M.Sc.E.E. Elton B. Radheshi Director of Market Operation dept. - - PowerPoint PPT Presentation

M.Sc.E.E. Elton B. Radheshi Director of Market Operation dept. Tirane 21/04/2016

“Understanding the SEE Power Market”

Infrastructure and regulatory development

 The Albanian Power Sector Main Players and Roles  Albanian Power system key figures during last years  Stepwise liberalization of the wholesale market  Main legislative and regulative developments on the Power Sector  Power Sector developments  OST developments  Power exchange initiative

THE ALBANIAN POWER SECTOR MAIN PLAYERS AND ROLES

Political Level Operational Level

ALBANIAN PARLIAMENT Prime Minster’s Office

MINISTRY OF INDUSTRY AND ENERGY Institutional Level NATIONAL AGENCY FOR NATURAL RESOURCES

NATIONAL REGULATOR KESH

accountable to counselling to controlled/owned by

DSO OST

MINISTRY OF ECONOMY

Independent body organised based on the Energy sector Law in late 1995. Board of commissioners appointed from the

• Parliament. Responsible mainly for tariffs methodology as well

as licensing procedures. Safeguard of the Energy Sector Incumbent generator. Joint stock company state owned. Responsible for production of electricity mainly Hydro. Covers around 86% of Albanian generation sources OST sh.a. is a joint stock company registered in July 2004, which shares are owned 100% from the Albanian Govt. OST is responsible for (i) Transmission (ii) System operation, (iii) Market operation Joint stock company 100% state owned, after ri-nationalisation from CEZ a.s. in 2014. Responsible for distribution system operation as well as wholesale supply. Covers around 90% of supply.

THE ALBANIAN POWER SECTOR MAIN PLAYERS AND ROLES CONT.

Independent Power Producers, only Hydro. In 2015 the IPP connected to the HV grid more were more then 21. Majority have PPA with OSHEE for 20 years. In 2015 overall production was around 0.9 TWh. As of 2012, after amendments to the PSL, all consumers connected to the HV network are obliged to be supplied from eligible suppliers. Actual size around 10% of the overall load, in 2015 their consumption was around 0.6 TWh. In 2015, 20 suppliers registered and licensed, only 4-5 active.

IPP

Suppliers Traders

Mainly responsible for cross border trade or trade of electricity to OSHEE for the losses and surpluses from KESH. In 2015, 25 traders registered and licensed, only 4-5 active in the market.

THE ALBANIAN POWER SECTOR MAIN PLAYERS AND ROLES CONT.

5068 5396 4737 3681 3204 4894 5452 5409 5516 2940 3795 5165 6924 4090 4449 6712 4343 5475 379 358 1002 1750 2227 926 479 524 605 2827 2465 1428

• 732

3181 2895 898 3067 1399 5446 5754 5739 5431 5430 5819 5931 5933 6121 5768 6260 6593 6924 7271 7344 7610 7411 6874

• 1.200
• 200

800 1.800 2.800 3.800 4.800 5.800 6.800 7.800 8.800

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Production Exchange Consumption

Production, Consumption and Import/Export by Years

TWh

Power system key figures during last years

6.712 4.343 5.475

898 3.067 1.399

7.610 7.411 6.874

• 1.000

2.000 3.000 4.000 5.000 6.000 7.000 8.000

2013 2014 2015 GWh

2013-2015

Production Exchange Consumption

Albania is a net importer of electricity (20-30% of its demand depending on inflows) and will continue in the near future with such assumption. Exception is made for 2010 with 0.7 TWh of exports. Last year key figures; Imports ~ 1.4 TWh Demand ~ 6.8 TWh Generation ~ 5.4 TWh A demand decrease in the last 2 years is evident (last year drop was ~7%), mainly due to (i) drastic measures from the Alb. Government to increase collections and efficiency, reduce of non-technical losses as well as (ii) economic situation in the country and (iii) climatic changes. Anyhow previsions are for an increase of the load for 2016, and 2017, respectively ~ 7 TWh and ~ 8 TWh.

KESH 86% IPP 14%

Generation structure in 2015

40% 22%

• 11%

45% 39% 12% 41% 20% 60% 78% 111% 55% 61% 88% 59% 80%

• 20%

0% 20% 40% 60% 80% 100% 120%

Import vs. Generation

Importi Generation

Power system key figures during last years

The curve, being a sinusoid shows that predictions for 2017 are for higher imports and lower generation, even assuming that some medium HPP will start production. The share of the IPP in the generation structure will increase year by year.

1,400 1,420 1,440 1,460 1,480 1,500 1,520 1,540 1,560 2011 2012 2013 2014 2015

1,453 1,485 1,542 1,486 1,489

MW

peak load

0,0 0,2 0,4 0,6 0,8 1,0 1,2 1,4 1,6 1,8 1000 2000 3000 4000 5000 6000 7000 8000 9000

Load Duration Curve - Series LDC-2015 LDC-2017 LDC-Series

Power system key figures

Cross border capacities

Albania actually has 3 interconnections to neighbourhood countries. Kosovo – Albania 250MW* (LT split auctions by EMS and OST) Montenegro – Albania 400 MW (NTC allocated in explicit auctions in SEE CAO) Greece – Albania 250 MW (NTC allocated in explicit auctions in SEE CAO) * Line 400 kV Tirana – Prishtina will be in

• peration by mid of this year, and will increase

NTC.

FYROM – Albania interconnection is under financial preparation of the Project, will be in place in 2020. Alb. part will be financed by KfW and FYROM part from EBRD. Will increase NTC to other 400MW.

Provisions concerning the stepwise liberalization and phase out of the wholesale and retail supply are already set in the Power Sector Law 43/2015. Liberalization has started with the amendment of the Power Sector Law in 26/11/2011, defining the provision that clients (around 9) connected to the HV network (110 kV and Higher) or have a consumption more then 50 Million MWh/year are obliged to be supplied on the free market Stepwise liberalization of the wholesale market

DSO 90% liberalized market 10% Clients 2015 Deadlines for phase out Consumption in MWh

Clients in 35 kV

36,509 01.07.2016

Clients in 20 kV

271,881 01.01.2017

Clients ne 10/6 kV

508,079 01.01.2018

Total MV

816,469

DSO 79% Clients on HV 10% Clients on MV 11%

01.01.2018 Stepwise liberalization in the next two years as per PSL, 43/2015

ERE est. and independence as per PSL

DAM 1995

Power Utility Unbundling

2004 2008 2012

Customers Supply liberalization

2015 2018

Non-household liberalization

?

2002

Other secondary regulations approved: Transitory Market Model approved on 2008, still in force. Market rules, approved in 2009, revised almost every 2-3 times per year until now, always transitory measures. Transmission and distribution as well as metering code approved already in 2008. New NC and Guidelines as per ENTSO-e, under preparation and submission to the ERE for approval. CACM under internal procedures for elaboration, acceptance and proposal to ERE.

Main legislative and regulative developments on the PS

 OST is a joint stock company created and registered in July 2004, which shares are owned 100% from the Albanian Govt.  OST at the beginning was part of KESH Holding, which was unbundled in the Generation, Transmission and Distribution activities.  OST become independent from KESH and owner of TSO assets from August 2008. The first Transmission tariff was approved by the Regulator on May 2006.  Under provisions of third energy package which were embraced from the Energy Sector law 43/2015, OST is under the further process of total unbundling from Supplier and Generation, provision stipulated

• n the law 08/2016.

 The process of certification from ERE as well as EnCS is also underway. It could be predicted that the process should be finished by June 30.  OST has signed the MLA with ENTSO-E for full membership. The certification is the remaining issue for full membership in ENTSO-s

OST developments, a bit of history

 Provisions stipulating the complete separation of the Market Operator from the TSO are set in the Power Sector Law, which predicts the full financial and legal separation to be finished by 31/12/2017.

 Market operator will be in charge, as set in the law, for the settlement of imbalances as well as bilateral contracts excluding the provisions for selling and buying of electricity.

• In this context OST is in the process of Market Operator corporatization inside OST
• Structural division including functional operations of the Market Operator has

already been established starting from April 01, 2016.

• MO tariff application, outside TSO tariff, will be made by mid of this year for

approval by the ERE

• Legal separation will be made as per Alb. Govt. decree

 provisions also for full DSO unbounding are set with deadline within 31/12/2017

OST developments a bit of history - 2

Power Exchange

Kick off meeting, July 2015

April 2016

Power Exchange way forward

Original HL plan, already shifted for at least 8-10 months, most of dates have already expired

Secondary legislation in place - only the Govt. Decision regarding the PSO, was approved at the end of March 2016, in our view it’s still temporary.

Power Exchange way forward

Albanian Government External Consultant PM

Working groups

EnCS Facilitator IFI’s Norway, IFC, KfW (project Sponsors) Steering Committee ERE, OST, KESH, OSHEE, WPS, SHPP, Traders etc.

Working groups Working groups Working groups

Steering committee already established in September last year, frequently meetings during last year each

• month. This year, only once.

Collaboration with External consultant, excellent Working groups not yet in place Market Model already discussed, almost agreed and distributed last December 2015, not yet distributed for clearing and approval from Govt. Business model as well as financial model already discussed with the consultant

Organizational and overall structure

Main challenges towards the Albanian PX

 PX Establishment and Licensing procedure

The Power sector law 43/2015 does not foresee neither any licence or any provisions for the PX. This should be checked and amended if needed. Albanian Market Model even discussed in the SC not yet approved by the Alb. Govt. deadline as per PSL June 2016. Market rules as Balancing Mechanism under preparation from OST. It should be submitted to the Regulator before end of June 2016. PX licence procedure not yet approved by ERE. The licensing procedure as well as obligations set in the license by the ERE should be well elaborated.

 Service Agreement with the European Partner

For the PX to enter into a service agreement it should fulfil the Law on Procurement for the service provider or should make a biding procedure for the service agreement.

 Clearing

Provisions for clearing house and settlement in order to increase stability and security of the PX are under investigation from OST. We are opting for foreign EU clearing house on the first stage to give insurances to the market participant’s.

Main challenges towards the Albanian PX

 Go-live of operation

Market design should be functional. Being a small market in order to function we believe it should be a intermediate solution, neither voluntary nor full obligatory anyhow soma Market maker Obligation should be set. In order to well function and to be competitive the go-live should take into considerations the following; Clarification on the VAT process. i.e. actual VAT law predicts the reverse charge mechanism also the law and guidance on tax procedures allows the VAT representatives. Anyhow we do believe that the procedures in order to allow foreign residents to participate in the PX should specify and clarify:

• VAT registration for foreign companies
• Obligation for non-resident companies performing supplies subject to VAT in Albania
• “tax proxy” recognition
• Procedures for opening of account of foreign companies in Albania (money laundry law has restrictions
• n such)
• Procedures on blocking the accounts from the tax authority should be amended to the extend that the

accounts linked to the process of power trade in the spot market are dedicated accounts which could not be blocked. On this issue the intervention of the Bank of Albania is very important

• The issue of invoices from PX without VAT for non resident traders which are taxable outside Albania

M.Sc.E.E. Elton B. Radheshi Director of Market Operation dept. Market Operator Division E-mail: e.radheshi@ost.al

Thank you for your attention!