The new generation investment and electricity market development in Kosovo

Abstract

This paper analyses the tension between designing power sale agreements that reduce uncertainty for the private investors and running the power systems as more efficiently as possible in the electricity market of Kosovo. The dispositions of such agreements are preliminary in resolving this tension and, therefore, in orienting the development of electricity market's restructuring towards a competitive direction. The paper reviews a contractual model, highlighting the tension between the two opposite directions: reducing uncertainty and risk in order to attract private investment, and operating the power system efficiently and building a competitive market in Kosovo. The competitive contracting can increase efficiency pressures and, at the same time, increase the investment risk. The influence of a long term power purchase agreements, as an investment tool for generation investments, have been analyzed in the context of current and future development of Kosovo electricity market.