The integrated approach to address the barriers that hinder an accelerate uptake of hydropower potential in WBs by Dr Lorenc Gordani on 13th May 2017

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The Regional Strategy for Sustainable Hydropower in the Western Balkans by ACERC is evaluated as an excellent instrument, structured in a wide range of backgrounds, that will enhance the chances to a sustainable development (going well above the itself hydropower’s) for all the area of the Western Balkans. However, focusing mostly to Albania legal order, the country have in long time provided its power generation almost entirely by hydropower, and is committed to the deployment of more than 800 MW from the renewable resources to reach the binding targets of 38% within 2020.

At the begin of February 2017 the Parliament of Albania passed the Law on Promotion of the Use of Energy from Renewable Sources. The draft law was challenged by the investors in the small hydropower plants in the country, but in last the Secretariat’s Negotiation Centre and Dispute Resolution facilitated the negotiations between the producers and the Albanian government and parliamentary committee about the draft to be proposes in the general assemble.

Notwithstanding the above projection, the Renewable Energy Directive has not been implemented to a full extent yet and still lags behind, due to insufficient administrative capacity. Furthermore, limited capacity in the transmission and distribution systems impedes the provision of priority access for renewable energy to the grid, as stipulated in the Law on Renewable Energy. In addition, several challenges exist which together with the administrative barriers, adding to transaction costs for businesses.

Administrative barriers that lead to a long project development period and a higher risk perception by investors. Then, with the introduction of new law it is hoping the follow with the establish of a one stop shop office able to lead to any game-changing benefits for project developers. Today, the access to the market is partly working for international investors only with the help of local partners who are aware of the context and have better access to local institutions and procedures.

The new PPA was adopted in June 2016 in accordance with the association of producer. Notwithstanding, a lot of improvements the new PPA do not address the bankability issues (such need the making clear of the fundamental take or pay principle) that reduce the investment risk, because developers are guaranteed stable future revenues earlier in the development process. The current FiT for small hydro systems will be maintained, for the installed capacity up to 2MW and wind up to 3 MW.

Support schemes across are now expected to be revised to comply with the new EU state aid guidelines. To improve the investment framework and tackle the major challenges hindering a more accelerated renewables deployment, has introduce more market-based support schemes, moving from feed-in-tariffs (FITs), to feed-in-premium (FiP) systems for installations up to 15 MW. The allocation of FiP tariffs shall be determined via a competitive, non-discriminatory bidding process (auction).

On the last days, there is the notice about a Memorandum of Understanding (MoU) among the Albania’s Minister of Energy and Industry and EBRD with the goal to stimulate sound investments in solar power generation. Following the above, the country as already release the solar energy price by 100 euros per MWh and for wind by 76 euros per MWh. This price will serve as the price level on the basis of which the beneficiaries of the scheme will be selected. However due to limited competition in the energy markets and the early stage of renewable energy development, there are, however, concerns about the auction scheme being a suitable model.

The overall ability of the balancing the system by Kesh is foreseen as an asset to mitigate the issues. However, the situation is foreseen to change with the creation of the balance market. Inevitable problems of the grid, exist in the period of strong rainfall that a part of damage cause an increase of energy putting in grid in same time by SHPP, and request that grid operator to be restrictive regarding the amount of renewable energy that may be integrated into the grid.

In last, there is need to a regulatory framework and legislation that lead to the install of trust in renewables by the banks. The partly “retroactive” changes in the support systems, in combination with the other barriers presented, has created a high-risk perceptions, resulting in difficult and expensive access to capital. Consequently, capital costs are markedly higher compared to the EU countries. However, the auction process may stabilise the investment context and address major hurdles to hydroelectric expansion.

A compromise solution found in December 2016, served as a basis for a special provision now incorporated within the new law. Part of the compromise is that the Secretariat will be involved in the setting of the methodology for the calculation of the support scheme applicable to existing producers. The contribute that may affect positively in the improve of both compliance with the acquis and investor confidence. The Secretariat has now to assist and verify the adopted methodology’s compliance with the Energy Community acquis.

In last, in the framework of the WB6 Sustainability Charter, the country has agreed to step-up the ongoing efforts to reform and integrate electricity markets and to become a part of the global response to climate change. The status in promotion of renewable energy in the Energy Community, as included in the 2016 Implementation Report, shown that the transposition and implementation of the Renewable Energy Directive 2009/28/EC is still an issue!

Then, for all here above described, we think that Hydropower Development Study in the Western Balkans complement in the best way the assistance already offered by Energy Community and other EU donors. The intervention with so complete and systematic material on the sector is consider by us as the best instrument to led the evaluation to proceed or not with the investment in a certain river basin, or the right type of HPP facilities (storage, run-of-river, reversible), and the best option among the repair, refurbishment, upgrade or rehabilitation of existing HPPs or the build-up of new greenfield HPP.

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 will 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”.

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