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 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.

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.

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.

EV market

Albania has the most expensive fuel in Europe, with no subsidies in place for consumers. This creates an opportunity for the nascent electric vehicle (EV) market to develop in the country. On the other hand, there are very few charging stations in Albania, which deters uptake. However, the government is working on a national network of 200-300 EV charging towers by 2025.

EV policy

In order to incentivize EV uptake, Albania in 2020 implemented a VAT reduction of 6% for electric minibuses and a VAT exemption for all new imported battery EVs.

Albania in December 2021 submitted a draft National Energy and Climate Plan (NECP) to the Energy Community Secretariat – an international organization comprising European Union member states and other non-EU countries whose goal is to create an integrated energy market. The NECP, which Albania adopted in February 2022, includes a target of boosting the share of renewables in the transport sector to 34.6% by 2030. In 2022, the Albanian government removed all registration fees for EVs, with a total value of 7,500 lek.

Buildings market

In 2021, the country mandated renovations for 3% of public sector buildings to meet the minimum requirements for energy performance. Public buildings are also required to clearly display their energy efficiency certificate. This is part of Albania’s Energy Performance of Buildings Directive, which provides guidelines for improving energy performance in the buildings sector.

Buildings policy

The latest draft NECP in 2022 states an aim for renewables to reach a share in heating sector of 16.6% by 2030.