Albania: Wind energy deployment by market opening

By Dr Lorenc Gordani*

Albania is a small country in South Eastern Europe with many valuable natural resources, including the possibility to produce abundant electric energy from wind power. Although wind energy technology, as an energy resource, is distributed throughout Europe and total licenses in the country amount to approximately 2548 MW, with an energy generation potential of around 5.7 TWh/year, today no wind farm project is in pipeline or already completed. Therefore, it is fundamental to face the main challenges that obstruct their deployment and the implementation options of these projects.

Starting with the fundamentals, the energy from wind has been used for centuries for pumping water, windmills, etc., and in recent decades the focus has shifted on the production of electricity. Machinery operated by wind energy operates successfully in isolated areas with its capacity varying from several kW to seven MW. Windmills can be quickly installed and used in a small area of land. However, in most countries, windmill installations face a common fundamental concern, such as the lack of continuous measurements of wind velocity spanning several years.

This is the case in Albania, as in many developing countries, the lack of continuous long lasting measurements of local wind speeds. Notwithstanding that approximately 2/3 of the whole of its territory is hilly and mountainous (east of the country) and the coast line is in the direction of North-South, various companies interested to invest in this sector have encountered difficulties to estimate whether it is worth doing without the right estimations.

However, Albania has historical data obtained from different metrological stations in the country, which refer to an average annual wind speed of 6-8 m/s and energy density of 250-600 W/m2. Therefore, even while being conservative, because the data are not gathered with the specific purpose of measuring wind energy potential, as identified by the Albanian Agency of Investment Developments – AIDA there is an untapped wind power potential of at least 20 electricity plants, in particular along the Adriatic coast.

Despite the limitations and accuracy of the above, there are already several domestic and foreign licensed investors exploring wind power production in Albania. According to the Ministry of Energy and Infrastructure, a series of zones have been identified with high potential of wind energy. Interest followed up to 2015 with a significant number of proposed big projects by investors reaching an approximate capacity of 2548 MW.

The first tranche of big projects came in early 2009, which saw a significant total licensed wind capacity of 1367 MW. Their technical studies showed promising potential between 5,8 m/s to 7 m/s, with load factors typically varying from 22% to 25%. The positive outcome was followed by the continued licenses granting process during the period 2009-2015. It all resulted, based on the information provided by the Ministry of Energy and Industry, to a rough total of 2548 MW, with a generation potential close to 6 TWh/year.

Notwithstanding the above plans for big wind projects, a further obstacle has been the intake of the energy produced. Since wind is an intermittent source, there is a need to consider load balancing for the system. The data of the Ministry of Energy and Industry indicated in the referred period that based on the grid structure, the capacity of the Albanian power system to absorb and dispatch wind energy was only about 180-200 MW.

The change of the situation can lead to huge investment, as well as being part of an integrated European network and the developing of power exchanges options. A further aspect of interest for the investors is related to the openness of the market, and the possibility offered today through the adoption of a balanced approach on a regional level since wind is an energy resource of low probability. A further even more economic option is also the integration with big hydropower resources offered by the national market as an excellent balancer of wind power plants.

The opening of the market has also brought the possibility of a reform of the remuneration mechanism. Until recently, Albania had a lack of supportive regulatory framework for the deployment of renewable energy sources other than hydropower. However, the situation has changed over the past two years with the introduction of feed in tariffs for projects up to three MW or three pillars. The feed-in tariff is aligned with the RE target set in the National Renewable Energy Action Plan adopted in January 2016. Also, today there are tariffs already in place of 76 Euro/MWh. Each company can pursue more than one project for a total of 70 MW.

Furthermore, in June 2019, Albania’s Ministry of Infrastructure and Energy announced its final approval of a net metering scheme for renewable energy. The scheme is open to renewable energy systems, including wind and solar projects, not exceeding 500 kW in capacity.

As a further step, the country has already introduced feed-in-premium tariffs or Contract for Difference (CfD) for renewable projects of over 3 MW of installed capacity. The tariffs are granted through a competitive auction process and will have a duration of 15 years. The first auction for a 50 MW solar PV plant was launched in August 2018 with the support of the Energy Community Secretariat and EBRD. More than 40 companies expressed their interest with three developers shortlisted and a contract was awarded to India Power Corporation Limited, to build a large-scale PV project with a total capacity of 100 MWp.

Additional support mechanisms for renewable energy producers with an installed capacity higher than a certain capacity level (around 0,5 MW) consist of customs duty exemptions for machinery and equipment used for the construction of new capacity. Based on this scheme, the developers also are entitled to benefit from tax exemptions from excise products.

Last but not least, a relevant contribution came from the possibility to acquire the terrain for a symbolic price of 1 euro and the support by the National Business Centre, which aims to operate as a one-stop-shop for shortening procedures and increasing the transparency of the licensing process (however, there are still several administrative steps, which have not been integrated).

Notwithstanding the importance of all the above developments, the opening of the market is fundamental and the integration with the regional and European one, which also leads to other options that make projects feasible even without direct incentives. Based on the spread between the cost of development of energy production in Albania and the EU, and the high profitability by the combination with hydropower potential, wind energy offers today a surplus value to markets that makes it competitive, especially if combined with the upcoming opportunities of a green certificate scheme.

Albania offers a very attractive wind energy potential for the market. The last development related to the opening of the power exchange and the approval of tariffs, offers the possibility for further studies to enhance available data, which could be a further chance for comprehensive wind potential, at least at the most promising sites. Nerveless, considering the constant reduction of cost shown by the available preliminary studies of international organisations, such as IRENA, untapped cost-competitive potential for the deployment of wind is calculate to be 987-2,153 MW in 2016, 5,201-6,990 MW in 2030 and 7,238-7,414 MW in 2050.

*Dr Lorenc Gordani, Professor of Public Law in Marin Barleti University and Independent Adviser in Energy Policy & Law, Regulation & Infrastructure in Albania

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