Albania’s Ministry of Infrastructure and Energy (MIE) is overseeing several major connectivity projects and a wholesale repositioning of its energy production strategy as the country works to fulfill conditions for accession to the European Union (EU). After a ‘ghost tender’ was awarded for an Albanian infrastructure project in 2018, new minister Belinda Balluku has placed sectoral reform high on the agenda by initiating processes aimed at greater transparency over public contracts and the compliance with EU regulations. With Albania keen to become a tourism hub and diversify its energy mix using renewable energy sources (RES), here Minister Balluku outlines the potential for investment in both infrastructure and energy and Germany’s contribution to the sectors’ development
What are the MIE’s most important infrastructure projects for 2019?
Albania exhibits dynamic growth in infrastructure. We have a clear development strategy, aimed at meeting citizens’ demands and being fully compliant with EU regulations. It places an important focus on tourism, with the objective of transforming Albania into the Mediterranean Balkans’ touristic hotspot. Clearly, modern infrastructure is required in order to support growth in this sector. I perceive the MIE as the main contributor to Albania’s tourism strategy. We are taking care to deliver projects on time that are supportive to our tourism strategy, while carefully monitoring security and quality.
And, after some years without important rail infrastructure investment, we now have two important projects: a railway connecting Tirana and Durres with Tirana International Airport, and a regional interconnection of Albania with Montenegro, enabling Albanians to cross Europe by rail. We will also develop both commercial and touristic port infrastructure projects and road infrastructure to increase road safety and improve connectivity.
Of significant focus is air infrastructure. Albania will soon have two new airports in addition to the current international airport in Tirana. One will be a regional airport in Kukës in the north, which we expect will begin construction in April 2019 and serve Albania and its neighbors by the end of 2020. The other will be an international airport in Vlorë, which will further stimulate the development of tourism on our southern coast. This is our biggest air infrastructure project, designed to international standards. Potential foreign investors in tourism and hospitality have expressed demand for this southern Albanian airport. We are now working to find a serious and committed partner for this project.
What are the main challenges facing Albania’s energy sector?
The most important challenge is to complete energy self-sufficiency and to contribute to the regional supply with our own generation sources. Our solution is to increase power generation through diversification and more production in the future. We are working hard to have additional generation sites as well as a line for regional interconnection. This requires further regulatory improvements and investment measures to comply with EU standards.
Other challenges in energy include improving our distribution grid through investing in lines and stations, and completing the legal framework reform and monitoring of public power contracts to increase efficiency, financial performance and stability. We reassure foreign investors and especially German investors that Albania has a growing investment potential that will be carried out through an absolutely transparent process.
This year Albania chairs the Energy Charter Conference, which gives us the opportunity to work closely with the EU on energy and moves us towards reaching our clear goals for EU accession: establishing the Albanian Power Exchange (APEX) and implementing a new market model with a deregulated power sector, moving towards full liberalization of the electricity market in the future.
Within the energy sector, where are the opportunities to diversify into other renewable energy sources like solar or wind?
Albania is one of the few countries in the world reliant on renewable energy, and it is mostly hydropower. So we are diversifying our mix of RES to use solar and wind sources in particular. Our last completed solar tender was the 50MW Akerni project near Vlorë, and we are looking forward to a bidding for a solar park in Karavasta, in the Fier region. To drive this diversification forward we are exploring supportive schemes that will attract investment. The ministry has prepared guidelines on net metering and billing and is now working with distribution and transmission operators on requirements to make this energy available to independent power producers.
Diversifying into solar and wind cannot solve our problem of vulnerability to weather conditions, but it can increase our generation capacities and address the imbalance in our generation sites, from north and northeast to south and southwest. All current energy production lies away from the biggest cities in Albania, creating efficiency problems as some of the load is lost during transmission.
The completion of new reforms – further unbundling and deregulating the power sector, implementing a new market model, establishing APEX, reducing electricity losses and increasing payment collections – will improve the financial performance of the power sector. Additionally, if our neighbors soon have to comply with EU regulations we believe there will be a huge market demand for clean energy. So we are also investing in our energy transmission system, with the aim of regional interconnection.
What opportunities exist for German companies to play a role in energy and infrastructure public-private partnerships (PPPs) in Albania?
Current infrastructure projects focused on the interconnectivity of the North-South corridors are being successfully conducted under PPPs. Projects in 2019 include the new Tirana-Durrës railway and accompanying highway, to be delivered by around 2021. The private partner is to add optional toll-free routes alongside the Tirana-Durrës toll road, which will comply with EU safety standards. This will be valuable for our community. We are looking for other PPPs to construct linking roads on the Adriatic-Ionian highway, between Milot and Balldren and between Orikum and Llogara – the Llogora tunnel.
We are also very focused on diversifying our power production through PPPs. This is important for us to guarantee energy protection and low tariffs for Albanian households, and to support the planned energy market liberalization. Some energy projects such as the Vlorë, Fier and Korçë thermo-power generation plants, will be framed as PPPs. These all aim to improve our energy security, so hold great importance for us.
We reassure foreign investors and especially German investors that Albania has a growing investment potential in energy and infrastructure that will be carried out through an absolutely transparent process.
What is the MIE doing to facilitate Albania’s accession to the EU? What impact could it have on Albania’s infrastructure and energy sectors, and on the EU as a whole?
The MIE has updated its regulatory framework to fulfill EU requirements related to road infrastructure. During 2019, we will build structures aimed at guaranteeing safety and security in the Albanian railway system. Our goal is to create a sea transport monitoring system to increase safety in this sector as well. In the energy sector, we are working to liberalize the market, create the APEX and a day-ahead market, improve energy efficiency, unbundle the power sector, and pass laws on security reserves of oil and derivative products and on biofuels.
We are ensuring as well that our reforms have a direct positive impact on Albanian citizens. We value discussion with our communities on every aspect of our projects and reforms. I believe most Albanians are pro-Europe and once the reasons behind these more Eurocentric measures are explained, the reforms are finding support amongst Albanians.
How is the ministry improving transparency around public tenders in both infrastructure and energy?
Albania is often blamed for a lack of transparency. Perception does not match reality, but it is still important. We understand that transparency is the guarantee our partners ask of us in exchange for investing in Albania. We are working hard to guarantee it to them and to our citizens. Problematically, our legislation and procurement have traditionally awarded public contracts to the lowest bid rather than the best-quality offer. We are regulating this continuously, finding weaknesses in our legislation and procurement processes and eradicating them with respect to our law on transparency. Tender procedures have and will continue to improve in order to provide full access to all interested parties, as well as ensure we allow only contracting parties that fully meet all technical requirements to move forward with us.
You have said you are freezing work on new hydro plants to study their impact. What are the reasons behind that?
Various appeals by interest groups have led the MIE to launch a process of surveying hydropower contracts in place since 2009 when the Albanian government decided to support hydropower development. At that time, the related regulatory framework was not ideal, and energy markets have evolved in the ensuing decade so updating this framework has become a priority both for us and for our European partners.
We are monitoring if each contracting entity respects the terms of their contract. It turns out that in many cases legal, technical and environmental conditions have been violated. So working groups have been set up to monitor contracts more closely. I have also suspended new hydropower-licensing requests, in order to change operational legislation to support market liberalization and deregulation, as requested by the EU. Signing a new license knowing that it does not fulfill EU requirements – for instance, if it is a fixed-price production license – will, if and when Albania joins the EU, constitute a breach of the law. Our role is to encourage business while ensuring legal requirements are fulfilled at every step. We take our cue from EU best practice.
How is your ministry using development aid from Germany to fuel development of reforms?
We consider the German Federal Government and German investors our strategic partners. Albania needs serious allies like Germany to ensure the continuity of investments in strategic areas. The German Federal Government has supported us in guiding the reforms process, and its advisory experience has been of vital assistance.
German grants given in the energy sector accompany loans accorded to energy generation, transmission and distribution. They are supporting jointly approved projects that we consider successful in terms of impact and implementation. Within these, the grants are used for technical assistance – preparing investment processes; improving governance; enhancing performance capabilities, and building domestic capacity.