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Albania

With a power score of 2.38, Albania ranks number 6 among emerging markets and number 18 in the global ranking.

  • Emerging markets
  • Europe

2.38 / 5

Power score


 

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Low-carbon strategy

Net-zero goal and strategy

Albania does not have a net-zero target. Instead, the country is focused on incorporating renewable energy, especially wind and solar, into its generation mix. Very little of Albania’s generation capacity is from fossil fuels; instead, the predominant technology is hydro, accounting for around 95% of domestic capacity when considering small and large plants.

Nationally Determined Contributions (NDC)

Albania’s initial Nationally Determined Contribution (NDC) – a non-binding plan to achieve the goals set out in the 2015 Paris Agreement – aimed to decrease only carbon dioxide emissions by 11.5% by 2030 versus a business-as-usual (BAU) scenario from 2016 levels. The scope was limited to the energy and industrial sectors, and excluded agriculture, forestry and land use, and waste.

The country submitted a revised NDC in October 2021, with a target to lower greenhouse gas emissions by 20.9% by 2030 compared with the BAU scenario. The updated NDC includes sectors that were previously omitted from the scope.

Fossil fuel phase-out policy

Albania does not have a specific fossil fuel phase-out policy. The country in August 2021 joined the Powering Past Coal Alliance, a coalition of governments and private sector entities that encourages ending the use of coal.

Power

Power policy

The country’s power policy is centered on renewable energy additions to the grid, as well as improving the overall grid. In terms of energy demand the country had set a target for renewables to account for 178% of the total in 2030 (the value exceeds 100% due to exports).

Albania’s government is encouraging the deployment of wind and solar through policies such as auctions, feed-in tariffs, value-added tax (VAT) and import tax exemptions. As of 2022, there are plans for both solar and wind power purchase agreements (PPAs), although none of the three auction projects announced (two for solar and one for wind) were signed.

Since the country’s main source of energy is hydro, a big challenge is bridging the remaining gap and keeping a stable grid because of potential droughts.

Power policies

Renewable energy auction
Feed-in Tariff
Import tax incentives
Net Metering
Renewable energy target
VAT incentives

Power prices and costs

The Energy Regulatory Authority (ERE) sets energy tariffs every year. Albania decreased commercial and industrial electricity prices from 13,160 Albanese lek ($120) in 2019 to 11,610 lek in 2021. Residential tariffs, on the other hand, increased from 9,500 lek in 2019 to 11,830 lek in 2021.

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Power market

Albania’s power market is dominated by state-owned generation company Albanian Power Corporation (KESH), which operates 79% of the country’s generation capacity, with private players owning a far smaller share. It supplies electricity to state-owned distributor Electricity Power Distribution System Operator (OSHEE), which serves regulated customers. Although some large customers receive power via bilateral contracts, Albania currently has no day-ahead and intraday market. The entity responsible for setting up these markets is the Albanian power exchange ALPEX.

Previously, grid-connected projects had the incentive of having utility compensating them for all renewable power generated, but since 2022, renewable energy plant operators are required to pay for grid imbalances, as with conventional power producers.

The Power Sector Law fails to task the national regulatory authority with defining and publishing the methodology and criteria to evaluate investments in electricity and gas and the higher risks they incur.

Installed Capacity (in MW)

2012201420162018202001K2K3K MW

Electricity Generation (in GWh)

2012201420162018202002K4K6K8K GWh
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Utility privatisation

Which segments of the power sector are open to private participation?


Generation
Transmission
Retail

Wholesale power market

Does the country have a wholesale power market?


Available
Not available

Doing business and barriers

OSHEE, the distribution system operator and supplier of electricity for regulated tariff customers, acts as the offtaker for new renewable projects. It is currently undergoing reform, using a loan from the World Bank to reduce its debt burden. This debt has accumulated as a result of low tariffs, electricity theft, and technical losses in the distribution system. OSHEE’s perilous financial position means there is higher offtaker risk and any PPA will likely be signed in conjunction with one, or several, government or World Bank guarantees.

Besides that, the lack of data transparency, long permit-granting procedures and the availability of fossil fuel subsidies are significant barriers to renewable energy growth in the country.

Albania’s transmission system is antiquated and some plants that need modernization. There are some ongoing strategic infrastructure projects, particularly the 400-kilovolt overhead power transmission line (OHL) interconnection between Albania and North Macedonia, positively influencing regional coupling, and some gasification and gas infrastructure projects.

Currency of PPAs

Are PPAs (eg. corporate PPAs and all other types) signed in or indexed to U.S. Dollars or Euro?


Available
Not available

Bilateral power contracts

Can a C&I (Commercial and Industrial) customer sign a long-term contract (PPA) for clean energy?


Available
Not available

Fossil fuel price distortions - Subsidies

Does the government influence the wholesale price of fossil fuel (used by thermal power plants) down through subsidies?


Available
Not available

Fossil fuel price distortions - Taxes

Does the government influence the wholesale price of fossil fuel (used by thermal power plants) up through taxes or carbon prices?


Available
Not available

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Climatescope 2022

Power Transition Factbook

This marks the 11th anniversary of Climatescope, BNEF’s annual assessment of energy transition opportunities. The project has been expanded to include activity not just in clean power but in the decarbonization of the transportation and buildings sectors. The Power Transition Factbook is the first of three reports that composes BNEF's Energy Transition Factbook. The transport and buildings sectors reports are coming soon.

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