Renewable energy in Albania

The way to solar and wind energy projects has been paved. Several solar and wind energy auctions have been organised since 2019, these auctions have led to two solar PV projects with a combined capacity of 240MW being awarded.  

In July 2023, the first successful wind auction was conducted, resulting in the award of three wind projects with a total capacity of 222.48MW.  

To assist developers, the regulator has commissioned a high-level analysis of Albanian territory to identify areas potentially suitable for the development of new solar projects. Additionally, areas unsuitable or non-eligible for developing new wind projects have been defined as “constraints” or “no go areas”

A new Law on the Promotion of Use of Energy from Renewable Sources has recently been approved (“Law no. 24/2023”). This law partially transposes the provisions of the EU Directive 2018/2001. The primary objective of Law no. 24/2023 remains consistent with its predecessor, Law no. 7/2017, which it supersedes. The aim is to foster increased energy production from renewable sources, ensuring sustainable development in Albania in alignment with its obligations under Energy Community Treaty.  

Law no. 24/2023 introduces revised national objectives, this includes a new target for renewable energy sources to make up 54.4% of the gross final consumption by 2030. 

In contrast to the repealed Law, which primarily focused on the development of hydropower as a renewable energy source, the Law no. 24/2023 now encompasses regulations for energy generation from wind and photovoltaic sources.  

The Law no. 24/2023 introduces the concept of demonstration projects to showcase the application of innovative energy technologies. 

Furthermore, the Law no. 24/2023 has introduced new incentives while also enhancing the implementation of earlier incentive schemes.  

In comparison to the repealed Law, the Law no. 24/2023 maintains the same approach concerning contracts for difference. This model of contracts is calculated as the difference between the winning bid by the renewable energy producer for the feed-in tariff (fixed price) and the electricity market price (reference price), the reference price is calculated annually by the Albanian Energy Regulator (“ARE”). The model contract is approved by the Council of Ministers through the Renewable Energy Operator and has a maximum duration of 15 years. 

The capacity thresholds that facilitated for small renewable sources (up to 2MW installed energy capacity for photovoltaic energy and of up to 3MW installed energy capacity for wind energy) have been revoked. According to the Law no. 24/2023, every project in the renewable sector will be awarded through a competitive procedure.  

Law no. 24/2023 introduces support schemes that include a new type of support contract, namely the premium contract. In this type of contract, a fixed premium (which can be positive or negative depending on the competitive process outcome), or a sliding premium (the difference between the guaranteed price and the reference price) is paid from the Renewable Energy Operator to producers with an advantage over the market price. Similar to the contract for difference, the premium contract is approved by the Council of Ministers through the Renewable Energy Operator.  

The purchase price of electricity from renewable sources for 2023 to be paid to existing preferred producers, as set out by ERE, follows the methodology proposed by the Minister and approved by the Council of Ministers. For the period from 9 February 2023 to 31 December 2023, it will not exceed ALL 10/kwh (approximately EUR 0.097/kwh).  

 The methodology for calculating this price is as follows: 

• Annual purchase price (ALL/kWh) = the annual average market price of the following day (HUPX DAM), of electricity in the baseload profile of the relevant year of the Hungarian stock exchange (HUPX) in Euro cent/kWh x the bonus for promoting renewable energy multiplied by 1.20 x the average exchange rate in Euro/ALL of the last year. 
• In any case, the price will not be lower than ALL 10/kwh (the price approved by ERE in 2023). 

Producers have the option to obtain an origin guarantee from ERE for energy generated by renewable energy sources. As Albania is a contractual party to the Energy Community Treaty, ERE also recognises origin guarantees issued by countries in the EU or any country that is a contractual party to the Energy Community Treaty.