Electricity trade opportunities in the SEE region - the case for an integrated market

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Despite ongoing liberalization in the Balkan utility industries, Albania's electricity sector remains in early development stages. Introducing market mechanisms could enhance competition and lower prices. The theoretical framework and evidence presented suggest that price reductions are more effectively achieved through integrated liberalized markets. Significant benefits for the Southeast European (SEE) electricity sector could arise from establishing a regional electricity market, potentially leading to integration with the broader energy market. Insights into comparative advantages are drawn from a simulated interconnected pool among SEE countries, particularly those bordering Albania, supported by differing generation resources. A theoretical platform is established for electricity cost formation, calculating key determinants of generation portfolios using optimization software. Cost evaluations are preceded by demand and load forecasts, employing the ARMA model and three macroeconomic growth scenarios. A linear model minimizes total generation costs, considering both short and long-term marginal costs. Results indicate that interconnected scenarios yield lower costs compared to isolated operations, highlighting economic benefits from a cooperative pool. The analysis concludes with policy recommendations aimed at creating a cohesive package of measures for integrated electricity markets. Initiatives should align with par