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12/3/2014 Internal energy market in the WBs
http://www.energyeast.com/portal/prospectiveoffereddevelopinginternalenergymarketwbs/ 1/2
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03Dec 2014
Challenges of attracting inflows capital and the interdependency between the regulation and infrastructure
By: Adv. Lorenc Gordani, PhD
Short introduction on the liberalisation process
At the opening of the following discussion it is important to start with referring to “Second Strategic Energy Review – An EU Energy
Security and Solidarity Action Plan” the EC proposes following with the priority regard the North-South Electricity and East-West gas
interconnections. In regard, the MC of EnC decided on 6 October 2011 to incorporate the so-called Third Energy Package by the
deadline of fully transpose 1st January 2015.
Potential investment in the new power generation
In order to cover the forecasted demand growth, and also aiming at exporting outside the region, the countries of WBs have
indicated in their strategies very ambitious investments in new power generation by 2020 and beyond to 2030. According to their
own forecasts the new power generation capacity needs represent approximately 21 GW or an increase of capacity approximately
64% from 2009. A total investment cost, for this additional capacity is calculated to around 44.6 billion EUR over the period of 2012
through 2020, for those new projects targeted for development and commissioning within this time period. The figure could be even
higher taking in consideration the capital expenditures growth required later during the decade for new planned facilities proposed
after 2021.
Boost of the investment in infrastructure
The new investments should be directed predominantly towards new renewable energy generation and natural gas fired power
plants, whose potential both in term of enhanced security of supply and contribution to reduced emission remains untapped as of
today in the region. Furthermore it is particularly important bearing in mind the role natural gas can play as a back up fuel in a
market with high penetration of interruptible energy source as the ambitions on renewables seems to imply.
In regard, the selection of TAP as a project to transport Shah Deniz II gas to Europe have significant consequences on the region as a
whole and in particular to the Energy Community Gas Ring. At the same time, the TAP pipeline is determined to be followed with the
planned Ionian Adriatic Pipeline (IAP). Additional gas interconnectors are also planned between Serbia, Croatia and Bosnia &
Herzegovina and a serial of tailored gas infrastructure investment are foreseen by the Gas-to-Power Initiative.
A number of projects of regional significance have been discussed for a long time regarding the crude oil. Here, the objective is to
ensure stable and diversified oil supplies serving both market and security of supply interests. In regard, the storage capacities in the
region amount to 8.8 mcm. In October 2012, the Ministerial Council took a stet further with adopting the oil stocks Directive
2009/119/EC imposing an additional 12.5 mcm required storage capacity.
Implementation of the regulatory framework
The above introduction, permits the reaching to the core considerations of the here topic i.e. the interdependency between
regulation, infrastructure and the flaking policies. The above developments are seen as a good premises for the enabling the
regional market integration with satisfying level of security, competition and sustainability of supply. A real market integration is
assured by the contemporary well developments on two levels: the physical interconnection between the different infrastructures
systems of the respective market and the commercial market behaviour and business rules applicable on the respective market.
Summering here, the last October Ministerial Council, reviewed the state of play of the implementation of the Treaty welcoming the
progress made and recognized the importance of the transposition and implementation of the Third Energy Package in the context
of providing security of supply and adequate conditions for investments. In specific it was recommend the acquis widen to include
additional rules on competition, state aid and public procurement in the energy sector and environmental issues.
Overcame of the challenges to attract institutional and private capital inflows
Given the capital intensity of energy infrastructure, and due to the pressure of the fiscal space on public funded investments, with a
public debt of around or above 60% or 65% of GDP, mobilising additional private capital becomes of the essence. An effort to attract
investments is the rationale behind many of the measures and actions taken by the EnC.
Notwithstanding, the macroeconomic level signs of recovery, both private and institutional investors still perceive most of the CPs to
Dec 3, 2014 @ 13:30 Dijana Hinic MARKETS, POWER
Prospective offered by the developing of the internal energy market in theWBs
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12/3/2014 Internal energy market in the WBs
http://www.energyeast.com/portal/prospectiveoffereddevelopinginternalenergymarketwbs/ 2/2
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Notwithstanding, the macroeconomic level signs of recovery, both private and institutional investors still perceive most of the CPs to
have a risk profile that discourages significant capital inflows. When asked what are the potential obstacles, many project promoters
listed: financing; social acceptance; land acquisition; the need for reorganisation of the company; coordination between countries
and companies involved in cross-border infrastructure; high investment costs (mainly for larger power plants), etc.
Pivotal role of the public financial support
Therefore, the energy market is undergoing a period of radical changes that requires significant investment in order to be fully
sufficient. In more, it is clear that the regulation alone will not be enough. Therefore, public support is necessary to enable the
implementation of the small, but significant share of projects, which are vital due to the security of supply they provide, however
will not be realised even with regulatory support.
Conclusive remarks of the Author
In the last meeting of the highest level kept in Kyiv, the presentation of the priorities of the Albanian Presidency for 2015 has been
shown. The Albanian Minister of Energy Mr Gjiknuri, stated that the focus of reforms of the EnC is in line with the recommendations
of the HLRG, inter alisas, in the implementation of the Third Energy Package in all CPs; adoption of the new acquis, as i.e.Reg.
347/2013 on energy infrastructure, Reg. 543/2013 on transparency on electricity markets, and the first set of network codes.
In regard, it is clear that the bulk of the reform work remains to be carried out by the CPs, their regulatory authorities and network
operators. The success of local and regional market opening and integrated efficiently lies in the determination and commitment to
fully participate in shaping of the future of the EnC. There is also need of strength will to continue working with the EC to make
available additional financial instruments through European and international funds that would support the PECIs.
Moreover, it is important to continue following closely the progress, not only for reporting purposes, but also to assist them in all
possible ways. In this regard, we in ACERC believe that only understanding the situation as it is will allow making suggestions for
improvement, both on the level of the Parties and the EnC itself. This article as others, of course, similar taking part abroad, can
help to stimulate a crystallisation of a better legal, institutional and procedural set-up for the future that is still faraway for being
clear and definitive.
Energy Community, energy market, West Balkans