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It's been a good summer for electricity-starved Albania as work began on the construction of three hydropower plants on the Devoll River with a combined capacity of 320 megawatts (MW), and one 48-MW hydropower plant on the Drin River. However, Prime Minister Sali Berisha has cautioned that another 400 hydro plants are needed to solve the country's dire energy situation.

Austrian power firms EVN and are jointly building the Ashta hydroelectric power plant in northern Albania, which will have an installed capacity of 48 MW and the investment will reach €160m. On August 4, newswires reported that environmental experts from Albania and neighbouring Montenegro had gathered in the northern city of Shkodra to discuss the environmental impacts from the implementation of the project for the construction of Ashta hydropower plant. The new hydropower plant will become operational in 2012.

In June, EVN and Statkraft of Norway begun constructing three hydropower plants on the Devoll River in Albania that will have a combined capacity of 320 MW and are expected to provide about 1000 GWh of energy at a cost of €1bn, which will increase the actual production of power in Albania by around 20%. "The implementation of this project, which is one of the major investments in Albania and among the biggest in Europe in the field of hydro energy, will enable the full optimization of the Devoll River... through three planned hydropower plans," PM Berisha said during the inauguration ceremony.

Over the last decade, Albania has faced growing difficulty supplying its consumers with electricity. A lack of primary energy resources, limited production and interconnection capacities and full dependence of its power production on hydro resources, are some of challenges for the country, experts say.

One of the main problems dogging Albania's energy sector is the increase in electricity consumption by households, which has led to high levels of technical and non-technical losses, and a reduction of security of supply. In Albania, electricity consumption per capita is approximately 2 MWh, much lower than the European average. However, analysts expect electricity consumption to grow by 5% each year, a rate that's second only in the region to Turkey. In other European countries, the electricity consumption mostly grows roughly by 2-3% a year.

Demand for electricity is much higher than domestic generation, which means that Albania is one of several net importer countries in the region. In 2007, the power utility Albanian Power Corporation (KESH) imported more than 50% of its consumption and was forced to institute rolling blackouts, know as load shedding. The water-level situation in reservoirs improved in 2008 and the utility load shedding form 17% to 5%, but the utility was still forced to import 40% of the consumption. In 2009, the situation has improved considerably and imports are only expected to come to 11% of consumption.

To overcome this situation, the government has being pushed by the EU and others into undertaking a series reforms, such as increasing tariffs to cover the cost, liberalising the market and unbundling KESH from a vertically integrated company. The Transmission System Operator (TSO) and the Distribution System Operator (DSO) are now separated from KESH and Czech power utility CEZ won a tender earlier this year to buy 76% of the DSO for €102m. "With no plans to privatize production, the focus is on upgrading existing facilities and building new power plants," KESH's CEO Gjergj Bojaxhi told the media.

In 2009, Albania secured another €4.3bn in investments for three other major energy projects:

• In January, a €1bn deal was signed with Italy's Marseglia Group to build a 140-MW liquid biomass energy plant and two 234-MW wind farms;

• In March, a €2bn agreement was reached with Italy's biggest power company, Enel to build an 800-MW coal-fired power plant with a generating capacity of approximately 1,300 MW, which would supply electricity to both the Italian and Albanian markets. The deal also include the construction of a jetty for coal-carrying ships, a 400-kV aerial transmission line to link up to the Albanian grid and a 500-kV line under the Adriatic Sea to connect to the Italian grid;

• In May, a €1.25bn Wind Park agreement was awarded to the Albanian subsidiary, Enpower Albania, of the Italian Moncada Energy Group. The project aims to build a 500-MW wind farm, and a 400-kV power transmission line to link Albania with Italy.

More controversially, a $5.3bn plan was announced in April by Albania and Croatia to jointly build a 1,500-MW nuclear power plant at Lake Shkoder, close to the border with Montenegro, which is fighting the proposal.

The Italian government is also interested in build nuclear plants in "neighboring countries" before building them in Italian soil, Italian Prime Minister Silvio Berlusconi said. PM Berisha has declared repeatedly that the country "is willing to host a nuclear plant in Albania" in order to "make Albania an energy superpower in the region".

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