Historic solar park to be built in Albania amid low confidence in hydropower

The European Bank for Reconstruction and Development (EBRD) is giving €29 million to a special purpose vehicle owned by France’s Voltalia, to develop the 140 MW Karavasta solar plant in southwest Albania, at a time communities continue to oppose hydropower, the country’s current number one energy source.

This project, the country’s first large-scale utility-scale solar photovoltaic plant, is a benchmark for Albania and the result of the first competitive auction in the country for solar energy after the presentation of the EBRD Renewable Energy Auctions Program.

The total project cost of €135 million has been co-financed by the International Finance Corporation (IFC), Intesa Sanpaolo Bank Albania, Privredna Banka Zagreb and Voltalia.

EBRD Director, Head of Energy for Europe, Grzegorz Zielinski, said: “We are proud to see this project completed financially. It will contribute significantly to the diversification of domestic production sources, which to date have been mainly hydro. At the national level, the project will significantly increase the share of solar energy production in Albania, further helping to reduce the effects of climate change.”

Matteo Colangeli, EBRD Director for the Western Balkans, said: “This is an excellent example of policy engagement for business, combined with skilful structuring of project finance, leading to concrete results for the country.”

Albania relies almost entirely on hydropower for energy production, which is seasonal and insufficient to meet the country’s growing energy demand. As a result, the government is highly dependent on expensive, fossil-based energy imports, particularly during times of high need or when rivers are running low.

Climate change is also negatively affecting energy production from hydropower plants due to the decrease in annual rainfall, which is expected to continue. The yearly demand of energy in Albania is expected to increase by 77% until 2030, and the production of electricity from large hydropower plants is expected to decrease by about 15%-20%.

The Karavasta project will enable a hybrid commercialisation strategy, which involves selling 50% of energy production to a state-owned utility at a fixed price, and selling the rest at market prices, combined with an energy price hedging instrument to avoid price volatility.

IFC financing will enable the development of a 140-megawatt PFV and a 19-kilometre overhead transmission line located in the municipality of Fier. After commissioning, the PFV is expected to generate over 265-gigawatt hours of electricity per year, accompanied by reductions in greenhouse gas emissions of approximately 96,500 tons of CO2 equivalent per year, thus supporting Albania’s EU-aligned climate goals.

“Given the high installed capacity of 140 MWp, as well as the short implementation time of one and a half years, this project has caused a boom for solar energy in the country,” said Constantin von Alvensleben, Voltalia’s Manager for Albania.

Ary Naïm, IFC’s Regional Manager for Central and Southeastern Europe, said: “This investment shows how with good policies, the countries of the Western Balkans can best attract new private investments and provide better and more sustainable infrastructure services, without relying only on the fiscal and human resources of the government.”

The development of more solar capacity is even more critical in the context of increased social pushback against hydropower plants. Many projects throughout the country have been resisted by local residents due to fears of irreparable damage to cultural sites, agriculture, tourism, the environment and its species, and the loss of entire villages and settlements.

“Ceasing the operations of HPPs is crucial to protecting and preserving the river’s natural flow and preventing the potentially catastrophic effect on habitats and flora and fauna,” said Catherine Bohne, director of TOKA, a campaign group that brought several court cases against HPP companies in Valbona, northern Albania.

In Europe, the global conservation group WWF is running a campaign to stop public subsidies of hydropower projects, saying that dams reduce freshwater biodiversity by 80% and migratory fish populations by 55% and warning that more than 8,000 hydro plants are planned across the continent.

It also called for the money to be spent on “low cost, low carbon, low-impact alternatives” such as wind and solar.

Meanwhile, the EU delegation to Albania told Exit.al in 2022 that environmental standards must be respected when putting forward new hydroelectricity projects.

“Investments in hydropower should strictly comply with national and international environmental, nature protection, and water management obligations” and “include high-quality assessments of the cumulative impacts on nature and biodiversity,” the EU delegation said at the time.

(Alice Taylor | Exit.al)