] will provide continuously to the Ministry of Infrastructure and Energy, and above all we discussed strengthening the strategic partnership between the U.S. and Albania through economic development, U.S. investments in the field of liquefied gas and hydrocarbons, and beyond,” Balluku said. “I appreciate the extraordinary support that DOE, and in particular Secretary Brouillette, is providing us at a crucial moment for the country’s energy sector.”

Attempts to diversify Albania’s electricity production beyond hydropower, and the government’s active pursuit of foreign investment, should provide the U.S. and other countries with incentives to support the expansion of Albania’s energy infrastructure. New investments in small- and medium-sized hydro have helped Albania’s total generation capacity increase over the past few years, with installed capacity today above 2.2 GW. About two-thirds of that generation is owned by the state.

Small solar farms also have been entered into service in recent years as the country introduces renewable energy resources into its generation mix. Lorenc Gordani, an independent energy lawyer who consults with several companies in Albania, and focuses on the energy market and related policy issues in the Western Balkans, said the energy ministry in January 2019 issued a tender seeking a public-private partnership for a concession contract to revive the Vlora plant, likely as a natural gas-fired facility. Gordani shared with POWER what he called the latest notice on the project, which makes known that “Turks of Celik Energi have withdrawn from negotiations with the Albanian government to obtain a 20-year concession at the Vlora Power Plant. … The only ones left at the negotiating table are the Greeks [with] Mytilineos Holdings, which has offered a nearly identical financial offer to the Turks to invest 70 [million] euros [$76.4 million] in the TPP [thermal power plant], which will enable its conversion from oil to natural gas, [along with] cooling turbine repair and branch construction with [the] TAP [Trans-Adriatic Pipeline] gas distribution point in Fier.”

1. The Trans-Adriatic Pipeline (TAP) is expected to be completed this year. It will move natural gas via Greece and Albania to Italy for further distribution to Europe. Its natural gas supply is expected to spur economic development in Albania. Courtesy: Albinfo / Creative Commons

Gordani noted that investment opportunities in energy in Albania are numerous, including the efforts to start the Vlora plant, along with construction of new generation, including renewable energy, and upgrades to transmission lines and the grid. The TAP (Figure 1), which will deliver gas via Greece and Albania to Italy for further distribution to Europe, and is expected to enter operation this year, likely will increase demand for gas-fired power and manufacturing investments in Albania. Gordani said hydropower, though, will continue to lead the nation’s generation mix.

“The country is rich in water resources [second in Europe per capita] and hydro has always been an important national asset for meeting the country’s energy needs,” he said. Gordani told POWER that Albania has eight major rivers that contribute to its hydropower potential. He said government data shows the country has granted permits for another 1,785 MW of generation capacity, with those projects not yet developed. He said there is an estimate of additional “hydropower potential studied, still unexploited, at around 815 MW.”

Gordani said the country’s current “installed hydropower capacity comprises mainly of large hydropower installations [that is, above 10 MW in size] and amounts to 1,904 MW, while small hydropower installations amount to 192 MW. Located in northern Albania, the Drin river is the largest river in the country and hosts three of the largest hydropower stations: Fierzë [500 MW], Komani [600 MW], and Vau I Dejës [250 MW].”

Over the past decade, the Albanian government has supported public investments and other initiatives to address the power generation sector, with much of the money coming from foreign countries, and Balluku appears to be reinforcing that effort. Among the new projects is Devoll Hydropower, which consists of two hydropower plants, Banja and Moglicë, in the valley of Devoll on the Devoll River, with a total installed capacity of 256 MW. Devoll Hydropower was initially a 50/50 joint venture between Norway’s Statkraft and the Austrian energy company EVN. Statkraft in 2013 acquired EVN’s 50% share and is now 100% owner of project. Other hydro projects underway include the Skavica installation on the Drin, and the Kalivac and Pocem projects on the Vjosa River.

The government’s new initiatives also include increased transmission capacity. Kreditanstalt für Wiederaufbau (KfW), a German bank, has financed several projects in the energy sector in the past decade, including 400-kV interconnection lines with neighboring Montenegro and Kosovo. North Macedonia’s state-owned electricity transmission system operator MEPSO late last year invited bids for a contract to build a 400-kV transmission line and a new 400/110 kV substation in the vicinity of Ohrid to provide North Macedonia with an electricity interconnection with Albania.

The European Bank for Reconstruction and Development (EBRD) has approved a loan of up to €37 million for the €49 million project; the remaining €12 million comes from a grant from the European Union. Luxembourg is providing funds for technical assistance to MEPSO. This first North Macedonia interconnection to Albania is part of a plan to establish an east-west electricity transmission corridor connecting Bulgaria, North Macedonia, Albania, Montenegro, and Italy; the section between Bulgaria and North Macedonia is already complete. Albania and Montenegro are connected by a 400-kV line and the submarine cable between Italy and Montenegro entered commercial use late last year.

“The Albanian energy market is undergoing a full restructuring process and a deep renovation,” said Gordani. “The country has huge potential in alternative resources.” The country last year approved a Consolidated National Action Plan on Renewable Energy Sources; Gordani said the plan focuses mostly on wind and solar power projects. The country’s Ministry of Infrastructure and Energy recently launched a tender for the construction of a 140-MW solar power plant in the Karavasta area, near Fier. The deadline for bids for the construction, maintenance, and operation of the plant is March 16, with the contract to be awarded in May, according to the ministry, which said, “The regulated price will be granted for 15 years and will certainly be purchased by the energy distribution operator.”

That project follows the country’s first successful renewable energy auction, a 2018 contract won by a consortium led by India Power Corp. for the construction of a 100-MW solar park in the Akerni area, near Vlora, a southwestern port city. According to the International Renewable Energy Agency, Albania has potential solar power resources of about 2.4 GW, and what Gordani calls “technical wind potential” of more than 7.4 GW “by 2030 if low-cost capital is available.” He said there also is potential for biomass generation. “The resource potential for biomass and geothermal also present interest, but have been studied to a lesser extent,” Gordani said. “More concerted efforts are needed to evaluate the technical and cost-effective potential for non-hydro renewable energy resources in order to attract investors and allow for concessions within high-potential zones.”

Gordani said losses of electricity on the grid at present represent more than 21% of total production, highlighting the need for system upgrades. “Unfortunately, the Albanian electricity system is plagued by exorbitant electricity losses,” he said. “The losses result from a combination of technical factors, due to the overloaded and aged grid infrastructure, and non-technical factors, such as non-payment of electricity consumption. From 2013, the country has been taking measures and managing to gradually reduce the losses in particular through the recovery system reform with the support of the World Bank. From the end of 2018, the country has taken the strategic reform of liberalization of the energy sector,” including a “power exchange with Kosovo, and market coupling process with Italy, Montenegro, and Serbia,” he said.

Balluku in late January said the country’s plan for renewables, backed by the EBRD, supports the launch of a study based on work by the World Bank that will split Albania into three zones, with an assessment of the solar potential of each. The announcement of the tender for the 140-MW Karavasta project came just after the country was identified as the location for a 2-MW floating solar project, which Norway’s Ocean Sun will build for Statkraft.

Darrell Proctor is a POWER associate editor.

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