Albania exclusive report: HPPs market, private investors and electricity generation & trading, what are the realistic scenarios and results of concessions usage

28. March 2014. / SEE Energy News

The new government seems to have ” frozen ” for some time the agreement with private small hydro power plants . Talks are underway of a review period ” step by step ” for contracts signed or those in the process , dealing with small producers of electricity from hydro sources . There is still a clear visibility , but for sure is that the new government would not steer completely securing electricity from water resources . During 2012 16 new hydropower plants went into production . The total production of electricity from hydropower plants up to 15 MW from 136.8 GWh in the year 2011, amounted to 299.9 GWh in 2012. Albania has still many difficulties in exporting power ( 400 kW projects lines that connect Albania with countries in the region are still in the development stage .

Just as was warned , government undertaken the cut for number of contracts for the construction of small hydropower plants. Numbering about 12 procedures made ​​” null ” . If these figures are so far in terms of concession contracts for the construction of small hydropower plants ?

According to official sources of the Ministry of Energy and Industry , since the entry into force of Law no . 9663 , dated 02.19.2006 ” On concessions ” , as amended, and by-laws for its implementation , the Ministry of Economy , Trade and Energy has signed since 2007 to September 2013 , 164 concession contracts and rehabilitation of 435 plants were signed. From the same source we learn that the installed capacity to date is estimated at 1,930 MGW , with annual production projected to total 345,087 GWh . While the total investment , according to official sources , the 2 billion worth of 654 million euros .

Current status is like this, in total with completed work on contracts signed from 2007 to September 2013 and are in the production phase of 44 hydropower plants with installed power 195 432 kW . Here are including Ashta 1 and Ashta hydropower plants with installed two 56 MW ​​. According to the ministry , in 2013 started work some important works in the field of electricity generation , which include:

Devolli plants on the river , with an installed power of 279 MW , with an investment of about 940 million euros , plants on Grand River and Fan Fan i Vogel , with an installed power of 87.700 kW , with an investment of about 142 million; Curraj plants on the river , with an installed power of 97.570 kW , with an investment worth about 100 million euros ; Osumi river hydropower plants with an installed power of 152 MW , with an investment of about 231 million euros , etc. .

Government considered these investments as the main engine of power generation and that will reduce dependence on imports , at a time when Albania is recognized as a major hydro resources . And to promote it, they undertook fiscal easing measures , where we remember from VAT exemption for capital assets , such as cement and iron , as well as the use of state property during the entire concession period for only 1 Euro in the construction of hydropower .

It was anticipated that the hydropower contracts and 15 authorizations granted for the construction of wind parks , wind and solar , Albania to meet its needs for electricity by 2015 . Everything has remained just on paper . Studies conducted at the time showed that Albania was able to build up to 4,500 MW hydro power installed , with an average annual production of about 16 billion kWh , while current demand is for about 7 billion kWh
However , the new government seems to make ” null ” all these . Each strategy will be reviewed. Will reconfigure the objectives . It is not known exactly who will be new orientation for provision of electricity , but it is accepted by the Ministry of Energy and Industry is the fact that such a thing cannot be said, ” so on two legs ” , but will require studies authentic , based on cost and who will be in accordance with European directives and objectives .

For environmental researchers , a large part of hydropower projects bring environmental destruction as a result of diversion of rivers ( streams ) . Experts say over 60 % of HPP that were planned to be built not justify the damage that would cause energy environment that will produce , in this way could meet only a “condition ” .

During the period 2007 – July 2013 , the Ministry of Economy , Trade and Energy ( METE ) examined 1,200 files privatization and concessions . Just for privatization and concession building new hydroelectric registered 727 requests . In operation are about 20 % of the total hydropower anticipated that fail to provide a very small percentage compared to the total electricity production .

To date , the domestic and foreign business received 164 concession contracts for the construction of about 435 EC – H s , which in total are worth billions of euros . The situation is not the best , because until September 2013 at the stage of production were only 44 hydropower stations with installed 195.432 kW . In most of the concession investment is not realized , or had delays. Identified cases where companies have resulted in ” ghost ” . All this translates into money stay blocked and are not injected into the economy. In this way , the main wealth of the nation is held hostage .

So, what are the reasons ? What did not work properly in the use of water resources, the main wealth of the country? Development of a concession passes through several stages that are divided into : the selection phase (identification and selection of the concessionaire ) that includes among others the development of competitive procedure and ends with the signing of a concession contract and the stage of development of the concession project ( construction , operation ) which includes financing , obtaining permits , use ( which itself is related to obtaining licenses and connection of the power sales contracts , spot market in the region and ends with the transfer of the project at state contracting authority . Every link the procedure has its own issues affecting the implementation of a concession project . But rather than technical difficulties , Albanian concessions has penalized the complete lack of experience of companies that have been granted these concessions, lot were not prepared to meet challenges .

So most of the concessions remained unrealized and result in tremendous delays , beyond the terms of contracts . A large part of them have not had the anticipated phase of obtaining permits necessary for their development . The right of the concessionaire to seek postponement of his investments is used by 92 % of the winning companies . It just varies from 12 months to install power projects up to 5 MW , up to 24 months for projects with installed capacity up to 20 MW . About 70 % resulted in delays beyond these deadlines . Despite giving assurances that contracting authorities to enforce contracts for the sale of power from the state entity power supply , the fact is that the concession companies can decide their assets as collateral to obtain financing ( as well as the right funders for replacement concessionaire in case serious breach of contract by the concessionaire ) have not resulted in sufficient guarantees for many of the projects . In providing funding affected the state of the electricity market .


Albania has still many difficulties in exporting power ( 400 kW projects lines that connect Albania with countries in the region are still in the development stage . Under these conditions , most of the concession companies without developing activity and waiting for their owners ( concessionaires ) to find the right investors , who will intervene on the application and development of these projects .

The law ” On Concessions ” provides that in case of failure to comply with the terms of the contract, the government or authority ( ministry ) has the right to apply a range of sanctions against the concession even to unilaterally breach of these contracts . And this should have happened in the years 2009-2010 , when he noticed the extreme delays . Today , most of the concessions granted projects have proved ineffective . It comes to investments accounted for at least a million euros per megawatt installed .

In many cases , these donors have reacted issues , one of which EBRD  expressed concern about the lack of a precise expertise for projects of small HPPs local . Such a situation was not translated well from flirted banks were reluctant to loan . Lack of experience in fulfilling negatively affected files as needed , preparation of environmental studies etc. .

Intended that a good part of small HPPs , except to produce energy , to be used for normalization of the irrigation system , as well as regulation of the environment , reducing pollution which somehow finds everywhere in the village and in the city . But what results from their monitoring ? Are the criteria for which are given and licenses ? Why not continue the construction of HPPs others who are given concessions ? Are time limits violated ? Who is responsible and are putting those responsible before the law and contracts concessionaires before penalties ? These are questions that still remain unanswered and that will probably be addressed in the new strategy that aims to prepare .

Why we failed

There was an attempt to increase the production of hydropower provided by small and medium , but also to liberalize the energy sector , but according to experts , in reality the situation was quite different . Currently , small hydropower plants operational , partially operational or rather , counted on the fingers . Part of the difficulty associated with construction and operation , but also a lack of experience , capital , but in particular with the plants farthest from the transmission network .

Experts point out the problems associated with the transmission network organizations , which operate at much higher levels than those that can provide small hydropower plants .

They say that this is a problem to be solved , it cannot be that the transmission of electricity generated by hydropower plants pass through the distribution network . At this point must be shared competencies and capabilities needed to be created .

Experts explain that it is necessary to perform a review of the existing legislation , as well as a realistic assessment of potential investment associated with that network distance . ” There can be accomplished such an investment , if there are opportunities to transmit energy. On the other hand , should be set tighter restrictions on the criteria to be met by entities licensed to operate in this sector . Because, actually , a very large part of these licenses are not implemented ” , experts explain .

Another problem has to do with the distance from the grid. Only lines connecting these plants with this network needed millions of dollars , which adds a considerable financial burden initial investment bill .

Experts also noticed that some concessionaires do not have much experience in the electricity market and some of them do not have much equity . Some have problems with land ownership , expropriation or social impacts in areas where hydropower plants are planned to be built .

But , what is that experts reinforce private concessionaires are required to add several thousand more megawatts of total electricity production nationwide .

Incentives yielded no effects

During the 80s , small hydropower plants in Albania produced to meet the energy needs of about 3 % . Today , according to official data , the total output from private generators is estimated at about 2 % of total production , a figure that has been declining . Today , about 54 hydropower plants that were in operation produce only 44 . Concession companies operating in this sector are in various stages of development projects , but for now everything is stopped waiting to understand what will be the strategy of the new government . In terms of investments , in total , it has reached about 2.6 billion dollars .

In previous strategy of the scepter of power , the Government has given priority to the use of large hydropower potential of the country . To foster private initiative for investment in the construction of HPP with capacity of up to 15 MW , the government authorized KESH to purchase all electricity produced by them , with the price approved by the ERE , according to a formula that was inflammatory refers to the average import price of electricity plus a 10 % bonus . Price differentiation between private hydropower to existing and new would be built was justified by the change in the value of investments between these two categories of objects.

Yes that is the investment that coincides with these concessions . According to the Ministry of Energy and Industry , the installed capacity of 1,930 reached almost MGW .

But, these investments resulted profitable ? According to experts , natural resources have been exploited and put to use ( or intend to put ) bring benefits for the state , as well as investment companies . We should not forget here that the production of electricity from water resources is low cost , and therefore viewed with interest .

Companies that invest ( or require ) the construction of hydropower plants are the Albanian and foreign . Specificity of concession contracts is that it connects between the contracting authority and the concessionaire , which can be as a single company , as well as joint venture . Within the union has foreign companies , as well as Albanian . Origin of foreign companies is mostly Austrian, Italian , Greek , etc. .

According to the Electricity Regulatory Authority for 2012 , total production from private generators was 299.9 GWh or 7.0 % of total net domestic product this year . During the same period , the number of companies and private concession in custody or had owned hydropower was 68 .

During 2012 16 new hydropower plants went into production . The total production of electricity from hydropower plants up to 15 MW from 136.8 GWh in the year 2011, amounted to 299.9 GWh in 2012 . In the 2012 report , the Energy Regulatory Authority shows the performance of this sector for the period 2004-2012 , which emphasized that the high production of 2010 , despite the increased capacity installed in a large extent , was influenced by more favorable hydro conditions . Noted the high rate of production of HPP concession granted after 2008 , and a significant hop in 2012 .

According to the ERE , the proceeds received from private entities for the sale of electricity produced by hydropower plants with a capacity up to 15 MW , which since 2011 the figure jumped to over 1 billion for 2012 amounted to over 2.5 billion . Since 2010 , due to rising energy import prices , prices for this category had increased . For 2012 , the new HPP concession , based on the methodology that relied on import prices of the previous year resulted in 9.3 lek / kWh or 34.9 % higher than the 2011 price . Also in 2012, the price of money approved was 7.77 / kWh from 7:57 lek / kWh or 2.6 % more . This difference in price growth between these two groups was the result of the application of two different methodologies : the private HPP / concession old calculation was based on the average price for tariff for the year , while the HEC with concessions the new calculation was based on the import price and the exchange rate for the previous year .

Statistics 2007- September 2013

164 concession contracts for the rehabilitation or construction of 435 hydropower
345.087 GWh annual production projected total
1,930 total power invested MGW
2.6 billion total investment
Only 44 hydropower stations produce electricity with an installed 195.432 KW

Source; Serbia Energy See Desk

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