The Albanian Power Corporation (KESH) is the country’s largest electricity producer, supplying around 70-75 percent of Albania’s energy needs. With its production based entirely on hydroelectricity, it helps give Albania the status of being one of the world’s few countries that relies fully on renewable energy sources, but is also subject to volatility depending on climatic conditions. Here, Benet Beci, who was appointed head of KESH in January 2019, explains his vision for diversifying the company’s power sources, regional integration and the modernization of the company’s operations
Your new position at KESH is preceded by a successful 13-year career at the Albanian Development Fund. What areas of your experience would you say best equip you to undertake the current role?
My time at the Albanian Development Fund (ADF) was a great experience. We were leading in an important sector for Albania, making significant investments in the spheres of local and regional development. During my time at the ADF, we saw an increase in our investment capacity from 10-20 million euros per year to more than 100 million euros per year, becoming the center of gravity in the development sector and a reference point for the central and local governments as well as numerous international donors. During these years, we were able to build a modern organization that followed international standards in the fundamental processes of our work.
I believe this vision will now serve as a reference for the management of KESH. We are starting from a solid foundation as a public company that is the biggest energy generator in the country. We are determined to operate as a modern company that is managed with the highest professional standards, diversify our generation capacities and our products, and compete successfully in the country and region in a liberalizing market.
What are KESH’s most important challenges and priorities for 2019?
KESH’s production is currently based entirely on the production of hydroelectric energy, and thus is heavily reliant upon hydrology. The year 2019 does not appear to be that promising in terms of hydrology, therefore KESH’s main revenue stream may not guarantee that projected levels of revenue will be achieved. Within the current legal and regulatory framework, the company’s activity is designated as a public service obligation – it is obliged to sell to the distribution company at a below-market price, not allowing for commercialization.
Among KESH’s key priorities for 2019 are to follow the Ministry of Energy’s milestones for market liberalization as set out in the legal framework, European directives and the recommendations of the Energy Community Secretariat; optimization and transparency of commercial operations; and preparation for investments in renewables to increase and diversify generation capacity.
Describe how Albania’s power generation through hydropower has improved over the last decades and the overall strategy to move generation capacity forward.
In the last decade, about 450 MW were added to the domestic generation portfolio, bringing domestic generation to over 8,000 GWh in 2018. Yet, domestic generation is highly dependent on hydrology, which tends to be volatile, leading to Albania’s continued status as a net importer of energy.
With this in mind, the national energy strategy aims to diversify the national generation portfolio through gas-fired power plants, renewable energy technologies and some additional hydro generation capacity. These entail mostly international and localized private investments in the country.
KESH itself, with the support of the EU’s Western Balkans Investment Framework (WBIF) mechanism, has already started preparation of a feasibility study for the Skavica Hydro Power Plant on the Drin cascade and is looking towards new capacities in photovoltaic systems.
What role do you see KESH playing in potential PPP’s and, more generally, in the liberalization of this space?
KESH is operating an important generation infrastructure, which represents significant value to the country’s economy. Its activity should be gradually commercialized and supported by improved corporate managerial practices, enabling the company to increase the value of its existing portfolio and attract additional private and foreign capital for further expansion. Holding a significant generation capacity in hydropower plants and aspiring towards clean energy technologies, KESH is seen as an important player in the future composition of the regional generation mix and an active participant in the integrated power market of the Western Balkans.
Depending on hydropower, Albania has been a net power importer through most of its recent history, but in 2016 it exported for the first time. Evaluate how KESH enables importing/exporting of energy and the potential for increasing exports in the future.
Exporting of energy also happened in 2010 and 2016. It was made possible by additional HPP capacity that has been constructed and put in operation over the last ten years; good hydrology characterized the years under consideration, which led to more effective utilization and operation of generation capacities; and additional interconnection capacity has been constructed over the last ten years, which supported generation investments, ensuring better and more efficient power flows at lower cross border transfer prices for electricity between countries of the region.
As mentioned earlier, like the entire Western Balkan region, Albania is still a net importer of energy. Current perspectives give importance to the regional landscape rather than to just the national level. This is intended to give a higher priority to integrated decision making in relation to future investment decisions in new generation capacities and expansion of the transboundary infrastructure and harmonization of operations, driving sustainability and bringing significant added value to the European perspective.
What are your thoughts on the progress and significance of the Albanian Power Exchange (APEX)?
An initial day-ahead market (sport market) is considered one of the essential mechanisms that will immediately bring the transparency which has been missing in the Albanian market and provide a number of major benefits. These benefits include the effective dispatch of the country’s generation fleet and the revelation of the real value of KESH hydro reservoirs; a boost in the sector’s liquidity; helping to manage hydrology and import risks; underpinning operational and investment decisions, serving as a secure off-taker platform for new investments, particularly for RES; and to pave the way for regional market integration by coupling with neighbours.
Local power exchanges are usually temporary measures and they anticipate the processes of integration into regional and European structures. Unfortunately, as an interim step, the process for establishing the APEX has been delayed. However, significant steps are foreseen in the near future and this would be a welcome step for KESH and the energy sector in general in Albania.
Albania could begin negotiations for EU accessions this June. What do you think EU accession could mean to KESH and Albania’s power generation capacities?
Integrating with the EU market is about sharing and enjoying the benefits of a transparent and open market, free movement of goods, services and labor, and better sharing of know-how and values. It is important that the strengthening of regional cooperation (WB6 region) encourages sustainability and job creation. The legislation proximation process in the energy sector has started and needs to advance not only in the regulatory aspects but in the operational aspects as well.
The hydropower industry is especially vulnerable to the expected impacts of climate change. Do you have a management plan against the risks of climate change?
For many hydropower operators, improving the climate resilience of assets and operations has become a strategic objective. For this reason, KESH, as the operator of the major hydro capacities in the country and in the region and one of the main suppliers satisfying domestic demand, has recently adopted, with the support of the European Bank for Reconstruction and Development (EBRD), a climate risk management plan. The objective of this plan is to develop a comprehensive understanding of the vulnerability of KESH to climate variability and climate change and to identify and assess the risks and opportunities posed on KESH’s assets and operations.
In order to mitigate climate risks and exploit at the same time climate-generated opportunities, a number of structural and non-structural adaptation measures have been identified. Some of these measures are in the process of implementation, others are potential measures that require further development and resource mobilization.
How would you describe KESH’s socio-environmental responsibility today, and how is the company orienting towards sustainable development?
KESH has recently adopted a corporate socio-environmental policy and in 2016 adopted its first Environmental Social Action Plan (ESAP). The ESAP is an expression of the company’s commitment to carry out its economic and operational activity in accordance with applicable environmental and social laws, environmental permits, licenses, certificates and approvals. It involves an environmental, social and health and safety audit and is open for potential amendments in response to changes in the circumstances of the company’s activity, unforeseen events and results of monitoring.
These measures represent the minimum requirements for company performance with regard to an internal socio-environmental policy. We plan a more ambitious corporate social responsibility plan to be integrated into the daily economic and operational activities of the company, aiming to bring back to the local communities of the cascade the value of the natural resources exploited by the company.
Do you have a final message?
The energy sector in Albania has numerous challenges ahead, particularly with regard to market liberalization and necessary investment in generation capacities, transmission and distribution.
From our company perspective, we are confident that we will be able to overcome these numerous challenges and contribute to a recovered and strengthened energy sector in Albania. We look forward to building an Albania that will be a joy for all to visit and a beacon of environmental and social service.