CCGT Korça a Feasible Option for the Albanian Gas Market, by Dr Lorenc Gordani, 30 April 2017

The energy system in our region is on the brink of a revolution, which will change how we produce and consume the energy. The Western Balkans (WB), as part of this development are facing today with a “strong” dilemma, regard long-term sustainable development: if there is a need to look more toward the national RES or reinforcement of cross-border interconnection, both thread by more attractive short solution offered by the decrease of today in fuel costs.

In the above context, Albania, along with Montenegro and Kosovo, are the only country in Europe, not linked to interstate gas transmission systems and has a completely isolated, national gas distribution system. In the past, the country had a significant gas sector, but there is virtually no gas network now. Domestic gas production has declined from 1 bcm in 1982 to 0.01 bcm in recent years. The very small remaining gas activity is concentrated in the southern part of the country supplying the oil refinery industry with limited volumes of domestic produced gas from the fields of Divjaka and Frakull and associated gas from the oil fields near Ballsh.

Demographic characteristics of Albania settlements are very unfavourable for the development of gas distribution networks. Albania have a relatively large number of settlements (approx. 3,000) with a relatively small number of inhabitants per settlement. However, present and future energy mix for Albania, evaluated with reference to the information collected from different sources such as AKBN and IEA and the implementation schedule of the Gas Master Plan for Albania, shows that the total potential thermal demand in Albania, represented in natural gas consumption rises from 1.5 bcm in 2020 to around 3 bcm in 2040.

Then theorically, the first connection to the gas network may only be available to those areas where it is feasible to develop natural gas network, and if the final price of gas for the end users is competitive in comparison with other energy sources. Therefore, the procedure of forecasting future gas consumption is to determine the heat and electricity market, and to determine which part of the heat market gas can cover, and what part of the electricity generation could be gas powered.

Whether the eligibility criteria for the investment in gas distribution networks for individual settlements/LGU´s is determined cost-effective, by the size of the settlements/LGU´s. Building gas distribution networks involves substantial economies of scale. A principal measure for benefiting from economies of scale is the average volume of gas demand per kilometre (km) of the distribution grid, which in turn, depends greatly on a country (or region) settlement density.

The second round is to determine the possible dynamics and direction of the gas transmission network development taking into account gas consumption of the large industrial consumers, power plants and refineries. From the time when gas network is constructed in some area, in scenarios of development of the future gas consumption in the area observed, a rate of penetration of the gas to the heat market is predicted. The penetration rate is based on experience from the already gasified countries in Southeast Europe.

Finally, the feasibility of the gas network system can be assessed by evaluating its ability to provide end users with gas at a competitive retail price compared to other forms of energy, mainly electricity and diesel. For the purpose of a here rapid present analysis, it can be assumed that a gas retail price at a 20%-25% discount to the electricity price for medium size industries and households would be appreciate.

The current average electricity price for Albania is at the level of 10.7 ALL/kWh (0.08 eur/kWh). In more, it is useful to analyse the price of electricity composition that includes:

• the still subsidise energy costs, based on data Albanian Authority of Energy ERE along the 2015, at level of 28%;
• the high costs related to grids and services (including the technical and commercial losses at 27.5%); the already support given for the renewables;
• and what will take more and more space, the cost for supporting the environmental policy; as well as the stranded investments as back-up and reserve (i.e. already Valona CCGT);
• and in last, of course the profit margin for the operator companies.

Then, due to developments and improvements, with effect at the capital investments to the grid and growth of the fixed costs for the operation of system, the prices of energy in Albania have to get a significant increase. The higher shares of RES at 38% up to 2020 and the new target to be establish regard the 2030, and in particularly the tomorrow-urban distributed RES, will increase the cost of DSO over the time. Another adding component of the cost increase may come also from national taxes.

Given that the current average electricity price for Albania and the predicted development, a gas retail price of 0.0578 eur/kWh (0.511 eur/cm) might be feasible consider a total network cost of around 0.20 eur/cm, and assuming that the gas supply price is 0.364 eur/kWh (0.322 eur/cm). Energy that can be also deliver to imports, through the upcoming investment in interconnections project so-called Projects of Energy Community Interest (PECI) as in the here case the nearby already commission interconnection line Albania – Macedonia.

In more the already approve moratorium of the woods cutting make more feasible to compete with the price of fuel wood form imports, that was hampered before by the low price in rural areas of region. With a final result of the economic optimization is a realistic expected a future potential natural gas consumption for electricity generation could be around 770 mcm in 2040, and forecasted natural gas consumption in refineries in 2040 could be around 89 mcm.

In conclusions, on the Albanian energy mix, from the data above it can additionally be noted that starting from 2030, electricity imports are not needed anymore if the planned three gas fired CCGT´s (included in the Albanian GMP) are implemented, and Albania will have excess capacity for exporting electricity. A scenery pertinent with the overall agreement of the WB6 countries, to tap into their high potential of energy independency and sustainable development.

Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations may differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author at the “lorenc_gordani@albaniaenergy.org”.