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Albania made limited progress on the reform of its energy system

According to the European Commission’s latest report published in October 2022, Albania has continued to maintain overall focus on the EU reform agenda, despite the challenge of addressing the economic and social consequences of the triple shock of the 2019 earthquake, the pandemic and of the Russian war of aggression against Ukraine.

As regards the green agenda and sustainable connectivity, Albania is moderately prepared on energy, environment and climate change.

Limited progress on the reform of the electricity market

The Commission found there was limited progress on the reform of the electricity market and connectivity measures in the renewables and gas sectors and on regional interconnection lines. In the context of the global energy crisis, such efforts, as well as energy efficiency measures, should be accelerated taking into account Albania’s commitments under the Paris Agreement and the need to engage in the clean energy transition, in line with the Green Agenda for the Western Balkans.

According to the report, in the coming year, Albania should in particular:

  • ensure the Power Exchange (ALPEX) and day-ahead electricity market are fully operational and continue strengthening the electricity transmission network;
  • complete the functional unbundling of energy operators and ensure full access to the liberalised market for all customers connected to 20 kilovolts (kV) in 2022, as well as the progressive extension of this access to all customers;
  • utilise benefits in the Energy Community guarantees of origin and sign a direct agreement with the service provider to use the national electronic register for issuance, cancellation and trade of guarantees of origin, in line with the EU standards;
  • finally, implement the updated National Energy and Climate Plan (NECP) 2020-2030, including renewable energy and energy efficiency action plans and ensure a shift of renewable electricity production away from hydropower.

Too much reliance on hydropower

Indeed, Albania depends almost exclusively on hydropower for electricity generation, making it vulnerable to climate impacts. It is a net importer of electricity at a rate of 30 per cent per year, as hydroelectricity is not sufficient to cover its needs.

Progress in power interconnection with neighbouring countries and setting up an integrated regional energy market is needed to strengthen the security of supply and create opportunities for green energy development and trading. The deployment of its vast solar and wind resources would significantly improve Albania’s energy security and reduce its energy system’s vulnerability to climate impacts. Albania
plans to use more photovoltaic and renewable energy from wind and this trend should be pushed forward given the NECP 2030 targets and the energy crisis.

Furthermore, the concession contracts for hydroelectric power plants (HPP) are not sustainable for Albania. The small HPPs have a significant impact on biodiversity and local communities, notably in protected areas where around 100 concessions are located or planned. Two large HPPs on the Vjosa River and the Drin River have generated opposition from communities. Such investments require full compliance
with the national legislation and the environmental and Energy Community acquis.

Security of supply:Albania should align with the acquis on minimum oil stocks of crude oil

On the security of supply, Albania is still moderately prepared but its oil stock legislation is not in line with the EU acquis. Progress is needed to create a central stockholding body for oil. Albania should align with the acquis on minimum oil stocks of crude oil and petroleum products required for security of supply.

On a positive note, the construction works of the interconnector with North Macedonia are expected to start at the end of 2022. The country also intends to connect the Vlora thermal power plant with the Trans-Adriatic Pipeline (TAP) through a natural gas pipeline, as well as through an LNG terminal to enhance the country and the regional energy security.

Climate change:alignment with the EU acquis remains limited

When it comes to climate change, Albania has some level of preparation for tackling this issue, but alignment with the EU acquis still remains limited. Albania pledged climate neutrality by 2050 at COP26 in November 2021, in line with the EU’s ambition. It also joined the Global Methane Pledge.

Good progress was done by adopting a revised National Determined Contribution (NDC) in October 2021, increasing the ambition from 11.5 per cent to 20.9 per cent of emissions reduction for the period 2021-2030, and by adopting a National Energy and Climate Plan (NECP) in December 2021. However, the emission reductions are foreseen for 2021-2030 in the NECP go up to 18.7 per cent, lower than the pledge in the revised NDC.

An overall lack of a specific administrative structure for handling climate change issues remains a matter of serious concern.

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