Despite ongoing liberalisation processes in the utility industries in the Balkan region, the Albanian electricity sector is still in the early stages. The process that would lead to the use of market or quasi-market mechanisms as part of reforms to the sector would bring greater competition into electricity markets in the interest of creating more competitive markets and lower prices. The theoretical framework developed in this thesis, alongside the evidence produced, suggests that the price reduction is better achieved through the integration of liberalised markets. We argue that major benefits in the southeast European (SEE) electricity sector could be achieved through the creation of a regional electricity market with the future prospect of becoming part of the integrated energy market (IEM). We provide insights into the possible comparative advantages that arise in the case of a simulated interconnected pool in some of the countries within SEE, particularly between the countries that share common borders with Albania. A difference in generation resources among the countries under investigation supports the suggested idea. A theoretical platform is constructed for electricity costs formation, from which key determinants of the generation portfolio and associated costs are calculated using optimisation problem software. Under the rationale of security of supply of the entire system, cost evaluation is preceded by demand and load forecast estimations. These are performed through two different approaches: the ARMA model, and an approach based on three different scenarios - base, high and low growth of the macroeconomic indicators that drive demand for electricity. The linear model set up to minimise the total costs of generation takes into account the calculation of short and long-term marginal costs. Results with differences in estimated costs give rise to the perspective of the simulation of the interconnected pool among the countries. Overall, it is found that costs under the interconnected scenario are lower ompared with those achieved when countries operate as individual system operators, implying that there are economic benefits from the creation of a pool. Drawing on these findings, the analysis concludes with the development of policy recommendations targeted towards the issue of designing a package of policy measures in the context of integrated electricity markets. In this context, proper initiatives have to be seen in the view of parallel policies undertaken by the countries in the region, since all the involved countries could benefit from comparative advantages that arise in terms of generation costs due to the creation of a common pool as they can exchange electricity.weiterlesen