Report No. 53331-ALB CLIMATE VULNERABILITY ASSESSMENTS An Assessment of Climate Change Vulnerability, Risk, and Adaptation in Albania's Power Sector FINAL REPORT December 2009 ESMAP MISSION The Energy Sector Management Assistance Program (ESMAP) is a global knowledge and technical assistance trust fund program administered by the World Bank and assists low- and middle-income countries to increase know-how and institutional capacity to achieve environmentally sustainable energy solutions for poverty reduction and economic growth. ESMAP COPYRIGHT DISCLAIMER Energy Sector Management Assistance Program (ESMAP) reports are published to communicate the results of ESMAP`s work to the development community with the least possible delay. Some sources cited in this paper may be informal documents that are not readily available. The findings, interpretations, and conclusions expressed in this report are entirely those of the author(s) and should not be attributed in any manner to the World Bank, or its affiliated organizations, or to members of its board of executive directors for the countries they represent, or to ESMAP. The World Bank and ESMAP do not guarantee the accuracy of the data included in this publication and accepts no responsibility whatsoever for any consequence of their use. The boundaries, colors, denominations, other information shown on any map in this volume do not imply on the part of the World Bank Group any judgment on the legal status of any territory or the endorsement of acceptance of such boundaries. Vice President: Philippe H Le Houerou Country Director: Jane Armitage Sector Director: Peter Thomson Sector Manager: Ranjit Lamech Task Team Leader: Jane Ebinger i TABLE OF CONTENTS SYNOPSIS vi ACKNOWLEDGMENTS vii ACRONYMS viii EXECUTIVE SUMMARY ix Albania`s Energy Sector and Climate Change ix Recommendations for Building Climate Resilience of the Energy Sector xi PĖRMBLEDHJE EKZEKUTIVE xv Sektori i energjisė nė Shqipėri dhe ndryshimet klimatike xv Rekomandimet pėr krijimin e elasticitetit klimatik tė sektorit energjitik xvii 1. OVERVIEW 1 1.1 Methodological Approach 2 1.2 Structure of this Report 4 2. CONTEXT 5 2.1 Existing Energy Sector Context in Albania 5 2.2 Climate Is Changing 13 2.3 Albania`s Low Adaptive Capacity 20 3. CLIMATIC VULNERABILITIES, RISKS, AND OPPORTUNITIES FOR ALBANIA`S ENERGY 24 SECTOR 3.1 Cross-cutting Issues 26 3.2 Large Hydropower Plants (LHPPs) 26 3.3 Small Hydropower Plants (SHPPs) 29 3.4 Thermal Power Plants (TPPs) 31 3.5 Wind Power 32 3.6 Power Transmission and Distribution 33 3.7 Energy Demand 34 3.8 Oil, Gas, and Coal Production 34 4. IDENTIFICATION OF ADAPTATION OPTIONS FOR MANAGING RISKS TO ALBANIA`S 36 ENERGY SECTOR 5. COST­BENEFIT ANALYSIS OF ADAPTATION OPTIONS 51 5.1 Objective of the Cost­Benefit Analysis 51 5.2 Assessment of Shortfall in Future Power Generation Due to Climate Change 51 5.3 Options to Meet the Projected Power Shortfall Due to Climate Change 55 5.4 Benefit Categories / Parameters Used in the Cost­Benefit Analysis 58 5.5 Results of the Cost­Benefit Analysis 62 5.6 Sensitivity Analysis 64 5.7 Using the Results of the Cost­Benefit Analysis to Support Decisions to Manage 71 the Albanian Energy Sector in the Face of Climate Change 6. NEXT STEPS TO IMPROVE THE CLIMATE RESILIENCE OF ALBANIA`S ENERGY SECTOR 75 7. REFERENCES, ANNEXES, AND APPENDICES 77 ANNEX 1: METHODOLOGICAL APPROACH TO THE ASSESSMENT 81 A1.1 Analysis of Observed Climatic Conditions and Data on Future Climate Change 81 A1.2 Geographical Information System (GIS) Mapping 81 A1.3 Workshop 1: Hands-on Vulnerability, Risk, and SWOT Analyses with Energy 83 Sector Stakeholders in Albania A1.4 Analysis of Climate Risks for Regional Energy Markets in South East Europe 85 A1.5 Development of High-level Qualitative and Quantitative Assessments of Climate 85 Change Risks to Energy Assets A1.6 Workshop 2: Adaptation and Cost­Benefit Analysis with Energy Sector 86 Stakeholders in Albania A1.7 High-level Cost­Benefit Analysis (CBA) 87 ANNEX 2: RISK ASSESSMENT BACKGROUND AND RATIONALE 88 ii ANNEX 3: ADAPTATION OPTIONS 91 ANNEX 4: WEATHER / CLIMATE INFORMATION SUPPORT FOR ENERGY SECTOR MANAGEMENT 109 A NNEX 5: F URTHER D ETAILS ON A PPROACH TO C OST ­B ENEFIT A NALYSIS 112 A5.1 Methodology 112 A5.2 Framing Workshop Parameters Summary 115 A5.3 Financial Assumptions 121 A5.4 Benefits Assessment and Valuation 121 A5.5 Benefit/Disbenefit Valuation 122 A5.6 Results Summary 124 A5.7 Limitations 125 A NNEX 6: F URTHER D ETAILS ON O PTIONS TO I MPROVE THE C LIMATE R ESILIENCE OF 127 A LBANIA ` S E NERGY S ECTOR A NNEX 7: A LBANIA P OWER S UPPLY D EMAND PASSIVE SCENARIO P ROJECTIONS 132 2003 TO 2050 ANNEX 8: ESTIMATING IMPACTS OF CLIMATE CHANGE ON LARGE HYDROPOWER PLANTS IN 140 ALBANIA A8.1 Existing Available Information on LHPPs and Climate Change Impacts 140 A8.2 Albania`s First National Communication 141 A8.3 Assessment of Climate Change Impacts on the Vjosa Basin 142 A8.4 Assessment of Climate Change Impacts on the Mati River Basin 143 A8.5 Correlation of Annual Average Inflows to Fierze and Electricity Generation 144 A8.6 Verbal Information from the World Bank 146 A8.7 Assessments of LHPPs in Brazil 146 A8.8 Summary 146 ANNEX 9: ESTIMATING IMPACTS OF CLIMATE CHANGE ON ENERGY GENERATION IN ALBANIA, 148 EXCLUDING LARGE HYDROPOWER PLANTS A9.1 Small Hydropower Plants (SHPPs) 148 A9.2 Thermal Power Plants (TPPs) 148 A9.3 Wind 148 A9.4 Domestic Solar Heaters 148 A9.5 Concentrated Solar Power 149 A9.6 Transmission and Distribution 149 A NNEX 10: G LOSSARY OF K EY T ERMS 150 FIGURES Figure 1: Generation, import, and supply of energy in Albania from 2002 to 2008 x Figure 2: Net Present Value of diversification options, using base case assumptions xiv Figura 1: Prodhimi, importimi dhe furnizimi me energji elektrike nė Shqipėri nga viti 2002 nė xvi 2008 Figura 2: Vlera e Tanishme Neto e alternativave tė diversifikimit, duke pėrdorur supozimet e xx rastit bazė Figure 3: The UKCIP risk-based decision-making framework for climate change adaptation, 3 modified for use in this assignment Figure 4: Generation, import, and supply of energy in Albania from 2002 to 2008 6 Figure 5: Locations of the five large hydropower plants that provide about 90 percent of 9 Albania`s domestic electricity production Figure 6: Existing and candidate interconnections in the region 12 Figure 7: Increases in concentrations of carbon dioxide in the atmosphere from 10,000 years 13 before present to the year 2005 Figure 8: Observed changes in climate, physical and biological systems 14 Figure 9: Projected increases (averaged across nine IPCC AR4 global climate models) in winter 15 and summer temperatures across South East Europe by the 2050s compared to the 1961 to 1990 average, under the A2 emissions scenario iii Figure 10: Man-made emissions of carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O) 16 and sulphur dioxide (SO2) for six SRES scenarios Figure 11: Projected changes averaged across nine IPCC AR4 global climate models in 17 summer and winter precipitation (mm/day) across South East Europe by the 2020s and 2050s compared to the 1961 to 1990 average, under the A2 emissions scenario Figure 12: The ECA countries likely to experience the greatest increases in climate extremes by 19 the end of the twenty-first century Figure 13: The drivers of vulnerability to climate change 20 Figure 14: Impact of natural disasters in ECA, 1990­2008 23 Figure 15: Annual Energy Profile for Albania from 1985 to 2006 in GWh 27 Figure 16: Relationship between Drin River flow and electricity production at Fierze 29 Figure 17: Variation of Fierze inflows and electricity generation, 1999 to 2007 29 Figure 18: Relationship between Mati River flow and electricity production from Ulėza and 30 Shkopeti HPP Figure 19: Projected electricity supply/demand for Albania from 2010 to 2050 52 Figure 20: Electricity shortage due to climate change 55 Figure 21: NPV using base case assumptions 62 Figure 22: Breakdown of NPV of options by parameter 63 Figure 23: Tornado chart showing sensitivity of NPV for each option to variations in the values 65 of each parameter Figure 24: Net present value of options under high parameter assumptions 65 Figure 25: Breakdown of costs and benefits, high parameter case 66 Figure 26: Costs vs. benefits for the extreme storm case (1 week per year outages) 67 Figure 27: Costs vs. benefits for the extreme storm case (1 month per year outages) 68 Figure 28: Costs vs. benefits for 50-year duration analysis 68 Figure 29: Sensitivity of options to discount rate 69 Figure 30: Sensitivity of options to carbon dioxide and other GHGs 70 Figure 31: Sensitivity of options to the value placed on water 70 Figure 32: Rainfall and Drin Dam Cascade generation in a wet year (October 2005 to 73 September 2006) Figure 33: Rainfall and Drin Dam Cascade generation in a wet year (October 2006 to 74 September 2007) Figure A1.1: Sample GIS output 82 Figure A1.2: Acclimatise Business Risk Pathways Model, adapted for Workshop 1 84 Figure A8.1: Average change in mean runoff according to CCSA for three time horizons: 2025, 142 2050, 2100 Figure A8.2 Projected Climatic Changes to 2100 143 Figure A8.3 Expected changes in runoff, Mati catchment`s 144 Figure A8.4: Relation of electricity production to river flow, MRCA 145 Figure A8.5: Electricity generation and Fierze inflows, 1999­2007 145 TABLES Table 1: Electricity production in South Eastern Europe in 2006, as % of total 8 Table 2: Summary of Albanian Scenarios for Changes in Precipitation (compared to 1961 to 18 1990 baseline) by Number of Global Climate Models Table 3: Summary of Climate Risks before Adaptation 24 Table 4: Number of Risks in Each Risk Severity Category, Before and After Adaptation 38 Table 5: Risk Register 41 Table 6: Base Case and High Case Parameter Value Assumptions 62 iv Table A2.1: Scale for Assessing Likelihood of Occurrence of Hazard 88 Table A2.2: Scale for Assessing Magnitude of Consequence 89 Table A2.3: Risk Mapping (Before Adaptation) 90 Table A2.4: Risk Mapping (After Adaptation) 90 Table A3.1: Adaptation Options that Apply to All Energy Asset Classes 91 Table A3.2: Adaptation Options--Energy Demand and Demand-side Energy Efficiency 95 Table A3.3: Adaptation Options--Large Hydropower Plants (LHPPs) 97 Table A3.4: Adaptation Options--Small Hydropower Plants (SHPPs) 100 Table A3.5 Adaptation Options--Thermal (Fossil Fuel) Power Plants (TPPs) 102 Table A3.6: Adaptation Options--Other Renewable Energy Sources 104 Table A3.7 Adaptation Options--Electricity Transmission and Distribution 105 Table A3.8: Adaptation Options--Fossil Fuel Supply and Transmission / Transportation 107 Table A4.1: Design and Operation of Energy Plants 109 Table A5.1: Private Benefit Categories--Examples 114 Table A5.2: Parameters for the CBA Discussed at Workshops and Meetings 117 Table A5.3: CAPEX and OPEX Summary (U.S. Dollars, 2010) 121 Table A5.4: Monetized Unit Benefit Values (U.S. Dollars) 124 Table A5.5: Benefits Realized by Each Option (U.S. Dollars, 2010) 124 Table A5.6: Base-case Parameters Results (U.S. Dollars, 2010) 126 Table A5.7: High-case Parameters Results (U.S. Dollars, 2010) 126 Table A7.1: Passive Scenario Projections 2030 to 2050 132 Table A7.2: Active Scenario Projections 2030 to 2050 136 Table A8.1 Climate Change Scenarios for Albania 141 Table A8.2: Climate Change Scenarios for Three Time Horizons: 2025, 2050, 2100 142 Table A8.3: Results for Hydropower (Deviation from the Reference Projections) and Relative 146 Participation of Each Basin in the Brazilian Hydropower System Table A8.4: Projected Changes in Annual Climatic Conditions, Runoff, and Hydropower 147 Production Table A9.1 Range of Projected Changes Compared to 1961­1990 Baseline 148 BOXES Box 1: Development and climate change at work 2 Box 2: Regional electricity markets in South Eastern Europe and climate risks 8 Box 3: Climate change modeling and greenhouse gas emissions scenarios 16 Box 4: Climate change, water resources, energy, and food security in Europe and Central Asia 32 (ECA) Box 5: Categorization of adaptation options for robust decision making under conditions of 37 high uncertainty, with some examples Box 6: A vital no-regrets` option for Albania--improved monitoring and forecasting of 39 weather and climate Box 7: Weather risk management through weather coverage and insurance instruments 40 Box 8: Active and passive scenarios in the draft National Energy Strategy, 2007 53 v SYNOPSIS Many countries are increasingly vulnerable to destructive weather events--floods, droughts, windstorms, or other parameters. The vulnerability is driven in part by climate but also by countries` sensitivity to events exacerbated by past practices, socioeconomic conditions, or legacy issues. The degree to which vulnerability to weather affects the countries` economies is driven by their coping or adaptive capacities. Seasonal weather patterns, weather variability, and extreme events can affect the production and supply of energy, impact transmission capacity, disrupt oil and gas production, and impact the integrity of transmission pipelines and power distribution networks. Climate change also affects patterns of seasonal energy demand. It is important to explore these vulnerabilities for the energy sector given its major contribution to economic development, the long life span of energy infrastructure planning, and the dependence of energy supply and demand on weather. This report showcases a pilot vulnerability, risk, and adaptation assessment undertaken for Albania`s energy sector to raise awareness and initiate dialogue on energy sector adaptation. A bottom-up, stakeholder-based, qualitative/semi-quantitative risk-assessment approach is used to discuss and identify risks, adaptation measures, and their costs and benefits. It draws on experience and published guidance from the United Kingdom and Australia, as well as existing research and literature. The climate vulnerability assessment framework puts stakeholders at the heart of the decision-making process and involves: Climate risk screening of the energy sector to identify and prioritize hazards, current vulnerabilities, and risks from projected climate changes out to the year 2050. Identification of adaptation options to reduce overall vulnerability. A high-level cost benefit analysis of key physical adaptation options. This pilot assessment demonstrates an approach that can be used to help countries and energy sector stakeholders develop policies and projects that are robust in the face of climatic uncertainties, and assist them in managing existing energy concerns as the climate changes. It identifies key direct risks to energy supply and demand and options for adaptation to establish where to focus subsequent in-depth analyses. It also identifies additional research needed to better understand the implications of extreme climatic events for the energy sector as well as potential indirect impacts--such as possible adaptation actions in the agriculture sector that may affect energy supply. vi ACKNOWLEDGMENTS This Report has been prepared by a core team led by Jane Ebinger. Team members are Lucy Hancock, Antonio C. Lim, Magnus Gehringer, Aferdita Ponari (World Bank), Richenda Connell, Nina Raasakka (Acclimatise), Stuart Arch, Alastair Baglee, Ivaylo Mirchev, Liudmila Nazarkina, Ben Pope (WorleyParsons), and Besim Islami (consultant). The team was assisted by Ana Gjokutaj, Kozeta Haxhiaj, and Josephine Kida (World Bank). The team benefited greatly from a wide range of consultations with stakeholders. Meetings and workshops were held in Albania with (in alphabetical order): Petrit Ahmeti, Neritan Alibali, Sokol Aliko, Ramadan Alushi, Ymer Balla, Indrit Baholli, Leonard Bardhoshi, Irma Berdufi, Daniel Berg, Taulant Bino, Miriam Bogdani, Agim Bregasi, Eglantina Bruci, Kujtime Caci, Eduart Cani, Marjana Coku, Marialis Ēelo, Endri Ēili, Leonidha Ēobo, Erion Cuni, Engjell Dakli, Stavri Dhima, Luan Dibra, Nazmi Diku, Dorjan Duka, Eduart Elezi, Lavdosh Ferrunaj, Arben Gazheli, Ilia Gjermani, Ardit Gjeta, Gani Gjini, Kole Gjoni, Konalsi Gjoka, Edmond Goskolli, Martin Graystone, Lorenc Gura, Sazan Guri, Suzana Guxholli, Marjola Hamitaj, Skender Hasa, Alfred Hasanaj, Ervin Hatija, Aheron Hizmo, Eida Hoxha, Fatmir Hoxha, Farudin Hoxha, Zhuljeta Hoxha, Rajmonda Islamaj, Hajri Ismaili, Qerim Ismeni, Marinela Jazoj, Ilir Kaci, Erion Kalaja, Mirela Kamberi, Shaban Kamberi, Zeki Kaya, Eniana Kociaj, Nevton Kodheli, Molnar Kolaneci, Lavdie Konjari, Niko Kurila, Hysni Laēi, Artan Leskoviku, Bashkim Lushaj, Sherif Lushaj, Margarita Lutaj, Bikore Mala, Afrim Malaj, Perparim Mancellari, Robert Manghan, Sokol Mati, Xhemal Mato, Merita Mansaku-Meksi, Niklas Mattson, Dorina Mehmeti, Olgert Metko, Marieta Mima, Donald Mishaxhi, Driada Mitrushi, Piro Mitrushi, Arben Mukaj, Alken Myftiu, Genc Myftiu, Agim Nashi, Bujar Nepravishta, Ndue Preka, Nikolin Prifti, Erikan Proko, Elton Qendro, Eduart Reimani, Anastas Risha, Kristo Rodi, Daniela Ruci, Mitat Sanxhaku, Alma Saraēi, Denisa Saja, Aleksander Shalsi, Erlet Shaqe, Sherefedin Shehu, Angjelin Shtjefni, Dritan Shutina, Mimoza Simixhiu, Muharrem Stojku, Kliti Storja, Konti Tafa, Peter Troste, Fatjon Tugu, Teuta Thimjo, Piro Trebicka, Endrit Tuta, Andi Vila, Anisa Xhitoni, Lufter Xhuveli, Petrit Zorba. The work was conducted under the general guidance of Charles Feinstein, Ranjit Lamech, and Camille Nuamah (World Bank). Ron Hoffer and Demetrios Papathanasiou (World Bank) and Amarquaye Armar (ESMAP) also provided valuable guidance. Additional input was provided by Drita Dade, Gazmend Daci, Giuseppe Fantozzi, and Salvador Rivera (World Bank). The report benefited from peer review by Mohinder Gulati and Walter Vergara (World Bank), Roberto Schaeffer (Federal University of Rio de Janeiro) and Vladimir Stenek (International Finance Corporation). The financial and technical support by the Energy Sector Management Assistance Program (ESMAP), the Trust Fund for Environmentally and Socially Sustainable Development (TFESSD) made available by the Governments of Finland and Norway, and The World Bank is gratefully acknowledged. ESMAP--a global knowledge and technical assistance partnership administered by the World Bank and sponsored by official bilateral donors--assists low- and middle-income countries, its clients, to provide modern energy services for poverty reduction and environmentally sustainable economic development. ESMAP is governed and funded by a Consultative Group (CG) comprised of official bilateral donors and multilateral institutions, representing Australia, Austria, Canada, Denmark, Finland, France, Germany, Iceland, the Netherlands, Norway, Sweden, the United Kingdom, and the World Bank Group. Finally, the team would like to dedicate this report to Antonio (Tony) Lim who passed away in October 2009. Tony was a tireless campaigner for climate change and carbon finance at the World Bank who worked diligently to bring better appreciation for and attention to climate issues and challenges, particularly in the energy sector. vii ACRONYMS AKBN National Agency for Natural Resources AR4 The Fourth Assessment Report of the IPCC, released in 2007 CAPEX Capital expenditure CO2 Carbon dioxide CAT-DDO Catastrophe Risk Deferred Draw-down Option CBA Cost­benefit analysis CCGT Combined cycle gas turbine power plant CCSA Climate change scenario for Albania CSP Concentrated solar power ECA Europe and Central Asia ECMWF European Centre for Medium-range Weather Forecasting EIA Environmental Impact Assessment EMI European meteorological institution EMP Environmental Management Plan ERE Energy Regulatory Authority ESIA Environmental and Social Impact Assessment ESMAP Energy Sector Management Assistance Program EUCOS EUMetNet Composite Observing System EUMetSat European Organisation for the Exploitation of Meteorological Satellites GCM General circulation model / Global climate model GIS Generation Investment Study GIS Geographical information system GHG Greenhouse gas IEWE Institute of Energy, Water, and Environment IPCC Intergovernmental Panel on Climate Change KESH Korporata Energjitike Shqiptare, Albanian Electricity Corporation LHPP Large hydropower plant LNG Liquefied natural gas METE Ministry of Economy, Trade and Energy NES National Energy Strategy NHMS National hydrometeorological service NMS National meteorological Service OPEX Operating expenditure OST Transmission System Operator RCM Regional climate model REBIS Regional Balkans Infrastructure Study SEE South Eastern Europe SHPP Small hydropower plant (less than 15 MW) SRES Special Report on Emissions Scenarios SST Sea surface temperature SWOT Strengths, weaknesses, opportunities and threats analysis T&D Transmission and distribution TAP Trans-Adriatic Pipeline TFESSD Trust Fund for Environmentally and Socially Sustainable Development TPP Thermal power plant UKCIP UK Climate Impacts Programme UNFCCC United Nations Framework Convention on Climate Change WB World Bank WBG World Bank Group WMO World Meteorological Organization viii EXECUTIVE SUMMARY Albania's Energy Sector and Climate Change Albania`s water resources are a national asset, with hydropower from the River Drin currently providing about 90 percent of domestic electricity. As climate change mitigation targets and legislation are tightened, and with other countries struggling to reduce their greenhouse gas emissions, Albania`s green production capability is an increasingly important national and regional asset. However, such a high dependence on hydropower also brings challenges. Albania finds it difficult to meet energy demand and maintain energy supply. The country`s rainfall, on which its hydropower depends, is among the most variable in Europe. Hydropower production varies between about 2,900GWh in very dry years to twice that amount in very wet years. Coupled with this, Albania has limited regional electricity interconnections at present, and imports are expensive. There are also significant inefficiencies in domestic energy supply, demand and water use. Technical losses in the transmission network were 213GWh in 2008 (3.3 percent), an improvement on losses in 2006 (which were 256GWh or 4 percent). Technical and commercial losses from the distribution system amounted to 1,927GWh (33 percent) in 2008. From 10 percent to 20 percent of water resources are lost in the irrigation system. All these factors have compounded to create frequent load shedding and consequent impacts on Albania`s economic development. Figure 1 clearly shows lower domestic power production linked to low rainfall in the period 2002 to 2008, with resultant associated high energy imports. It is worth noting that, even with imports, load shedding has still been required, so the energy supply data in Figure 1 do not represent the true energy demand. Efforts are underway to address these challenges and improve resource use efficiency: In 2008, for the first time, no load shedding was programmed and there has been a recent decision in Albania to eliminate load shedding from 2009 onward, along with a commitment to provide a 24-hour electricity supply. As well as reductions in losses from the transmission system, losses from the distribution system were reduced by 5.5 percent in 2008 compared to 2007. The efficiency of water use in energy generation is influenced by long-term reductions in efficiency (due to aging of assets) and more-recent management actions to improve water use efficiency. In 2007 and 2008, inflows to Fierze Reservoir were similar (approximately 4,120,000,000 m3) but power generation in 2008 was 29.4 percent higher than in 2007. This was because high water levels were maintained in the reservoir in 2008, and there was better optimization between electricity import and domestic production. This improvement is reflected in a metric known as specific consumption (m3 of water consumed per kWh of electricity generated). Specific consumption in 2007 was 1.40 m3/kWh, whereas in 2008 it improved to 1.04 m3/kWh. The new Dam Safety Project (funded by the World Bank) is reviewing investments in the Drin and Mati River Cascades, including investments in bathymetry and hydrology. However, unless prompt action is taken, climate change looks set to worsen Albania`s energy security over the medium to long term. This study estimates that a reduction in runoff of 20 percent by 2050 driven by climate change could lead to 15 percent less electricity generation from Albania`s large hydropower plants (LHPPs) and 20 percent less from small hydropower plants (SHPPs). At the same time, increases in extreme precipitation events could lead to increased costs for maintaining dam security. Other energy assets are not immune from climate impacts. Rising sea levels and increased rates of coastal erosion will threaten energy assets in the coastal region. Rising air temperatures are also estimated to reduce the efficiency of TPPs by about 1 percent by 2050. If river-water cooled TPPs were developed in future, these would be affected by changes in river flows and higher river temperatures, further reducing their ix efficiency. Efficiency losses of 1 percent by 2050 are also estimated for transmission and distribution networks. Owing to uncertainties in current and future wind speeds, estimates of changes in wind power generation cannot be made. Solar energy production in Albania may, however, benefit from projected decreases in cloudiness--it is estimated that output from solar power could increase by 5 percent by 2050. Figure 1: Generation, import, and supply of energy in Albania from 2002 to 2008 (ERE, 2008) Energy demand is also related to climatic conditions. Higher temperatures due to climate change will reduce demand for space heating, particularly in winter, but will increase demand for space cooling and refrigeration in hotter months. The seasonality of Albania`s supply­demand imbalance will become increasingly critical: As summer demand rises along with temperatures, hydropower production in summer looks set to be most affected by reduced rainfall. At the same time, demand for agricultural irrigation will rise, further competing with water demand for small hydropower. Adapting to climate variability and change will become increasingly important for the Albanian energy sector. KESH, Korporata Energjitike Shqiptare, the Albanian Electricity Corporation, is currently privatizing the country`s energy sector. (The distribution system has recently been privatized, with the Czech company, CEZ, being the private sector operator.) As awareness of climate issues is accelerating globally, concerns about unmanaged climate risks and their impacts on the financial performance of the energy sector could make Albania less attractive to foreign energy investors. This study provides high-level assessments of climate risks and adaptation options for Albania`s energy sector, drawing on existing research and literature. It identifies key direct risks to energy supply and demand and options for adaptation in order to establish where subsequent more in- depth analyses should be focused. Additional research is recommended to better understand the implications of extreme climatic events for the energy sector and of changes in seasonality in x energy supply and demand, as well as potential indirect impacts--for instance, due to the adaptation actions that may be taken in the agriculture sector, which may affect energy supply. Recommendations for Building Climate Resilience of the Energy Sector Given the challenges above, how could Albania best manage its future security of energy supply in the face of a changing climate? Albania`s recent draft National Energy Strategy (NES) sets out a so-called active scenario, which aims to improve energy security. It looks out to the medium term (the year 2019) and describes plans to diversify the energy system, by encouraging development of renewable energy generation assets (solar, small hydropower plants, wind, and biomass) and thermal power plants. It does not consider climate change impacts on energy security on these timescales. Yet, as already described, over the longer time horizons of this study (out to the year 2050) these assets will be increasingly affected by climate change. The draft NES`s active scenario notes the importance of new electricity interconnection lines to facilitate Albania`s active participation in the South East Europe energy market. But the wider region will also be affected by climate change--about one quarter of the region`s electricity is generated by hydropower plants, and regional summer energy demand will rise along with temperatures and due to economic development. This could increase import prices and reduce supply, so these interconnections may not help Albania maintain energy security unless regionwide coping strategies are devised. The draft NES active scenario also emphasizes the need for improved energy efficiency through greater use of domestic solar water heating, improved building standards, lower-energy appliances, and alternative heating sources other than electricity. These energy-efficiency measures are increasingly critical as the climate changes, and Albania must provide financial incentives to promote their uptake. But, based on experience from other countries, implementing them in a timely manner will be a significant challenge. Even if the measures in the draft NES active scenario were extrapolated to 2050 and fully implemented, this study estimates that, due to climate change impacts on supply and demand, Albania would still have a supply­demand gap. The estimated net shortfall due to climate change is on the order of 350 GWh per year by 2030, equivalent to power generation from a 50 MW thermal power plant. By 2050, the shortfall rises to 740 GWh per year (105 MW), or 3 percent of total demand. As previously noted, this disguises a more significant impact on energy security due to changing seasonal demand and production, with summer peak demand increasing when hydropower production is at its lowest. So, what are the critical actions that Albania could take now to improve energy security now and in the future? First, Albania could increase its investment in, and coordination of, meteorological, hydrometeorological and hydrological monitoring, modeling, and forecasting. These capabilities have been considerably eroded in recent decades due to lack of investment and poorly coordinated institutional arrangements. The current poor state of monitoring networks and forecasting capability prevent optimal use of water resources and operation of hydropower plants today--though some recent optimization improvements have been made. By exploiting better data on reservoir use, margins, and changes in rainfall and runoff, it should be possible to improve further the management of existing reservoirs. Investments in monitoring and forecasting would have other benefits, helping the agriculture and transportation sectors and the general population, while building resilience to climate change. Albania could develop (in- country) or obtain (from elsewhere) weather and climate forecasts appropriate for energy-sector xi planning, from short-range forecasts (1 to 3 days ahead) and medium-range forecasts (3 to 10 days ahead), to seasonal forecasts and regional downscaled climate change projections. Short- range and medium-range forecasts should be made available to decision makers with adequate lead time to help in optimizing the operation of the energy system. This could be supported by better interaction between meteorological/hydrometeorological experts and energy-sector decision makers. Drawing on this information, energy-sector stakeholders could work in partnership with water users in the agricultural sector to undertake climate risk assessments that are integrated across these sectors and could devise agreed strategies for managing shared water resources. Regional cooperation across South East Europe on sharing of monitoring data and forecasts could also be strengthened, especially in relation to shared watersheds (Drin, Vjosa). Albania could work in partnership with neighbors on regional studies on climate risks and their implications for energy security, prices and trade. These studies will help to build understanding of the extent to which the whole region will be affected in the same way at the same time by climatic events such as droughts, and how best to manage such regional risks. Second, there are enormous opportunities for Albania to close its supply­demand gap through improved energy efficiency and demand-side management. While this is recognized in the draft NES active scenario, more emphasis and progress could be made on this issue. The large technical and commercial losses in the distribution system could be reduced and demand-side management could be improved through, for example, improved bill collection and establishment of cost-recovery tariffs (amending energy subsidies that are distorting market signals). Such actions are vital for many reasons--fiscal, economic, and as part of good governance. The recent privatization of the distribution system provides a driver for this. Similarly, the losses from the water irrigation system could be tackled and greater emphasis placed on improving the management of reservoirs, and on coordinating actions for more- efficient water resource use in every sector. The Ministry of Agriculture, Food and Consumer Protection has made significant progress recently in reducing irrigation losses from agriculture in some parts of Albania, and this work could usefully be scaled up across the country. In the face of climate change, the imperative for efficient and sustainable use of water resources is increasing. Thirdly, Albania could review its technical standards and planning/contractual processes for all energy infrastructure, and upgrade them where needed to ensure that assets can withstand climate variability and projected climate change impacts over their lifetimes. For new assets, consideration of climate variability and change could be addressed through site selection decisions, environmental impact assessments, tariffs, incentives, contracts and public­private partnerships. Similarly, upgrading and rehabilitation of existing assets could build in assessments of, and resilience to, climate change impacts. For instance, it may be possible to increase water storage in existing reservoirs at a reasonable cost, to dampen the effects of seasonal variations in runoff. Emergency Contingency Plans (ECPs) for hydropower plants could also be reviewed and upgraded where needed, to take account of expected increases in precipitation intensity due to climate change. Power producers and local authorities may also need to improve their capacities to implement ECPs, ensuring that they provide sound mechanisms for monitoring weather and its influence on river flows and reservoir levels, as well as communication with downstream communities and contingency plans for evacuation. Finally, climate change emphasizes the imperative (recognized in the draft National Energy Strategy active scenario) for Albania to increase the diversity of its energy supplies--both through increased regional energy trade and through developing a more diverse portfolio of domestic generation assets, ensuring that these are designed to be resilient to climate change. For example, Albania could structure Power Purchase Agreements including off-take arrangements xii and power-swap agreements that recognize the complementarities between the different countries` energy systems. For this study, a high-level cost­benefit analysis (CBA) has been undertaken to estimate the relative costs and benefits to Albania of increased energy trade and different types of domestic energy generation, to supply the shortfall in Albania`s electricity that is attributed to climate change impacts (350 GWh per year by 2030, and 740 GWh per year by 2050) that remains after full implementation of an extrapolated NES active scenario to 2050. The CBA included the following options: Import of electricity Upgrading of existing large hydropower plants Upgrading of existing small hydropower plants New large hydropower plants New small hydropower plants New thermal power plants New wind farms New concentrated solar power plants (CSPs) The performance of these options has been assessed, using parameters confirmed as important by energy-sector stakeholders in Albania. As well as financial parameters (capital and operational costs), environmental factors including water value, greenhouse gas emissions, and other emissions and ecosystem values were seen as relevant in choice among energy asset options. In terms of social parameters, disturbance to people and property was also assessed in the CBA. Using these parameters, the sustainability of the various options was ranked. Figure 2 presents the net present value (NPV) results in current (2010) U.S. dollar terms for each of the options tested, under a base case set of assumptions. According to the CBA, the most economic options for Albania are upgrade of existing LHPPs and SHPPs, followed by development of new SHPPs and thermal power plants (the latter assumed to be gas-fired and shown as CCGTs in Figure 2). An alternate thermal power option could be the use of supercritical pulverized coal technology. While not considered in detail in the CBA, this option would lead to greater GHG emissions and water usage than a gas-fired thermal power facility, and would be less sustainable. Nevertheless, it would likely still be the fourth most-sustainable option. Sensitivity analyses were undertaken, to test the sensitivity of these options to varying discount rates and values of greenhouse gas emissions. These confirmed that upgrading existing LHPPs and SHPPs were the most economic options. For discount rates in the range 2 percent to 20 percent, the relative ranking of the top two options does not change, with the Upgrade existing LHPP option returning the greatest NPV over all discount rates, followed by Upgrade existing SHPP. However, when the discount rate is larger than 16.2 percent, thermal power plants (CCGTs) become marginally more attractive than New SHPP. Thermal power plants have higher operating costs, but the effects of future operating costs on their NPV are diminished at higher discount rates. In addition, as the discount rate increases, import of electricity becomes a relatively more attractive option, though it remains NPV-negative across all discount rates examined. xiii Net Present Value of Options 400 300 200 USD millions 100 - -100 -200 IMPORT Enhance CCGT Enhance New WIND CSP New Extg. Extg. SHPP LHPP LHPP SHPP Figure 2: Net Present Value of diversification options, using base case assumptions In relation to the effects on the options of varying the price of CO2 and other greenhouse gases (GHGs), as expected, the economics of the renewable assets are insensitive to this parameter. Clearly, those options that are sensitive to increasing GHG value are thermal power plants (CCGTs) and import of electricity (assumed generated using CCGTs). The higher the value placed on carbon dioxide and other GHGs, the more unfavorable thermal power plants and electricity imports become in relative terms. However, domestic thermal power plants remain NPV-positive up to the highest value tested, US$100 per tonne of GHG. In conclusion, there are several critical actions that Albania could take now--namely, improving meteorological and hydrometeorological monitoring, modeling, and forecasting, and improving energy efficiency, demand-side management, and water-use efficiency. These will help manage existing climate variability better and will build the country`s resilience to climate change. Albania is on the brink of a significant adaptation opportunity: major investments in new energy assets are underway or being planned. Integrating adaptation measures into these can help ensure their climate resilience. As the electricity system is privatized, it is possible to consider how to structure incentives for adaptation; there could be opportunities for cost sharing between government and the private sector. According to the CBA, upgrades to existing LHPPs and SHPPs are the most economic options for Albania to fill the climate change-induced energy gap that will emerge over the period 2030 to 2050. For development of new assets and upgrade of existing assets, the earlier that climate risks and resilience are considered, the greater the opportunities to identify financially and economically efficient solutions that will build the robustness of the energy system for coming decades. xiv PĖRMBLEDHJE EKZEKUTIVE Sektori i energjisė nė Shqipėri dhe ndryshimet klimatike Burimet ujore tė Shqipėrisė janė njė pasuri kombėtare, ku energjia hidrike nga lumi Drin siguron rreth 90% tė energjisė elektrike tė prodhuar nė vend. Ndėrkohė qė synimet dhe legjislacioni pėr zbutjen e ndryshimeve klimatike bėhen mė shtrėnguese, dhe kur vendet e tjera mundohen tė ulin shkarkimet e gazeve serė, aftėsia e Shqipėrisė pėr prodhim tė gjelbėr ėshtė njė vlerė kombėtare dhe rajonale gjithnjė dhe mė e rėndėsishme. Megjithatė, njė varėsi e tillė e lartė tek energjia hidrike sjell dhe sfida. Pėr Shqipėrinė ėshtė e vėshtirė tė plotėsojė kėrkesėn pėr energji elektrike dhe tė ruajė nivelin e furnizimit me energji. Sasia e reshjeve tė shiut nė vend, nga tė cilat varet dhe energjia hidrike, janė nga mė tė ndryshueshmet nė Europė. Prodhimi i energjisė hidrike luhatet nga rreth 2,900 GWh nė vitet shumė tė thata deri nė rreth dyfishin e kėsaj sasie nė vitet qė janė jashtėzakonisht tė lagėshta. Pėrveē kėsaj, Shqipėria ka aktualisht numėr tė kufizuar interkonjeksionesh rajonale pėr energjinė elektrike dhe importet janė tė shtrenjta. Gjithashtu, ka inefiēencė tė lartė si nė anėn e furnizimit vendas me energji elektrike dhe nė kėrkesė, ashtu dhe nė pėrdorimin e ujit. Humbjet teknike nė rrjetin e transmetimit nė vitin 2008 ishin 213GWh (3.3%), njė pėrmirėsim nė krahasim me humbjet e vitit 2006 (tė cilat ishin 256GWh ose 4%). Humbjet teknike dhe tregtare nga sistemi i shpėrndarjes shkonin nė 1,927GWh (32.7%) nė vitin 2008. Ndėrmjet 10% dhe 20% e burimeve ujore humbasin nė sistemin e ujitjes. Tė gjithė kėta faktorė janė grumbulluar dhe shkaktojnė ndėrprerje tė shpeshta tė energjisė dhe pasoja me ndikim nė zhvillimin ekonomik tė Shqipėrisė. Figura 1 tregon qartėsisht qė ulja e prodhimit vendas tė energjisė elektrike ėshtė e lidhur me uljen e sasisė sė reshjeve nė periudhėn nga viti 2002 deri nė vitin 2008, me njė rezultante tė shoqėruar me rritje tė importeve tė energjisė. Ja vlen tė vihet nė dukje qė, edhe me importet, janė nevojitur ndėrprerje nė furnizimin me energji elektrike, kėshtu qė tė dhėnat e furnizimit me energji nė Figurėn 1 nuk pėrfaqėsojnė kėrkesėn e vėrtetė pėr energji. Po bėhen pėrpjekje pėr tė adresuar kėto sfida dhe pėr tė pėrmirėsuar eficencėn e pėrdorimit tė burimeve: Nė vitin 2008, pėr tė parėn herė, nuk janė programuar ndėrprerje tė energjisė elektrike dhe ka patur njė vendim tė kohėve tė fundit nė Shqipėri pėr tė eliminuar ndėrprerjet pėr shkak tė mbikgarkesės nga viti 2009 dhe mė tej, sė bashku me njė angazhim pėr tė siguruar njė furnizim me energji 24 orė. Ashtu si uljet e humbjeve nga sistemi i transmetimit, edhe humbjet nė sistemin e shpėrndarjes u ulėn me 5.5% nė vitin 2008, krahasuar me vitin 2007. Eficenca e pėrdorimit tė ujit gjatė prodhimit tė energjisė elektrike ndikohet dhe nga uljet historike nė eficencė (pėr shkak tė vjetėrimit tė aseteve) si nga dhe veprimet menaxhuese mė tė fundit qė synojnė tė pėrmirėsojnė eficencėn e burimeve ujore. Nė vitet 2007 dhe 2008, prurjet nė rezervuarin e Fierzės ishin shumė tė ngjashme (rreth 4,120,000,000 m3) por prodhimi i energjisė elektrike nė vitin 2008 ishte 29.4% mė i lartė se nė vitin 2007. Kjo erdhi si shkak i ruajtjes nė nivele tė lartat tė ujit nė rezervuar nė vitin 2008, dhe optimizimit mė tė mirė ndėrmjet importimit dhe prodhimit tė brendshėm tė energjisė elektrike. Ky pėrmirėsim pasqyrohet nė njė element tė njohur si konsumim specifik (m3 ujė tė konsumuar pėr kWh energji elektrike tė prodhuar). Konsumi specifik nė vitin 2007 ishte 1.40 m3/kWh, ndėrsa nė vitin 2008 u pėrmirėsua deri nė 1.04 m3/kWh. Projekti i ri mbi Sigurinė e Digave (financuar nga Banka Botėrore) po shqyrton investimet nė kaskadat e lumenjve Drin dhe Mat, pėrfshirė dhe investimet nė batimetri dhe hidrologji. xv Figura 1: Prodhimi, importimi dhe furnizimi me energji elektrike nė Shqipėri nga viti 2002 nė 2008 (ERE, 2008) Megjithatė, po tė mos ndėrmerren veprime tė menjėhershme, ndryshimet klimatike duket qė do ta pėrkeqėsojnė sigurinė e energjisė nė Shqipėri nė afat tė mesėm dhe tė gjatė. Ky studim vlerėson se njė reduktim 20% nė rrjedhje deri nė vitin 2050 i nxitur nga ndryshimet klimatike mund tė ēojė nė 15% mė pak prodhim tė energjisė elektrike nga hidrocentralet e mėdha tė Shqipėrisė (HECM) dhe 20% mė pak nga hidrocentralet e vogla (HECV). Nė tė njėjtėn kohė, rritjet nė ngjarjet ekstreme tė reshjeve mund tė ēojnė nė rritjen e shpenzimeve pėr ruajtjen e sigurisė sė digave. Edhe asetet e tjera tė energjisė nuk janė tė imunizuara nga ndikimet klimatike. Rritja e niveleve tė detit dhe rritja e shkallės sė erozionit bregdetar do tė kėrcėnojnė asetet e energjisė nė zonat bregdetare. Temperaturat nė rritje tė ajrit vlerėsohen gjithashtu qė do tė zvogėlojnė efikasitetin e TEC-ve me 1% deri nė vitin 2050. Nėse nė tė ardhmen do tė ndėrtohen TEC-e qė ftohen me ujin lumenjve, kėto do tė ndikohen si nga ndryshimet nė sasinė e rrjedhės sė lumenjve ashtu dhe nga temperaturat mė tė larta tė ujit tė lumit, duke zvogėluar mė tej efikasitetin e tyre. Humbjet e efikasitetit prej 1% deri nė vitin 2050 janė parashikuar edhe pėr rrjetet e transmetimit dhe shpėrndarjes. Pėr shkak tė paqartėsive mbi shpejtėsinė e erės si atė aktuale dhe nė tė ardhmen, nuk mund tė bėhen vlerėsime mbi ndryshimet nė prodhimin e energjisė elektrike me anė tė erės. Megjithatė, prodhimi i energjisė diellore nė Shqipėri mund tė pėrfitojė nga zvogėlimi i parashikuar nė mbulimin me re ­ ėshtė llogaritur qė prodhimi nga energjia diellore mund tė rritet me 5% deri nė vitin 2050. Kėrkesa pėr energji elektrike ėshtė e lidhur edhe me kushtet klimatike. Temperaturat mė tė larta pėr shkak tė ndryshimeve klimatike do tė ulin kėrkesėn pėr ngrohjen e hapėsirave, veēanėrisht nė dimėr, por do tė rrisin kėrkesėn pėr ftohje hapėsirash dhe pėrdorim frigoriferik nė muajt mė tė nxehtė. Sezonaliteti i ēekuilibrit furnizim-kėrkesė tė Shqipėrisė do tė bėhet gjithnjė e mė kritik: ndėrkohė qė kėrkesa gjatė verės rritet sė bashku me temperaturat, prodhimi i energjisė hidrike nė verė duket do tė jetė mė i prekuri nga reduktimi i sasisė sė reshjeve. Nė tė njėjtėn kohė, kėrkesa pėr xvi ujitje nė bujqėsi do tė rritet, duke konkuruar mė shumė me kėrkesėn pėr ujė tė hidrocentraleve tė vogla. Adaptimi me ndryshueshmėrinė dhe ndryshimin e klimės do tė bėhet gjithnjė e mė i rėndėsishėm pėr sektorin energjetik shqiptar. KESH-i, Korporata Elektorenergjitike Shqiptare, ėshtė aktualisht duke privatizuar sektorin e energjisė tė vendit. (Sistemi i shpėrndarjes ėshtė privatizuar kohėt e fundit, ku kompania ēeke CEZ ėshtė operatori privat i sektorit). Ndėrkohė qė ndėrgjegjėsimi mbi kėrcėnimet e klimės po pėrshpejtohet nė nivel global, shqetėsimet nė lidhje me rreziqet e pamenaxhuara tė klimės dhe ndikimet e tyre mbi performancėn financiare tė sektorit tė energjisė mund ta bėjnė Shqipėrinė mė pak tėrheqėse pėr investitorėt e huaj tė energjisė. Ky studim jep vlerėsime tė nivelit tė lartė mbi rreziqet klimatike dhe mundėsitė pėr tu pėrshtatur pėr sektorin energjitik tė Shqipėrisė, duke u mbėshtetur nė kėrkimet dhe literaturėn ekzistuese. Ai identifikon rreziqet kryesore tė drejtpėrdrejta pėr furnizimin dhe kėrkesėn pėr energji elektrike dhe mundėsitė pėr tu pėrshtatur, si dhe paraqet ku duhet tė pėrqendrohen mė shumė analizat e mėtejshme mė tė thella. Rekomandohen kėrkime shtesė pėr tė kuptuar mė mirė implikimet e ngjarjeve ekstreme klimatike pėr sektorin e energjisė dhe tė ndryshimeve nė sezonalitetin e furnizimit dhe kėrkesės pėr energji elektrike, si dhe ndikimet e mundshme tė tėrthorta ­ pėr shembull, pėr shkak tė veprimeve pėrshtatėse qė mund tė merren nė sektorin e bujqėsisė, dhe tė cilat mund tė ndikojnė nė furnizimin me energji. Rekomandimet pėr krijimin e elasticitetit klimatik tė sektorit energjitik Duke patur parasysh sfidat e mėsipėrme, si mund tė menaxhojė mė mirė Shqipėria nė tė ardhmen sigurinė e furnizimit me energji pėrballė njė klime qė po ndryshon? Draft-strategjia e fundit Kombėtare e Energjisė (SKE) e Shqipėrisė pėrcakton njė tė ashtuquajtur skenar aktiv`, i cili synon tė pėrmirėsojė sigurinė e energjisė. Ai mbulon periudhėn afat-mesme (deri nė vitin 2019) dhe pėrshkruan planet pėr tė diversifikuar sistemin energjitik, duke nxitur ndėrtimin e aseteve pėr prodhimin e energjisė tė rinovueshme (diellore, hidrocentrale tė vogla, era dhe biomasa) dhe termocentraleve. Ajo nuk merr parasysh ndikimet e ndryshimeve klimatike mbi sigurinė e energjisė nė kėto periudha kohore. Megjithatė, siē pėrshkruhet dhe mė lart, pėrgjatė shtrirjeve mė tė gjata kohore tė kėtij studimi (deri nė vitin 2050) kėto asete do tė ndikohen gjithnjė e mė shumė nga ndryshimet klimatike. Skenari aktiv i draft- SKE-sė vė nė dukje rėndėsinė e linjave tė reja tė interkonjeksionit tė energjisė elektrike pėr tė lehtėsuar pjesėmarrjen aktive tė Shqipėrisė nė tregun e energjisė tė Europės Jug-Lindore. Por dhe rajoni mė i gjerė gjithashtu do tė ndikohet nga ndryshimet klimatike ­ rreth njė e katėrta e energjisė elektrike tė rajonit prodhohet nga hidrocentralet, dhe kėrkesa rajonale pėr energji gjatė verės do tė rritet sė bashku me temperaturat dhe pėr shkak tė zhvillimit ekonomik. Kjo mund tė rrisė ēmimet e importit dhe tė zvogėlojė furnizimin, kėshtu qė kėto interkonjeksione mund tė mos e ndihmojnė Shqipėrinė tė ruajė sigurinė e energjisė nėse nuk hartohen strategji pėrballuese pėr gjithė rajonin. Skenari aktiv i draft SKE-sė gjithashtu thekson nevojėn pėr tė pėrmirėsuar efiēencėn e energjisė nėpėrmjet rritjes sė pėrdorimit mė tė madh shtėpiak tė ngrohjes sė ujit me energji diellore, pėrmirėsimin e standarteve tė ndėrtimit, pėrdorimin e pajisjeve shtėpiake qė pėrdorin pak energji dhe burimet alternative pėr ngrohje pėrveē energjisė elektrike. Kėto masa tė efiēencės sė energjisė janė gjithmonė e mė kritike ndėrkohė qė klima ndryshon, dhe Shqipėria duhet tė ofrojė nxitje financiare pėr tė bėrė tė mundur pėrdorimin e kėtyre masave. Por, duke u bazuar nė pėrvojėn e vendeve tė tjera, zbatimi i tyre nė kohė do tė jetė njė sfidė e rėndėsishme. xvii Edhe nė qoftė se masat nė skenarin aktiv tė draft SKE-sė qė shtrihet deri nė vitin 2050 do tė zbatohen plotėsisht, ky studim vlerėson se, pėr shkak tė ndikimeve tė ndryshimeve klimatike mbi kėrkesėn dhe ofertėn, Shqipėria ende do tė ketė njė hendek furnizim-kėrkesė. Mungesa e parashikuar neto pėr shkak tė ndryshimit tė klimės ėshtė rreth 350 GWh nė vit deri nė vitin 2030, e barabartė me prodhimin e energjisė nga njė termocentral 50 MW. Deri nė vitin 2050, mungesa rritet nė 740 GWh nė vit (105 MW), ose 3% e kėrkesės totale. Siē u theksua dhe mė lart, kjo fsheh njė ndikim mė tė rėndėsishėm pėr sigurimin e energjisė pėr shkak tė ndryshimit tė kėrkesės dhe tė prodhimit sezonal, me rritjen e kėrkesės pik tė verės nė kohėn qė prodhimi i energjisė hidrike ėshtė nė nivelin e tij mė tė ulėt. Pra, cilat janė veprimet kritike qė Shqipėria mund tė ndėrmarrė tani pėr tė pėrmirėsuar sigurinė e energjisė tani dhe nė tė ardhmen? Sė pari, Shqipėria mund tė shtojė investimin e saj, dhe koordinimin e monitorimit, modelimit dhe parashikimit meteorologjik, hidrometeorologjik dhe hidrologjik. Kėto aftėsi janė shkatėrruar nė mėnyrė tė konsiderueshme nė dekadat e fundit pėr shkak tė mungesės sė investimeve dhe rregullimet institucionale tė koordinuara dobėt. Gjendja e keqe aktuale e rrjeteve tė monitorimit dhe aftėsive parashikuese pengojnė pėrdorimin optimal tė burimeve ujore dhe funksionimin e hidrocentraleve sot ­ megjithėse, siē vihet nė dukje mė lart, janė bėrė disa pėrmirėsime tė kohėve tė fundit pėr optimizimin. Duke shfrytėzuar tė dhėna mė tė mira mbi pėrdorimin e rezervuarėve, kufijve dhe ndryshimeve nė sasinė e reshjeve dhe rrjedhjeve, do tė jetė e mundur tė pėrmirėsohet mė tej menaxhimi i rezervuarėve ekzistues. Investimet nė monitorim dhe parashikim tė motit do tė kishin pėrfitime tė tjera, duke ndihmuar edhe sektorėt e bujqėsisė dhe transportit dhe popullatėn nė pėrgjithėsi, si edhe ndėrtimin e elasticitetit ndaj ndryshimeve klimatike. Shqipėria mund tė zhvillojė (nė vend) ose tė marrė (nga vende tė tjera) parashikimet e motit dhe klimės tė pėrshtatshme pėr planifikim nė sektorin e energjisė, duke mbuluar parashikimet nė periudhė afat shkurtėr (1-3 ditė pėrpara), parashikimet nė periudhė afat mesme (3-10 ditė), parashikimet sezonale si dhe parashikimet rajonale tė ndryshimit tė klimės me shkallė tė zvogėluar. Parashikimet pėr periudhė afat shkurtėr dhe afat mesme duhet tė jenė nė dispozicion tė vendim- marrėsve nė kohė reale, pėr tė ndihmuar nė optimizimin e funksionimit tė sistemit energjitik. Kjo mund tė mbėshtetet nėpėrmjet bashkėveprimit mė tė mirė ndėrmjet ekspertėve meteorologjikė/hidrometeorologjikė dhe vendim-marrėsve nė sektorin e energjisė. Duke u mbėshtetur nė kėto tė dhėna, palėt e interesuara tė sektorit tė energjisė mund tė punojnė nė partneritet me pėrdoruesit e ujit nė sektorin e bujqėsisė, pėr tė ndėrmarrė vlerėsime tė rrezikut tė klimės qė janė tė integruara nė tė gjithė kėta sektorė dhe tė hartojnė strategji tė pranuara pėr tė menaxhuar burimet ujore tė pėrbashkėta. Duhet gjithashtu tė forcohet bashkėpunimi rajonal nė tė gjithė Europėn Juglindore pėr shkėmbimin e tė dhėnave tė monitorimit dhe parashikimeve, veēanėrisht nė lidhje me pellgjet ujėmbledhės tė pėrbashkėta (Drin, Vjosa). Shqipėria mund tė punojė nė partneritet me fqinjėt nė studime rajonale mbi rreziqet klimatike dhe implikimet e tyre pėr sigurinė, ēmimet dhe tregtinė e energjisė. Kėto studime do tė ndihmojnė pėr tė ndėrtuar tė kuptuarit nėse i gjithė rajoni do tė ndikohet nė tė njėjtėn mėnyrė, e nė tė njėjtėn kohė nga ngjarjet klimatike tė tilla si thatėsira, dhe cila ėshtė mėnyra mė e mirė pėr tė menaxhuar rreziqe tė tilla rajonale. Sė dyti, ekzistojnė mundėsi shumė tė mėdha pėr Shqipėrinė pėr tė mbyllur hendekun e saj furnizim-kėrkesė pėrmes pėrmirėsimit tė efiēencės sė energjisė dhe menaxhimit tė anės sė kėrkesės. Megjithėse kjo ėshtė e pranuar nė skenarin aktiv tė draftit tė SKE-sė, duhet t`i vihet mė shumė theksi dhe tė bėhet pėrparim nė kėtė ēėshtje. Mund tė reduktohen humbjet e mėdha teknike dhe tregtare nga sistemi i shpėrndarjes, si dhe mund tė pėrmirėsohet menaxhimi i kėrkesės pėrmes mbledhjes sė pėrmirėsuar tė faturave dhe vendosjes sė tarifave qė mbulojnė kostot (duke ndryshuar subvencionet e energjisė tė cilat po deformojnė sinjalet e tregut). xviii Veprime tė tilla janė jetike pėr shumė arsye ­ fiskale, ekonomike dhe si pjesė e qeverisjes sė mirė. Privatizimi i fundit i sistemit tė shpėrndarjes siguron njė shtysė pėr kėtė. Nė mėnyrė tė ngjashme, humbjet nga sistemi i ujitjes mund tė trajtohen dhe tė vihet mė shumė theksi nė pėrmirėsimin e menaxhimit tė rezervuarėve, dhe nė bashkėrendimin e veprimeve pėr pėrdorimin mė efiēent tė burimeve ujore nė ēdo sektor. Ministria e Bujqėsisė, Ushqimit dhe Mbrojtjes sė Konsumatorit ka bėrė pėrparim tė ndjeshėm kohėt e fundit nė reduktimin e humbjeve gjatė ujitjes nė bujqėsi nė disa pjesė tė Shqipėrisė, dhe kjo punė mund tė shkallėzohet nė mėnyrė tė dobishme nė tė gjithė vendin. Pėrballė ndryshimeve klimatike, po rritet domosdoshmėria pėr pėrdorim efiēent dhe tė qėndrueshėm tė burimeve ujore. Sė treti, Shqipėria mund tė rishikojė standardet e saj teknike dhe proceset planifikuese/ kontraktuese pėr tė gjithė infrastrukturėn energjitike, dhe pėr t`i pėrmirėsuar ato ku tė jetė e nevojshme pėr tė siguruar qė asetet mund tė pėrballojnė ndryshueshmėrinė klimatike dhe ndikimet e parashikuara tė ndryshimeve klimatike gjatė jetės sė tyre. Pėr asetet e reja, shqyrtimi i ndryshueshmėrisė dhe ndryshimeve tė klimatike mund tė trajtohet pėrmes vendimeve mbi pėrzgjedhjen e vendndodhjes, vlerėsimeve tė ndikimit nė mjedis, tarifave, stimujve, kontratave dhe partneritetit publik-privat. Nė mėnyrė tė ngjashme, pėrmirėsimi dhe rehabilitimi i aseteve ekzistuese mund tė pėrfshijė vlerėsimet, dhe elasticitetin, ndaj ndikimeve tė ndryshimeve klimatike. Pėr shembull, mund tė jetė e mundur tė rritet ruajtja e ujit nė rezervuaret ekzistuese me njė kosto tė arsyeshme, pėr tė zbutur efektet e variacioneve sezonale nė rrjedhje. Planet e emergjencave tė paparashikuara (PEP) pėr hidrocentralet duhet gjithashtu tė shqyrtohen dhe pėrmirėsohen aty ku ėshtė e nevojshme, pėr tė marrė parasysh rritjet e pritshme nė intensitetin e reshjeve si shkak i ndryshimeve klimatike. Prodhuesit e energjisė dhe autoritetet lokale mund tė kenė gjithashtu nevojė pėr tė pėrmirėsuar kapacitetet e tyre pėr tė zbatuar PEP, duke siguruar qė ato japin mekanizma tė shėndoshė pėr monitorimin e motit dhe ndikimin e tij nė prurjet e lumenjve dhe nivelet e rezervuarėve, si dhe komunikim me komunitetet qė banojnė poshtė rrjedhės dhe planet e emergjencės pėr evakuim. Sė fundmi, ndryshimet klimatike theksojnė domosdoshmėrinė (e pranuar nė skenarin aktiv tė draftit tė Strategjisė Kombėtare tė Energjisė) pėr Shqipėrinė, pėr tė rritur diversitetin e furnizimeve me energji ­ si nėpėrmjet rritjes sė tregtisė rajonale tė energjisė ashtu dhe nėpėrmjet zhvillimit tė njė portofoli mė tė shumėllojshėm tė aseteve prodhuese vendase, duke siguruar qė kėto tė jenė projektuar nė mėnyrė qė tė jenė elastikė ndaj ndryshimeve klimatike. Pėr shembull, Shqipėria mund tė strukturojė Marrėveshjet e Blerjes sė Energjisė duke pėrfshirė edhe rregullimet e marrjes dhe marrėveshjet e kėmbimit tė energjisė, tė cilat njohin plotėsimet ndėrmjet sistemeve tė energjisė tė vendeve tė ndryshme. Pėr kėtė studim, ėshtė ndėrmarrė njė analizė e nivelit tė lartė tė kosto-pėrfitimeve (CBA) pėr tė llogaritur kostot dhe pėrfitimet relative pėr Shqipėrinė tė tregtisė sė rritur tė energjisė dhe llojet e ndryshme tė prodhimit vendas tė energjisė, pėr tė furnizuar (mbuluar) mungesėn e energjisė elektrike tė Shqipėrisė qė i atribuohet ndikimeve tė ndryshimeve klimatike (350 GWh nė vit deri nė vitin 2030, dhe 740 GWh nė vit deri nė vitin 2050) dhe qė mbetet pas zbatimit tė plotė tė skenarit aktiv tė SKE tė shtrirė (ekstrapoluar) deri nė vitin 2050. CBA pėrfshin mundėsitė e mėposhtme: pėrmirėsimin e hidrocentraleve tė mėdha ekzistuese, pėrmirėsimin e hidrocentraleve tė vogla ekzistuese, hidrocentrale tė reja tė mėdha, hidrocentrale tė reja tė vogla, termocentrale tė reja, xix impiante tė reja tė erės, dhe impiantet e reja tė energjisė sė pėrqėndruar diellore (CSP). Performanca e kėtyre alternativave ėshtė vlerėsuar, duke pėrdorur parametrat qė janė konfirmuar si tė rėndėsishme nga aktorėt kryesorė tė sektorit tė energjisė nė Shqipėri. Ashtu si dhe parametrat financiare (shpenzimet kapitale dhe operative), faktorėt mjedisorė duke pėrfshirė vlerėn e ujit, gazet me efekt serrė dhe shkarkimet e tjera dhe vlerat e ekosistemit u panė si tė rėndėsishėm nė zgjedhjen midis alternativave tė aseteve tė energjisė. Pėrsa i pėrket parametrave sociale, u vlerėsua shqetėsimi i njerėzve dhe pronės nė CBA. Duke pėrdorur kėto parametra, u rendit qėndrueshmėria e alternativave tė ndryshme. Figura 2 paraqet rezultatet e Vlerės sė Tanishme Neto (Net Present Value ­ NPV) nė terma aktuale (2010) nė USD pėr secilin nga alternativat e testuara, bazuar nė njė grup supozimesh si rast bazė. Sipas CBA, alternativa mė ekonomike pėr Shqipėrinė ėshtė pėrmirėsimi i HECM dhe HECV ekzistuese, e ndjekur nga ndėrtimi i HECV tė reja dhe termocentraleve tė reja (treguar nė Figurėn 2 si CCGT` ­ turbina gazi me cikėl tė kombinuar). Njė opsion alternativ i energjisė termike mund tė jetė pėrdorimi i teknologjisė superkritike me qymyr tė pluhurizuar. Megjithėse nuk shqyrtohet me hollėsi nė CBA, kjo alternativė mund tė ketė shkallė mė tė lartė tė shkarkimeve tė gazrave me efekt serrė dhe tė pėrdorimit tė ujit krahasuar me njė termocentral me gaz, si dhe do tė jetė mė pak i qėndrueshėm. Megjithatė, ka tė ngjarė tė jetė zgjedhja e katėrt mė e qėndrueshme e grupit tė alternativave. Net Present Value of Options 400 300 200 USD millions 100 - -100 -200 IMPORT Enhance CCGT Enhance New WIND CSP New Extg. Extg. SHPP LHPP LHPP SHPP Figura 2: Vlera e Tanishme Neto e alternativave tė diversifikimit, duke pėrdorur supozimet e rastit bazė Janė ndėrmarrė analizat e ndjeshmėrisė, pėr tė provuar sa tė ndjeshme janė kėto opsione nė nivele tė ndryshme zbritjeje dhe vlera tė ndryshme tė shkarkimeve tė gazeve serė. Ato konfirmuan se pėrmirėsimi i HECM dhe HECV ekzistuese ishin alternativat mė ekonomike. Pėr normat e zbritjes (discount rates) nga 2% deri 20%, renditja relative e dy opsioneve kryesore nuk ndryshon, ku alternativa Pėrmirėsimi i HECM shfaqi NPV mė tė madhe nga tė gjitha normat e zbritjes, e ndjekur nga Pėrmirėsimi i HECV ekzistues. Megjithatė, kur norma e zbritjes ėshtė mė e madhe se 16,2%, termocentralet (CCGT ­ turbina gazi me cikėl tė kombinuar) bėhen pak mė tėrheqėse se sa HECV tė reja. Termocentralet kanė kosto tė larta operative, por efektet e kostove tė ardhshme operative mbi NPV e tyre zvogėlohen nė nivele mė tė larta zbritjeje. Pėrveē kėsaj, me rritjen e normave tė zbritjes, importimi i energjisė elektrike bėhet njė alternativė xx relativisht mė tėrheqėse, edhe pse ai mbetet me NPV negative nė tė gjitha normat e zbritjes qė janė ekzaminuar. Nė lidhje me ndikimet mbi opsionet e ndryshme tė ndryshimit tė ēmimit tė CO2 dhe gazeve tė tjera me efekt serė (GHG), siē pritej, ekonomia e aseteve tė rinovueshme ėshtė e pandjeshme ndaj kėtij parametri. Ėshtė e qartė qė ato opsione qė janė tė ndjeshme ndaj vlerės nė rritje tė GHG janė termocentralet (CCGT) dhe importimi (supozohet tė jetė prodhuar duke pėrdorur CCGT). Sa mė e lartė tė jetė vlera e vendosur mbi dioksidin e karbonit dhe GHG-tė e tjera, aq mė tė pafavorshme bėhen termocentralet dhe importimi nė terma relative. Megjithatė, termocentralet vendase mbeten me NPV pozitive deri nė vlerėn mė tė lartė tė testuar, me 100 USD pėr ton GHG. Nė pėrfundim, ekzistojnė disa veprime tė rėndėsishme qė Shqipėria mund tė ndėrmarrė tani ­ pėrkatėsisht, pėrmirėsimin e monitorimit, modelimit dhe parashikimit meteorologjik dhe hidrometeorologjik, dhe pėrmirėsimin e efiēencės sė energjisė, menaxhimin e anės sė kėrkesės dhe pėrdorimin efiēent tė ujit. Kėto do tė ndihmojnė pėr tė menaxhuar mė mirė ndryshueshmėrinė ekzistuese tė klimės, dhe do tė krijojnė elasticitetin e vendit ndaj ndryshimeve klimatike. Shqipėria ėshtė nė prag tė njė mundėsie tė rėndėsishme pėrshtatshmėrie: investime tė mėdha nė asetet e reja energjitike janė duke u zhvilluar ose duke u planifikuar. Integrimi i masave tė adaptimit nė to mund tė ndihmojė sigurimin e elasticitetit tė tyre ndaj klimės. Ndėrkohė qė sistemi i energjisė elektrike ėshtė ėshtė privatizuar, ėshtė e mundur tė shqyrtohet se si tė strukturohen stimujt pėr adaptim; mund tė ketė mundėsi pėr ndarjen e shpenzimeve ndėrmjet qeverisė dhe sektorit privat. Sipas CBA, pėrmirėsimi i HECM dhe HECV ekzistuese ėshtė opsioni mė ekonomik pėr Shqipėrinė pėr tė mbushur hendekun e energjisė tė shkaktuar nga ndryshimet klimatike, i cili do tė shfaqet gjatė periudhės nga viti 2030 deri nė 2050. Pėr zhvillimin e aseteve tė reja dhe pėrmirėsimin e aseteve ekzistuese, sa mė herėt tė merren nė konsideratė rreziqet dhe elasticiteti klimatik, aq mė tė mėdha do tė jenė mundėsitė pėr tė identifikuar zgjidhje me efiēencė financiare dhe ekonomike qė do tė krijojnė qėndrueshmėrinė e sistemit tė energjisė pėr dekadat e ardhshme. xxi 1. OVERVIEW Energy security is a key concern in Albania, which relies on hydropower for about 90 percent of its electricity production. While renewable energy resources like hydropower play a fundamental role in moving the world towards a low-carbon economy, they are also vulnerable to climatic conditions. Climate variability already affects Albania`s energy production to a considerable extent, and climate change is bringing further challenges. This report summarizes work conducted in partnership with stakeholders in Albania`s energy sector and other closely related sectors. It aimed to build greater understanding of the climate risks faced by the energy sector and of priority actions that could be taken to reduce vulnerabilities. It addressed the following question: "How can Albania best manage its future security of energy supply in the face of a changing climate?" Best is defined as an optimal balance between financial, environmental and social objectives. The work involved: Climate-risk screening of the energy sector to identify and prioritize hazards, current vulnerabilities Estimating the impacts of projected climate changes on energy supply and demand out to the year 2050 Identifying adaptation options to reduce overall vulnerability A high-level cost­benefit analysis of key physical adaptation options The analysis was intended to raise awareness among stakeholders and provide high-level (semi- quantitative) assessments of risks and adaptation options for Albania`s energy sector, drawing on existing research and literature on climate change and its impacts. It aimed to identify key risk areas and options for adaptation, to establish where subsequent more in-depth analyses should be focused. Additional research would help to improve understanding of the implications of extreme climatic events, which are addressed only briefly in this study. There may also be significant indirect impacts that could be better understood through integrated cross-sectoral assessments--for instance, the effects on energy supply of the adaptation actions that may be taken in the agriculture sector. The recommended next steps to further refine and improve the evidence base for adaptation planning are described in Section 6. It is intended that this assessment will help support the Albanian government and other energy- sector stakeholders in developing policies and projects (future energy assets) that are robust in the face of climatic uncertainties, and will also assist them in managing existing energy concerns, as the climate changes. 1 Box 1: Development and climate change at work The World Bank Group`s (WBG) operational response to climate change is articulated in Development and Climate Change: A Strategic Framework for the World Bank Group, a framework prepared at the request of the Development Committee during the WBG`s 2007 Annual Meetings and endorsed a year later. Six action areas are identified to support the specific needs and priorities of World Bank clients: 1. Support climate actions in country-led development processes. 2. Mobilize additional concession and innovative finance. 3. Facilitate the development of market-based financing mechanisms. 4. Leverage private sector resources. 5. Support accelerated development and deployment of new technologies. 6. Step up policy research, knowledge, and capacity building. Supporting tools for adaptation and actions with mitigation co-benefits are linked to each action area. The focus is on improving knowledge and capacity, including learning by doing. The framework sets measurable indicators to track implementation performance over fiscal years 2009 to 2011. (Adapted from: Development and Climate Change, A Strategic Framework for the World Bank Group, World Bank, 2008a). The analysis has been co-funded by the Energy Sector Management Assistance Program (ESMAP), the Trust Fund for Environmentally and Socially Sustainable Development (TFESSD) and the World Bank. It fits within the broader context of the World Bank`s Strategic Framework on Development and Climate Change (see Box 1). 1.1. METHODOLOGICAL APPROACH The overall approach for undertaking the analysis followed a risk-based framework for decision- making on climate change adaptation, applying guidance published in the UK (Willows and Connell, 2003) and Australia (Broadleaf Capital International and Marsden Jacob Associates, 2006). An annotated version of the framework is shown in Figure 3. The framework puts stakeholders at the heart of the decision-making process. It starts by working with stakeholders to define their objectives and success criteria, and maintains their involvement through the stages of climate vulnerability assessment, risk assessment, and risk management (adaptation planning). The assessment was intended to deliver a high-level (semi-quantitative) analysis covering the entire energy sector. It identifies key issues related to Albania`s energy security in the face of climate variability and change, and demonstrates where subsequent in-depth analyses should be focused. Delivering the assessment involved the following activities that are described further in Annex 1: Review Albania`s energy sector strategies, energy assets and energy demand projections. Review and build on work conducted for Albania`s First National Communication to the United Nations Framework Convention on Climate Change (Islami et al., 2002). Analyze observed climatic conditions and data on future climate change for Albania. Use Geographical Information System (GIS) to map Albania`s energy assets overlaid with data on climate change. 2 Conduct a hands-on vulnerability assessment and development of SWOT1 analyses, with energy-sector stakeholders in Albania, through a workshop and series of meetings. Review and assess Albania`s meteorological and hydrometeorological capacity, monitoring networks and forecasting, and assess information exchange between hydrometeorologists and energy-sector decision makers. Analyze climate risks for regional electricity markets in South East Europe. Review literature and expert analyses to develop risk ratings and high-level semi-quantitative assessments of climate change risks to energy security. Identify adaptation options to address climate-related vulnerabilities and risks, along with agreement on the objectives and parameters for the cost­benefit analysis, through a second workshop and meetings with energy sector stakeholders in Albania. Conduct a desk-based high-level cost­benefit analysis (CBA). How can Albania's energy sector ensure that it delivers successfully on its energy security objectives in the face What is the energy of climate variability and climate change? What are the sector in Albania aiming opportunities from climate change for Albania's energy to achieve? sector? Develop criteria for assessing risks and adaptation options, considering critical thresholds and sensitivities, legislation, cost, etc. Undertake tiered vulnerability and risk assessments, drawing on latest climate change trends and future projections. Evaluate risks against Stage 2 criteria. Identify risk management (adaptation) options including: Evaluate risk management options No regret & low regret options, against Stage 2 Bring information criteria. Win-win options, together. Undertake cost- Flexible options ­ Undertake final benefit analysis. adaptive management. checks. Figure 3: The UKCIP risk-based decision-making framework for climate change adaptation, modified for use in this assignment (Willows and Connell, 2003). 1 Strengths, Weaknesses, Opportunities and Threats 3 1.2. STRUCTURE OF THIS REPORT This report presents the outcomes of the assessment just described. The remainder of this report is set out as follows: Section 2 describes the context for this assessment, covering the Albanian energy sector, observed and projected climatic conditions and Albania`s adaptive capacity. Section 3 outlines the climatic vulnerabilities, risks, and opportunities facing Albania`s energy sector. Section 4 describes the key adaptation options identified for managing climate risks to the energy sector. Section 5 provides the cost­benefit analysis of physical adaptation options. Section 6 sets out next steps for improving the climate resilience of Albania`s energy sector. Section 7 includes references and lists of annexes and appendices. Annex 1 describes the methodological approaches to each stage of the assignment. Annex 2 provides the background and rationale for the prioritization of climate-related risks. Annex 3 provides tables of cross-cutting adaptation options, as well as options for each asset type. Annex 4 describes the weather and climate information needs for energy sector management, covering design, operations and maintenance. Annex 5 gives further details on the approach to the cost­benefit analysis. Annex 6 gives further details on recommended actions to improve the climate resilience of the energy sector. Annex 7 is a spreadsheet providing the scenarios of Albania power supply and demand from 2003 to 2050, which were applied in the cost­benefit analysis. Annex 8 estimates impacts of climate change on large hydropower plants in Albania. Annex 9 estimates impacts of climate change on energy generation in Albania, excluding large hydropower plants. Annex 10 includes a glossary of key terms. 4 2. CONTEXT 2.1 EXISTING ENERGY SECTOR CONTEXT IN ALBANIA Overview of Albania's Energy Sector Albania has been struggling for some time to meet energy demand and maintain energy security. This is largely as a result of the country`s current dependence on hydropower as almost the sole means of electricity production, coupled with a lack of investment in other energy assets. The situation has developed in a process of radical change since the beginning of Albania`s economic transition in the early 1990s. At that time, the country was virtually 100 percent electrified and a net exporter of electricity within the region. After an initial decline in industrial production and ensuing reduced energy demand during the early transition period, the demand for energy rose by 10 percent per year from 1992 to 2000, making Albania a net energy importer by 1998 (World Bank, 2008). However, demand rose by less than 1 percent per year from 2000 to 2006, possibly in part linked to regional events but probably also partly due to increases in electricity prices, reductions in network losses and improvements in collections (World Bank, 2008). Poor- quality supply also meant that some consumers switched permanently to alternative sources of energy (Kaya, Z., pers. comm.). The outdated technologies used in many branches of the economy, as well as old equipment and standards applied in households and the services sector, mean that Albania is a country with low energy consumption per capita, but with high energy intensity (Government of Albania, 2007). Due to increasing consumer demand and insufficient quantity of electrical power produced in the country, it is almost certain that electricity imports in the near future will continue to be essential to maintain a secure power supply (Government of Albania, 2007). However, financial and transmission constraints have restricted the amount of energy imports to date, resulting in load shedding (power cuts) that has had adverse economic and social effects. In addition, because of a worsening electricity shortage in the South East Europe region more generally, import prices have risen to unusually high levels, and KESH, the Albanian Electricity Corporation, has occasionally been unable to buy imports even when it has the funds to pay for them (World Bank, 2008). Figure 4 depicts the relationship between electricity production in Albania and imports. Hydropower production ranges from below 2,900 GWh in very dry years to as much as 5,800 GWh in abnormally wet years (World Bank, 2008). Efforts are underway to address these challenges and improve resource use efficiency: In 2008, for the first time, no load shedding was programmed and there has been a recent decision in Albania to eliminate load shedding from 2009 onward, along with a commitment to provide a 24-hour electricity supply. As well as reductions in losses from the transmission system, losses from the distribution system were reduced by 5.5 percent in 2008 compared to 2007. The efficiency of water use in energy generation has also improved, due to better monitoring and management. In 2007 and 2008, inflows to Fierze Reservoir were very similar (approximately 4,120,000,000 m3) but power generation in 2008 was 29.4 percent higher than in 2007. This was because high water levels were maintained in the reservoir in 2008, and there was better optimization between electricity import and domestic production. This improvement is reflected in a metric known as specific consumption (m3 of water consumed per kWh of electricity 5 generated). Specific consumption in 2007 was 1.40 m3/kWh, whereas in 2008 it improved to 1.04 m3/kWh. Climate risks already affect all asset types in the energy sector to varying degrees and, unless the risks are proactively managed, future climate change is likely to further degrade the inefficiencies already present in the system. Furthermore, the wider South East Europe region may also experience similar challenges, as highlighted in Box 2 (Ponari et al., 2009). Figure 4: Generation, import, and supply of energy in Albania from 2002 to 2008 (ERE, 2008). Albania's Draft National Energy Strategy and Recent Regulatory Reforms The draft recent National Energy Strategy (NES) recognizes that problems with energy security have had an impact on the development of economic activity in the country, as well as on levels of living comfort (Government of Albania, 2007). The main aim of the draft NES, which looks out to 2019, is to guarantee a safe supply of energy to support the sustainable economic development of the country. To that end it has outlined key issues to address the growing challenges facing Albania regarding energy supply and demand, including the following main objectives (Government of Albania, 2007): Improving energy security through the diversification of the energy system and construction of new generation assets and inter-connection lines Encouraging development of renewable energy generation assets (solar, small hydropower stations, wind, biomass) to maximize use of local resources Opening up the domestic electricity market and actively participating in the regional market, in the framework of the Community Energy Treaty of South-Eastern European Countries, based on the requirements of the European Union for reforming the electrical power sector (Directive 54/2003 of EU) The regulatory licensing process for energy assets has recently been altered. The Power Sector Law has assigned the Regulatory Licensing Authority, ERE, the role of regulating the electricity 6 system and issuing licenses for electricity production, while permission to construct new energy production facilities is granted by the Ministry of Economy, Trade and Energy (METE). In the past year, regulations have been developed related to the 2008 amendment of the law on renewables, which aimed to harmonize Albanian practice with EU directives, as well as to speed up and manage the approval process for renewable concessions. The revised approval process covers authorization of wind, biomass, other renewables, and thermal power plants. Small hydropower plants are covered by the Law on Concessions. Albania's Energy Assets A brief overview of the existing and planned energy assets in Albania is useful for understanding the extent to which high dependence on hydropower, low diversity in the energy system, and inefficient grid systems constitute the main reasons for Albania`s poor energy security. Large Hydropower Plants Hydropower from three large hydropower plants (LHPPs) on the River Drin account for about 90 percent of electrical power produced within Albania, utilizing the country`s plentiful water resources (Government of Albania, 2007). The remaining domestic generation is mainly from the two LHPPs on the Mati River Cascade. These five LHPPs have a combined installed capacity of 1.45GW (see Figure 5): Drin River Cascade: Fierza--4 125 MW with annual production of about 1,800 GWh, built in the 1970s and modernization completed in 2006 Koman--4 150 MW, with annual production of about 2,000 GWh, built in the 1980s Vau i Dejes--5 50 MW, with annual production of about 1,000 GWh, built in the 1960s Mati River Cascade: Ulza--25 MW, producing about 120 GWh, commissioned in 1958 Shkopeti--25 MW, producing about 94 GWh per year, commissioned in 1970 A further LHPP is installed on the Bistrica River, with 25MW installed capacity. Recognizing the importance of the main five LHPPs to Albania and the wider South Eastern Europe Energy Community, the World Bank has provided credit of US$35.3 million to Albania for a dam safety project, which will contribute to safeguarding them, improve their operational efficiency, and enhance the stability of power supply for the regional electricity market (World Bank, 2008b). The Ministry of Economy, Trade and Energy (METE) estimates that there is capacity for about 3,200MW of additional hydropower power plants within Albania (Tugu, 2009). A number of large hydropower plant projects are being considered or are in progress: 7 Box 2: Regional electricity markets in South Eastern Europe and climate risks At present, hydropower is about 30 percent of electricity production across South Eastern Europe (SEE) as a whole, though the relative contributions of hydropower, fossil fuel combustion and nuclear power vary considerably from country to country (Table 1). This diversity in sources of electrical power is becoming a strength, as countries in the region have subscribed to the Energy Community Treaty, which aims to create a regional energy market compatible with the internal energy market of the European Union. Table 1: Electricity production in South Eastern Europe in 2006, as % of total Fossil fuel Country Hydropower Nuclear combustion Albania 98 2 0 Bosnia and Herzegovina 44 56 0 Bulgaria 9 48 43 Croatia 49 51 0 Greece 10 88 0 Kosovo 0 100 0 FYR Macedonia 24 77 0 Montenegro 59 41 0 Romania 29 62 9 Serbia 30 70 0 TOTAL SEE 24 65 10 (World Bank, 2009a; International Energy Agency, 2009). Note: Grey highlights a dependence above 50 percent. Across the region, electricity demand is expected to grow considerably over coming decades. Expansion of hydropower could make a significant contribution toward meeting future demand: as the cost of fossil fuels rise, hydropower is increasingly cost-effective. Excluding Croatia, which does not plan to develop further hydropower, SEE has an unexploited potential of about 22,000 MW of hydropower capacity (annual generation of about 73,000 GWh). However, regional development of hydropower sources and regional trading do not necessarily help to manage energy security risk: climate trends can affect shared transboundary waters and regionwide energy demand in the same way, at the same time. Future energy prices in South Eastern Europe will be sensitive to climate change, in part because hydropower is exposed to climate risk. An assessment of the sensitivity of energy prices to availability of water for hydropower for the years 2010 and 2015, undertaken in the Regional Balkans Infrastructure Study, Electricity (REBIS) and Generation Investment Study (GIS), indicated that the marginal production cost for a unit of energy could be 15 percent to 50 percent higher in a dry year than in a wet year (PricewaterhouseCoopers LLC and Atkins International, 2004). REBIS assumed that the region might be wet or dry as a whole. In fact, climate patterns within SEE are complex, and a regional approach to managing climate risk for the energy sector could potentially be devised. Research undertaken in Brazil (Pereira de Lucena et al., 2009) has demonstrated that climate risk to Brazil`s hydropower facilities is buffered by the fact that they are located across several partly uncorrelated hydrological regimes. Drawing on Brazil`s experience, it would be very helpful to understand whether all South Eastern Europe`s watersheds face wet or dry years or seasons at the same time, or whether it is possible that careful selection of an ensemble of hydropower investments could help to diversify risk. (Ponari et al, 2009). 8 Vjosa River: Kalivaci HPP is under construction. A study on the hydropower potential of the Vjosa is being prepared by KESH and is expected to lead to further concessions soon. Drin River Cascade: Verbund (Austria) have been granted a concession for Ashta HPP and construction is expected to start shortly. Scavica HPP is currently under tender. Devolli River Cascade: A concession has been granted to EVN (Austria). Figure 5: Locations of the five large hydropower plants that provide about 90 percent of Albania's domestic electricity production (World Bank, 2008b). 9 Small Hydropower Plants (less than 15 MW capacity) Small hydropower plants (SHPPs) are defined in Albanian law as plants with capacity up to 15MW, in line with EU norms. While there are 84 existing SHPPs, only about 20 privately owned SHPPs are operating at present. Most of these are in need of rehabilitation. Since the passage of the General Concession Law on December 18, 2006, by the Albanian Parliament, an additional 50 new concessions were granted to small hydropower plant (SHPP) owners in Albania. A feed-in tariff for SHPP is a major incentive for new investments. Thermal Power Plants The only thermal power plant (TPP) currently operating in Albania is at Fier. The plant operates on heavy fuel oil produced by the Ballsh oil refinery, and available capacity has only about 20MW capacity. Due to its low fuel efficiency and associated high operating costs, the plant is used for only a few days every year (World Bank, 2008). It is currently being rehabilitated. The commissioning of the 100 MW seawater-cooled Vlore TPP (due to commence full operation in January 2010) will add about 760 GWh (15 percent) per year of domestic production. Additional large TPP projects are also being considered or taken forward, including a 250MW combined cycle gas turbine (CCGT) power plant at Fier as part of the planned LNG terminal and a coal-fired TPP at Porto Romano (1000MW) that could export some of its electricity to Italy (Hoxha, 2009). Renewables Currently, apart from hydropower, there are no industrial-scale renewable assets in operation in Albania (World Bank, 2008). The lack of investment in other assets to diversify the energy system plays an important role in the current challenges Albania is faced with in terms of energy security. Several wind projects are under discussion or development, including plans for a joint wind/biomass project in Lezhe District and close to Vlore (Karaburun Peninsula). Some seven wind licenses have been issued to date, which would provide 1 million kWh installed capacity (2-2.2 billion kWh per year of production). These will likely export some of the electricity they generate to Italy. Solar and geothermal are not currently foreseen for industrial-scale power generation purposes. However, they are considered useful for heating in the domestic, public, and services sectors. Electricity Transmission System The transmission system consists of 122 km of 400 kV, 1128 km of 220 kV, 34.4 km of 150 kV, and 1216 km of 110 kV lines. There is a 400 kV interconnection to Greece (Elbasan to Kardia), a 220 kV interconnection to Montenegro (Vau i Dejes to Podgorica) and a 220 kV interconnection to Kosovo (Fierze to Prizren). There is also a 150 kV interconnection with Greece (Bistrice 1 to Igumenice). The 220 kV transmission network serves to interconnect the three LHPPs on the Drin River and the existing Fier TPP, with the major load centers of Tirana-Durres, Elbasan, Burreli, and Fier (World Bank, 2008). The existing transmission grid does not yet have enough capacity to allow for full regional energy trade with Albania`s neighbors, but it is generally in good condition, as most transmission lines are either new or have been upgraded (Acclimatise et al., 2009a). The expected completion in 2010 of a 400 kV transmission interconnection between 10 Tirana and Podgorica and a subsequent 400 kV transmission interconnection to Kosovo will relieve the transmission constraint on importing electricity. Some new interconnection lines are underway (see Figure 6) such as Tirana­Elbasan (AL), a 400 kV line which is due to be finished in 2010, and the interconnection line Tirana (AL)­Prishtina (KS), also 400 kV, which is under development and for which construction is expected to start in 2010. An interconnection of Albania with Italy with DC lines is in an early stage of development, but no details are available yet. Other particularly important regional interconnection updates are given as below (Electricity Coordinating Center Ltd and Energy Institute Hrvoje Pozar, 2004): The priorities until the year 2010 are as follows: Ugljevik (BA) to S. Mitrovica (SER) C. Mogila (BG) to Stip (MK) (under construction) Florina (GR) to Bitola (MK) Maritsa Istok (BG) to Filipi (GR) Ernestinovo (HR) to Pecs (HU) Filipi (GR) to Kehros to Babaeski (TR) Bekescaba (HU) to Nadab (Oradea) (RO) The priorities for the period 2010 and 2015 are: Zemlak (AL) to Bitola (MK) 2010/15 Nis (SER) to (Leskovac) to Vranje to Skopje (MK) 2010/15 These projects are broadly supported by decision makers in the region, as well as the EU, because they will help with the creation of a regional energy market in SEE, facilitating smooth integration into the EU internal electricity market by 2010. Under the Athens Memorandum of November 2002,2 the countries in the region made commitments toward a common energy policy, including gradual liberalization of power markets, restructuring of energy companies, maintenance of cost-recovery tariffs, adoption of tariff methodologies and technical codes for network access, enforcement of payments, introduction of social safety nets, and setting-up of independent regulators to scrutinize third- party network access. The subsequent treaty establishing the Energy Community in South East Europe comprises a number of market design elements in electricity. The European Commission notes that this European market design is not based on one single concept, but has rather evolved from different regional designs harmonized through the Florence process involving existing EU Member States (European Commission, 2005). 2 The 2002 Athens Memorandum relates to electricity, whereas the 2003 Memorandum relates to gas. 11 Figure 6: Existing and candidate interconnections in the region (Cerepnalkovski et al., 2002). Electricity Distribution System The distribution grid is considerably weaker and more inefficient than the transmission system. Commercial losses (i.e., electrical power taken from the network illegally) constitute the main losses from the distribution grid and have led to KESH being unable to invest in maintenance and rehabilitation of the system (World Bank, 2008). Commercial losses amounted to 760 GWh (13.4 percent) in 2008 and carry a considerable economic cost to KESH (Government of Albania, 2007). Although city distribution networks are generally in good condition, there are significant parts of the distribution grid that need upgrading, especially those serving rural and mountain communities, many of which do not have secure energy supplies (Acclimatise et al., 2009a). The recent privatization of the distribution system to CEZ will see new investment, as well as efforts to curb total losses from the grid, with targets to reduce total losses (technical and commercial) to 15 percent at the end of 2014, down from a value of about 33 percent in 2008 (CEZ Regulatory Statement, 2008). Oil, Gas, and Coal Production Facilities The main areas where oil is produced are Patoz Marinza, Cakran-Mollaj, Ballsh-Hekal, Gorisht- Kocul, and Kucova. Bankers Petroleum currently produces about 600kt/yr of oil, about 75 percent of Albania`s domestic production, approximately half of which is for export markets. The remainder is mainly produced by Albpetrol. Bankers Petroleum has plans to reactivate some existing wells, which could more than double national production in the next three to four years. It should be noted that there is a significant legacy of contaminated land around the oil production facilities at Patos Marinza, which is recognized by the EU as an environmental hotspot (UNEP, 2000). 12 Albania has two oil refineries. The main refinery is at Ballsh (producing 1 m bbl/yr of heavy fuel oil, low grade diesel (8 API) and bitumen), and a second at Fier produces about 0.5 m bbl/yr. While Albania has both on- and off-shore gas reserves, none are currently being exploited. There are no current oil and gas pipeline connections to regional markets, though there are a number of proposals including the TAP (Trans-Adriatic Pipeline) and the Balkans Gas Ring. In addition, an LNG terminal is proposed in the Fier Region. The coal industry in Albania is small. Most mines have been shut down, while those at Memalija and Mborje-Drenova are still operating but at reduced capacity. Waste minerals, stored in enrichment facilities near mines, present a contamination risk. 2.2 CLIMATE IS CHANGING Causes and Effects of Global Climate Change According to the Intergovernmental Panel on Climate Change Fourth Assessment Report (IPCC AR4), warming of the climate system is unequivocal, and most of the observed increase in global average temperatures since the mid-twentieth century is very likely due to emissions of greenhouse gases, such as carbon dioxide, from human activities. Eleven of the twelve years from 1995 to 2006 rank among the twelve warmest years in the instrumental record of global surface temperature (since 1850). Carbon dioxide concentrations in the atmosphere are higher now than at any time during the past 650,000 years, with human activities already having increased concentrations by one-third compared to preindustrial levels (see Figure 7). By the middle of the twenty-first century, concentrations are likely to be double preindustrial levels. Figure 7: Increases in concentrations of carbon dioxide in the atmosphere from 10,000 years before present to the year 2005 (IPCC, 2007). 13 Figure 8 shows the temperature changes that have occurred globally from 1970 to 2004. Large parts of the northern hemisphere land mass have seen increases over this period of up to 2 oC. Changes in snow, ice, and frozen ground have increased the number and size of glacial lakes and increased ground instability in mountain and other permafrost regions. Some hydrological systems have also been affected through increased runoff and earlier spring peak discharge in many glacier- and snow-fed rivers and effects on thermal structure and water quality of warming rivers and lakes. In terrestrial ecosystems, spring events are occurring earlier and plants and animals are shifting poleward and upward in altitude, in response to warming. Of the more than 29,000 observational data series that show significant change in physical and biological systems, more than 89 percent are consistent with the direction of change expected as a response to warming. Figure 8: Observed changes in climate, physical and biological systems (IPCC, 2007). Baseline Climatic Conditions and Observed Trends in Albania's Climate In general, temperatures in Albania showed a decreasing trend from 1961 until the mid-1980s, but temperatures have been increasing since then. In the last 15 years, a positive temperature trend has been observed at almost all of Albania`s meteorological stations. Since the 1980s, the numbers of very hot days (when temperatures exceeded 35oC) has increased, whereas the numbers of very cold days (with temperatures below ­5oC) has decreased (Bruci, 2008). In general, over the period from 1961 to 1990, annual precipitation across Albania decreased by about 1 percent. The decreasing trend was statistically significant for the Ishmi River basin, in the downstream basin of the Mati River, and in the upper part of the Vjosa River basin. In the northern Albanian Alps, a slight positive trend in precipitation was observed, but this was not statistically significant (Bruci, 2008). 14 Sea levels have risen in the Mediterranean, though by less than in the neighboring Atlantic sites during the period 1960 to 2000. However, decadal sea level trends in the Mediterranean are not always consistent with global values, in particular for the 1990s, during which the Mediterranean has seen sea level rise of up to 5 mm per year compared to the global average (Marcos and Tsimplis, 2008). Climate Change Scenarios for Albania and the Wider South Eastern Europe Region Climate change scenarios for Albania and the wider region over coming decades are summarized as follows. Further details are provided in Acclimatise, 2009. These scenarios are taken from nine of the most up-to-date global climate models (GCMs) used in the Intergovernmental Panel on Climate Change Fourth Assessment Report (IPCC, 2007), for a range of greenhouse gas emissions scenarios (see Box 3). Temperature According to the scenarios, annual average temperatures are expected to increase by about 1°C to 2°C by the 2020s and 3°C by the 2050s (see Figure 9). The greatest temperature increases are expected to occur in summer months (June to August). Winter 2050s Summer 2050s Figure 9: Projected increases (averaged across nine IPCC AR4 global climate models) in winter and summer temperatures across South East Europe by the 2050s compared to the 1961 to 1990 average, under the A2 emissions scenario (Acclimatise, 2009). Precipitation Although precipitation projections are generally inconsistent among global climate models, the eastern Mediterranean is one region for which most global models produce a similar result, which is one of drying over the course of the twenty-first century. Models indicate reductions in annual average precipitation for Albania of approximately 5 percent by 2050, and decreased summer precipitation of about 10 percent by the 2020s and 20 percent by 2050 (see Figure 11). 15 This drying, coupled with the marked increase in temperature noted above, would lead to reduced runoff and increased wild-fire risk. Box 3: Climate change modeling and greenhouse gas emissions scenarios Modeling of future climate conditions is undertaken by meteorological agencies around the world using models of the climate system that have been developed over many decades. These models, known as general circulation models (GCMs) or global climate models, are validated in current practice by tests of how well they are able to simulate climate conditions that have occurred over the last 100 years or so and through international climate model intercomparison experiments. While these models provide data at a coarse spatial scale (typically 2.5o x 2.5o), they indicate the future climatic conditions that countries could experience over coming decades. For some regions and countries, regional climate models (RCMs) have also been developed, providing better- resolved projections of future climates, typically at about 50 km 50 km spatial resolution. To project changes in future climate conditions, scenarios of future greenhouse gas (GHG) and other emissions are fed into the GCMs. Because there are uncertainties about the amounts of emissions that will be released in the future, a range of emissions scenarios are used. At present, most GCMs have been run using the SRES emissions scenarios (Nakienovi and Swart, 2000), and these underpin the recent assessments of future climate published by the Intergovernmental Panel on Climate Change (IPCC, 2007). Figure 10: Man-made emissions of carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O) and sulphur dioxide (SO2) for six SRES scenarios (Nakienovi and Swart, 2000). The IS92a scenario from the IPCC Second Assessment Report in 1996 is also shown for comparison. 16 Summer 2020s Summer 2050s Winter 2020s Winter 2050s Figure 11: Projected changes averaged across nine IPCC AR4 global climate models in summer and winter precipitation (mm/day) across South East Europe by the 2020s and 2050s compared to the 1961 to 1990 average, under the A2 emissions scenario. (Acclimatise, 2009) Table 2 summarizes projected trends in future precipitation in Albania drawn from nine GCMs. Summers are projected to be drier in the 2020s by six of the nine models presented, with one model showing wetter summers and two models indicating a mixed signal. None of these models projects a wetter summer by the 2050s. Eight of the nine models presented show drier summers and one model shows a mixed signal. 17 The nine models show less agreement concerning winter precipitation change: by the 2020s, four of the nine models indicate drier winters, three show wetter winters and one shows a mixed signal. A similar situation is seen in the 2050s, where five of the nine models indicate drier winters and four show wetter winters. The risk of uncertainty is heightened by the consideration that most of Albania`s precipitation occurs in the winter months. Table 2: Summary of Albanian Scenarios for Changes in Precipitation (compared to 1961 to 1990 baseline) by Number of Global Climate Models (Acclimatise, 2009) Model trend in Number of models future precipitation compared to 2020s 2020s 2050s 2050s baseline summer winter summer winter Dry 6 4 8 5 Wet 1 3 0 4 Mixed 2 2 1 0 Ensemble mean Dry Dry Dry Dry Wind Speed, Relative Humidity, Cloudiness Projections of future changes in wind speed are viewed with low confidence as hindcasts appear to have weak skill; as it happens the selected climate models show little change in wind speed. Relative humidity and cloudiness are projected to decrease slightly in future over the year as a whole, with decreases being greatest in summer, in association with decreased rainfall. Climate change scenarios indicate a reduction in cloudiness of 6 percent to 8 percent by the 2050s in summer and a reduction of 0 percent to 3 percent in winter. Sea Surface Temperature and Sea Level Rise Sea surface temperatures (SSTs) throughout the eastern Mediterranean are projected to increase by about 1oC in the 2020s and 2oC by the 2050s. Sea levels are also projected to rise, due to thermal expansion of the oceans and melting of ice, leading to increased flood and erosion risks in coastal areas. Extreme Events There has been concern that climate change may bring a change in the frequency of magnitude of extreme climatic events--for instance, more-intense heavy rainfall events and a lengthening of dry periods. According to some models, Albania is projected to be highly affected by changes in extreme events, compared to other countries in Europe and Central Asia (ECA) (World Bank, 2009a). It is second only to Russia in terms of projected increases in extremes, as indicated in Figure 12. 18 Figure 12: The ECA countries likely to experience the greatest increases in climate extremes by the end of the twenty-first century (Baettig et al., 2007 in: World Bank, 2009b). (The index combines the number of additional hot, dry, and wet years; hot, dry, and wet summers; and hot, dry, and wet winters projected over the 2070­2100 period relative to the 1961­1990 period. As such, countries already experiencing substantial variability and extremes are less likely to rank highly on this index.) Uncertainties and Limitations in Scenarios of Future Climate Change Scenarios of future changes in climatic conditions for a given location have a number of uncertainties and limitations that need to be borne in mind by users of the information: 1. Different general circulation models (GCMs) show different projected future climate conditions, because the models vary in the ways that they represent the atmosphere, land, and sea, and the interactions between them. It is therefore important to use a range of GCMs to assess the importance of the differences among the selected models. In general, agreement among the nine models presented concerning changes in temperature is good, while there is less agreement among these models concerning precipitation changes. The agreement among these models concerning precipitation changes in the eastern Mediterranean is better than it is for some other areas of the world. Model agreement for changes in wind conditions is weaker. 2. GCMs are usually run at a coarse spatial scale (typically 2.5o 2.5o). Locally, the same models could project different trends if undertaken at higher resolution, , particularly in areas where the topography is very variable or in coastal locations. Downscaling from GCMs using Regional Climate Models (RCMs) or statistical methods identifies these variations. To be sure, if the parent GCMs are themselves in poor agreement, downscaling does not resolve the differences. 3. As noted in Box 3, there are uncertainties about the amounts of greenhouse gas emissions that will be released in the future, so a range of emissions scenarios should be explored. In practice, for the near term (2020s) this uncertainty makes little difference as, on these timescales, the climatic changes that will result from greenhouse gas emissions have already been built into the climate system due to past emissions. For the 2040s onwards, however, 19 projections based on different emissions scenarios start to diverge and by the end of the century, there are large differences between them. 4. GCMs project changes in average seasonal or annual climate conditions, but do not provide ready information on changes in extreme climatic events, such as heavy downpours of rain, which may have significant impacts. These issues are explored in further detail in Acclimatise (2009). Ideally, the quantified estimates of climate change impacts on Albania`s energy assets provided in Section 3 should be provided as ranges of potential future changes, to capture uncertainties. For instance, hydrological assessments of changes in runoff affecting large and small hydropower plants should make use of a wide range of climate models and emissions scenarios (and indeed hydrological models), using downscaling methods to provide data at the catchment scale. This depth of analysis was beyond the scope of the current study and is an area for future research. 2.3 ALBANIA'S LOW ADAPTIVE CAPACITY Managing the risks for Albania`s energy sector from changing climatic hazards appropriately will require analysis and forward planning by government and private energy sector players, to establish optimal adaptation strategies for existing and new energy infrastructure. Figure 13 illustrates the breakdown of three different factors that drive ECA countries` vulnerability to climate change, which indicates that Albania suffers from relatively high exposure and sensitivity to climate change, coupled with a relatively low adaptive capacity to offset these vulnerabilities. Among ECA countries, Albania is second only to Tajikistan in this vulnerability rating. Figure 13: The drivers of vulnerability to climate change (Fay and Patel, 2008 in: World Bank, 2009b). Albania`s current low adaptive capacity is mainly due to its inefficient and wasteful use of water and energy resources, weak regional interconnections, and the poor state of national hydrometeorological services. 20 Inefficient Use of Water Resources The management of water resources is a key issue for Albania, given its dependency on hydropower and the use of water for irrigating agriculture. Responsibilities for water resource management are fragmented; many water bodies are involved in its use and oversight 3. Lack of a comprehensive inventory of water resources and a weak institutional framework for their management, compounded by climate change, means that the country risks increasing water crises in the future (World Bank, 2003). It is estimated that some 10 percent to 20 percent of Albanian water resources are lost in the irrigation system (Fantozzi, 2009). As outlined in Section 2.1, efforts are underway to change this, and the efficiency of water use in energy generation has improved recently. Furthermore, some areas of agricultural land in Albania have been equipped with efficient irrigation systems in the last couple of years. Weak Regional Interconnections, Technical and Commercial Losses and Inefficient Use of Energy As just highlighted, although the power transmission grid has been recently upgraded, the interconnections between Albania and its neighboring countries are currently weak and constrain energy import and export. Technical losses in the power transmission network in 2008 were 213GWh (3.3 percent) (ERE, 2008). In 2008, technical and commercial losses from the distribution system amounted to 33 percent, though there are strong targets to reduce this as part of the privatization of the distribution system (CEZ Regulatory Statement, 2008). Demand-side energy efficiency is also currently low, and the draft National Energy Strategy includes objectives and measures to tackle this issue (Government of Albania, 2007). Increased demand and insufficient quantity of electrical power produced in the country make it likely that imports will be essential in the near future to ensure a steady supply of power (Government of Albania, 2007). Deficiencies in Hydrometeorological Services The energy sector is one of the economic sectors most affected by weather, and most dependent on weather and climate information (Ebinger et al., 2009). The currently depreciated and poor state of the national weather and hydrological monitoring network places a significant constraint on Albania`s ability to monitor and forecast in support of secure energy (Hancock and Ebinger, 2009). Coupled with low funding and the poor state of National Meteorological Services (NMS) and National Hydrometeorological Services (NMHS) is the high weather dependence of the Albanian economy--about 65 percent of Albania`s GDP is estimated to be weather dependent, the highest among eight ECA countries assessed (IBRD & HMI, 2006; Tsirkunov et al., 2007; Hancock, Tsirkunov and Smetanina, 2008 in: Ebinger et al., 2009). Financial constraints are at the heart of the issue behind the poor state of the Albanian national meteorological services (NMS) and national hydrometeorological services (NHMS) (HMI & IBRD, 2006; Hancock and Ebinger, 2009; Ebinger et al., 2009). A comparison of Albania with seven other ECA countries reveals that it has the lowest investment in annual NMS and NHMS 3 Water management is the responsibility of the National Water Council established under Law 8093 on Water Reserves (March 21, 1996, as amended). Responsibilities are also allocated to River Basin Councils under a decision of the Council of Ministers Nr 2 "Establishment of River Basin Councils" (June 21, 2006, as amended). Further responsibilities and tasks are allocated to Organizations of Water Users under Law 8518 on "Irrigation and Drainage" (July 30, 1999, as amended). 21 funding, totalling $440,000, or only 0.01 percent of average annual GDP (Tsirkunov et al., 2007; Hancock, Tsirkunov and Smetanina, 2008 in: Ebinger et al., 2009). The percentage of weather equipment that has been completely depreciated is about 60 percent, and there is an increasing need for modernization in all departments, especially for replacing aging equipment and observation stations (IBRD & HMI, 2006). Insufficient funding also limits the consistency and availability of national hydrological and meteorological datasets. Although comprehensive, digitized datasets exist up until 1990, thereafter the information is much more patchy and data are generally only digitized up until 2000 (Hancock and Ebinger, 2009). KESH is now working with weather and climate experts and is planning to install a network of river-level sensors and a system for collecting regional weather forecasts. With this information, managers will be able to forecast the level of the Drin more accurately, timing the filling and releasing of water from reservoirs, to maximize energy generation while maintaining dam security. However, more could be done; Albania is not fully exploiting the benefits of weather forecasting. The Institute of Energy, Water, and Environment (IEWE) does not provide 1 to 3 day forecasts of precipitation and runoff applicable to the needs of KESH, because the meteorological and hydrological stations operated by IEWE do not report daily; many transmit observations by postal mail. The monitoring network also has serious gaps: there are neither upper-air stations nor radar in the network, despite the necessity of these for forecasting and for assessment of rainfall that has occurred. Furthermore, Albania does not currently subscribe to quantitative precipitation forecasts 3 to 10 days ahead, which are available from organizations such as the European Centre for Medium-range Weather Forecasting (ECMWF). The lack of coordination among the three agencies charged with weather monitoring and forecasting is a further key factor behind the weak national capacity of Albania`s NHMS (Hancock and Ebinger, 2009). The Military Weather Service, the Institute for Energy, Water and Environment (which operates within the University of Tirana), and the National Air Traffic Agency currently do not cooperate effectively, and thus each remains short of data and resources needed for its mandate (Hancock and Ebinger, 2009). Furthermore, Albania does not currently share meteorological and hydrological data effectively with its neighbors with whom it shares watersheds, even though this could help to reduce uncertainties about inflows into its reservoirs. This further limits its abilities to engage effectively in regional energy trading. The incidence and impact of natural disasters over the last decades provides another proxy for vulnerability to current climate (World Bank, 2009b). As depicted in Figure 14, this suggests that Albania is among the most vulnerable countries in ECA. Existing climate risks and extreme events are not generally well monitored, understood or managed. Unless improvements are made, Albania`s ability to cope successfully with changing climate risks will be severely constrained by its low adaptive capacity. 22 A lbania Tajikis tan Moldov a Mac edonia, FY R Lithuania A z erbaijan Georgia Bos nia Population affected by natural A rmenia disaster (per 1,000 person) Ukraine Rus s ia Economic losses resulting from natural disaster (per Kaz akhs tan $1,000,000 of GDP) Cz ec h Republic Uz bekis tan Turkey Slov akia Serbia Romania Ky rgy z Republic Hungary Turkmenis tan Slov enia Poland Latv ia Es tonia Croatia Bulgaria Belarus 0 20 40 60 80 100 120 140 Figure 14: Impact of natural disasters in ECA, 1990­2008 (EM-DAT, Centre for the Research on the Epidemiology of Disasters, Université Catholique de Louvain, no date in: World Bank, 2009b). 23 3. CLIMATIC VULNERABILITIES, RISKS, AND OPPORTUNITIES FOR ALBANIA'S ENERGY SECTOR This section highlights the climate-related vulnerabilities, risks and opportunities for Albania`s energy sector, based on the outcomes of the stakeholder-led and desk-based analyses described in Annex 1. A SWOT (strengths, weaknesses, opportunities and threats) analysis developed with stakeholders (see Acclimatise et al., 2009a) helped to highlight key current vulnerabilities in the energy system, some of which have already been emphasized in earlier sections of this report. An overview of the specific vulnerabilities for each asset type is summarized in this section. Looking forward, the risks identified from climate variability and climate change, in the absence of adaptation, are highlighted in Table 3. Some of these risks affect the energy sector in general, such as the impacts of climate change on demand for electricity; others are associated with specific energy asset types. The components of each risk (probability of hazard and magnitude of consequence) are shown on the risk maps in Annex 2, Tables A2-3 and A2-4. It is important to note that the consequence of a particular risk may be manifest in many different ways: there may be financial loss, impacts on energy security, environmental or social impacts, or perhaps a reputational consequence for Government. The risks for each asset type are outlined in Table 3, with further detail provided in Acclimatise et al. (2009a). Table 3: Summary of Climate Risks before Adaptation Risk Description of risk Magnitude of risk Asset class Code before adaptation affected No. 1 Higher peak demand in summer due to higher Extreme All temperatures could lead to lack of capacity. 2 Less summer electricity generation from hydropower Extreme LHPP / facilities due to reduced precipitation and runoff could SHPP reduce energy security. 3 EU Carbon trading schemes add cost to thermal power Extreme TPP generation. 4 Changes in seasonality of river flows (including more Extreme SHPP rapid snowmelt due to higher winter temperatures) combined with mis-management of water resources could decrease the operating time for SHPPs, resulting in decreased production. 5 Increased CAPEX / OPEX due to climate change Extreme All could lead to reduced shareholder value. 6 Higher peak summer demand across the region could Extreme All increase import prices and reduce supply. 7 Paucity of hydromet data makes it difficult to manage Extreme LHPP / water resources and optimize operation of hydropower SHPP plants. 8 Sea level rise could lead to increased coastal erosion, High Oil potentially affecting coastal infrastructure such as Production & ports for oil export. other coastal infrastructure 9 Lack of data (impact of climate change on wind High Wind patterns) creates uncertainty about optimal sites / design for generation using wind. 24 Risk Description of risk Magnitude of risk Asset class Code before adaptation affected No. 10 Climate change increases risk of competition between High SHPP, LHPP water users. & river- cooled TPP 11 Dry periods followed by heavy downpours of rain High LHPP / would exacerbate soil erosion from agricultural land, SHPP leading to increased sedimentation and reduced output from SHPP and LHPP. 12 Mal-adapted infrastructure design if climate change High All not built-in could lead to reduced operation / efficiency of assets. 13 Changes in extreme precipitation lead to higher costs High LHPP for maintaining dam operations / security. 14 Changing temperature, ground conditions and extreme High Oil and Coal precipitation could increase contamination risks Production associated with oil and coal mining facilities, potentially leading to increased risk of contamination of local water courses. 15 Reduced precipitation and increased temperatures can High TPP affect environmental performance of river water- cooled TPP abstracting and discharging water into local water courses. 16 Transmission and distribution losses increase due to High Transmission summer temperature rise resulting in higher effective & demand and reduced energy security.4 Distribution 17 Concerns about unmanaged climate risks causes Moderate All Albania to be less attractive to foreign investors. 18 Changes in extreme precipitation and wind lead to Moderate Transmission transmission disruption. & Distribution 19 Loss of productivity for thermal plants due to higher Moderate TPP air and water temperatures and / or reduced ability to abstract and discharge cooling water. 20 Increases in landslips due to heavy rains resulting Low Gas from climate change could increase the risk of loss of integrity for gas pipelines. Note: The magnitude of risk rating system presented here is described in Annex 2, Tables A2.1 and A2.2 4 Losses in the transmission network are already relatively high, due to the configuration of the electricity network. The main sources of power generation are in the north of the country, while the main electricity consumers are located in central and southern Albania. 25 3.1 CROSS-CUTTING ISSUES Current Vulnerabilities As highlighted in earlier sections, energy security has been a major concern in Albania for some years. This is particularly prominent in relation to electricity distribution systems and hydropower plants: Unstable power supplies and lack of access to electricity in some rural communities are constraining economic development, and the productivity of both large and small hydropower plants has been affected by droughts in recent years, leading to frequent load shedding. Many of Albania`s existing energy assets are aged and have seen insufficient investment. They are operating inefficiently or, in some cases, not at all. Technical and commercial losses of energy are a major cause for concern and energy demand is poorly managed. While energy trade could help with energy security, limited interconnectivity with neighboring countries prevents robust trade at present. Other vulnerabilities related to Albania`s low adaptive capacity were discussed in Section 2.3. Risks and Opportunities Rising temperatures associated with climate change, together with economic development, are set to increase energy demand in summer, when the water available for hydropower plants is lowest, threatening future energy security. The same effect on demand is likely to occur across South Eastern Europe, which could increase costs of importing electricity. There will however be benefits in terms of reduced heating demand in Albania during warmer winters. For existing, unadapted energy assets, climate change seems set to reduce efficiencies and increase operating costs (OPEX). Capital expenditure (CAPEX) will be needed to retrofit existing assets so they can cope with new climatic conditions. Private developers of energy assets also have concerns about climate risks. However, Albania is also on the brink of an exciting opportunity: as highlighted in Section 2.1, major investments in new energy assets are underway or being planned. Integrating adaptation measures into concession agreements, contracts, site selection, and design decisions for these new facilities could help ensure their climate resilience. As KESH privatizes the energy system, it could consider how to structure incentives for adaptation; there could be opportunities for cost sharing between Government and the private sector on adaptation actions. The earlier that climate risks and adaptation are considered, the greater the opportunities to identify financially efficient solutions to build the robustness of the energy system for coming decades. 3.2 LARGE HYDROPOWER PLANTS Current Vulnerabilities The output from large hydropower plants is vulnerable to variability in the runoff that feeds their reservoirs. In turn, runoff is affected both by seasonal precipitation and temperature (including the timing of snowmelt). Figure 15 clearly depicts lower production from Albania`s LHPPs (shown in blue), linked to low rainfall in the period 2000 to 2002, and resultant associated high- energy imports. Planning for new LHPPs draws on river gauge data gathered for a year prior to application. However, rating curves linking river level to discharge have not been updated. As 26 the calibration is likely to have changed as a result of natural and man-made erosion of riverbeds, river flow remains uncertain in most basins other than the Drin and to some extent the Mati. This lack of information constrains Albania`s ability to plan effectively for new assets that are robust to changing climate risks. Extreme rainfall can also cause spillover at LHPPs and threaten dam security. As outlined in Section 2.1, the World Bank has provided credit to Albania for a dam safety project (World Bank, 2008b) for Albania`s five LHPPs, aimed at safeguarding them from dam failure and improving their operational efficiency. Current levels of sedimentation of LHPP reservoirs are unknown but may be significant. 6750 6500 Import 6250 Small HPP 6000 Thermal Pow er Plants 5750 Hydro Pow er Plants 5500 5250 5000 4750 4500 4250 4000 3750 3500 3250 3000 2750 2500 2250 2000 1750 1500 1250 1000 750 500 250 0 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Figure 15: Annual Energy Profile for Albania from 1985 to 2006 in GWh (Islami, 2009). Risks and Opportunities As outlined in Section 2.2, the climate change models examined in this study are in good agreement that Albania and the wider eastern Mediterranean region will experience decreases in summer precipitation, projected to be about 20 percent by the 2050s. The models examined are in weaker agreement about the direction of change in winter precipitation (i.e., whether it will increase or decrease) although increases in temperature (which are mutually consistent) will mean that snowmelt occurs more rapidly and evapotranspiration increases. Even if winter precipitation amounts increase in the future, lack of reservoir storage and turbine selection adapted to past hydrology may impose limits on the ability of hydropower facilities to harness increased winter river flows and energy may be wasted through spillover. Furthermore, while seasonal changes can be managed to some extent by improved reservoir management (and indeed this is beginning to be achieved by KESH), this is impeded by the country`s lack of hydrometeorological capacity, as outlined in Section 2.3. 27 Climate change is also projected to increase the intensity of rainfall, which can cause higher spillover at hydropower facilities, put increased pressure on dam reservoirs, and cause landslips. Communities and land close to large dams may be exposed to increased risk of flooding. Increased intensity of precipitation events can also lead to upstream soil erosion and greater siltation of hydropower reservoirs. As a consequence of these risks, unless risks are proactively managed, climate change is anticipated to impact negatively on the financial performance of LHPPs, leading to loss of revenue and increased OPEX and CAPEX. High-level Quantitative Estimate of Climate Change Impact on LHPP Production by 2050 An in-depth approach to quantifying the impacts posed by climate change for hydropower plants would involve hydrological modeling using downscaled climate change scenarios, and subsequent modeling of the impacts of changes in river flows on hydropower plant output. Such analysis is beyond the scope of this analysis; instead, to develop high-level quantitative estimates, the following information and data were used: Rainfall-runoff modeling of the relationships between projected changes in climate (precipitation and temperature) and changes in river flows for several catchments Albania (Islami et al., 2002; Bogdani and Bruci, 2008; Islami and Bruci, 2008). A correlation of annual average inflows to Fierze hydropower plant on the Drin Cascade (Annex 8) and consequent electricity generation, together with a similar correlation for power production from LHPPs on the Mati River (Islami and Bruci, 2008). Recent research undertaken in Brazil, which used regional climate modeling data to project impacts on output from Brazil`s hydropower plants (Andre et al., 2009; Schaeffer et al., 2009). Rainfall-runoff modeling undertaken for the Drin, Mati and Vjosa River basins using climate change projections for temperature and precipitation indicates reductions in runoff in these catchments of about 20 percent by 2050 (Islami et al., 2002; Bogdani and Bruci, 2008; Islami and Bruci, 2008). It should be noted that this is an approximate estimate, based on a small number of global climate models and hydrological models. As highlighted in Section 2.2, a wide range of models and greenhouse gas emissions scenarios better represents uncertainties, but it was beyond the scope of the current study to undertake new hydrological assessments. Furthermore, climate change is expected to lead to increased rainfall intensity and longer dry periods, which will affect runoff and hence hydropower production. Again, analysis of the implications of these changes, while they may be important, is beyond the scope of this assessment and is an area for future research. Correlations were developed for both the Drin and Mati Rivers of the relationship between river flows into the reservoirs and electricity production (Connell, 2009; Islami and Bruci, 2008). These are shown in Figures 16 to 18. These correlations indicate that, as a first estimate, if the flows on the Drin and Mati Rivers declined by 20 percent, electricity generation would fall by about 15 percent. This estimate has been applied in the cost­benefit analysis presented in Section 5. Further information on how this estimate was derived is provided in Annex 8. It is worth noting that Albania`s hydropower managers have recently begun to improve their operations to better manage drought risks to production. Working with weather and climate experts, they are planning to expand the network of river-level sensors and rain gauges, and a system for collecting regional weather data. Using this information, managers will be able to 28 forecast the level of the Drin more accurately, timing the filling and release of water from reservoirs so they can draw the most energy from the system without endangering dams that may collapse if the water level rises to over-top dam height. Figure 16: Relationship between Drin River flow and electricity production at Fierze (Annex 8). Figure 17: Variation of Fierze inflows and electricity generation, 1999 to 2007 (Annex 8). 3.3 SMALL HYDROPOWER PLANTS (SHPP) Current Vulnerabilities Existing small hydropower plants in Albania have generally been constructed to serve local communities and sized accordingly. In that sense, they are not necessarily in the best locations or sized optimally for river flows. Many are being rehabilitated, so they will recommence operation in their current locations. As with LHPPs, the key climatic vulnerabilities for SHPPs relate to variability in precipitation and temperature, through their impacts on runoff. During three consecutive years of drought in Albania (2005, 2006, 2007), some SHPPs were unable to produce the needed power to feed into the grid or even to supply their local communities on a sustainable basis, reducing the total power available. Annual operating periods 29 of some SHPP facilities have reduced in recent years from 8 months to 4, linked to less snow (Acclimatise et al., 2009a). Figure 18: Relationship between Mati River flow and electricity production from Ulėza and Shkopeti HPP (Islami and Bruci, 2008). Risks and Opportunities Because SHPPs do not have reservoirs, their performance is linked essentially to the intensity and duration of precipitation. They will therefore be affected by any future decreases in annual average and summer precipitation amounts. Snow affects SHPP production by slowly releasing stored water as it melts, and consequently SHPPs are particularly sensitive to more-rapid snowmelt due to higher winter temperatures. The irrigation needs of agriculture take precedence over energy production in Albania, so SHPPs could also be affected by farmers` adaptation strategies in response to climate change--namely the need to increase irrigation (World Bank, 2009c). At present, agricultural irrigation is undertaken for about three to four months per year in summer, often in the daytime, when energy demand is lower, thus reducing the chance of conflicts over water use. Energy demand is currently at a maximum in winter. However, as already noted, rising temperatures will cause shifts to greater energy demand in summer, potentially bringing farmers and SHPP owners into conflict over water use, unless actions are taken to manage this. The need for agricultural irrigation in Albania cannot currently be easily forecast before or during the irrigation season, making forward planning by SHPP owners very difficult. Furthermore, water delivery to farmers is not organized in automated delivery schemes that follow defined basin modeling so it is not possible to maximize its effectiveness. However, large areas of agricultural land in Albania have been equipped with efficient irrigation systems in the last couple of years, which has had a dramatic effect on reducing water use in these areas. Additionally, minimum flow requirements are in place to protect river ecology, so potential lower flows due to climate change could affect the flow available for SHPP utilization. Climate change is also anticipated to lead to increased risks of siltation for SHPPs, when combined with deforestation and poor watershed management, affecting asset performance. 30 High-level Quantitative Estimate of Climate Change Impact on SHPP Production by 2050 Assumption of a one-to-one relationship between changes in river flows and SHPP power output leads to projection of a 20 percent reduction by 2050, according to the projected decrease in runoff estimated for LHPP generation in the previous section (Annex 9). This estimate has been applied in the cost­benefit analysis presented in Section 5. It is noted that there could be significant indirect impacts of climate change on SHPPs, due to the adaptation actions that may be taken in the agriculture sector. For instance, farmers` demands for irrigation water will increase due to higher temperatures. Hence, the 20 percent reduction may be an underestimate. Assessments of such indirect impacts were beyond the scope of this assessment but could usefully be addressed in additional cross-sectoral climate change risk assessments. Box 4 overleaf summarizes some of the interlinkages between water resources, energy security, and food security. 3.4 THERMAL POWER PLANTS (TPPS) Risks and Opportunities As outlined in Section 2.1, Albania is developing thermal power plants to improve energy security. Optimal TPP performance is slightly vulnerable to climate change impacts, mostly with regards to operating efficiency: rising temperatures have a modest impact on gas turbine performance, and the availability and temperature of cooling water can also affect operations. Currently, the TPP assets under development or in discussion (at Vlore Port, Fier and Porto Romano) are to be cooled by sea water. However, if Albania were to consider developing river- water-cooled TPPs, then the impacts of climate change on river flows and water temperatures could have significant effects on their operation in warmer, drier months. There could then be insufficient river flow to meet cooling requirements, and abstractions could be prevented for periods of time by regulations designed to protect river ecology during low flows. Thermal power plants in the United States have been subjected to such constraints on a number of occasions during recent droughts (Karl et al., 2009). The Vlore TPP is located near Vlore Port. The Vlore plant has raised the elevation of the site by 2 m above sea level due to its proximity to the Vlore floodplain (Maire Engineering, 2008). Further modifications have been made to equipment installed on site. Nevertheless, it is not possible to estimate in this assessment how much more frequently, if at all, the site might flood in the future due to climate impacts due to limited available information on the reason for the site elevation decision. In general, coastal energy assets may be significantly affected by rising sea levels and coastal erosion and this should be an important consideration in the siting of future TPPs. High-level Quantitative Estimate of Climate Change Impact on TPP Efficiency by 2050 The authors estimated the efficiency (output) reduction for TPP based on engineering expertise at 1 percent by 2050, associated with the impacts of rising temperatures. 31 Box 4: Climate change, water resources, energy, and food security in Europe and Central Asia (ECA) Rising temperatures and changing hydrology are already affecting forestry and agriculture in many countries in ECA. The region`s natural resilience and adaptive capacity have been diminished by the Soviet legacy of environmental mismanagement and the pursuit of economic growth carried out with blatant disregard to the environment. This is evident in agriculture where poor management of soil erosion, water resources, pest control, and nutrient conservation increases the sector`s vulnerability to climate change. Inadequate capital investment and watershed management have led to significant water losses and reduced the productivity of irrigation systems as well as hydropower generation capacity. Over time, the impact of global warming, other nonclimatic factors (such as inefficient use of water), legacy issues and the continuing unsustainable demand will exacerbate water stress in Europe and Central Asia. Global warming will negatively affect water systems in some parts, as reduced precipitation and high evaporation rates decrease water availability for agriculture and hydropower production alike. ECA countries are expected to help offset the projected decline in world food production due to decreasing agriculture yields in lower latitudes due to climate change. However, there are important caveats: the projected gap between potential and actual yields in ECA is 4.5 times higher than the potential increase in agricultural production from climate change by 2050. Unless current inefficiencies in the agricultural sector are addressed, food insecurity in the region will become a major development concern. The inability of Kazakhstan, Russia, and Ukraine to close the productivity gap and respond to recent crop price increases does not bode well for their capacity to adapt to and benefit from climate change. Going forward, improved water resource management and better-performing water utilities and energy systems will help reduce climate vulnerability. Gains from improved agricultural practices, including adaptation measures such as better water resource management, could outweigh projected negative impacts. Energy security considerations will be integral to the long-term investment decisions on water resource allocation. Albania currently derives 90 percent of its energy from (both large and small) hydropower plants; plants that are feeling the effect of weather variability and are likely to see further declines in runoff and energy production into the future (estimated at 15 percent and 20 percent respectively by 2050, as outlined in this section of the report). It is a complex picture. Agricultural demand for irrigation water is seasonal and subject to significant variability. Timing is also critical. Today, water demand for agricultural use is low during periods of peak energy demand (winter and night-time) and high when energy needs drop (summer and daytime). But winter demand for energy is expected to drop with climate change and daytime summer demand to rise with increasing temperature and cooling demand. (World Bank, 2009d) 3.5 WIND POWER Risks and opportunities As outlined in Section 2.1, Albania currently has no industrial wind power generation facilities, although it is holding discussions about developing them and seven licenses have been issued. The wind resources of Albania are uncertain. Until recently, the wind field maps available could draw only on data measured at 10 m height above ground (as per World Meteorological Organization standards adhered to by Albania`s national measuring stations), rather than the height where the turbines would be located. Especially in Albania`s mountainous terrain, there is no consensus model for extrapolation from the measured field to the wind field of interest. These considerations have made wind farm development vulnerable to climate uncertainties that can affect design and operational parameters. Recognizing this, a Wind Energy Resources Assessment for Albania has been conducted by the Italian Ministry for the Environment, Land and Sea, which has resulted in a map of average wind speed for Albania that is an improvement on past data availability. If changes in wind speed and/or direction were to occur, however, 32 reoptimization of the design and operation of wind energy facilities would be could be needed to ensure that installed turbines did not slip out of their optimal operating band. High-level quantitative estimate of climate change impact on wind power by 2050 The climate change projections are very uncertain with respect to wind, and the data that are available for Albania indicate little or no change. The cost­benefit analysis in Section 5 has therefore assumed no change. 3.6 POWER TRANSMISSION AND DISTRIBUTION Current vulnerabilities As outlined in Section 2.1, the power transmission system was recently upgraded, aligning with EU standards, and ongoing investments are focusing on improving regional interconnectivity. Technical losses in the transmission network in 2008 were 213GWh (3.3 percent) (ERE, 2008). The distribution grid already presents clear climatic vulnerabilities and has high technical and commercial losses (about 33 percent in 2008). Although city networks are generally in good condition, there are significant parts of the distribution grid that need upgrading, especially those serving rural and mountain communities, who already do not have secure energy supplies due to the deterioration of the grid. In periods of high winter precipitation, snow and ice can cut off distribution lines. Repair crews have difficulties repairing damaged networks due to difficult road conditions and local authorities may not always have the resources and expertise to repair damage quickly. High winds can also cause damage to power lines. The capacity of communities to cope with interruptions to supply of power (and other services) is highly dependent on the level of economic development. For instance, small businesses may not have backup generators. Even if the effect of intermittent power can be managed with the use of backup generators, there is an additional capital and operating cost in use of such generators. Risks and opportunities Owing to the recent technical upgrades of the transmission system, its performance is not expected to be significantly affected by projected changes in temperature and precipitation. However, it is worth noting that, at present, EU standards do not account for climate change, and the technical specifications may require review in the years to come. Indeed, the EU Adaptation White Paper refers to the need to review and update EU regulations in the light of climate change projections (European Commission, 2009). Rising temperatures due to climate change will gradually erode the efficiency of the transmission and distribution systems, by reducing the ability of transmission lines to lose heat to their environment. If climate change leads to increased winter precipitation, damaging events could occur more frequently unless the distribution grid is upgraded, with consequent worsening social impacts. Because projections of future changes in wind are highly uncertain, it is not possible to say with any confidence whether damage to power lines from these events will happen more often. However, increased intensity of precipitation could lead to greater incidence of landslips, affecting distribution lines in hill terrain. 33 High-level Quantitative Estimate of Climate Change Impact on Transmission and Distribution Efficiency by 2050 Using engineering expertise, the efficiency reduction for transmission and distribution has been estimated as 1 percent by 2050, the consequence of rising temperatures. 3.7 ENERGY DEMAND Current Vulnerabilities Energy demand is not managed effectively at present, with old, inefficient equipment and standards being applied in households and the services sector. Many houses have inadequate insulation, leading to wasteful use of energy. Furthermore, electrical power is often the main source of energy for heating. Commercial losses are significant, running at 13.4 percent in 2008 (ERE, 2008). Risks and Opportunities The most significant impacts of climate change on energy consumption are likely to be the effects of higher temperatures on the use of electricity and the direct use of fossil fuels for heating in Albania. Higher temperatures are likely to affect the following major electric end uses: Space heating Energy demand for space heating will decline Air conditioning Energy demand for space cooling will increase Water heating Energy demand for water heating will decline slightly Refrigeration Energy demand for refrigeration will increase Of these end uses, air conditioning and space heating are those most likely to be significantly affected by climate change in Albania, since both are functions of indoor-outdoor temperature differences. Compounded by the anticipated reduction in availability of hydropower in summer, this could exacerbate energy security difficulties. There are opportunities, however: climate change is expected to shorten the cold season and reduce the severity of cold weather events, reducing energy demand for heating. Quantitative estimates of climate change impacts on energy demand are described in Section 5.2. 3.8 OIL, GAS, AND COAL PRODUCTION Current Vulnerabilities Although Albania`s oil production facilities are not considered to be directly vulnerable to climate risks to any great extent, the ability to import LPG or to export crude oil products depends on shipping ports. At present, extreme weather can delay ships arriving into Vlore Port by one to two days, although wider channels being opened at Vlore Port in summer 2009 will reduce this problem. Furthermore, it is understood that the port has a transgressive geological structure though current rates of erosion are not well understood (Acclimatise, 2009a). Oil production facilities at Patoz Marinza are one of five European hotspots for contaminated land (UNEP, 2000). Pollution carried via drainage channels into the Gjanica River, which is 34 heavily contaminated by oil operations, and contamination pathways are affected by climatic influences on ground conditions. The Ballsh oil refinery is vulnerable to electricity disruptions: it relies on the grid, and if a power cut lasts more than an hour, financial losses estimated at $100,000 or above can occur (Acclimatise et al., 2009a). The existing low-pressure gas pipelines from Fier and Ballsh have experienced loss of integrity in the past, due to landslips at valley crossings after storms and heavy downpours. These risks are seen as minimal, however, when compared to the risk of sabotage. Albania`s coal industry is small, employing only about 200 people at present (Acclimatise et al., 2009a). Coal is stored outdoors, sometimes on slopes, and is therefore vulnerable to heavy rainfall, which can lead to loss of product and also ground and water contamination. Risks and Opportunities Higher temperatures are not anticipated to affect oil production facilities significantly. Indeed, there may be a slight positive effect of warming temperatures on their cost profile. However, unless steps are taken to adapt new and existing port developments, port operators could face increased risk of flooding and storm damage, with consequent service disruption for oil producers and increased operating costs. Furthermore, it is not clear whether the new design for Vlore Port takes into account projections of rising sea levels, but, given the fact that the coastline is eroding, increased risk of coastal erosion is a potential cause for concern. The existing problems with contaminated land and watercourses at Patos Marinza could be exacerbated if, as projected, climate change brings increased summer droughts. The consequent changes in ground conditions could create new pathways for pollutants, which would then flush through into water courses during heavy downpours, worsening an already difficult situation. The low-pressure gas pipelines from Fier and Ballsh could see increased risk of landslips, associated with projected increased incidence of heavy downpours as a result of climate change. The main climate change impacts on Albania`s limited coal facilities are also likely to result from heavy downpours of rain, which could lead to increased loss of product and increased risks of ground and water contamination. As outlined in Section 1, the focus of this assessment is on how Albania can best manage its future security of energy supply in the face of climate change. Given that oil, gas, and coal production assets are not key factors in Albania's energy security, impacts on these assets were not taken forward as part of the cost­benefit analysis. However, it is clear from the analysis outlined in this section that oil, gas, and coal production are vulnerable to changing climate risks, and the issues identified here merit further consideration by the decision makers responsible for these activities. 35 4. IDENTIFICATION OF ADAPTATION OPTIONS FOR MANAGING RISKS TO ALBANIA'S ENERGY SECTOR The key cross-cutting climate risks and opportunities related to energy security identified in the previous section are that, over time: Annual energy demand may decline slightly (an estimated reduction approximately 0.1 percent per year, see Section 5.2). Winter energy demand will reduce and summer peak demand will increase. Energy supply from existing assets will decline, particularly in summer, leading to a shortage in supply that would have to be filled to ensure energy security. Adapting to climate change, to reduce vulnerabilities and risks and take advantage of opportunities, will be increasingly important for the Albanian energy sector. Stakeholders provided input on adaptation options applicable to the Albanian energy sector through a workshop and series of meetings (Acclimatise et al., 2009b). Detailed descriptions of the potential adaptation options, including cross-cutting actions and individual actions for each energy asset class, are summarized in Annex 3, Tables A3.1 to A3.8.5 The adaptation option tables highlight which options are no-regret, low-regret, win-win, and flexible (see Box 5 for definitions of these terms). These kinds of options are particularly useful in devising decision strategies in the face of uncertainties about the future. In essence, the adaptation options fall into three main groups: 1. Informational actions including: gathering and sharing additional meteorological and hydrometeorological data; analysis and modeling of catchments that may be suitable for hydroelectric power generation; working with neighboring countries to understand regional risks from climate change and their implications for regional energy trading; further research on climate change impacts through downscaling of global climate model data; and researching the impacts of changing seasonal conditions and extreme climate events. Many of these options are considered to be no-regret options. As such, it is considered that undertaking these options would prove beneficial for a wide range of reasons, whatever the extent of future climate change. Stakeholders in Albania should consider the no-regret options as a priority. No further analysis has been conducted for these options, though further details on one vital no-regret option, namely improved monitoring and forecasting of weather and climate, are provided in Box 6, Annex 4 and Hancock and Ebinger (2009). 2. Institutional actions including: reviewing, upgrading, and enforcing design codes to require new assets to take account of climate change; and reviewing the government prioritisation policy for resources such as water in the face of climate change. It is anticipated that many of these adaptation options would be subject to regulatory impact assessment prior to being introduced. Therefore, no further assessment of these options has been carried out in this report. However, further details are provided in Box 7, on weather coverage and insurance instruments that could help mitigate the anticipated losses associated with climate variability and extreme events. 5 Note that the adaptation options numbers listed in the Risk Register below (Table 5) correspond to the adaptation option numbers in Tables A3-1 to A3-8. 36 3. Physical/technical actions: A number of potential engineering adaptation options have been identified, including: amendments to the way existing LHPPs are operated; upgrades of existing assets to optimize performance and minimize decline in power generation due to climate change; and construction of new and diversified power generation assets. Box 5: Categorization of adaptation options for robust decision making under conditions of high uncertainty, with some examples No regret: Measures that deliver benefits that exceed their costs, whatever the extent of climate change, e.g.: Investment in energy demand management Preparing for questions about adaptation from government, investors, analysts, lenders, lawyers Funding baseline climate monitoring and regional climate models More holistic approaches to water cycle management in water-constrained locations Low regret: Low cost measures with, potentially large benefits under climate change, e.g.: Allowing for heavier rainfall when designing new drainage system--make drainage pipes wider; use Sustainable Drainage Systems which allow rainfall to percolate into the ground, reducing runoff Win-win: Measures that contribute to climate adaptation and also deliver other benefits, e.g.: Creation of salt-marsh habitat provides flood protection for coastal areas and also contributes to nature conservation objectives Flexible approaches/'Adaptive management: Keeping open / increasing options that will allow additional climate adaptation in future, when the need for adaptation and performance of different adaptation measures is less uncertain, e.g.: Flood management: Allow for future increases in defence height by making foundations wider and deeper, but do not build higher defence immediately Avoid maladaptive actions: Some actions will make it more difficult to cope with climate change risks, e.g.: Inappropriate development in a flood risk area The Risk Register presented in Table 5 summarizes the main climate-related risks before and after adaptation, demonstrating how effective the adaptation actions could be in reducing risks. It also summarizes the adaptation actions that could help to manage each risk. In developing the risk-severity ratings after adaptation, it has been assumed that the adaptation actions would be fully implemented. However, we add a note of caution: as mentioned in Section 2.3, Albania has low adaptive capacity, which means that implementing these actions would require considerable effort, coordination and, in some cases, funding. Some 20 risks are identified in Table 5. The risks falling into each risk severity category before and after full implementation of adaptation measures are outlined in Table 4. (For further details on the risk categories, refer to Annex 2, Tables A2.1 and A2.2.) As can be seen in Annex 2 (Tables A2.3 and A2.4), for a given risk, the adaptation options considered could lead to a decrease in the likelihood of occurrence of a hazard and/or a decrease in the magnitude of its consequence. 37 Table 4: Number of Risks in Each Risk Severity Category, Before and After Adaptation Number of Risks in Category Risk Severity Category Before Adaptation With Full Implementation of Adaptation Measures Extreme 7 0 High 9 6 Moderate 3 5 Low 1 9 For most of the extreme risks, the key adaptation options include: diversification of energy into other forms of generation than hydroelectric power, working with neighboring countries to understand regional risks and implications for regional energy trading, and improved data collection and modeling to enable hydropower plant design and operation to be optimized. Diversification of assets was also seen by most stakeholders engaged during this assessment as a critical step for the Albanian energy sector. With this in mind, the high-level cost­benefit analysis element of this assessment, presented in Section 5, has focused on looking at a diverse range of asset classes that may be utilized to adapt to climate risks to supply and demand. The economic cost­benefit analysis presented here is thus an example of a process that Albania could use as it evaluates adaptation options. A more in-depth analysis, appropriate for the magnitude and costs of the challenges presented by climate change, would consider a larger variety of options and explore the costs and benefits in greater detail. 38 Box 6: A vital `no-regrets' option for Albania--improved monitoring and forecasting of weather and climate As outlined in previous sections, hydropower provides about 90 percent of domestic electricity in Albania. This buffers national economic development from fossil fuel price shocks and will help Europe as a whole to meet its targets for reduction of greenhouse gas emissions. However, Albania`s dependence on renewable energy sources makes it vulnerable to the weather, especially because the rainfall on which Albania`s hydropower depends is among the most variable in Europe. Albania`s vulnerability has been highlighted in recent drought years (e.g., 2002 and 2007). Improved weather monitoring and forecasting could bolster Albania`s energy security, enabling planning for water shortages, guiding the optimal tradeoffs among various water users in times of shortage, and supporting management of reservoirs to extract the largest amount of energy per unit of flow. However, Albania`s national weather-monitoring network was damaged in the civil struggles of the 1990s and has been only partly rehabilitated. Many stations and hydroposts are heavily depreciated, and telecoms do not support the data reporting frequency that efficient management of hydropower requires. As a result, the network that records rainfall, temperatures, and river levels is sparse and reports very little information in real time. Rainfall and runoff could be qualitatively forecast to three days if modest resources were invested in obtaining and tuning models; but in part because computing capacity is extremely weak, Albania uses the model output of neighboring countries, which is not verified in detail nor continuously re-tuned to Albania`s conditions. Longer lead-time forecasts to seven days could be obtained from the European Centre for Medium-range Weather Forecasting to support national forecasts and planning; although these are low-resolution they would provide valuable guidance on regional water availability. Currently, Albania is not a full subscriber and has only limited access. Seasonal forecasting via statistical models is having increasing success in some regions of the world, but good success in Albania would need to draw on digitized historical data, which is not available because much of Albania`s historical data is not in digital form. Watershed models and maps of national climate could be updated to support planning for the future, but today they provide only weak guidance because they are out of date. Wind farms, also of potential interest to Albania, are also weather-dependent. Their optimal design depends on knowledge of the distribution of wind speeds; currently, a verified map of the wind resource for Albania does not exist. Management of the transmission and distribution system can also be made more robust. Power is generated in the Drin cascades of northern Albania while most consumers are concentrated in the south, so the country`s transmission and distribution system necessarily involves long transmission lines, exposed to severe weather. Repairs of inevitable occasional damage would be more rapid if Albania were able to monitor severe weather, pinpointing lightning strikes, heavy winds, and the other sources of damage. Finally, better weather forecasting would enable Albania to make the most of its natural resources by improving the accuracy of demand forecasts that build on knowledge of upcoming temperature and cloudiness to assess demand for electricity. As outlined in Section 2.2, climate projections from a range of climate models are in good agreement about the extent of future increases in temperature for the South Eastern Europe region and they are also in general agreement that future summer precipitation would decrease. They are valuable as a source of qualitative information about the patterns of regional climate trends but further downscaling would provide more localised data for energy asset management. It would be helpful to determine whether several more-robust projections of changes in Albania`s precipitation could be identified through a review of correlation of modeled baseline climates against observed historical precipitation patterns, and to focus on downscaling an ensemble of these. All these functions are very weak in Albania today: monitoring, modeling, and forecasting. Albania`s former strengths in this area could be revived and expanded to bolster its energy security, which is so strongly linked to its variable climate. As the climate changes, Albania is likely to see changes in the availability of renewable energy sources. Increased skill in monitoring and forecasting the weather that measures out these resources would enable Albania to adapt flexibly and rapidly to trends on all time scales. (Further insights on this topic are provided in Annex 4 and Hancock and Ebinger (2009). 39 Box 7: Weather risk management through weather coverage and insurance instruments Albania`s economy is weather sensitive and vulnerable to man-made and natural disasters; some avoidable. In the past 33 years, 62 percent of disasters were hydrometeorological in origin and in the past decade alone there have been 2 significant periods of drought, 45 major landslips, and 3,767 forest fires. Projected changes in climate--rising temperatures and reduced precipitation--could compound already adverse impacts on fiscal stability and macroeconomic performance, businesses, and households. Albania is taking steps to address its vulnerability through a US$9.16 million (equivalent) Disaster Risk Management and Adaptation Project approved by the World Bank`s Board in May 2008 (effective June 2009). This project supports: Capacity building for emergency response and strengthening of disaster risk mitigation planning Provision of accurate, tailored hydrometeorological forecasts and services to weather sensitive sectors (agriculture, energy, water resource management etc.) Development of building codes that address seismic risk Development of private catastrophe risk insurance for households, small and medium enterprises Lending and technical assistance programs could be complemented by weather coverage and insurance instruments that could help mitigate the anticipated losses associated with climate variability and extreme events. Weather coverage is an emerging market instrument that pays on the basis of a measurable weather event and does not require individualized loss assessment (as in the case of more traditional insurance). Customized weather coverage is being used by hydroelectric utilities in Australia, the United States, India, and Canada to do the following (WeatherBill 2009): Stabilize revenues and protect against income loss due to precipitation or temperature fluctuations affecting power generation. Control costs associated with power purchases to address supply shortages arising from weather related events (e.g., below average precipitation). Manage cash reserves, for example to ensure that reserve funds are not required to cover operating costs when budgets are stressed due to successive drought years. Such instruments can be accessed on the insurance market. The World Bank Group (WBG) also offers a range of services to mitigate the impacts of disasters and weather events: Catastrophe Risk Deferred Draw-down Option (CAT DDO), a deferred development policy loan offering IBRD eligible countries immediate liquidity up to US$500 million or 0.25% of GDP (whichever is less) if they suffer a natural disaster. Sovereign Budget Insurance, advisory services to help countries access the international catastrophe reinsurance markets on competitive terms; currently used by 16 Caribbean countries as parametric insurance against major hurricanes and earthquakes. Insurance Linked Securities, a multi-country catastrophe bond to poll the risks of several countries and transfer the diversified risk to capital markets is under development. WBG has experience in working with Mexico to transfer earthquake risk to investors through such mechanisms (2006). Catastrophe Property Insurance, to create competitive insurance markets and increase catastrophe insurance penetration. Indexed Based Weather Derivatives. In Malawi the World Bank provided intermediation services on an index-based weather derivative. If precipitation falls below a certain level, a rainfall index reflects the projected loss in maize production, and payout is made when production falls significantly below historic averages. (World Bank, 2008a; World Bank; 2009b; WeatherBill Inc, March 27, 2009.) 40 Table 5: Risk Register (For details on the rating system presented here (labeled 1 to 5 and A to E), see Annex 2, Tables A2.1 and A2.2) Risk Severity Before Adaptation Risk Severity After Adaptation Risk Description, Risk Level Adaptation Actions Risk Level Event and Before Consequence Likelihood Consequence Likelihood After Consequence Adaptation Adaptation Rank Develop shared understanding of Higher peak region-wide climate risks to demand in energy security; increase energy summer due to trade; supply diversification; higher Almost supply and demand side 1 temperatures 5 Catastrophic A Extreme 2 Minor D Unlikely Low Certain management / efficiency; optimize could lead to current generation; make new lack of energy assets climate resilient capacity. (Adaptation Options: 1, 7, 10 to 15). Less summer electricity Optimize current water and power generation generation management system, from implement engineering adaptations hydropower as part of dam rehabilitation, facilities due amend and implement design to reduced Almost 2 5 Catastrophic A Extreme standards to take account of 3 Moderate C Moderate High precipitation Certain climate change, diversify power and runoff generation, contingency planning could reduce such as insurance back-up and / or energy regional trading (Adaptation security. Options: 7, 16 to 23). 41 Risk Severity Before Adaptation Risk Severity After Adaptation Risk Description, Risk Level Adaptation Actions Risk Level Event and Before Consequence Likelihood Consequence Likelihood After Consequence Adaptation Adaptation Rank EU Carbon Diversify asset portfolio so that trading thermal power remains a small schemes add Almost contributory element; seek ways to 3 4 Major A Extreme 3 Moderate C Moderate High cost to thermal Certain offset carbon emission costs power through regional / global trading generation. (Adaptation option: 7). Changes in seasonality of Collect and analyze hydromet data river flows for existing and potential basins; (including require climate change aspects to more rapid be considered in designs and snowmelt due upgrades of new and existing to higher facilities, work with other users winter (particularly in the agriculture temperatures) sector) to reduce potential future combined with Almost 4 4 Major A Extreme competition for water resources; 2 Minor C Moderate Moderate mismanageme Certain consider insurance, upgrade nt of water existing facilities to optimize resources generation (Adaptation options: 24 could decrease to 30). the operating time for SHPPs, resulting in decreased production. 42 Risk Severity Before Adaptation Risk Severity After Adaptation Risk Description, Risk Level Adaptation Actions Risk Level Event and Before Consequence Likelihood Consequence Likelihood After Consequence Adaptation Adaptation Rank Increased CAPEX / Diversify assets; require OPEX due to consideration of climate change in climate contracts for new energy assets; 5 change could 4 Major B Likely Extreme regional interconnections and 3 Moderate B Likely High lead to explore potential financial risk reduced management products (Adaptation shareholder Option: 7). value. Higher peak Develop shared understanding of summer region-wide climate risks to demand across energy security; diversify assets, the region Almost 6 3 Moderate A Extreme regional interconnections and 3 Moderate C Moderate High could increase Certain explore potential financial risk import prices management products (Adaptation and reduce Option: 1, 7). supply. Paucity of hydromet data makes it Collect, model and analyze difficult to Almost Major A Extreme hydromet data (Adaptation 2 Minor D Unlikely Low 7 manage water 4 Certain Options: 1, 2, 16, 17, 24, 25). resources and optimize operation of hydropower 43 Risk Severity Before Adaptation Risk Severity After Adaptation Risk Description, Risk Level Adaptation Actions Risk Level Event and Before Consequence Likelihood Consequence Likelihood After Consequence Adaptation Adaptation Rank plants. Sea level rise could lead to Research impacts of rising sea increased levels on coastal zone, implement coastal erosion design codes with climate change potentially taken into account, identify assets 8 affecting 3 Moderate C Moderate High 2 Minor D Unlikely Low at risk, include climate resilience energy assets in new design and rehabilitation of in the coastal existing assets (Adaptation region such as Options: 3, 6, 8, 31, 33, 34, 36). ports for oil export. Lack of data (impact of climate Collect appropriate wind data and change on complete mapping; research and wind patterns) monitoring of climate change 9 creates 3 Moderate C Moderate High impact on wind; incorporate 1 Insignificant E Rare Low uncertainty climate change assessment in about optimal design requirements (Adaptation sites / design options 37, 38, 39). for generation using wind. 44 Risk Severity Before Adaptation Risk Severity After Adaptation Risk Description, Risk Level Adaptation Actions Risk Level Event and Before Consequence Likelihood Consequence Likelihood After Consequence Adaptation Adaptation Rank Climate Collect and analyze data, raise change awareness of competing interests, increases risk 10 3 Moderate B Likely High and work together, particularly 3 Moderate D Unlikely Moderate of competition with agricultural water users between water (Adaptation Options 1, 2, 4, 5). users. Dry periods followed by heavy downpours of rain would exacerbate soil erosion from Monitor and assess sedimentation agricultural risk, rehabilitate existing assets, 11 land, leading 3 Moderate B Likely High work with other stakeholders to 3 Moderate D Unlikely Moderate to increased manage future risks (Adaptation sedimentation Options: 17, 19, 25 and 27). and reduced output from SHPP and LHPP. 45 Risk Severity Before Adaptation Risk Severity After Adaptation Risk Description, Risk Level Adaptation Actions Risk Level Event and Before Consequence Likelihood Consequence Likelihood After Consequence Adaptation Adaptation Rank Mal-adapted infrastructure design if climate change not Monitor impact of climate change built-in could on dam security and look to 12 lead to 3 Moderate B Likely High financial risk management 2 Minor D Unlikely Low reduced products to spread the risk operation / (Adaptation Options: 17, 21). efficiency of assets. Changes in extreme precipitation lead to higher Monitor impact of climate change costs for on dam security and look to 13 maintaining 3 Moderate B Likely High financial risk management 3 Moderate C Moderate High dam products to spread the risk operations / (Adaptation Options: 17, 21). security. 46 Risk Severity Before Adaptation Risk Severity After Adaptation Risk Description, Risk Level Adaptation Actions Risk Level Event and Before Consequence Likelihood Consequence Likelihood After Consequence Adaptation Adaptation Rank Changing temperature, ground conditions and extreme precipitation could increase contamination risks Assess likely impact of climate associated change, plan contingency for any 14 3 Moderate B Likely High 3 Moderate C Moderate High with oil and proposed / necessary intervention, coal mining (Adaptation Options: 48 to 51). facilities, potentially leading to increased risk of contamination of local water course. Reduced Monitor river flows and emissions precipitation to ensure abstractions and 15 2 Minor B Likely High 2 Minor C Moderate Moderate and increased discharge do not damage river and temperatures avoid negative impacts by can affect considering impact of climate 47 Risk Severity Before Adaptation Risk Severity After Adaptation Risk Description, Risk Level Adaptation Actions Risk Level Event and Before Consequence Likelihood Consequence Likelihood After Consequence Adaptation Adaptation Rank environmental change in design of future assets performance (Adaptation Options: 33 and 36). of river water- cooled TPP abstracting and discharging water into local water courses. Transmission and Reduce existing technical losses distribution (e.g., insulation of cables, losses increase undergrounding of critical cables, due to summer consider DC rather than AC for temperature long lines), manage commercial Almost 16 rise, resulting 1 Insignificant A High losses (e.g., tariffs and metering), 1 Insignificant C Moderate Low Certain in higher amend and implement design effective standards to take account of demand and climate change for new / upgraded reduced infrastructure (Adaptation Options: energy 3, 12, 14). security. 48 Risk Severity Before Adaptation Risk Severity After Adaptation Risk Description, Risk Level Adaptation Actions Risk Level Event and Before Consequence Likelihood Consequence Likelihood After Consequence Adaptation Adaptation Rank Concerns Further data collection and about research on potential impacts of unmanaged climate change in Albania; ensure climate risks regulations require climate change 17 cause Albania 3 Moderate D Unlikely Moderate 2 Minor D Unlikely Low assessment to be implemented in to be less design (Adaptation Options 4 to 9) attractive to foreign investors. Changes in extreme Further assess possible risks to the precipitation network, transfer risk to partners 18 and wind lead 2 Minor C Moderate Moderate with expertise to manage the 2 Minor D Unlikely Low to issues, develop contingency plans transmission (Adaptation Options 41 to 46). disruption. Loss of Collect and analyze data to productivity identify issues, understand and for thermal manage existing risks, avoid risk 19 plants due to 1 Insignificant B Likely Moderate 1 Insignificant C Moderate Low to new assets by considering at higher air and design stage (Adaptation options: water 32, 34, 36). temperatures and / or 49 Risk Severity Before Adaptation Risk Severity After Adaptation Risk Description, Risk Level Adaptation Actions Risk Level Event and Before Consequence Likelihood Consequence Likelihood After Consequence Adaptation Adaptation Rank reduced ability to abstract and discharge cooling water. Increases in landslips due to heavy rains Monitor integrity of existing low resulting from pressure pipelines due to landslips climate after heavy downpours and review 20 2 Minor E Rare Low 2 Minor E Rare Low change could and upgrade design codes to increase the ensure assets are climate-resilient risk of loss of (Adaptation Options: 49 and 50). integrity for gas pipelines. 50 5. COST­BENEFIT ANALYSIS OF ADAPTATION OPTIONS 5.1 OBJECTIVE OF THE COST­BENEFIT ANALYSIS Based on discussions with stakeholders it was agreed that a high-level economic cost­benefit analysis would be an appropriate method of examining options to manage the risks and vulnerabilities to Albania`s energy security in the face of climate change. Having subsequently considered the impacts of climate change on energy security further, and given that diversification of power generation assets was identified as a key adaptation option, stakeholders agreed that the objective for the cost­benefit analysis be refined to address the following question: What is the optimal technology (power generation asset) to supply the shortfall in electricity that is directly caused by climate change? Implicit in the word optimal in this question is the delivery of sustainable development. Also implicit is the time period over which options should be considered. During discussions with stakeholders, it was suggested that a 30-year period should be considered, however this was later refined to 40 years (up to 2050) to tie in with climate modeling timeframes and a notable threshold date. 5.2 ASSESSMENT OF SHORTFALL IN FUTURE POWER GENERATION DUE TO CLIMATE CHANGE To assess the range of energy generation technologies that could be used, it is first necessary to identify what shortfall in power generation may result from climate change in Albania. The calculations and projections below use as their starting point the most recent draft National Energy Strategy (NES, Government of Albania, 2007). The draft National Energy Strategy presents two scenarios, passive and active (described in Box 8 overleaf), and considers the medium-term period out to the year 2019. Since the present assessment has a longer time horizon than the draft NES, extending out to 2050, a number of assumptions have been made to build supply and demand projections beyond the timescales of the NES. These assumptions are detailed in Annex 8. Step 1. Supply­Demand Projections Excluding Climate Change In discussions undertaken during the workshops and subsequent meetings, stakeholders highlighted that it was important to assess the impacts of climate change over a long planning horizon; therefore, a time period from 2010 to 2050 was selected. But the draft NES for Albania only provides projections for power supply and demand for the medium-term, from 2003 to 2019. Therefore, as part of this assessment, the projected power demand described in the draft NES was extrapolated beyond 2019 for each of the two demand-side scenarios that the draft NES presents: The passive scenario, which involves no energy demand control or energy efficiency measures) 51 The active scenario, which includes implementation of energy efficiency measures such as residential property insulation standards and installation of domestic solar water heating The extrapolation of demand projections beyond the timeframe of the draft NES was based on Albanian energy-expert opinion (Islami, 2009) and corresponds to annual growth rates in demand of 2.8 percent initially, declining to 2.1 percent by 2050, in the passive projections; and 2.2 percent declining to 1.8 percent in the active projections. These demand growth projections are illustrated in Figure 19 and are detailed in full in Annex 8. From these demand projections, potential energy supply curves were generated that would meet demand. Electricity typically cannot be stored but, rather, is produced instantaneously; in that sense, supply and demand projections are the same line. Reconciliation is achieved as follows: detailed supply projections are based on known potential energy assets included within the draft NES, plus additional energy assets known to be under discussion within the Albanian energy sector, plus energy imports at the level that achieves demand­supply balance without load shedding (after 2013, when the draft NES predicts load shedding will cease). The use of imported energy represents the demand that cannot be addressed with domestic sources. 30,000 25,000 20,000 GWh 15,000 10,000 5,000 0 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 Year Baseline Supply/Demand Active Supply/Demand Figure 19: Projected electricity supply/demand for Albania from 2010 to 2050 Step 2. Superimposing the Impacts of Climate Change on Supply­Demand Projections Based on the climate change risks identified for Albania (see Section 3, Annex 8 and Annex 9), the active-scenario projections of supply and demand were modified. Section 3 highlighted the anticipated impacts of climate change: Demand side: o Summer cooling of residential and commercial properties will increase due to rising summer temperatures. o Winter heating of residential and commercial properties will decrease as winter temperatures rise. 52 o Based on analysis of the above effects and combining these two phenomena results in an estimated net effect of a reduction in annual demand of approximately 0.1 percent per year. It is noted that this annual decrease may disguise a more significant impact on energy security due to changing seasonal demand, with the summer peak demand increasing and potentially becoming a greater controlling factor than current winter peak demand (see Section 5.7 for more information on seasonality of impacts). Box 8: Active and passive scenarios in the draft National Energy Strategy, 2007 The draft National Energy Strategy uses two future scenarios (passive and active) to project Albania`s electricity supply and demand up until 2019. Both projections are based on economic growth in Albania of +5 percent GDP per year. The passive-scenario projection assumes the preservation and development of the present situation in terms of supply and demand for energy in all sectors of the local economy. It projects continuation of electrical power consumption as the dominating source of energy for space heating and water heating in the households and services sector. This projection assumes that a considerable part of the future demand for electrical power shall be covered by extension of the thermal generating capacities (based on marine petroleum, solar, fuel oil, and imported natural gas) and hydropower energy. The active-scenario projection assumes efforts to address the supply­demand imbalance that is expected to arise under a passive scenario. It assumes the following objectives: Improving supply security Improving energy efficiency Diversification of energy resources Use of renewable resources Real pricing of electrical power Implementation of the regional electricity market Environment protection The active-scenario projection assumes a focus on improving energy efficiency through: Greater use of domestic solar water heating Improved building standards (insulation, windows etc.) Lower energy appliances Alternative heating sources other than use of electricity Although the active scenario envisions efforts intended to address current energy security concerns, many of the actions included in the active scenario would also help to build resilience to the impacts of climate change. The projections made underthe active scenario are dependent on the successful implementation of the measures outlined above, which will be challenging. For the elements of the cost­benefit analysis involving the active-scenario projections, it has been assumed that these measures are implemented as described in the draft NES. (Government of Albania, 2007) Supply side: o Reduce annual precipitation and increases in temperature, leading to lower runoff and less hydropower generation. As outlined in Section 3, the impact of climate change on large hydropower plants is estimated as reduction of their generation by 15 percent by 2050. For small hydropower plans, the reduction is estimated as 20 percent by 2050. 53 o Reduce efficiency of thermal power plants and also transmission and distribution networks. The efficiency reduction has been estimated as 1 percent for TPPs by 2050, associated with rising temperatures. This estimate does not take into account any impact on efficiency of thermal power plant operations due to environmental management associated with cooling water discharge. Vlore TPP will be cooled using seawater, and it is considered unlikely that its operations would need to change for discharge to the marine environment. (However, if Albania develops river- or lake- cooled TPPs in the future, these risks could be significant.) Losses from transmission and distribution networks are also estimated as 1 percent by 2050. o The projected reduction in cloudiness would mean that the output of solar power plants would increase in the future. As outlined in Section 3, it is estimated that an increase of 5 percent would occur by 2050. The resulting predicted net reductions in supply (shortfall in power generation) due to climate change are on the order of 580 to 740 GWhrs/annum (2 percent to 3 percent of total power demand) by 2050, based on the extrapolated passive- and active-scenario projections respectively. Interestingly, the shortfall caused by climate change in the active-scenario projection is greater than that in the passive-scenario projection. This is because the active- scenario projection assumes greater demand-side efficiency measures, less reliance on GHG- emitting thermal plants, and a greater share of generation burden placed on hydropower plants, which are more affected by climate change than other sources of electricity. However, an aspect that should not be overlooked is the fact that many of the actions proposed as part of the active scenario represent adaptation options: energy efficiency measures, diversification of assets, and regulatory reform. Ensuring implementation of these measures would be an important part of a strategy for Albania to manage climate-related risks and vulnerabilities to the energy sector. As climate change impacts take effect in Albania, these adaptive-active scenario options will have increasing value. However, the benefits evident in the active-scenario projection are predicated on successful implementation of energy efficiency measures, asset diversification, and other measures mentioned in the draft NES. As can be seen in Figure 20, the active- and passive-scenario projections track together over the time period considered, with the energy shortage due to climate change slightly higher in the active scenario than that in the passive scenario. As already mentioned, the draft National Energy Strategy projections end at 2019. From 2020 onward, the shortage is projected using a different methodology and a number of technologies are assumed either to come online or increase output. This is the reason for the inflection in the active scenario line at 2020. (See Annex 7 for further details.) 54 800 700 600 500 Shortage (GWh) 400 300 200 100 - (100) 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 Passive Scenario Shortage Active Scenario Shortage Figure 20: Electricity shortage due to climate change Superimposing the impacts of climate change on the annual supply­demand projections reflects only part of the potential threat that Albania`s energy sector faces from climate change. There is a question regarding how the energy system will work during critical periods (very hot or dry periods) and whether more-significant impacts may emerge under some circumstances that are beyond the annual-average shortfall projected in Figure 20. For example, the shortfall projected does not take account of the limited capacity for storage of water in reservoirs that serve LHPP assets. If, due to climate change, runoff that fills the reservoirs comes in shorter, more-extreme periods of wet weather that requires water to be spilled, followed by long dry periods and shortage of water, the power generation from LHPPs could be less than projected above. This issue is discussed further in Section 5.7. A recent study in Brazil indicated that where power production was calculated based on projected annual-average rainfall/runoff data, climate change would result in a 3 percent drop in power generation. When the same analysis was conducted using more detailed seasonal data, it was projected that the drop in firm power production could be as much as 30 percent (Schaeffer et al., 2009). At this stage, there are insufficient hydrometeorological and climatological data available for Albania to enable an estimate of future subannual rainfall and power-generation relationships. However, this could be researched further by policy makers and technical managers. 5.3 OPTIONS TO MEET THE PROJECTED POWER SHORTFALL DUE TO CLIMATE CHANGE IMPACTS Having identified potential future shortfall in electricity supply due to climate change, and noting that some measures that contribute to building climate resilience are already contained within the active-scenario projection, this assessment looks at the costs and benefits of options for diversification of Albania`s electricity supply. Before discussing these options, it is worth noting briefly the significant benefits of improving energy efficiency. The Asian Development Bank estimates that if 1 million incandescent light bulbs were replaced with compact fluorescent lamps (CFLs) at a cost of about $1.5 million, electricity demand would be reduced by about 50 MW. It estimates that the cost of building a 55 new 50 MW power station would be at least $50 million, and that operating costs would add another $2 million to $3 million per year. This demonstrates how cost-effective energy efficiency measures can be, and further strengthens the argument for ensuring that the energy efficiency measures in the draft NES are implemented. For the cost­benefit analysis, eight reasonable and practicable technology-based options (asset types) for filling the electricity shortfall were identified during the workshops. These selected options are described in order of increasing estimated capital cost. Assumptions relating to the parameters that were used to assess each option in the CBA are also outlined: 1. Import. The import of electricity from neighboring countries is considered to be a realistic potential option. There is a premium associated with the cost of this power and prices fluctuate on a daily basis. To assess the environmental and social effects associated with this option in the CBA, only those global impacts that could potentially affect Albania were considered. Water usage and emissions for this option were considered to be the same as for the combined cycle gas turbine option. Impacts on ecosystems and disturbances to people and property were not considered, as it was assumed that the regulatory authority in the generating country has already taken these into account. It has been assumed that all imported electricity is produced using combined cycle gas turbine (CCGT) technology, although it is recognized that a range of electricity generation technologies are used in South Eastern Europe (see Box 2, Section 2.1), including nuclear power, hydropower, other renewables, and GHG-emitting thermal plants fueled by coal. 2. Use combined cycle gas turbine (CCGT) technology. A new-build CCGT-based power plant would use natural gas, which is cleaner than coal but has several disadvantages, such as dependence on foreign sources of fuel and relatively high GHG emissions in comparison with renewable technologies such as hydropower. Supercritical pulverized coal technology was not considered in detail in the CBA, but if supercritical pulverized coal technology were used instead of a gas-fired CCGT, it would have different environmental costs: it has approximately 200 percent of the water usage and 220 percent of the GHG emissions of CCGT. CCGT is clearly the more sustainable thermal option in spite of costing approximately 10 percent more than coal on a levelized basis. 3. Improve/update existing large hydropower plants (LHPPs). There is some capacity for improvement in existing large hydropower assets, including actions such as optimizing data collection and usage, reservoir/dam maintenance and reservoir management. 4. Improve/update existing small hydropower plants (SHPPs). Many of the small hydropower assets in Albania are old, and technology and design have improved considerably since they were installed. In many cases, improvements such as optimizing turbine operation with respect to varying river flow regimes, widening intake and outfall channels, resizing turbines/plant, and improving connections to the transmission network are possible. 5. Install new small hydropower plants (SHPPs). There are a number of unexploited sites where new run-of-river hydropower plants could be sited. These smaller plants generally serve smaller communities and could be connected to local distribution networks as well as the national transmission grid. 6. Develop wind power. At this stage, there is no wind-power electricity generation in Albania, although, as outlined in Section 2, a number of potential projects are currently under consideration in Albania`s coastal areas. 56 7. Use concentrated solar power. Concentrated solar power (CSP) captures solar energy through a large array of mirrors, directing light toward a brine solution or other thermal receptor that converts the solar energy into electricity. There are currently no CSP plants in Albania. However, there are several located in the Mediterranean region in areas with similar solar characteristics to those of Albania. 8. Install new large hydropower plant (LHPP). This option represents the building of a completely new dam and reservoir to exploit the remaining generation potential in Albania`s hydrological system. In undertaking the CBA, potential constraints on the implementation of technologies have been considered: It is considered that, subject to approval, there are no physical constraints on the number of thermal power plants that could be installed. With respect to wind power, there are insufficient data at present on wind speeds in Albania at turbine operating heights. However, it is assumed that there is adequate wind potential for the purposes of the CBA. In the case of CSP, technology is developing in this area and a number of stakeholders felt that this technology might become more feasible in the future, perhaps by 2040 and beyond. Aspects considered in relation to current use of CSP were: I. The technology is relatively new. II. The capital costs are higher compared to other technologies. III. There is not enough operating experience accrued worldwide to provide real data for operating and maintenance costs. IV. It involves higher technological, schedule and financial risks. It is expected that by 2040 the capital costs for CSP would be comparable with other technologies and sufficient experience worldwide would be developed that would reduce the current risks associated with CSP. For the purposes of the CBA, best estimates of technology costs (CAPEX and OPEX) have been used in the analysis, though it is recognized these may be reduced if/when the technology advances. With respect to hydropower, much more data are available. METE stated during meetings that the current estimate of Albania`s hydropower generation capacity is 3,200MW total for LHPP and SHPP (Tugu, 2009). Of this, there is currently 1,445MW of LHPP and 15MW SHPP installed capacity. The future supply projections developed in this assessment are based on development of a further 1,150MW LHPP and 390MW SHPP, thus giving a total installed capacity of 3,000MW by 2050. These values are estimated before the impact of climate change has been taken into account, which it is predicted would reduce hydropower potential in Albania. Therefore, there may be a significant physical constraint on further potential capacity for hydropower generation, beyond those facilities already included in the future projections. However, given the uncertainty surrounding total potential for hydropower generation in Albania, and that estimates may be substantially modified if additional basin hydrometeorological data and modeling were available, further development of both LHPPs and SHPPs have been considered for the purposes of the CBA. 57 Importantly, to compare the costs and benefits of all the different assets on a like-for-like basis, a quantity of power was chosen, 350 GWh, which could meet the estimated climate change- induced shortage for 20 years. All of the generation capacity is not required at once, but rather the need increases over the assessment period. Some assets would probably not be able to fill the entire gap from beginning to end. Additionally, the assets under study have different expected periods of service. Twenty years represents a period of time for which energy needs could be met by the technologies under consideration. For the second 20 years to 2050 (the timescale under consideration for climate change risks in this assessment), the additional generation needs could be reexamined. This analysis thus considers what could be done in the immediate future, providing guidance as to what may be good options. It is important to note that the use of a normalized quantum of a particular asset that could provide 350 GWh per year is hypothetical and a simplification, in the sense that installing this amount of capacity may be unrealistic in most cases. For instance, economies of scale dictate that a 50 MW thermal plant (which would provide about 350 GWh) would generally be less feasible on a financial basis than a larger unit. Furthermore, to complete a high-level CBA, it has been necessary to make broad assumptions about the specific locations where future assets may be sited and also of the various options, their costs, and their impacts on society and the environment. In addition, it should be noted that the options would themselves be susceptible to climate change. The most notable impacts would be on the SHPP and LHPP options, as these are most sensitive to climate change (see Sections 3.3 and 3.2), though the efficiency of TPP is also slightly reduced as temperatures rise (see Section 3.4). In contrast, there may be benefits for future solar power production due to reduced cloud cover in summer in the future (see Section 2.2). Since the available cost and benefit data are relatively high-level, further analysis of these impacts on the options is not included in the scope of the CBA. Thus, the options considered in this assessment are generic and indicative rather than definitive. However, it is considered useful and informative to undertake a high-level CBA for these technologies, to provide an indication of what the key issues are, and to identify where further data could be used to reduce uncertainty or confirm a chosen course of action. The eight power technology options were evaluated on the basis of eight parameters that were determined based on the outcome of workshops and discussions with stakeholders. Parameters were chosen that reflect sustainable-development performance aspects--that is, financial, social, and environmental aspects of the different options. The parameters selected are detailed next. 5.4 BENEFIT CATEGORIES/PARAMETERS USED IN THE COST­BENEFIT ANALYSIS In a complete economic analysis, the benefits of a given course of action are compared to the cost. Actions that result in a net overall positive benefit to society as a whole are deemed economic and sustainable. The approach for this analysis is to attempt to capture the maximum likely benefits and dis- benefits (i.e., costs) that would accrue to both the power producers (private benefits/dis-benefits) and to society (external benefits/dis-benefits), for each of the various alternatives being assessed. To do this, a conservative approach (from the economic point of view) has been adopted, with each external (societal) monetizable benefit valued using a method that would tend to overstate (rather than understate) the benefits. In addition, a qualitative examination of some likely nonmonetizable benefits is also included. Thus, in the CBA, likely costs are compared with conservatively high benefits, or disbenefits, as the case may be. In adopting this approach, the report is biasing the economic analysis toward the societal position. This is advantageous 58 because it assures that the external perspective is fully considered and valued, and helps to deflect any possible criticism that the analysis favours the proponent. The parameters/potential benefits considered are summarized next and described in more detail in Annex 5. Financial Parameters Financial parameters reflect a number of key issues identified at the workshops. An obvious issue is the cost per unit of electricity produced. Although social and environmental aspects are also important, the cost of producing electricity plays heavily on the viability of a given asset type. Loss of production is also reflected in the financial parameters, specifically revenue from electricity sold. The possibility that an asset type may not be able to fill the electricity shortage is included in the model by virtue that it would have lower associated electricity revenue. 1. Capital Expenditure. Capital expenditure is the financial expense required during the construction of the plant. It represents investment in the fixed assets that are used to generate electricity. The value of land is also included in capital expenditure figures. 2. Operating Expenditure. Once the plant has been built, ongoing expenditure is required to keep the plant operating. These costs comprise spares, maintenance, fuel, and other ongoing costs required to keep the plant operating. Operating expenses vary depending on asset type and depend on factors such as the location of the asset (more isolated assets are more expensive to supply) and the age of the technology (newer technologies are often more expensive to maintain). 3. Electricity Revenue. The revenue received through the sale of produced electricity represents both the value of the production of the electricity and its contribution to macroeconomic activity. Electricity revenue is based on the stated market price of 8.23 Lek per kWh (USD 0.085 per kWh) (Tugu, 200). This parameter also represents a portion of the benefits to the economy through a contribution to GDP. Environmental Parameters In the workshops environmental parameters were also identified as high priority issues to be taken into account when deciding which type of power assets to build. Greenhouse gases, other emissions, water and ecosystems were included as parameters in the CBA. In addition to determining a base case monetary value for these parameters, a potentially realistic maximum (high case) monetary value for these parameters was also determined, as shown in Table 6. 1. Value of water. Water in many forms (as a resource, in precipitation, in storms) is a key factor in the risks associated with climate change. In Albania especially, where a large proportion of electricity generation is based on water flows, it is important to account for water usage and availability when looking at the different generation options. In this economic CBA, the base value of water was based on the rate charged to an enterprise consumer in Albania, 90 Lek per m3 (USD 0.93 per m3). This price is based on information from Tirana Municipality (2006). It is noted that, other than for concession costs for new small hydropower plants, hydropower generators do not currently have to pay for water that they use. However, inclusion of this value in the analysis takes account of the fact that there may be cost in the future, as water becomes more highly valued by society. 2. Carbon dioxide and other greenhouse gases (GHGs). CO2 is the well-known greenhouse gas that is traded in markets around the world. The base value used in this analysis was based 59 on the European Trading Scheme market spot price, 15.80 per tonne (USD 21.55 per tonne) (11 May 2009). Other studies, such as the Stern Review (Stern, 2006), use detailed models to project the cumulative economic impact of additional units of GHG, called the social cost of carbon (SCC), estimated at approximately USD 75 per tonne CO2-e. This value was used in the evaluation of the high case (see Table 6). Other emissions that were considered were particulate emissions and NOx. After research, none of the generation asset types were determined to have significant emissions of particulate matter, so it was not monetized or explicitly included in the model. There are limited emissions of NOx from the CCGT plant option, and these emissions were valued at USD 62 per tonne based on the U.S. EPA auction of NOx emissions permits. Due to the limited scope of the study, some GHG emissions were not included. The GHG emissions caused by the decomposition of organic matter during the creation of a reservoir for a large hydropower plant and emissions during transportation of materials for construction of the various generation assets are two examples. 3. Value of ecosystems (loss of ecological services). Building a power plant on a greenfield site destroys or converts ecosystems to other uses. For the CBA, it was assumed that hydropower plants were built in mountainous ecosystems and all other asset types were constructed in coastal ecosystems. Based on published studies, the ecosystem services for the mountains were valued at USD 30 per hectare (UNEP, 2001) and coastal ecosystems were valued at USD 117 per hectare (Department of Natural Resources, 2004). The analysis included loss of ecological resources, specifically the loss of mountainous or coastal ecosystems, due to clearing associated with activities directly related to the power generation options being considered. Social Parameters The economic CBA takes into account an aspect of social concerns through a parameter that describes the overall disturbance to people and property caused by new constructions. There were several other social aspects identified as important in the workshops that could not be generalized and therefore were not included within the scope of this high level analysis; examples are impacts on tourism, recreational benefits of some asset types (e.g., reservoirs) and political implications of constructing a new power asset in a region or area where public dissatisfaction is high. 1. Disturbance of people and property. This aspect has been valued using an approach that has been previously widely used for assessing the disturbance from wind farms (Ladenberg, 2001). This value was pro-rated for the other asset types based on the population density of the area and the footprint of the asset at hand. It is clear that there are other disturbances, such as recreational benefits, and importantly for Albania, impacts on tourism. This is an area for further study when more information about specific proposals is available. Other important aspects are mentioned below. 2. Discount rate. In economics, it is common to assume that having something now is worth more than getting it in the future. This is the basis for interest on bank accounts. To account for the fact that expenditure today precludes other uses of the money, a discount is applied to future cash flows. The amount of this discount rate has an effect on the present value of future cash flows. In this assessment, a base discount rate of 4.5 percent has been used. This discount rate has been adopted as the base value following discussion with the World Bank`s energy economist in Albania. The value is higher than the social discount rate used in other developed European economies (e.g., the United Kingdom uses 3.5 percent) and reflects the higher potential growth rates that a developing economy, such as Albania`s, may experience. 60 The choice of discount rate can be contentious, especially in the context of environmental and social benefits that occur many years in the future. Whereas environmental benefits for future generations may not be considered as less valuable than the same benefits for the current generation, in the context of purely financial investments, such as savings accounts, benefits now are much more highly valued than later benefits. This causes a divide between the discount rate used for public projects and the private discount rate used by investors when making investment choices. The power sector necessarily combines a number of stakeholders with interests in both the private financial and the public social/environmental performance of investments. A project that is attractive from a purely private financial point of view may not be interesting from a public point of view (or vice versa). Therefore, for this assessment the impact of discount rate on the outcome of the CBA is explored through sensitivity analysis, to understand the effects that discount rate assumptions may have on the relative performance of different options. Important Aspects for Further Study As many parameters as feasible have been included within the scope of the high-level CBA assessment. However, it is important to note that there are several important aspects that either could not be included or were not included to the full extent possible in principle. Water, by nature of its multiple forms and uses, is a particularly complicated aspect to consider in policy decision making. In future studies, the alternative possible uses of water (e.g., irrigation) should be considered. There are also nonuse and ecological values to consider. Not every use of water accrues all of these values. For instance, using water to cool a turbine through evaporation precludes its use for irrigation, whereas water that has passed through a hydropower turbine may still be available of downstream irrigation. Each asset type will have a different impact on the surrounding ecosystems. Furthermore, different locations will have different types of ecosystems of different values. Outside a highly- general study, greater ecosystem impact information is required to consider properly the full costs and benefits of various options. Broader economic impacts are also important. Again, across various assets, the exact impact that constructing a given facility will have on gross domestic product and employment will depend on the number of people that particular facility takes to operate, the type of training required and the legal structure of the operating company. Although these effects could only be superficially covered in this assessment, they are suited for inclusion in a more detailed and specific future study. Vulnerability to natural disasters and increased climatic vulnerabilities is another parameter that was identified as important at the workshops, but has only been incorporated in the CBA through sensitivity testing (see Section 5.6). Further study could expose potentially-critical hidden vulnerabilities that would need to be incorporated into policy decisions. A summary of the base case and high case parameter values used in the CBA is presented in Table 6. 61 Table 6: Base Case and High Case Parameter Value Assumptions Benefit Category Units Base (USD) High (USD) Value of water m3 0.93 3.00 Carbon dioxide and other Tonne 21.55 75.00 GHG emissions NOx emissions Tonne 62.00 80 Value of ecosystem /ha/yr 30 200 (mountain) Value of ecosystem (coastal) /ha/yr 117 200 Disturbance of people and /hh/km2/yr 1.82 5.00 property 5.5 RESULTS OF THE COST­BENEFIT ANALYSIS Given the financial, environmental and social base values discussed in the previous section, the results of the CBA for the base values only are presented below. The charts (Figures 21 and 22) provide the net present value (NPV) results in current (2010) U.S. dollar terms for each of the technology options under consideration. Net Present Value of Options 400 300 200 USD millions 100 - -100 -200 IMPORT Enhance CCGT Enhance New WIND CSP New Extg. Extg. SHPP LHPP LHPP SHPP Figure 21: NPV using base case assumptions Figure 22 illustrates the NPV results broken down by each internal and external parameter value. 62 Breakdown of Costs and Benefits by Option 700 600 500 400 MUSD 300 200 100 - Benefit Benefit Benefit Benefit Benefit Benefit Benefit Benefit Cost Cost Cost Cost Cost Cost Cost Cost IMPORT LHPP CCGT ESHPP New WIND CSP New Update Update SHPP LHPP CAPEX Option Electricity Benefit GHG Ecosystem Impact (Coastal) Ecosystem Impact (Mountain) Water NOx Disturbance of People OPEX Figure 22: Breakdown of NPV of options by parameter The options are sorted from greatest to least capital expenditure, going from left to right. In general, options with an NPV less than zero are not considered economic/sustainable. Options with an NPV greater than zero are economic/sustainable. The higher the NPV the more sustainable is the option. The three most-sustainable options identified are as follows: 1. Enhancements to existing large hydropower assets 2. Enhancements to existing small hydropower assets 3. The building of new small hydropower plants Within the scope of this CBA, two options appear unsustainable within the context (i.e., to fill the future shortfall in electricity supply due to the impacts of climate change) and boundaries of this assessment, namely: building new large hydropower plants, and importing power. However, in this particular analysis the relative ranking of the options is more important than the specific NPV of any particular option. Due to the high-level nature of this analysis, other possible benefits that may be very relevant when considering a specific project have not been considered. In a detailed analysis phase, careful consideration of all possible benefits may well mean that the two unsustainable options may, in fact, be sustainable in certain contexts. This is especially important to note in the case of New LHPP. Although in the context of this analysis the net present value is below the breakeven point (zero), this should not imply that the options should never be undertaken. Nevertheless, these results provide useful information by way of illustrating a high-level comparison of the options. The breakdown chart in Figure 22 shows that by far the biggest costs are capital expenditure (CAPEX) and operating expenditure (OPEX). This is unsurprising, as most of the options are 63 based on renewable fuels, which have fewer external costs than traditional generation asset types such as coal-fired power plants. The nonrenewable option, CCGT, is a low-carbon source of energy and thus also has limited environmental impact. Importing electricity has the biggest operating expenditure, because the electricity is purchased from the regional grid, and thus, the price reflects recapture of foreign capital expenditures, operating expenditures, and the profits of the other generating assets. However, this should not be taken as evidence that imports do not play an important role in Albania`s energy mix. This assessment is concentrating only on the shortage due to climate change, which is one piece of a larger energy context. Imports are sometimes necessary to fill short-term shortages and avoid load shedding. Furthermore, this analysis was based on a one-time snapshot of market prices, where import cost is higher than domestic sales revenue in Albania. In reality, there are a number of measures that could help manage the cost of imports. Financial tools such as options or long- term contracts could hedge against price movements and keep imports viable for appropriate uses. However, the results of this analysis suggest that for the gap caused by climate change, another source of electricity may be preferable. As mentioned in Section 5.3, supercritical pulverized coal technology was not considered in detail in the CBA. A cursory analysis based on general knowledge of the relationship between the cost, GHG emissions, and water usage of supercritical coal and CCGT technologies indicates that although coal technology is less sustainable than CCGT, it ranks relatively the same amongst all the other options. That is, it would likely be the fourth most sustainable option behind the three options just identified. 5.6 SENSITIVITY ANALYSIS Any CBA analysis of this type is inherently subject to uncertainty. Cost estimates provided are to ±30 percent accuracy, and the valuation and estimation of benefits is subject to even larger changes, as discussed in Annex 5. However, the aim of the analysis is not to reveal absolutes in terms of dollars, but better and worse decisions overall, when comparing the range of possible decisions that could be made. From this perspective, sensitivity analysis is important because it allows the overall conclusions of the analysis to be tested across a wide range of parameter inputs. If a decision is favourable or economic over a wide range of parameter inputs, compared to other possible decisions, then despite the overall uncertainty in the actual dollar figures, the decision can safely be identified as superior to the alternative options. This is particularly useful when considering the sustainability of options. By definition, sustainability is concerned with the future, which is inherently uncertain. By varying key input parameters over a wide but reasonable range, the implications of a range of possible futures can be examined. The overall sensitivities are presented in the tornado chart in Figure 23. The sensitivities are normalized so the most sensitive option/parameter combination is 1.0 and less-sensitive options/parameter combinations have shorter lines, with values less than 1.0. The parameter to which every option is sensitive is the electricity benefit, which is the value to the producer and society for use of electricity. GHG and water value is significant for large hydropower options, and GHG emission costs are significant for CCGT and import options. 64 Figure 23: Tornado chart showing sensitivity of NPV for each option to variations in the values of each parameter One possible parameter case, using the high-case values summarized in Table 6, is presented in Figures 24 and 25. In this case, the values of water, carbon dioxide and other GHGs, and fuel for the CCGT are increased to represent a high scenario under the effects of climate change. Net Present Value of Options 300 200 100 USD millions - -100 -200 -300 -400 IMPORT Enhance CCGT Enhance New WIND CSP New Extg. Extg. SHPP LHPP LHPP SHPP Figure 24: Net present value of options under high parameter assumptions 65 Breakdown of Costs and Benefits by Option 900 800 700 600 500 MUSD 400 300 200 100 - Benefit Benefit Benefit Benefit Benefit Benefit Benefit Benefit Cost Cost Cost Cost Cost Cost Cost Cost IMPORT LHPP CCGT ESHPP New WIND CSP New Update Update SHPP LHPP CAPEX Option Electricity Benefit GHG Ecosystem Impact (Coastal) Ecosystem Impact (Mountain) Water NOx Disturbance of People OPEX Figure 25: Breakdown of costs and benefits, high parameter case The value of water primarily affects the large hydropower assets. Dams increase the surface area by which water can evaporate, causing water losses. With a higher value of water, the water usage of the large hydropower assets becomes a greater issue to society as a whole, and therefore this option becomes less attractive. Increase in the value of CO2 and other GHGs and fuel for the CCGT creates a marked decrease in the viability of the CCGT option. Increasing the value for CO2, fuel costs, and water is akin to making the assumption that these commodities are going to be increasingly valuable in the future under climate change. It should be noted that although Albania is not yet subject to a carbon trading system such as that adopted in the European Union (EU), it is important that the pricing of carbon is taken into account now, as Albania aims for inclusion in the EU, so in the future explicit GHG emission levies may apply. The reaction of the CCGT option in this analysis to this change in parameter values suggests that further study is warranted when considering CCGT. In this high-parameter case, small hydropower and updating existing hydropower are still viable options, and solar power begins to show relative advantages as well. These renewable options are not as vulnerable to fluctuations in fuel costs, increases in the value of CO2 and other GHGs, or increases in the value of water. Another set of parameters was designed to explore the effect that increasing frequency of extreme events may have on the availability of electricity from various sources. The primary source of risk is the vulnerability of power transmission assets to wind and lightning strikes. Although transmission lines are generally designed to withstand storms, repairing lines that are more remote is more difficult, meaning that assets that require longer transmission distances, 66 such as hydropower and import, are more vulnerable. To set up this scenario, a penalty was placed on long-distance transmission assets--that is, all hydropower assets and the import option. For the base value, it was assumed that in the second 20 years of the analysis, these assets are unable to supply the needed power for one week per year, due to extreme events. By adjusting this factor up and down, the significance of this effect on the relative ranking of the options is revealed. The results of this extreme event scenario are illustrated in Figure 26. It can be seen that the effects on the ranking of options are relatively minor, in spite of the effect having an approximately USD$8 million penalty. This indicates that in spite of the increased risk, the other parameters are more important to the relative ranking. It is important to note that this is based on the assumptions made, and that further study may reveal cases where transmission vulnerability may be an important consideration. A more-significant effect was investigated; i.e., long transmission assets being put out of service for a month per year. Depending on the availability of resources in Albania and the remoteness of the terrain, this effect is a possibility. Figure 27 shows the results of one month of shortage for long transmission assets for every year of the final 10 years of the assessment period. However, interestingly, even when the long transmission assets are further penalized and are taken out of service for a month every year, the effect is not enough to change the conclusions of this high- level CBA analysis. Net Present Value of Options 400 300 200 USD millions 100 - -100 -200 IMPORT Enhance CCGT Enhance New WIND CSP New Extg. Extg. SHPP LHPP LHPP SHPP Figure 26: Costs vs. benefits for the extreme storm case (1 week per year outages) 67 Net Present Value of Options 300 200 100 USD millions - -100 -200 -300 IMPORT Enhance CCGT Enhance New WIND CSP New Extg. Extg. SHPP LHPP LHPP SHPP Figure 27: Costs vs. benefits for the extreme storm case (1 month per year outages) A final case illustrates the effect that length of time can have on the analysis, whereby the timeline is extended from 20 years to 50 years (see Figure 28). All base-case parameter values are used. It should be noted that many of the assets would not last until 2050 without extensive reinvestment. However, this case illustrates the consequences of the time and discount rate assumptions. Under this scenario, all options except import (discussed above) have greater value to society because they are providing value for a longer period of time. Eventually, the ongoing benefits outweigh the one-off investment costs. Net Present Value of Options 500 400 300 200 USD millions 100 - -100 -200 -300 IMPORT Enhance CCGT Enhance New WIND CSP New Extg. Extg. SHPP LHPP LHPP SHPP Figure 28: Costs vs. benefits for 50-year duration analysis 68 Figure 29 presents the sensitivity of the various options to changes in the discount rate in the range 0 percent to 20 percent. The NPV is represented by the vertical axis and the discount rate increases along the horizontal axis from left to right. The chart illustrates that in general, over a range of different discount rates that would typically be used for public decision making, the relative ranking of the options does not change, with the Update LHPP option returning the greatest NPV. However, as the discount rate increases toward ranges that represent typical investment thresholds for private investors, Import becomes a relatively more attractive (though still NPV-negative) option. Additionally, when the discount rate is larger than 16.2 percent CCGT becomes marginally more attractive than New SHPP. CCGT has higher operating costs. However, the effect of the future operating costs on CCGT" in comparison with New SHPP is such that NPV for CCGT is diminished at higher discount rates. Figure 29: Sensitivity of options to discount rate Another interesting parameter for the sensitivity analysis is the value of carbon dioxide and other GHGs. Varying the CO2 price over a range of values is illustrated in Figure 30. 69 Figure 30: Sensitivity of options to carbon dioxide and other GHGs As expected, the economics of a group of renewable assets are generally insensitive to the value of carbon dioxide and other GHGs. Those options that are sensitive to increasing value are CCGT and Import (the latter assumed to be generated via CCGT), due to the fact that they both use fossil fuels. The higher the value placed on carbon dioxide and other GHGs, the more unfavorable the Import and CCGT options become in relative terms. The sensitivity of the options to water value is shown in Figure 31. The LHPP options exhibit the largest sensitivity to the value of water. New LHPP remains the least favorable option under conditions where the value of water is greater than USD 0.71/m3. However, even at lower values (down to zero) New LHPP does not become favorable in comparison to any of the other options except Import. The value of water also has a large impact on the relative attractiveness of Update LHPP; the higher the value of water, the more appealing are alternative options. As mentioned already, due to the high-level nature of this analysis, other possible benefits that may be very relevant when considering a specific project have not been considered. 70 Figure 31: Sensitivity of options to the value placed on water 5.7 USING THE RESULTS OF THE COST­BENEFIT ANALYSIS TO SUPPORT DECISIONS TO MANAGE THE ALBANIAN ENERGY SECTOR IN THE FACE OF CLIMATE CHANGE The high-level cost­benefit analysis examined eight options to provide equivalent power generation of 350 GWh per year for the next 20-year planning horizon, where existing technology and current asset life span remains most relevant. This analysis therefore ranks the options based on a common measure. On the one hand, it is recognized that the projected shortfall in energy supply due to the impacts of climate change will gradually increase over time, and that some technical options are more flexible in their implementation and may be more economic where an incremental increase in supply capacity is preferred (e.g., gradual implementation of small hydroelectric or wind power schemes). On the other hand, it may be considered that larger plants built early in the planning period may provide additional returns. These considerations could be examined in further detail by future studies, but are beyond the scope of the current assessment. In addition, to fill the projected energy shortfall, the CBA indicates that the most economic/ sustainable options to consider are enhancing existing small and large hydropower schemes and development of new small hydropower schemes. However, it is recognized that there may be a limit to the amount of additional hydropower generation capacity within Albania. METE estimates that there is capacity for only 3,200 MW installed HPP in Albania (Tugu, 2009), and there may be insufficient additional capacity, beyond that used in the projections for supply to 2050, to accommodate all additional requirements due to climate change. Therefore the results of the CBA could be used to some extent to prioritize adaptation measures, starting initially with 71 upgrading existing facilities, moving on to exploiting remaining small hydroelectric power opportunities, before consideration of other assets that may be less economic/sustainable. Important Notes As noted above, this analysis addresses only a small part of the larger context of the effects of climate change on Albania`s energy sector. Additionally the high-level nature of the assessment means that in specific situations the results of a CBA could be different. Several constraints and limitations on the CBA are worth mentioning. First, the environmental and social effects of the construction phase for energy assets were not considered; only the financial aspects. Although the construction of a power plant is a resource- intensive undertaking, it is difficult to make a general qualification about social and environmental impacts without studying a specific project. For instance, in some cases the construction of an equivalent capacity hydropower facility may cause more CO2 emissions than constructing a thermal power plant, especially during the construction of a dam. However, in other cases--for instance, if a thermal plant were sited in an environmentally valuable area--its construction may have the greater impact. Another issue that is not addressed directly in this economic cost­benefit assessment, but that would need to be addressed in further analysis, is the political and business climate in Albania. This includes factors such as Albania`s ability to attract investment funds and obtain necessary permitting. Many of the effects of climate change are seasonal in nature, though this analysis does not account for this, as the available data on seasonal water flows and energy production are sparse. However, it is worth noting the range of effects climate change may have on seasonal performance of energy assets, in particular HPPs. Not only may climate change affect the quantity of precipitation at any given period of the year, climate change may also influence the timing of changes. For instance, it was noted by Albanian energy sector stakeholders that existing SHPPs rely on runoff generated by spring and summer melting of the snow pack in the mountains. This runoff extends the period that the SHPP are able to operate. Although insufficient data were available for this assessment to determine the possible changes in snowmelt, it is anticipated that the timing and rate of spring melt may increase runoff and the risk of spillover of LHPP dams, which means that less water would be available for power generation if reservoirs were not sized adequately. To provide some illustration of the seasonal effects associated with power generation in Albania, historical monthly river flow rates into the Fierze Reservoir on the Drin River and power generation in the Drin Cascade were reviewed. Seasonal variations were examined for a relatively wet year (2006, Figure 32) and a relatively dry year (2007, Figure 33), from datasets provided by KESH. It should be noted that the flow rate presented on the graphs is the rate of inflow into Fierze reservoir and that the power generation--Drin total is the combined power generation for Fierze, Koman, and Vau i Dejes hydropower plants. The demand data presented are the demand that was met, and not necessarily the demand that may have existed if there had been unrestricted supply (i.e., had there been no load shedding, demand might have been greater). Although it is recognized that operation of dams and power generation from hydropower plants is potentially complex, a number of observations about the potential impacts of seasonality and possible future climate change impacts can be made based on these data. 72 Figure 32 (wet year) indicates that river flows are highly seasonal, with the winter and spring months having the greatest flow. In the wet year, power generation is more correlated with river flows than in the dry year. Generation appears to be independent of demand, as throughout the year demand exceeds generation, except for a short period during the spring. Correlation of Inflow rate and Power Generation for Drin Dam Cascade Wet Year 500 800000 450 Monthly Average Flowrate (m3 sec-1) 700000 Monthly Power Generation (MWhrs) 400 600000 350 300 500000 250 400000 200 300000 150 200000 100 50 100000 0 0 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep 2005 2005 2005 2006 2006 2006 2006 2006 2006 2006 2006 2006 Monthly Average Flowrate Monthly Power Generation - Fierze Monthly Power Generation - Drin Total Monthly Demand Figure 32: Rainfall and Drin Dam Cascade generation in a wet year (October 2005 to September 2006) Figure 33 shows a dry year. Seasonal variations are still apparent but are much less well defined. Generation is also less correlated with flow rate, and again generation appears to be independent of demand. At the beginning of the period examined (October 2006), generation increases, almost in anticipation of the increased flow rate seen in November and December. However, generation quickly levels off to a much lower level than in the corresponding months of the wet year. 73 Correlation of Inflow rate and Power Generation for Drin Dam Cascade Dry Year 500 800000 450 700000 Monthly Average Flowrate (m3 sec-1) Monthly Power Generation (MWhrs) 400 600000 350 500000 300 250 400000 200 300000 150 200000 100 100000 50 0 0 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep 2006 2006 2006 2007 2007 2007 2007 2007 2007 2007 2007 2007 Monthly Average Flowrate Monthly Power Generation - Fierze Monthly Power Generation - Drin Total Monthly Demand Figure 33: Rainfall and Drin Dam Cascade generation in a wet year (October 2006 to September 2007) Interpretation of this limited dataset indicates that, as expected, hydroelectric power generation is seasonal and strongly influenced by runoff. When the potential power generation is calculated by dividing the inflow rate by the efficiency factor that KESH reports for the Fierze dam (1.04 m3/kW in 2008) (Stojku, 2009), it is seen that potential power generation of the Drin cascade closely follows the seasonal pattern, with periods of excess and periods of deficit. This is as expected for a dam storage facility. The climate change projections indicate that future summers will become drier in Albania, runoff from snow melt may occur more rapidly and earlier, and summer energy demand will increase. As a result, these seasonal fluctuations will likely become more pronounced and may negatively impact Albania`s energy security. It is therefore important to consider these aspects when interpreting the need for diversification of assets and the conclusions of the cost­benefit analysis. Future studies would be useful, to examine in more detail the seasonal effects on energy security associated with climate change. 74 6. NEXT STEPS TO IMPROVE THE CLIMATE RESILIENCE OF ALBANIA'S ENERGY SECTOR Given the risks and adaptation actions highlighted in the previous sections, there are a number of steps that could be considered to build the resilience of Albania`s energy sector to cope with climatic variability and change. Many of these are no-regrets actions that would improve Albania`s energy security even without climate change, and some are included in the draft National Energy Strategy active scenario. Many others are generally low cost, though clearly where financial resources are constrained, even low-cost measures could be difficult to fund. They fall into the three categories outlined in Section 4: 1. Informational 2. Institutional 3. Physical / technical The steps, along with suggested timescales for commencing them, are as outlined next. Further details on these actions are provided in Annex 6. The annex highlights which actions are no- regrets and which are already included in the draft National Energy Strategy active scenario. In Year 1, Albania could consider: Improving meteorological and hydrometeorological monitoring, modeling and forecasting capabilities, and communicating that information effectively to energy sector stakeholders, to support energy sector planning and management Further research on climate change impacts on the energy sector, through downscaling of global climate model outputs, and researching the impacts of changes in seasonal climate conditions and extreme climatic events Initiating dialogue and research with partners in South Eastern Europe to develop a shared understanding of regional risks from climate change to energy security, and to discuss the implications for energy prices and trade Mapping out detailed plans to address issues in Years 2 to 5 and onward In Year 2, emphasis could be placed on beginning to develop policy, regulatory and other management options to manage climate risks, including: Improving and exploiting data on reservoir use, margins and changes in rainfall and runoff, to improve operational management of existing reservoirs Developing incentives for energy efficiency measures to reduce demand Enforcing measures to reduce technical and commercial water and energy losses Engaging with water users in the agricultural sector, to devise agreed strategies for managing shared water resources Incorporating assessments and management of climate risks into energy sector contracts, environmental impact assessments and other policy instruments for new facilities Developing tariffs and incentives to promote climate resilience of energy assets 75 Structuring Power Purchase Agreements with neighboring countries that take account of climate change risks Reviewing and upgrading Emergency Contingency Plans Investigating weather coverage and insurance instruments In Year 5, progress could be made in the following areas: Ensuring that new energy investments and rehabilitation of existing assets are building in resilience for projected climate changes Diversifying energy asset types, taking account of climate change Reducing technical and commercial losses from the transmission and distribution network Demonstrating progress on demand-side energy efficiency Having improved regional interconnections in place, and ensuring that regional partners have a shared plan in place for regional energy security in the face of climate change Testing Emergency Contingency Plans Ensuring that the measures commenced in Years 1 and 2 are making progress and being implemented successfully As noted, a number of these actions are already recognized by the government or identified for action, and are described in the draft National Energy Strategy`s active scenario (Government of Albania, 2007). 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Country and Water Notes and Selected Transboundary Basins. Washington, D.C., USA. World Bank. (2008a). Development and Climate Change, A Strategic Framework for the World Bank Group. World Bank. (2008b). Project Appraisal Document on a Proposed Credit in the amount of SDR 21.7 million (US$35.3 million equivalent) to Albania for a Dam Safety Project (Phase 5) in support of the South East Europe APL Program. World Bank. World Bank. (2008c). The World Bank Group`s Catastrophe Risk Financing Products and Services, July 2008. World Bank. (2009a).World Development Indicators. World Bank, Washington, D.C., USA. World Bank. (2009b). Project Appraisal Document on a Proposed Loan in the Amount of Eur 2.0 million (US$3.0 million equivalent) and a Proposed credit in the amount of SDR 3.8 million (US$6.16 million equivalent) to Albania for a Disaster Risk Mitigation and Adaptation Project, May 23, 2009, Report No. 43380-AL. World Bank. (2009c). Climate Change and Agriculture: Albania Country Note (Draft for Discussion). Washington, D.C., USA. World Bank. (2009d). Adapting to Climate Change in Europe and Central Asia. Washington, D.C., USA. 80 ANNEX 1: METHODOLOGICAL APPROACH TO THE ASSESSMENT A1.1 ANALYSIS OF OBSERVED CLIMATIC CONDITIONS AND DATA ON FUTURE CLIMATE CHANGE A considerable amount of research has been undertaken by climate experts in Albania to describe observed climatic conditions and trends, and this research was utilized in this assessment to provide a context for the existing vulnerabilities of the energy sector and as a baseline against which climate change will be felt (Bruci, E. 2008; Bruci, E. 2009). To understand potential future changes in climate for Albania and South East Europe more generally, data from nine global climate models (GCMs) that formed part of the Intergovernmental Panel on Climate Change Fourth Assessment report (IPCC AR4) were evaluated (Acclimatise, 2009). Projections of changes in the following climate variables were developed and mapped: · Temperature · Precipitation · Wind speed · Relative humidity · Cloudiness · Sea surface temperature · Sea level rise It should be noted that most global climate models operate at a coarse spatial resolution (2.5 o 2.5o is typical) that is insufficiently detailed for risk assessments and adaptation planning in small countries. As a result, methods have been developed to downscale the climate information to finer resolution, though these have only been applied in a small number of locations and often only provide results for the end of the century. In the absence of coordinated efforts to undertake climate downscaling for Albania, the global models, when studied at the regional scale, offer the best currently available guide to future Albanian climate conditions. It is clear that Albania would benefit from additional investment in downscaling of large-scale global climate models to scales of more relevance to river basin planning. A1.2 GEOGRAPHICAL INFORMATION SYSTEM (GIS) MAPPING To provide a visual tool to facilitate discussions at Workshop 1, graphics presenting climate change data were input into a GIS, to provide an overlay of climatic hazards against energy assets. These maps were developed in both ArcGIS and GoogleEarth. A sample of the GIS output is shown in Figure A1.1. The complete output is available and has been provided to energy sector stakeholders in Albania. 81 Figure A1.1: Sample GIS output. 82 A1.3 WORKSHOP 1: HANDS-ON VULNERABILITY, RISK, AND SWOT ANALYSES WITH ENERGY SECTOR STAKEHOLDERS IN ALBANIA A first workshop discussed climate risks and vulnerabilities of Albania`s energy sector, leading to the development of SWOT (strengths, weaknesses, opportunities and threats) analyses (Acclimatise et al., 2009a). It was held on March 10, 2009, and brought together more than 60 key stakeholders in Albania`s energy sector, including government ministries and agencies, utilities and corporations, private companies, expert consultants, university academics and NGOs, as well as energy sector experts from the World Bank and other international organizations. The objective of the workshop was to develop a shared understanding among these stakeholders of the climate risks and vulnerabilities of Albania`s energy sector. The workshop was opened by Ms. Camille Nuamah (World Bank), Dr. Suzana Guxholli (Council of Ministers), and H. E. Lufter Xhuvelli (Minister of Environment, Forests and Water Administration). Plenary sessions were followed by four breakout group discussions on various aspects of Albania`s energy sector that could be vulnerable to climate risks: 1. Hydropower plants and energy demand 2. Other forms of energy generation: thermal power plants and renewable energy 3. Electricity transmission and distribution and small hydropower plants 4. Fossil fuel supply and transmission / transportation Each of these working groups focused their discussions around three key areas: 1. Overall strategies and objectives for Albania`s energy sector 2. Climatic vulnerabilities of existing and planned energy sector assets 3. Climate change risks A Business Risk Pathways Model was used in the workshop to help facilitate working group discussions. This took the form of a diagram presenting the linkages between changing climate hazards and their consequences for the performance of the energy sector (Figure A1.2). This tool was subsequently used to provide the criteria for assessing the significance of climate change risks to the energy sector (see Annex 2 for further details). Building on the outcomes of the workshop and meetings, SWOT analyses were developed for each of the breakout group themes. Directly after the first workshop, meetings were held with energy-sector experts from government, the private sector, research and academic institutions and NGOs, at which the risks and vulnerabilities identified during the workshop were discussed in greater depth. 83 Figure A1.2: Acclimatise Business Risk Pathways Model, adapted for Workshop 1. 84 A1.4 ANALYSIS OF CLIMATE RISKS FOR REGIONAL ENERGY MARKETS IN SOUTH EAST EUROPE Albania`s draft National Energy Strategy (2007) places emphasis on Albania increasing energy trade with its neighbors in South East Europe as a way of helping with security of energy supply. Hydropower is widely used throughout the region, and the climate change projections indicate that the whole region could experience higher temperatures and reduced summer precipitation in future. However, it is not clear that all parts of the region would experience wet or dry seasons or years at the same time. A brief analysis of energy generation types across the region was undertaken, considering how climate risks could affect them and questioning whether careful selection of an ensemble of hydropower investments could help to diversify risk (Ponari et al., 2009). A1.5 DEVELOPMENT OF HIGH-LEVEL QUALITATIVE AND QUANTITATIVE ASSESSMENTS OF CLIMATE CHANGE RISKS TO ENERGY ASSETS While the first workshop and associated meetings were helpful in identifying the key risks and vulnerabilities of the energy sector, it was not possible within the time available at the workshops and meetings to develop high-level quantitative estimates of the risks to each energy asset type, nor was it achievable to evaluate the significance of each of the risks. These estimates were required as input to the CBA. Instead, high-level quantitative estimates of risk and risk ratings were developed based on engineering expertise and a review of relevant literature. Estimating climate change impacts on hydropower plants and other energy assets An in-depth approach to quantifying the impacts posed by climate change for large hydropower plants (LHPP) would involve hydrological modeling using downscaled climate change scenarios, and subsequent modeling of the impacts of changes in river flows on hydropower plant output. However, this approach would take considerable research effort and time, which is beyond the scope of this high-level assessment. Instead, quantitative estimates were developed drawing on the following information and data: Modeling of the relationships between changes in climate (precipitation and temperature) and changes in river flows for several catchments Albania (Islami et al., 2002; Bogdani and Bruci, 2008; Islami and Bruci, 2008) A correlation undertaken of annual average inflows to Fierze hydropower plant on the Drin Cascade (Annex 8) and consequent electricity generation, together with a similar correlation for power production from LHPP on the Mati River (Islami and Bruci, 2008) Recent research undertaken in Brazil, which used regional climate modeling data to project impacts on output from Brazil`s hydropower plants (Pereira de Lucena et al., 2009; Schaeffer et al., 2009) These information sources were analyzed and a paper was produced, providing a high-level estimate of climate change impacts on generation from LHPP (Annex 8). This estimate was subsequently used in the cost­benefit analysis. Estimates of the climate change impacts on other energy assets were developed drawing on climatological and engineering expertise and on the relationships between climatic factors and asset performance (Annex 9). In some cases, the relationships between average climatic 85 conditions and energy assets are straightforward and well-established in the engineering sector (e.g., impacts of increases in temperature on efficiencies of gas turbines). It is worth noting again that it is not the purpose of this analysis to assess in detail all of the impacts of climate change on Albania`s energy sector. Instead, this analysis provides high-level (semi-quantitative) assessments to identify key risk areas where subsequent more in-depth analyses could be focused. In particular, data are not available on future changes in extreme climatic events, which could have significant consequences for the sector. Furthermore, knowledge and data on the detailed design characteristics of Albania`s energy assets, particularly in relation to proposed new assets, would be needed. Evaluating the Significance of Risks The significance of a risk is rated according to the probability of a hazard occurring and the magnitude of its consequence. A risk rating system for Albania`s energy sector was developed using the tool presented in Figure A1.2. This rating system is detailed in Annex 2, Tables A2.1 and A2.2. Drawing on the quantitative estimates described, and using expert judgement, a desk-based exercise was undertaken to assign a rating to each of the risks. These ratings were tested and revised in collaboration with stakeholders during the second workshop. The resultant risk maps are presented in Annex 2, Tables A2.3 and A2.4. Further detail is provided in Sections 3 and 4. A1.6 WORKSHOP 2: ADAPTATION AND COST­BENEFIT ANALYSIS WITH ENERGY SECTOR STAKEHOLDERS IN ALBANIA A second workshop and associated meetings, held on April 21­23, 2009, discussed adaptation measures to address the potential risks and vulnerabilities identified in the first workshop, and set out the framework for an assessment of their costs and benefits (Acclimatise et al., 2009b). Workshop participants included a cross-section of more than 25 stakeholders from the government, key agencies and institutions, academia, the private sector and NGOs. The second workshop involved five steps: 1. Agreeing the objective for the cost­benefit analysis of the energy sector 2. Confirming the key risks posed by climate change 3. Agreeing the boundaries / limits and constraints of the CBA 4. Identifying adaptation options to meet the objective 5. Discussing the range of parameters to be used to evaluate the performance of adaptation options in the CBA The workshop agreed that the objective of the high-level CBA was to address the following question: How can we best manage Albania's future security of energy supply in the face of a changing climate? 86 Best was defined as an optimal balance between financial, environmental and social objectives. The workshop also agreed on the key adaptation option to be assessed as part of the CBA, namely, diversification of power generation assets. It was confirmed that the CBA would be a high-level assessment, utilizing readily available data and international normative valuations for selected aspects. Additional detailed study of external costs and benefits was excluded from the scope. Constraints associated with implementation of possible adaptation options were also discussed, such as the limits of potential capacity for additional hydropower in Albania and availability of fuel for thermal power plants, as well as key parameters that should be considered when undertaking the CBA, including costs of carbon dioxide emissions and economic value of water. Directly after the workshop, further meetings were held with energy sector stakeholders from government, the private sector, research and academic institutions, and NGOs, during which the parameters for evaluating the adaptation options in the CBA were prioritized, and data on costs and benefits were obtained. In addition, a meeting was held with a group of engineering students, to consult on the assessment and hear their opinions about the most important parameters for the cost­benefit analysis. Following from the workshop and meetings, the CBA approach and options to be assessed were further refined to provide the most value as an output from this assessment. A1.7 HIGH-LEVEL COST­BENEFIT ANALYSIS (CBA) As already outlined, during the second workshop, stakeholders discussed how the Albanian energy sector could be adapted to manage the potential risks to energy security from a changing climate. The CBA aimed to assess key sustainable development aspects (i.e., financial, social, and environmental aspects) that could be considered when assessing the optimal way in which adaptation could be implemented. An economic model for assessing the benefits of environmental and social protection has been presented in Hardisty and Ozdemiroglu (2005). The WorleyParsons EcoNomicsTM process that is based on this method was used. It explicitly describes and measures sustainability aspects in economic terms, by monetizing external costs and benefits and adding these to the conventional internal or private costs and benefits of a proposed project or action. Economic theory was then used to calculate the net present value (dollar value in today`s money) of options that incur costs and benefits over a period of time (the planning horizon). This cost­benefit analysis approach is the basis upon which analyses of the adaptation options have been carried out (see Section 5). While the WorleyParsons EcoNomicsTM process was used for this assessment, the approach is repeatable using standard methods. A more detailed explanation of the CBA process is provided in Annex 5. 87 ANNEX 2 RISK ASSESSMENT BACKGROUND AND RATIONALE Table A2.1: Scale for Assessing Likelihood of Occurrence of Hazard Likelihood Category E D C B A Rare Unlikely Moderate Likely Almost certain Highly unlikely Given current Incident has Incident is Incident is very to occur practices and occurred in a likely to occur likely to occur, procedures, this similar country possibly several incident is / setting times unlikely to occur OR 5% chance of 20% chance of 50% chance of 80% chance of 95% chance of occurring per occurring per occurring per occurring per occurring per year year year year year 88 Table A2.2: Scale for Assessing Magnitude of Consequence Magnitude of Consequence 1- 2- 3­ 4­ 5- Insignificant Minor Moderate Major Catastrophic Engineering / Impact can be An adverse A serious event A critical event Disaster with Operational absorbed event that can that requires that requires potential to through normal be absorbed additional extraordinary lead to shut activity with some management management down or management effort effort collapse of the effort asset / network Safety and First aid case Minor injury, Serious injury Major or Single or Health medical or lost work Multiple multiple treatment case case Injuries, fatalities with/or permanent restricted work injury or case disability Environment No impact Localized Moderate Significant Significant on baseline within site harm with harm with harm with environment boundaries possible local effect widespread Localized Recovery wider effect Recovery effect to point measurable Recovery in longer than 1 Recovery source within 1 1 year year longer than 1 No month of Failure to year recovery impact comply with Limited required regulations / prospect of consents full recovery Social No impact on Localized, Localized, Failure to Loss of society temporary long-term protect poor social license social impacts social impacts or vulnerable to operate groups Community National, protests long term social impacts Financial (for <100,000 100k­500k 500k­5m 5m­10M >10m single extreme event or annual average impact) Energy Up to 1 hr 1 hr­3 hrs 3 hrs­12 hrs 12hrs­3 days > 3 days Security: Lost Production / Load Shedding Reputation of Localized Localized, Local, long- National, National, long- Government / temporary short term term impact on short-term term impact Political impact on impact on public opinion impact on with potential Context public opinion public opinion with adverse public opinion; to affect local media negative stability of coverage national media government coverage 89 Table A2.3: Risk Mapping (Before Adaptation) Consequence Insignificant Minor Moderate Major Catastrophic 1 2 3 4 5 16 6 347 12 Almost A 95% Certain 19 15 10 11 12 5 B Likely 80% 13 14 18 89 C Moderate 50% 17 D Unlikely 20% 20 Likelihood E Rare 5% Table A2.4: Risk Mapping (After Adaptation) Consequence Insignificant Minor Moderate Major Catastrophic 1 2 3 4 5 Almost A 95% Certain 5 B Likely 80% 16 19 4 15 2 3 6 13 C Moderate 50% 14 1 7 8 12 10 11 D Unlikely 20% 17 18 9 20 Likelihood E Rare 5% Note: The risks are presented in the maps above using the Risk Code No. noted on Table 3. 90 ANNEX 3: ADAPTATION OPTIONS Table A3.1: Adaptation Options that Apply to All Energy Asset Classes No. Adaptation Type Potential Adaptation Actions Applicable to All Who could make it happen? Who would bear the Is it a no- Energy Asset Classes cost? Would the action be acceptable to all regret, low- stakeholders? What are the barriers or bottlenecks? regret or win- win option? Building Adaptive Capacity 1 Research and analysis Climate risk assessments and cost-benefit analyses Would require funding and collaboration between (CBA) could be further developed and policy makers / regulators and energy sector incorporated into energy sector planning and asset developers and operators as well as technical design. experts (e.g., climatologists, hydromet service Higher resolution data on future climate variability providers). and climate change for Albania and the wider Albania would need to collaborate with other South East Europe region could be developed national governments in the region. Develop more risk-based integrated climate change impact assessments, including cross- sectoral assessments exploring the interactions between water, agriculture, and energy. Undertake research on the impacts of extreme climatic events on energy assets. Keep track of new developments in climate change No-regret research of relevance to the energy sector. Re-invigorate participation in World Meteorological Organization. Join European Center for Medium-range Weather Forecasting. Join EUMetnet, expand contribution to European consolidated observing system (EUCOS), prepare to join other European meteorological institutions (EMIs) and consider supporting EU COST. Contribute research on climate change and support European Meteorological Society. Work in partnership with South Eastern Europe region to develop shared understanding of climatic 91 No. Adaptation Type Potential Adaptation Actions Applicable to All Who could make it happen? Who would bear the Is it a no- Energy Asset Classes cost? Would the action be acceptable to all regret, low- stakeholders? What are the barriers or bottlenecks? regret or win- win option? vulnerabilities and risks, and their implications for regional energy security, pricing and trade. 2 Data collection and Monitor impacts of climatic factors on energy Government (including Ministry of Environment), monitoring sector performance. KESH and hydromet service providers. Continuously monitor and update regional weather Would require collaboration internationally. and water resource availability. Would need funding for participation in regional Monitor and forecast regional energy demand and meteorological collaborative efforts, membership availability of shared energy from regional in, for instance, ECMWF, EUMetsat, EUMetnet sources, and hydropower available within Albania and ICEED. that draws on shared resources (e.g., Lake Ohrid) Funding would be a potential barrier, together with that could be affected by upstream energy users. loss of hydromet capacity Share weather monitoring and forecasting data between Institute or Energy, Water and the Environment, Military Weather Services and the National Air Traffic Agency. No-regret Repair and adapt existing automated climate stations to provide continuous reporting, using for example solar panels to power them. Share data regionally in return for regional information exchange. Data on precipitation and runoff could be shared with regional neighbors, given that Albania`s rivers are shared with Greece, Macedonia and Kosovo. Reestablish monitoring and analysis of the watersheds. At the moment, seasonality of the flow and its trends are unclear. Contingency planning could be less expensive if this information were available. 3 Changing or developing Consider amending regulations to require METE, Ministry of Environment and ERE. regulations, standards, developers to consider climate change in proposals Barriers: would require developers to have access codes, etc. and energy sector contracts to information on climate change (above), and to Low-regret Develop tariffs and incentives to promote climate be able to interpret this data (i.e. must be tailored resilience of energy sector. to users); it would require regulators to be 92 No. Adaptation Type Potential Adaptation Actions Applicable to All Who could make it happen? Who would bear the Is it a no- Energy Asset Classes cost? Would the action be acceptable to all regret, low- stakeholders? What are the barriers or bottlenecks? regret or win- win option? Consider amending regulations to capture climate conversant with climate change risks and impacts change costs in energy price and the price of water. and have capacity to assess submissions. Review and upgrade (as necessary) design codes Enforcement of new codes for infrastructure could for assets and infrastructure to support their be an issue. Codes would need to be aligned with climate-resilience. EU standards. Incorporate climate risk and adaptation assessment Costs of making new assets climate change in Environmental and Social Impact Assessments resilient could be shared between Government and for new energy facilities. developers (KESH and private sector). Would require high-level commitment and mechanisms for enforcement. 4 Awareness-raising and Awareness of climate change and its impacts could Government, regulators and other public bodies organizational be raised and championed in government on a (universities). development multisector basis. Government would bear the cost. International Committee or collaborative organization could be adaptation funds or other international support established to oversee action on climate resilience. could potentially be drawn upon. No-regret Capacity would need to be built in all sectors Potential barriers: ownership, commitment, (public and private institutions). funding. Perceptions would need to be changed, so that climate change is not seen as simply an environmental issue. 5 Working in partnership Regional cooperation could be initiated to develop Joint initiatives involving the Government, energy climate-resilient management plans for shared industry, hydromet services, academics / research watersheds. institutes, other users of water and energy and Energy-sector stakeholders and organizations consumers. dependent on the energy sector could work in It could be useful to establish whether there is an partnership to understand climate change risks and existing industry organization that could champion No regret develop adaptation measures. this. Partnership working could help to avoid National government could lead on engaging with competition between different organizations` national governments in the region. adaptation strategies. 93 No. Adaptation Type Potential Adaptation Actions Applicable to All Who could make it happen? Who would bear the Is it a no- Energy Asset Classes cost? Would the action be acceptable to all regret, low- stakeholders? What are the barriers or bottlenecks? regret or win- win option? Delivering Adaptation Actions 6 Accept impacts and bear Consider establishing a process to ensure that National government, operators (KESH and OST) (some) loss future development design takes account of and regulator (ERE). climate change effects. Low-regret Identify key assets at risk from climate change and plan for their future management. 7 Spread/share impacts Draft National Energy Strategy promotes The Albanian government would need to attract diversification into TPP and other renewables, as external private investors. well as regional energy trading, which could help No-regret provide improved energy security. Regional energy trading could help to spread risks of climate-related disruptions to supply. Diversifying the location of energy assets could Government could set the strategy. Other help avoid concentrating assets in at-risk locations. Consider the use of weather insurance to cover Operators (KESH, OST, private). potential risks. Where available, consider using other financial Other products that lay-off risk, such as Alternative Risk Transfer mechanisms (ART) including risk bonds, futures, derivatives, swaps, and options. 8 Avoid negative impacts New energy assets could be designed to be Operators (KESH, OST, private). climate-resilient. Barriers: lack of awareness and information on Rehabilitation of existing assets could provide an which to act. Low-regret opportunity to build in climate-resilience. Costs and coordination issues would need to be considered. Engineering solutions could improve efficiency of Engineers, driven by government. generation, transmission and distribution, and use Government and operators. of water and energy. No-regret Contingency planning could support a response to increasing risk of heat waves and drought. Consider location of new energy assets Government and operators. Low-regret Support implementation of improved design 94 No. Adaptation Type Potential Adaptation Actions Applicable to All Who could make it happen? Who would bear the Is it a no- Energy Asset Classes cost? Would the action be acceptable to all regret, low- stakeholders? What are the barriers or bottlenecks? regret or win- win option? standards for new assets Continue the existing efforts to improve efficient Government and farmers. use of water resources in the agriculture sector, Win-win and reduce technical and commercial water losses. 9 Exploit opportunities Climate models are generally in good agreement Government could set standards for energy over Albania regarding changes in temperature and efficiency. summer precipitation, providing a useful basis for Barriers: funding and enforcement. analysis of sensitivities of energy assets and No-regret development of climate resilience. There is significant potential to improve energy efficiency (demand and supply side). Identify and consider developing energy Asset developers (KESH and private sector. technologies that are favored by future climate Low-regret change conditions, e.g., increased solar potential due to increased sunshine hours. TPP are not as climatically vulnerable as many Government could set the strategy. Other other forms of energy generation. Delivered by operators (KESH and private). Table A3.2: Adaptation options--Energy Demand and Demand-side Energy Efficiency No. Adaptation Type Potential Adaptation Actions for Energy Demand Who could make it happen? Who would bear the Is it a no-regret, and Demand-Side Efficiency cost? Would the action be acceptable to all low-regret or stakeholders? What are the barriers or bottlenecks? win-win option? Building Adaptive Capacity 10 Research and analysis Develop better understanding of the relationships Energy sector experts work with met / hydromet between climate-related factors and energy service providers. demand. Develop better understanding of the change in No-regret demand and change in residential and nonresidential sectors due to climate change. Undertake cost­benefit analyses of adaptation 95 No. Adaptation Type Potential Adaptation Actions for Energy Demand Who could make it happen? Who would bear the Is it a no-regret, and Demand-Side Efficiency cost? Would the action be acceptable to all low-regret or stakeholders? What are the barriers or bottlenecks? win-win option? measures. 11 Data collection and Monitor peak demand for space cooling in METE and KESH. No-regret monitoring summer. 12 Changing or developing Consider amending regulations, standards, codes Government and regulator. regulations, standards, of practice to ensure they are resilient to / take . codes, etc. account of changing climatic conditions. Regulations/ codes would require alignment with Support enforcement of regulations/ codes for EU standards. energy efficiency in new buildings. Would require high-level commitment and Low-regret Consider use of tariff instruments to support mechanisms for enforcement. energy efficiency and change consumer behaviour. Investment in existing building upgrades could be Identify ways to regulate energy efficiency in incentivized by government. existing buildings. Enforcement of new codes could be an issue. Delivering Adaptation Actions 13 Accept impacts and bear Be prepared for increase in summer energy Government and energy sector operators (KESH (some) loss demand for cooling. and private) No-regret 14 Avoid negative impacts Improve domestic, commercial, and industrial Government, regulator, and CEZ. energy efficiency. Barriers: lack of funding to deliver energy Tackle and reduce commercial losses, for instance efficiency measures, inertia whereby consumers No-regret through use of tariffs and incentives. are slow to make changes. Incentives could be considered such as grants / rebates for energy efficiency measures. Install alternative fuel sources (other than Building owners. electricity) for heating buildings. Barriers: insufficient service alternatives to Other electric power heating. 15 Exploit opportunities Significant potential to improve energy Government could provide incentives such as efficiency. grants / rebates for energy efficiency No-regret measures. Higher solar radiation (due to projected less Building owners. cloud cover with climate change) increases opportunities for domestic and commercial Low-regret solar water heating. Geothermal energy resources could be used for 96 No. Adaptation Type Potential Adaptation Actions for Energy Demand Who could make it happen? Who would bear the Is it a no-regret, and Demand-Side Efficiency cost? Would the action be acceptable to all low-regret or stakeholders? What are the barriers or bottlenecks? win-win option? domestic and commercial heating and cooling. Geothermal energy is not climatically vulnerable and could potentially help increase climate resilience. Table A3.3: Adaptation Options--Large Hydropower Plants (LHPP) No. Adaptation Type Potential Adaptation Actions for Large Who could make it happen? Who would bear the Is it a no- Hydropower Plants (LHPP) cost? Would the action be acceptable to all regret, low- stakeholders? What are the barriers or bottlenecks? regret or win- win option? Building Adaptive Capacity 16 Research and analysis Develop better understanding of the relationships Collaboration between policy makers/ regulators between climate-related factors and the and energy sector developers and operators as well performance of LHPP assets. as hydromet service providers. Develop watershed-based hydromet data gathering Barriers: lack of capacity of hydromet services to optimize operation of existing LHPP and (financial, human, institutional, etc.). characterize other potential basins for new LHPP. National government could work with other Develop better understanding of impact of climate national governments to understand cross-border change on frequency and severity of drought and issues. storm periods. Study the feasibility of building pump and storage No-regret. plants. Explore opportunities to improve weather/ climate information services (seasonal forecasts, etc.) Consider local downscaling of climate change scenarios benchmarked against past experience of climate and assess impacts on LHPP performance. Develop more risk-based integrated climate change impact assessments to help optimize use of LHPP, including the impacts of extreme climatic events. 97 No. Adaptation Type Potential Adaptation Actions for Large Who could make it happen? Who would bear the Is it a no- Hydropower Plants (LHPP) cost? Would the action be acceptable to all regret, low- stakeholders? What are the barriers or bottlenecks? regret or win- win option? Perform analysis looking at cross-sector and cross- border impacts of climate change in relation to water management for LHPPs. 17 Data collection and Monitoring to focus on more vulnerable assets, KESH and other operators could monitor impact of monitoring e.g., existing and planned LHPP. climatic factors. Monitor sedimentation of hydropower facilities to KESH and the Large Dam Safety Board could confirm operational lifetime aspects are correctly examine sedimentation. No-regret assessed in light of climate change, in the Drin Limited historical topographical data may make cascade particularly. Sedimentation has not been sedimentation assessment difficult. measured for more than 40 years. Monitor dam security. 18 Changing or developing Consider amendments to regulations to require Government and LHPP operators. regulations, standards, LHPP developers to consider climate change in Costs would be borne by operators. codes, etc. proposals and energy sector contracts. Consider amending design standards for LHPP to ensure assets are climate-resilient over their lifetimes. Consideration how climate concerns could be built Low-regret into long-term LHPP contracts. Strengthen efforts to control illegal logging, which increases risks of soil erosion and consequent sedimentation of reservoirs. Ensure that regulations on dam safety are implemented. 19 Working in partnership. Holders of existing and future hydromet data could Hydromet data holders and LHPP operators. work in partnership with LHPP operators. Barrier: hydromet data may be viewed as a No-regret valuable asset and not willingly shared with other parties. Delivering Adaptation Actions 20 Accept impacts and bear Be prepared for more frequent drought and storm LHPP operators. (some) loss. events as well as changing hydrographic profiles No-regret for basins. 21 Spread/share impacts. Share cost of adapting existing assets. Government, utility operators. Other 98 No. Adaptation Type Potential Adaptation Actions for Large Who could make it happen? Who would bear the Is it a no- Hydropower Plants (LHPP) cost? Would the action be acceptable to all regret, low- stakeholders? What are the barriers or bottlenecks? regret or win- win option? 22 Avoid negative impacts. Increase LHPP-installed capacity, ensuring that Government, utilities. new assets are designed to be climate change- Barriers: lack of awareness and information on resilient. which to act, costs, coordination. Consider raising the dam crest on Fierze. Feasibility studies would be needed for all Other Consider increasing the capacity of spillways on engineering adaptation options. Fierze and Komani dams. Consider development of a pump storage scheme on Drin river cascade. Establish whether proposed locations for new Government, utilities, and private developers. LHPP would be sustainable in the face of climate change risks to water resources. Improve existing asset efficiency through measure such as: clear / redesign trash racks, upgrade turbines and generators, replace equipment to No-regret reduce water losses (shut-off valves), improve apron below dams to reduce erosion, use improved hydromet data to optimize operation. Strengthen contingency planning for operation during periods of extreme drought 23 Exploit opportunities Rehabilitation of existing dams (options noted Government and utilities. No-regret above). 99 Table A3.4: Adaptation Options--Small Hydropower Plants (SHPP) No. Adaptation Type Potential Adaptation Actions for Small Hydropower Who could make it happen? Who would bear the Is it a no-regret, Plants (SHPP) cost? Would the action be acceptable to all low-regret or stakeholders? What are the barriers or bottlenecks? win-win option? Building Adaptive Capacity 24 Research and analysis Develop better understanding of relationship Collaboration between policy makers/ regulators between snowfall, snowmelt and SHPP generation. and energy sector developers and operators as well Develop higher resolution data on future snowfall as hydromet service providers. and snowmelt projections. Barriers: capacity of hydromet services (financial, Assess the future relationship between SHPPs and human, institutional, etc.) demand for water from other users (e.g., National government could collaborate with other agriculture). national governments to understand cross-border Develop watershed based hydromet data gathering issues. to better inform future water use. Explore opportunities to improve weather/ climate No-regret information services (e.g., seasonal forecasts). Consider local downscaling of precipitation and temperature using an ensemble of GCMs, benchmarked against their ability to predict observed precipitation. Develop more risk-based integrated climate change impact assessments, including the impacts of extreme climatic events. Perform analysis looking at cross-sector and cross- border impacts in relation to water management. 25 Data collection and Monitoring to focus on more vulnerable assets, Hydromet service providers and SHPP owners. monitoring e.g., existing and planned SHPP. No-regret Monitor changes in snow and river flows for their impacts on SHPP production. 26 Changing or developing Consider amending regulations to require SHPP Government, regulator (ERE) and SHPP owners. regulations, standards, developers to consider climate change in proposals codes, etc. and energy sector contracts. Low-regret Consider amending design standards for SHPP to ensure they are climate-resilient over a facility`s lifetime. 100 No. Adaptation Type Potential Adaptation Actions for Small Hydropower Who could make it happen? Who would bear the Is it a no-regret, Plants (SHPP) cost? Would the action be acceptable to all low-regret or stakeholders? What are the barriers or bottlenecks? win-win option? Consider how climate change could be built into long-term SHPP contracts. Consider how regulations could support water resource allocation for energy generation as well as other users. 27 Working in partnership Improve watershed management together with Hydromet service providers, farmers, and SHPP agricultural water users. Support delivery of owners. medium-range (3 to 10 day) forecasts for farmers An institutional decision would be needed to Win-win to build partnership, buffer potential conflicts over support information flow to irrigation users. water availability and support coordination on water use. Delivering Adaptation Actions 28 Spread/share impacts 29 Avoid negative impacts Consider whether proposed locations for new Regulator, OST, and SHPP developers. SHPPs would be sustainable in the face of climate Barriers: lack of awareness and information on change risks to water resources and competition which to act; costs and coordination; Access to from other water users. finance for asset improvement sand new SHPP Improve management of water resources (e.g., investments. reduce technical and commercial losses). Review the use of guarantees to support the Improve efficiency of water use in agriculture owners of SHPP in accessing capital. sector (much progress on this has been achieved recently). Contingency planning for operation during periods No-regret of extreme drought. Improve efficiency and performance of existing SHPP through measures such as replacing old turbines, purchasing larger turbines or by replacing the turbine`s runners with more efficient ones; increasing turbine name-plate output through a detailed hydrological study that would support to better usage of the flow; digging wider channels; replacing/rehabilitating other equipment (e.g., stop, control and shut-off valves). Generally, 101 No. Adaptation Type Potential Adaptation Actions for Small Hydropower Who could make it happen? Who would bear the Is it a no-regret, Plants (SHPP) cost? Would the action be acceptable to all low-regret or stakeholders? What are the barriers or bottlenecks? win-win option? improvements could be achieved by replacing/ rehabilitating each piece of equipment in the SHPP. Assess whether the transmission grids are able to carry power generated by SHPPs. Develop water storage capacity for SHPPs to Regulator (ERE) and SHPP owners, working with Low-regret support for longer periods of operation. farmers. 30 Exploit opportunities Upgrade existing SHPP facilities. SHPP owners` association, METE, and AKBN. SHPP could play a role in providing local Barriers: Feed-in tariff for existing SHPP is less electricity supply in remote areas, more prone to than new SHPP; linking SHPP to the transmission No-regret transmission failure during extreme climatic system can take time. events that are predicted to increase. Table A3.5 Adaptation Options--Thermal (Fossil Fuel) Power Plants (TPP) No. Adaptation Type Potential Adaptation Actions for Thermal Power Who could make it happen? Who would bear the Is it a no-regret, Plants (TPP) cost? Would the action be acceptable to all low-regret or stakeholders? What are the barriers or bottlenecks? win-win option? Building Adaptive Capacity 31 Research and analysis Develop risk-based integrated climate change Would require collaboration between policy impact assessments when siting and designing makers/ regulators and TPP developers and TPPs. For coastal facilities consider sea-level operators as well as technical experts; and funding. change and coastal storm surge in the assessment. Could assist in understanding and anticipating No-regret For river-cooled TPP, assess flood risk and risks, and integration of risk management into availability of cooling water and environmental sector operations. impacts during periods of low flow or high Could take time to achieve international standards. temperatures. 32 Data collection and Monitor impacts of climatic factors on TPP operators monitoring performance of TPP (e.g., reduction in efficiency during high-temperature periods) No-regret If new TPP are river-water cooled, monitor river flows to ensure abstraction and discharges do not 102 No. Adaptation Type Potential Adaptation Actions for Thermal Power Who could make it happen? Who would bear the Is it a no-regret, Plants (TPP) cost? Would the action be acceptable to all low-regret or stakeholders? What are the barriers or bottlenecks? win-win option? damage the river water environment during periods of low flow. 33 Changing or developing Consider amending regulations to require TPP Regulator and TPP developers. regulations, standards, developers to consider climate change in proposals codes, etc. and energy sector contracts. Review and upgrade (where necessary) design codes for TPP assets and associated infrastructure Low-regret (buildings, pipelines, roads, etc.) to ensure their climate resilience. Integrate climate risk assessment, including changes in sea level, storm surges and coastal erosion in the design of new coastal infrastructure. Delivering Adaptation Actions 34 Accept impacts and Assess potential impact, if any, of changing sea Government, regulator and developer. bear (some) loss levels and coastal erosion on the proposed site for Barriers: information. No-regret the Porto Romano TPP. 35 Spread/share impacts Typically insurance for TPPs would cover usual TPP owners. risks such as earthquake, flood and fire. TPP developers could engage with insurers to discuss if Other risks could change as a result of rising sea levels and coastal erosion. 36 Avoid negative impacts Consider whether proposed coastal locations for Government and TPP developers. new TPP would be sustainable in the face of Barriers: lack of awareness and information on climate change risks (sea-level change, erosion). which to act; costs and coordination. If river-water-cooled TPP are considered in the future, ensure that their abstraction and discharge requirements would not adversely affect river environments, noting that river flows would likely No-regret decrease in the summer. Develop contingency plans to manage potential risks. To manage the impacts of rising temperatures on TPPs, technical adjustments could be made. For example, condensers could be enlarged and/or cooling water flow rates could be increased. 103 Table A3.6: Adaptation Options--Other Renewable Energy Sources No. Adaptation Type Potential Adaptation Actions for Other Renewable Who could make it happen? Who would bear the Is it a no-regret, Energy Sources cost? Would the action be acceptable to all low-regret or stakeholders? What are the barriers or bottlenecks? win-win option? Building Adaptive Capacity 37 Research and analysis Map wind resources, in the Karabun Peninsula and Would require collaboration between policy in other regions that are likely sites, to identify makers/ regulators and renewable power developers best locations and design for new wind turbines. and operators as well as technical experts. Map geothermal resources. Would assist with understanding and anticipating Undertake climate risk assessment and CBA of risks, and integration of risk management into No-regret adaptation measures when planning and designing sector operations. new renewable energy assets. Would require funding and commitment. Could take time to reach international standards. 38 Data collection and Monitor impacts of climate factors on renewable Asset owners and meteorological service providers. No-regret monitoring energy assets. 39 Changing or developing Consider amending regulations to require Government and regulator. regulations, standards, renewable power asset developers to consider codes, etc. climate change in proposals and energy sector contracts. Low-regret Review and upgrade (where necessary) design codes for renewable energy assets and associated infrastructure (e.g., buildings, pipelines, roads, etc.) to ensure that assets are climate-resilient. Delivering Adaptation Actions 40 Exploit opportunities Decreased cloudiness due to climate change Households, commercial property owners (particularly in summer) would benefit solar Developers of large-scale solar assets (e.g., Other energy production. CSP). 104 Table A3.7 Adaptation Options--Electricity Transmission and Distribution No. Adaptation Type Potential Adaptation Actions for Electricity Who could make it happen? Who would bear the Is it a no-regret, Transmission and Distribution cost? Would the action be acceptable to all low-regret or stakeholders? What are the barriers or bottlenecks? win-win option? Building Adaptive Capacity 41 Research and analysis Undertake climate risk assessment and CBA of Would require collaboration between policy adaptation measures when upgrading or makers/ regulators and T&D developers and developing new T&D systems. Critical climate operators as well as technical experts. data for design of T&D systems are minimum and Would assist with understanding and anticipating maximum temperatures, and wind conditions. risks, and integration of risk management into No-regret sector operations. Would require funding and commitment. Could take time to reach international standards. 42 Data collection and Monitoring to focus on more vulnerable assets, OST and CEZ. monitoring e.g., vulnerable areas of distribution system, and rural /remote areas. No-regret Monitor effects on transmission losses due to higher temperatures. 43 Changing or developing Consider amending regulations, standards, codes Government and regulator, drawing on information regulations, standards, of practice for T&D systems to ensure they are from meteorological service providers. codes etc resilient to / take account of changing climatic conditions. Low-regret Re-assess the climate parameters used for design of existing transmission lines (e.g., frequency of extreme events). Delivering Adaptation Actions 44 Accept impacts and Accept slightly higher technical losses due to OST and CEZ. bear (some) loss higher temperatures. Meet losses through extra Other generating capacity 45 Spread/share impacts Privatization of distribution system passes risks to CEZ. Other a private partner 105 No. Adaptation Type Potential Adaptation Actions for Electricity Who could make it happen? Who would bear the Is it a no-regret, Transmission and Distribution cost? Would the action be acceptable to all low-regret or stakeholders? What are the barriers or bottlenecks? win-win option? 46 Avoid negative impacts Examine costs and benefits of further upgrade of OST and CEZ. transmission and distribution system to account for Barriers are lack of awareness and information on lower efficiency in hotter weather. Considering the which to act; costs and coordination. following options: Insulating the lines Other Underground cables (which makes them less susceptible to climatic conditions) in certain areas where uninterruptible supply is required Use of DC instead of AC current (noting that this is expensive). Contingency planning for effects of high winds, OST and CEZ. No-regret lightning, ice loading on T&D systems. 47 Exploit opportunities There is large potential to improve efficiency of OST and CEZ. the distribution system. The transmission grid has recently been upgraded to EU standards that should make it resilient to a wide range of climatic No-regret conditions. However, it is noted that EU standards have not yet taken on board climate change (though this will change in time, according to the EU Adaptation White Paper). 106 Table A3.8: Adaptation Options--Fossil Fuel Supply and Transmission / Transportation No. Adaptation Type Potential Adaptation Actions for Fossil Fuel Supply Who could make it happen? Who would bear the Is it a no- and Transmission/ Transportation cost? Would the action be acceptable to all regret, low- stakeholders? What are the barriers or bottlenecks? regret or win- win option? Building Adaptive Capacity 48 Research and analysis Undertake climate risk assessment and CBA of Would require collaboration between policy makers/ adaptation measures for existing and new fossil regulators and fossil fuel developers and operators as fuel resources. well as technical experts. Would assist with understanding and anticipating risks, and integration of risk management into sector No-regret operations. Would require funding and commitment. Could take time to reach international standards. 49 Data collection and Monitor changing ground conditions and Operators of oil, gas, and coal production facilities monitoring concentrations of ground pollutants at Patos and Ministry of Environment. Marinza. Monitor effects of sea level rise, storm surges and coastal erosion on coastal assets. No-regret Monitor integrity of existing low pressure gas pipeline due to landslips after heavy downpours. Monitor potential for pollution incidents due to heavy downpours at mines. 50 Changing or Consider amending regulations to require Government and regulators. developing regulations, developers of fossil fuel assets to consider climate Asset owners. standards, codes, etc. change in proposals and contracts. Infrastructure owners. Review and upgrade (where necessary) design Low-regret codes for fossil fuel assets and associated infrastructure (buildings, pipelines, roads, ports, etc.) to ensure that assets are climate-resilient. Delivering Adaptation Actions 51 Avoid negative impacts Identify whether contaminated land remediation Operators of oil and coal production facilities and would be effective / quick enough in light of Ministry of Environment No-regret climate change impacts. Barriers: lack of awareness and information on which 107 No. Adaptation Type Potential Adaptation Actions for Fossil Fuel Supply Who could make it happen? Who would bear the Is it a no- and Transmission/ Transportation cost? Would the action be acceptable to all regret, low- stakeholders? What are the barriers or bottlenecks? regret or win- win option? Support contingency planning for legacy to act; costs and coordination. contaminated land e.g., effects of drought followed by heavy downpour leading to contamination and health risks. Support contingency planning for effects of extreme precipitation on mine sites and associated pollution risk. 52 Exploit opportunities. Higher temperatures could have a slight beneficial Operators of oil production facilities could benefit. impact on the cost profile at oil production Other facilities. 108 ANNEX 4: WEATHER / CLIMATE INFORMATION SUPPORT FOR ENERGY SECTOR MANAGEMENT Table A4.1: Design and Operation of Energy Plants This table has been extracted from Hancock and Ebinger (2009). Design Operations and Maintenance Current Resources Options to Improve Current Resources Options to Improve Large For LHPP design, hydrological Revise hydrological For continuous optimization of Expand river-level gauge network Hydropower models and time series of flow models, recommence reservoir levels, continuous in Drin; initiate in Mati; and add Plants (LHPP) are needed, but they are out of measurements; digitize all awareness of water in the system rain gauges in both watersheds to date. available data. and rain entering the system are indicate water entering the system needed. There is only a small (radar better). Identify best-skilled network of river-level gauges in the atmospheric models with respect Drin watershed. Radar assessments to historical Albanian precipitation of ongoing precipitation would be data. Downscale an ensemble of useful; precipitation forecasts would such to facilitate analysis of be helpful. But there is no radar, watersheds under climate change. and numerical precipitation forecasts are low resolution and not verified. Small For design of new SHPPs or to Undertake revision of To plan power generation and Highly resolved precipitation Hydropower select which concessions are hydrological models. turbine management, operators have forecasts could be undertaken and Plants (SHPP) economically promising today, Digitize rainfall data and only low-resolution precipitation could provide probabilistic watershed models are needed, make it publicly available. forecasts for the very near term. information out to seven days. but those available date to 1990 Improve monitoring. Forecasts are not routinely verified. Rain gauges would indicate water or before, and rainfall statistics entering the system (radar better). to 1990. Not only for LHPPs but also for SHPPs would be useful to identify best-skilled atmospheric models with respect to historical Albanian precipitation data (and downscale an ensemble to facilitate analysis of watersheds under climate 109 Design Operations and Maintenance Current Resources Options to Improve Current Resources Options to Improve change). Power To devise distribution network Digitize the climate data To anticipate risks to network and Initiate highly resolved Transmission protected against severe and make it available undertake rapid repairs, storm probabilistic weather forecasts and weather, climate data (minimum publicly; strengthen forecasts and lightning detection are with verification to tune accuracy; Distribution and maximum temperature and monitoring. needed. But severe storms are not initiate lightning detection to (T&D) wind conditions) are needed, reliably forecast; no lightning speed network repairs; undertake but what exists is old and much detection network in place; no weather and radar monitoring to is not digitized. radar. assess storms underway. Thermal To assess availability of cooling Revise hydrological models To assess adequacy and temperature Monitor rainfall entering the Power Plants water for river or lake cooled to show availability of of cooling water and ambient air system to provide cooling water (TPP) TPPs, water temperatures, cooling water; expand temperatures, assessment of stream (radar, rainfall, stream levels); ambient air temperatures, and monitoring of rainfall to levels and rainfall entering the improve resolution of weather climate data are needed. Data up support ongoing revisions. system are needed, but lacking. No forecasts and provide probabilistic to 1990 are available; beyond radar. Forecasts needed, but these information. that, data set is incomplete and are low resolution and risky to use hydrological models are old. as they do not provide probabilistic information and are not verified. Wind To site and design wind Improve resolution of wind To anticipate wind extremes and Improve resolution of forecasts; generation plants, knowledge of maps; add monitoring of assure security of infrastructure, add monitoring of wind at key wind speed distributions at wind at turbine height. wind forecasts are needed. But altitudes; calibrate the forecasts. turbine height is needed. But forecasts are at very low resolution, little data are available. Maps lack probabilistic information and have been undertaken at low are not verified. resolution, but their accuracy at turbine height is not known; data at turbine height have been taken in a few places but not long term. 110 Design Operations and Maintenance Current Resources Options to Improve Current Resources Options to Improve Solar To site large solar arrays, need Climatology of cloudiness To anticipate solar power Increase resolution of forecasts; data on irradiance and assessed in more detail; generation, cloudiness forecasts are include cloudiness in further cloudiness. Satellite imagery assessment of model needed, but these are available at detail. could be used. Future accuracy. low resolution and not verified. cloudiness is not known but is generally projected by climate models to decrease in summer associated with decrease in precipitation; this is a skill gap in climate modeling. Energy To forecast demand long-term, The widest possible range To forecast demand day to day, Increase resolution of forecasts, Demand KESH has data on demand of climate projections forecasts of key demand variables provide probabilistic information, patterns in the past. covering natural effects as (such as temperature, cloudiness) undertake verification and tuning. well as anthropogenic are needed, but these are available effects should be reviewed only at low resolution, without to understand the range of probabilistic information, and not future demand possibilities verified. linked to temperatures, cloudiness, etc. 111 ANNEX 5: FURTHER DETAILS ON APPROACH TO COST­BENEFIT ANALYSIS This annex contains supplementary information to the cost­benefit analysis (CBA), outlined in Section 5. It includes the following sections: Methodology Framing workshop parameters summary Financial assumptions Benefits assessment and valuation Results summary Limitations A5.1 M ETHODOLOGY Assessment Process Overview A structured process has been used to evaluate ways to address the shortage of energy generation predicted to be caused by climate change. This process involved the following steps: 1. Identify the issue or dilemma requiring assessment, followed by background data review and discussions. 2. Conduct a formalized workshop process, carried out with stakeholders to frame the assessment overall. 3. Collect data and pursue consultation. 4. Conduct economic CBA modeling. 5. Present results. The key steps in this process are discussed in more detail next. Theoretical Basis for the Assessment An economic model for assessing the benefits of environmental and social protection has been presented in Hardisty and Ozdemiroglu (2005). Based on this CBA method, it is possible to explicitly monetize a number of relevant external costs and benefits, thereby allowing these costs and benefits to be added into the conventional internal or private (company or developer) costs and benefits of a proposed project or action. This model, described below in more detail, is the basis upon which the analysis of options has been carried out. Benefits Objective setting must consider the benefits of achieving a given objective. In economics, the overall objective of any decision is assumed to be the maximisation of human welfare over time. To compare the different benefit and cost streams over time, the process of discounting is used and amounts over time are expressed as present values. Economic analysis recommends the decision with the maximum net present value (NPV) (present value of net 112 benefits, or benefits minus costs, over time) or the highest benefit cost ratio (BCR) (ratio of the present value of benefits to the present value of costs). Benefits of environmental protection can effectively be expressed as the damages avoided by undertaking that action. Net Benefits What is important in a decision-making process is the overall comparison of the costs of action, with the benefits of action; hence the term cost­benefit analysis. To find net benefits, we deduct the flow of costs from the flow of benefits. Thus, the present value of the net benefits (NPV) (benefits minus costs) of the selected project or action in any year, t, is given by: T ( B Bx ) (C p Cx ) NPV p 0 (1 r )T Where NPV is the total social NPV of project p, Bp and Cp are the private or internal costs and benefits of the project, Bx and Cx are the external benefits and costs of the project respectively and r is the discount rate. Valuation of Benefits For the equation to be calculated, both the costs and benefits of each adaptation option must be estimated in a common unit. Economic analysis uses money as this common unit, based on what individuals are willing to pay, and what one would have to spend on the actions to supplement the shortfall in energy generation due to climate change. The value of the environment or natural resources includes: as an input to production or consumption (direct use value); its role in the functioning of ecosystems (indirect use value); or its potential future uses (option value). In the case of water, for instance (a key consideration in this study), people may also value water and be willing to pay for its protection unrelated to their own use of the resource (nonuse values) but because of its benefits to others (altruistic value), for future generations (bequest value) and for its own sake (existence value). The sum of these different types of economic benefits or values is referred to as total economic value (TEV) in economic literature. Private Benefits If the analysis is undertaken from the perspective of the problem holder, only the costs and benefits that accrue to the problem holder are considered. This approach, which is a financial (as opposed to economic) analysis, uses market prices of costs and benefits, which include subsidies or taxes. Private discount rates are used, which are determined by the cost of capital or rates of return from alternative investments in the private sector. Private discount rates are generally higher than social discount rates. Financial analysis does not deal with environmental or other external social impacts. Table A5-1 presents a selection of typical private benefit categories. 113 Table A5.1: Private Benefit Categories--Examples Value of production realized from project or investment, from energy or water on-sale, for example Increased property value Elimination of corporate financial environmental liability Elimination of potential for litigation / prosecution (civil and criminal) Avoidance of negative public relations or even impact on company stock value Protection of a resource used as a key input to an economic process (e.g., water for irrigation or manufacture) Avoidance of exposure of on-site personnel to pollutants A full economic analysis looks at those costs and benefits that accrue to society as a whole, and is therefore appropriate in helping to develop national policy. This includes costs and benefits to the project owner or state proponent as well as those to the rest of the society. The latter are also known as external costs and benefits (as they are external to the transactions in the market and hence not included in market prices) so long as they are not compensated by or paid to the problem holder. This different definition of costs and benefits requires them to be measured differently than in a financial (private) analysis. The prices for marketed goods and services that are affected should no longer be market prices, but real or shadow prices. Shadow prices are estimated by subtracting (or adding) the subsidy and tax elements from (to) market prices. Subsidies and taxes are referred to as transfer payments--their payment does not cause a net change to the costs and benefits faced by the society as a whole but simply a transfer from one party to another within society. For example, litigation expenses are considered transfer payments. The proponent`s costs for litigation become the benefits of the law firm, and hence cancel each other out when a social analysis is undertaken. In practice, only some of the benefits identified during a CBA can be readily quantified and monetized. This is likely to include several of the key private benefits (such as land value). External benefits are less readily monetized, as there is often no market data that could be directly used for their estimation. Valuation methods applicable to problems of sustainable development include the following: Actual market techniques, where the good itself is priced on the open market as a saleable commodity. For example, water sold as drinking water has a price per unit volume, and land is bought and sold, and has a specific value, depending on location, zoning, and market conditions. Surrogate market techniques, in which a market good or service is found that is influenced by the externality that itself is not reflected in a market (or it is nonmarket). For example, water might be used to irrigate crops that are sold at market prices. The crop market in this example is a surrogate market and a proportion of the economic value of the yield is representative of the value of water as an input. This approach is especially useful when irrigation water is provided free or is subsidized resulting in lower prices than the water would have fetched in free markets in the absence of subsidies. If that water resource is polluted, another way to quantify the cost is to look at the expenditures people make to avoid the contamination damage (e.g., purchase of water filters or bottled water)--these markets act as a surrogate markets for the value of (clean) water. 114 Hypothetical market techniques create hypothetical markets via structured questionnaires, which elicit individuals` willingness to pay (WTP) to secure a beneficial outcome or to avoid a loss, or their willingness to accept compensation (WTA) to forgo a beneficial outcome or to tolerate a loss. Among these stated preference techniques are contingent valuation and choice modeling. WTP is a standard method used worldwide for estimating the economic value for goods and services for which no direct market exists. Economic valuations, transferred from a specific test group, location and subject and applied to other projects, are a common economic practice, known as Benefits Transfer, and a standard practice within WTP surveys. In the process of undertaking a beneficial action, it is sometimes possible that secondary environmental impacts are produced by those actions, despite best attempts at mitigation. The economic value of these impacts should be included in the overall economic assessment. The costs of dealing with these effects (as a lower bound estimate), or the value of the damages that they cause, which are not borne by the problem holder, are termed external costs of action (Hardisty and Ozdemiroglu, 2005). External costs of action (X) can be divided into two categories: 1. Planned or process-related external costs that cannot be mitigated against (Xp) 2. Unplanned or inadvertent external costs (Xup), such that: X = Xp + (P Xup) where P is the probability that the unplanned external cost will occur. External costs of action could include production of greenhouse gases from energy-intensive solutions, production of other airborne pollutants such as NOx and SOx, and secondary impacts on water quality, biodiversity, or community. Modeling The CBA modeling is based on published methodologies (Hardisty and Ozdemiroglu, 2005; UK Environment Agency, 1999), and follows conceptual approaches espoused and approved by a number of government organisations worldwide. A5.2 F RAMING W ORKSHOP P ARAMETERS S UMMARY Table A5.2 presents the parameters that were identified in Workshop 2, their importance to stakeholders in Albania, and how they were or were not incorporated into the CBA. The average ranking for each parameter is presented based on the opinions of workshop attendees and discussions with other stakeholders during meetings including: an industrial consumer, an academic, engineering students, and a World Bank economist. The rationale for inclusion or exclusion from the CBA is also noted. A number of parameters were identified as areas for further study: value of water, value of ecosystems, disturbance of people and properties, impacts on tourism, GDP impacts, and vulnerability to natural disasters. In these cases, parameters could not be fully integrated into the study (typically because of a lack of data at the appropriate level of abstraction) but may 115 be important for future policy making. One example is tourism. In the absence of a good basis for quantifying the benefits or dis-benefits that might arise in a typical power generation setting in Albania, the tourism parameter was not included in the current analysis. However, tourism is very important to the local economy, and it would enhance the value of the study if the impact on tourism of a particular policy choice were captured. 116 Table A5.2: Parameters for the CBA Discussed at Workshops and Meetings Class Parameters Workshop Interpreted Industrial Academic's World Bank Average Rank Parameter Comment/ Rationale for Attendee Rating of 20 Consumer's Rating Economist's Scores in Adopted in Monetization Rating Engineering Rating Rating Class Analysis Students Environmental Value of water 3 3 2.5 1 1.5 2.2 2nd Yes This parameter is recognized as being very complex, as there are many 'goods and services' provided by water (e.g. ecosytem support, irrigation, human consumption, recreation). Detailed analysis of this parameter is beyond the scope of this study and therefore 'proxy' values are needed to capture this important aspect. The unit 'price' of water has been taken as the Albanian cost to consumer and sensitivity. Cabon dioxide 3 1 2 3 2.3 1st Yes EU trading price and industry and other GHG norms for operational emissions. Particulate matter 2 1 2 3 2 3rd Yes There are no significant emissions from any of the analyzed technologies so PM has not been explicitly included in the analysis. Nox, Sox 3 1 2 1 1.8 5th Yes Operational Nox incorporated in the analysis using industry norms and international market values. Value of 1.5 1.5 2 3 2 3rd Yes Footprint of power plant and ecosystems associated land take (e.g. estimate of reservoir land area). Assumptions made that mountainous terrain is principal forest ecosystem and lowland terrain is coastal (as per examples such as Vlore and Porto Romano). 117 Class Parameters Workshop Interpreted Industrial Academic's World Bank Average Rank Parameter Comment/ Rationale for Attendee Rating of 20 Consumer's Rating Economist's Scores in Adopted in Monetization Rating Engineering Rating Rating Class Analysis Students Non-use values 1 0.5 1 0.8 6th No This parameter is difficult to monetize without in depth study that is beyond the scope of this study. Social Recreation 1 0 1 0.7 6th No Low priority and complex to benefits analyze. Assessment considered to be beyond the scope of this study. Impacts on 2 2 2 2nd No Although this was seem as a tourism priority by stakeholders, there is insufficient information regarding the likely impacts of energy generation on tourism in Albania to enable meaningful analysis in this study. Further study could be undertaken to quantify and monetize this parameter. Disturbance of 3 1 3 1 2 2nd Yes It is clear that there are other people and disturban ces such as community property relocation. The necessary data to make a detailed assessment is lacking at this stage so a proxy has been used to approximate part of this aspect. Overall number 1 1.5 1.3 5th No Low priority and partially of employees per accounted for in OPEX and GDP MW generated/ parameters. job creation 118 Class Parameters Workshop Interpreted Industrial Academic's World Bank Average Rank Parameter Comment/ Rationale for Attendee Rating of 20 Consumer's Rating Economist's Scores in Adopted in Monetization Rating Engineering Rating Rating Class Analysis Students GDP/ econmic 2 1 3 2 2nd Yes It is is recognized tht energy development supply to consumers enables them to generate wealth in excess of the cost of electricity. An 'electricity benefit' factor has been incorporated in the analysis. However this is a constant factor for all approaches (as users would get the same benefit where ever the electricity was generated and thus the marginal difference between options is zero. Politics 2.5 3 2.8 1st No It is considered that the political process would utilize the output from the study to inform and support future decisions that are made. Therefore it is not appropriate to incorporate political views in the cost benefit analysis. Financial Cost per MW 3 2 2 2.5 3 2.5 3rd Yes Industry norms and Albanian data. produced - CAPEX, OPEX Efficiency (for 1 1 6th No Efficiency is reflected in the every dollar in CAPEX and OPEX to meet the how much do required energy production you get out?) (GWh). Land Value 3 3 1st Yes Land usage is reflected in the representaton of loss of ecosystem/ 'goods and services' that the land would otherwise provide. 119 Class Parameters Workshop Interpreted Industrial Academic's World Bank Average Rank Parameter Comment/ Rationale for Attendee Rating of 20 Consumer's Rating Economist's Scores in Adopted in Monetization Rating Engineering Rating Rating Class Analysis Students Reduction of 3 1 2 4th No This parameter is captured in the liabilities (e.g. assumption that all options being not paying assessed would meet demand, and penalties for that the 'electricity benefit' factor turning off captures this element to some electricity) extent. Investor/ funding 3 1.5 1.5 2 4th No Considered by stakeholders as a agency low priority. confidence Improved 1 1 1 6th No Considered by stakeholders as a reputation low priority. Loss in 3 2 3 2.7 2nd Yes This is reflected in the 'electricity production benefit' parameter. Vulnerability to Not Yes This parameter has been captured natural disasters/ scored by a sensitivity scenario within climatic the analysis. This factor aims to vulnerabilities represent the fact that large (e.g. landslide, hydroelectric power generation is seismic) often in remote areas with long transmission lines to supply consumers in southern Albania. 120 A5.3 F INANCIAL A SSUMPTIONS A summary of the overall capital expenditure (CAPEX) and operating expenditure (OPEX) (in real terms) for each option is shown in Table A5-3. OPEX is divided into non-energy operating expenditure and energy operating expenditure. This separation enables looking at an increase in energy (such as fuel) expenditure on a standalone basis in sensitivity analysis. Table A5.3: CAPEX and OPEX Summary (U.S. Dollars, 2010) OPEX OPEX Asset Size CAPEX Option Description (USD $m)- (USD $m)- (MW) (USD $m) Non-energy Energy 1 Import - - 36 - 2 LHPP Update 78 14 1 - 3 CCGT 50 72 1 8 4 SHPP Update 88 106 4 - 5 New SHPP 88 132 4 - 6 Wind 130 286 7 - 7 CSP 88 311 2 - 8 New LHPP 78 468 1 - CAPEX and non-energy OPEX values adopted are based on proprietary WorleyParsons data for industry norm (benchmark) values, data from purchased research databases to which WorleyParsons subscribes, and publicly available sources of information. Many local conditions may influence CAPEX, including: local policy and strategies, characteristics of local resources, and import chains. Non-energy operational costs depend on many local specifics as well, including: plant size, plant organizational structure, local legislation, and labor and material costs. Energy costs depend significantly on plant efficiency. Values used in the analysis were reviewed and adjusted in light of discussions with stakeholders in Albania and are considered to be sufficient for the purposes of this study. Values should be considered indicative only. A5.4 B ENEFITS A SSESSMENT AND V ALUATION Overview In a complete economic analysis, the benefits of a given course of action are compared to the cost. Actions that result in a net overall positive benefit to society as a whole are deemed economic. In this section, the benefits applicable to this analysis are identified and valued. The approach for this analysis is to attempt to capture the maximum likely benefits that would accrue to institutions (private benefits) and to society (external benefits), should various generation alternatives be enacted. To do this, a conservative approach (from the economic point of view) has been adopted; with each external (societal) monetizable benefit valued using a method that will tend to overstate (rather than understate) the benefits. In addition, a qualitative examination of some likely nonmonetizable benefits is also included. 121 Thus, in the CBA, likely costs are compared with conservatively high benefits, or disbenefits, as the case may be. In adopting this approach, the report is biasing the economic analysis towards the societal position. This is advantageous because it assures that the external perspective is fully considered and valued, and helps to deflect any possible criticism that the analysis favors the project proponent. Scope and Basis of the Analysis This analysis considers only the costs and benefits associated with the various options designed to provide enough electricity to supplement the expected supply shortfall caused by climate change. If an external asset is damaged by implementation of a particular option, this damage appears as a disbenefit (negative benefit). If the value of the asset is maintained as it is (undamaged), then there is no effect, and no benefit or disbenefit is created. So, for example, if a water resource is left intact, in place, the current ecological support and option values of the water remain, and there is no benefit or disbenefit included in the analysis. If forest, as another example, is cleared, a negative benefit (disbenefit) is included. A5.5 BENEFIT/DISBENEFIT VALUATION The following benefit categories have been considered in the analysis. These benefits are directly related to the Albanian energy sector and were included in the analysis based on the workshop proceedings. Carbon Dioxide and Other Greenhouse Gases (GHGs) Owing to concerns about the effects of greenhouse gas emissions on the Earth`s climate, caps have been set on the total amount of GHG emissions in given areas, such as the EU. Permits, which are permissions to emit a portion of the total allowable GHG emissions, are traded like other commodities in open markets. The market price represents the value of the emissions based on supply (the cap is initially set based on current scientific knowledge) and demand (the desired amount of emission reductions); a balance between the interests of the people as a whole and the individuals or groups who wish to emit GHG. A spot value from the European market was used in the analysis, a value for GHG at USD $21.55 per tonne of CO2­ e (European Market Price, 11 May 2009). Other studies, such as the Stern Review (Stern, 2005), use detailed models to project the cumulative economic impact of additional unit of GHG, called the social cost of carbon (SCC), estimated at approximately USD$75/t CO2-e. This has been chosen as the high case` cost for this analysis. Firms may also strategically set an internal offset price based on their view of current markets and regulatory frameworks. The analysis calculated the GHG emissions associated with each option, and includes these costs over the range identified above. Value of Water The total economic value (TEV) of water can be broken down into three components: the direct use-value (used or potentially useable by humans); the ecological support value, and the option value (value to society from having the resource available at some time in the future to be used). Each option realizes different components, dependent on the final state of the water. In addition, the extent to which they are realized is dependent on the relative quality of the water resulting from the treatment level for each option. Within the sensitivity analysis, therefore, the TEV of water is varied around a base estimate of the value of water sold to enterprise users of USD$0.93 / m3 (90 Lek / m3) (Tirana Municipality, 2006). 122 Given the scarcity of readily accessible water that could develop under climate change, the high unit value of water can be taken to be the cost of replacing a similar amount of fresh water. The replacement value of fresh water is considered to be equivalent to the current cost of desalination by conventional means, with a premium added for the external costs associated with GHG emissions resulting from the desalination process. Wade (2004) has reported that the cost of desalination varies between about US$0.70/m3 and US$5.30/m3, depending on the scale of the facility (larger capacity facilities produce water at lower unit costs). Karagiannis (2008) indicated costs from US$1.60 for 2.70/m3, with oil at US$23/bbl. Costs in the order of US$1.10/m3 are typically used by government bodies and commercial operations. However, given the current high costs of fuel, for the capacity that would be required to replace the volumes of water discussed in this analysis, a value of US$3.00/m3 has been chosen. Loss of Ecological Resources Any options that involve significant land clearing to make way for power plants will cause direct ecological damage. For this analysis, it is assumed that these habitats would not otherwise have been destroyed or damaged. Valuation estimates for the surface ecology in the project area are provided by several sources, which provide estimates of the willingness- to-pay (see hypothetical market techniques in Section 5.1 of this Annex) for preservation of similar native vegetation (UNEP, 2001) of US$30 ha/yr for mountain ecosystems and US$117 per ha/yr (Ladenberg et al., 2007) for coastal ecosystems. For each option that involves land clearing, estimated impacted areas have been calculated. Disturbance of People and Property Construction of power plants can affect people and property in a negative way. For instance, given two houses that are exactly the same except that one is closer to a power plant, the one in the vicinity of a power plant will generally be cheaper. This reflects the value that people place on the possible health troubles (real or imagined), and the general preference for a natural view rather than neighboring a large industrial facility. The base value of this disbenefit was US $1.82 /hh/ha/pa (Ladenburg, 2001). This value was prorated for the other asset types based on the population density of the area and the footprint of the asset at hand. Electricity Financial Benefit The revenue received through the sale of produced electricity represents both the value of the production of the electricity and its contribution to macroeconomic activity. The electricity revenue is based on the stated average energy price, to all consumers, of 8.23 Lek per kWh (US$0.085 per kWh) (Tugu, 2009). To account for the fact that the climate change projections indicate that there will be less water available for hydropower electricity production, the electricity revenue from hydropower assets has been adjusted downwards as time progresses. The hydropower was adjusted downward on the basis of a total of a 15 percent decrease in generation capacity over the next 40 years, which is consistent with the projections based on climate modeling (Annex 8). It is applied on a cumulative yearly basis, with approximately 0.4 percent less capacity each year than the year before. Benefits Summary Based on information provided in Section 5, the range of expected values for each of the major benefit categories is provided below in Table A5.4. Each of the values in the table is 123 based on a reference, as discussed in Section 5. As can be seen, the unit values for benefits vary over a considerable range. Base-case estimates have been deliberately chosen to reflect a reasonable value for the parameters and the high case` estimates aim to bracket the likely uppermost value, and also to provide an indication of the likely future value trend. It is highly probable that all environmental assets will steadily increase in value over time, given the increasing scarcity of these resources worldwide and the increasing demand for natural resources as the world population continues to grow. Despite this, the analysis presented does not assume any future increase in values, but holds the current values constant over time. Table A5.4: Monetized Unit Benefit Values (U.S. Dollars) Benefit Category Units Base High Value of water m3 0.93 3.00 Carbon dioxide and other Tonne 21.55 75.00 GHGs NOx Tonne 62.00 80 Value of ecosystems: /ha/yr 30 200 mountain Value of ecosystems: /ha/yr 117 200 coastal Disturbance to people and /hh/km2/yr 1.82 5.00 property A5.6 R ESULTS S UMMARY Benefits Realized by Each Option Table A5-5 presents the net present value (NPV) in USD of the benefits (or disbenefits) accrued by each option. Table A5.5: Benefits Realized by Each Option (U.S. Dollars, 2010) Environmental Social GHG Ecosystem Ecosystem Value of NOx Disturbance (coastal) (mountain) water to people Import -39,336,650 -4,809,838 -94,308 LHPP -89,551,619 Update CCGT -39,336,650 -3,371 -4,809,838 -94,308 -57,302 ESHPP Update New SHPP -89,453 Wind -9,993,205 CSP -593,244 -3,644,669 -3,325,316 New LHPP -491,777 -89,551,619 -467,808 124 Present Value Benefits Calculation The present value sum of benefits is calculated using the following formula, in the case of a uniform annual flow: PA 1 i N 1 C i i N 1 where: P = Present Value i = discount N = number of years A = uniform series amounts (e.g., if the benefit is worth USD$100 / year) C = one off benefit The discount rate is an issue of controversy, with differing opinions on the value that should be used. In this study a base discount rate of 4.5 percent has been used as a base value. Variation in this discount rate is explored through sensitivity analysis. This base value for discount rate has been adopted following discussion with the World Bank`s economist in Albania. The value is higher than the social discount rate used in other developed European economies (e.g., the United Kingdom uses 3.5 percent) and reflects the higher potential growth rates that a developing economy, such as Albania`s, may experience. This discount rate is perturbed in the sensitivity analysis. A5.7 L IMITATIONS There are limitations to this analysis, largely the result of assumptions that are required to be made, and also due to the often-subjective nature of selections and appraisals that must be made by the user. The methodology presented in Hardisty and Ozdemiroglu (2005) depends necessarily on the expert input of the user. In reality, these are the same limitations inherent in most, if not all, such methodologies for economic analysis: they depend heavily on the assumptions made, the expertise and experience of the user and stakeholders. As such, this methodology is seen as a tool for deliberation over options with stakeholders, each of whom will tend to value various resources and potential risks slightly differently. 125 These tables contain the data for the charts presented in the results section in Section 5. Table A5.6: Base-case Parameters Results (U.S. Dollars, 2010) Financial Environmental Social CAPEX OPEX Electricity GHG Ecosystem Ecosystem Value of NOx Disturbance NPV Benefit (coastal) (mountain) Water to People Import -519,255,000 431,228,000 -39,337,000 -4,810,000 -94,000 -132 Update -13,650,000 -13,833,000 420,148,000 -89,552,000 303 existing LHPP CCGT -72,000,000 -140,062,000 431,228,000 -39,337,000 -3,000 -4,810,000 -94,000 -57,000 175 Update -105,600,000 -51,875,000 417,824,000 260 existing SHPP New SHPP -132,000,000 -51,719,000 417,824,000 -89,000 234 Wind -286,000,000 -96,833,000 431,228,000 -9,993,000 38 CSP -311,380,000 -31,816,000 431,228,000 -593,000 -3,645,000 -3,325,000 80 New LHPP -467,000,000 -13,833,000 420,148,000 -492,000 -89,552,000 -468,000 -152 Table A5.7: High-case Parameters Results (U.S. Dollars, 2010) Financial Environmental Social CAPEX OPEX Electricity GHG Ecosystem Ecosystem Value of NOx Disturbance NPV Benefit (coastal) (mountain) Water to People Import -519,255,000 431,228,000 -136,902,000 -15,516,000 -122,000 -241 Update -13,650,000 -13,833,000 420,148,000 -288,876,000 104 existing LHPP CCGT -72,000,000 -140,062,000 431,228,000 -136,902,000 -6,000 -15,516,000 -122,000 -157,000 66 Update -105,600,000 -51,875,000 417,824,000 260 existing SHPP New SHPP -132,000,000 -51,719,000 417,824,000 -596,000 234 Wind -286,000,000 -96,833,000 431,228,000 -27,454,000 21 CSP -311,380,000 -31,816,000 431,228,000 -1,014,000 -11,757,000 -9,135,000 66 New LHPP -467,000,000 -13,833,000 420,148,000 -3,279,000 -288,876,000 -1,285,000 -355 126 ANNEX 6: FURTHER DETAILS ON OPTIONS TO IMPROVE THE CLIMATE RESILIENCE OF ALBANIA'S ENERGY SECTOR Next steps Actions marked with an asterisk (*) are no-regrets actions that could improve Albania`s energy security even without climate change. Those marked with a cross () are included in the draft NES active scenario. Informational * Compile digital databases on historic and observed climatological and hydrological conditions. Provide free access on the Web to these data. * Improve coordination of Albania`s forecasting agencies (the Military Weather Services, Institute of Energy, Water and Environment and the National Air Traffic Agency), by sharing data, expertise, and financial strength to support better quality forecasting. These organizations could collectively engage with energy-sector stakeholders to understand their data needs to support management of the energy / climate interface. * Upgrade Albania`s weather and hydrological monitoring network, focusing most urgently on the Drin basin: Monitoring sites could be equipped with automatic devices able to record and transmit in real- time the key weather variables (rainfall, runoff, temperature, sunshine hours, wind speed, reservoir head, evaporation, turbidity, water equivalent of snow). Measure sedimentation in reservoirs, which has not been measured for 40 years. The data above could be collected by KESH and used in managing reservoirs for safety and energy production. Wind data are also required, measured at the height of wind turbines (80 to 100 m) to ensure wind farms are designed appropriately and will operate efficiently. Once these data are available, explore whether high wind speeds coincide with periods of lower rainfall, in which case wind power could provide a useful resource when generation from hydropower facilities is lower. * Develop in-country or obtain weather and climate forecasts appropriate for energy-sector planning needs: Short-range forecasts (1 to 3 days ahead) could be provided by IEWE--including weather products for energy demand forecasting (temperature, cloudiness), reservoir management (rainfall), safety and disaster management (heavy rainfall, high winds, lightning strikes) * Medium-range forecasts (3 to 10 days ahead) could be obtained by subscribing, for example, to the European Centre for Medium-range Weather Forecasting regional forecasts-- particularly for use by KESH--to facilitate effective management of water reserves for hydropower generation * Seasonal forecasts (several months ahead) could be developed by IEWE from statistical models of teleconnections, using observed and historical data for application to energy-sector planning Climate change scenarios (years and decades ahead): o These should be at a spatial resolution suitable for river basin planning (e.g., 50 km 50 km) o They should be developed by downscaling ensembles of outputs from global climate models (GCMs), which are provided by Met Agencies around the world, coordinated through the World Meteorological Organization. o The GCMs to be included in the ensemble should be those that are best able to 127 Next steps Actions marked with an asterisk (*) are no-regrets actions that could improve Albania`s energy security even without climate change. Those marked with a cross () are included in the draft NES active scenario. simulate the observed (historic) precipitation. * Consider providing free access to these data to energy-sector stakeholders. Short-range and medium- range forecasts should be available in real time via the Web. Undertake further research on climate change impacts using downscaled climate change scenarios, researching the impacts of changes in seasonal conditions and extreme climatic events. * Update watershed models and maps of Albania`s climate to support planning for optimization of future hydropower assets. * Join networks of experts working on climate and climate change issues; for instance, WMO, EUMetNet, and EUCOS. * Create partnerships between weather, climate and hydrological experts, and energy-sector stakeholders to enhance dissemination of dissemination of information and to ensure that data providers understand user needs. * Strengthen regional cooperation on sharing of weather/ climate information and forecasting and undertake research to develop shared understanding of regionwide climate change risks and their implications for energy security, energy prices and trade, including: Data exchange on historical and recent observed data Joint studies and monitoring activities with institutions in neighboring countries, especially in the two upper watersheds of the Drin and in the Vjosa watershed Regional studies to establish whether all South East Europe`s watersheds are positively correlated (i.e., whether they experience wet or dry years or seasons at the same time, and whether wet and dry years correspond with cold and hot years): o If so, the existing and proposed hydropower assets in the region may be exacerbating the region`s vulnerability to climate risks. o If not, it may be possible to undertake an investment strategy to diversify risk across the region. * Work with regional partners to develop better knowledge of the linkages between energy prices and hydrological conditions in the face of climate change: Marginal costs of energy production are higher in dry years than wet years. Some data linking these factors are available for 2010 and 2015. Research should be undertaken to develop data out to 2020 and 2030, taking account of climate change projections. * Improve understanding of current rates of coastal erosion and of the impacts of rising sea levels and storm surges on future erosion rates, for better management of coastal assets (e.g., TPP and port facilities). * Learn from experience of energy-sector experts worldwide on managing current and future climate- related risks (e.g., hydropower experts in Brazil and EDF in France, both of whom have been researching these issues for some time). * Monitor changing ground conditions and concentrations of pollutants at Patos Marinza. Identify whether contaminated land remediation at Patos Marinza would be effective / quick enough in the light of climate change impacts and if not, develop additional management plans while rehabilitation is underway. 128 Next steps Actions marked with an asterisk (*) are no-regrets actions that could improve Albania`s energy security even without climate change. Those marked with a cross () are included in the draft NES active scenario. * Monitor potential for pollution incidents at coal mines due to heavy downpours. Institutional: Managing current climatic variability and changes in average climatic conditions * Improve and exploit data on reservoir use, margins, and changes in rainfall and runoff to improve management of existing reservoirs. * Consider providing incentives for energy-efficiency measures to reduce demand. * Support enforcement of measures to reduce technical and commercial losses of water. * Work with water users in the agricultural sector to devise agreed strategies for managing shared water resources with owners of hydropower plants. This could draw on the outcomes of World Bank research investigating climate change impacts on agriculture in Albania. The outcomes of the research presented in this report and the agricultural assessments could be integrated to consider the cross- sectoral issues around water management. * Support enforcement of measures to reduce commercial losses from the power distribution system. Incorporate robustness to climatic variability and climate change in regulations, design codes, energy- sector proposals, site selection decisions, environmental impact assessments, contracts, public-private partnerships for new energy assets and other policy instruments for new facilities. Ensure that proposed locations for new LHPP will be sustainable in the face of climate change risks. Assess use of tariffs and incentives to promote climate resilience of energy assets. Consider amendment to regulations to capture climate change costs in energy prices and the price of water. * Strengthen measures to control illegal logging that contributes to soil erosion and siltation of reservoirs. Set up a committee to provide oversight and monitoring of progress on climate change adaptation. Institutional: Managing climatic extremes Review and upgrade Emergency Contingency Plans (ECPs) for LHPPs, to take account of expected increases in precipitation intensity due to climate change, ensuring that they include: monitoring of precipitation; modeling of river flows; communication instruments and protocols for downstream communities; and plans for evacuation. * Consider use of Power Purchase Agreements with neighboring countries and large energy users to assist Albania in coping with the impacts of extreme droughts on energy security. This would need to be supported by real-time data on regional runoff and precipitation (as outlined above), and could include: Off-take arrangements with countries generating energy through less climatically vulnerable assets such as thermal power plants Power swap agreements, whereby Albania could buy thermal energy from neighbors at low cost during off-peak hours at night while allowing its reservoirs to fill, then recoup the energy during the next day`s peak load hours via a higher fall Instituting formal arrangements with large energy users such that they agree to their electricity supply being cut off in an extreme situation, in return for which they pay less for electricity * Investigate applicability of weather coverage and insurance instruments for energy-sector risk management. 129 Next steps Actions marked with an asterisk (*) are no-regrets actions that could improve Albania`s energy security even without climate change. Those marked with a cross () are included in the draft NES active scenario. * Support development of contingency plans in collaboration with stakeholders for better management of extreme climatic events and ensure that resources could be mobilized effectively to respond to them. * Ensure that regulations on dam security are enforced. Physical / technical Optimize existing energy assets: * Improve maintenance of existing assets, many of which were designed and constructed several decades ago. Check that the sizing of existing assets is robust to climate variability and projected changes in average climatic conditions and explore whether water storage could be increased at reasonable cost to help manage seasonal variations. Review old and/or inefficient equipment and identify cost-effective measures to improve efficiencies, such as: o Clearing / redesigning trash racks o Upgrading turbines and generators o Replacing equipment to reduce water losses (e.g., shut-off valves) o Improving aprons below dams to reduce erosion o Raising dam crest on Fierze o Increasing capacity of spillways on Fierze and Komani dams o Developing pump storage scheme on Drin river cascade o Digging wider channels for SHPPs * Reduce losses: Reduce electricity transmission losses. Reduce losses of water--hold dialogues with stakeholders sharing watersheds to discuss losses and establish how best to work together to reduce them. Improve demand-side energy efficiency through incentives (e.g., for insulation and energy efficient appliances) and enforcement. Ensure new assets are resilient: For new assets at the design stage, review the robustness of design and site locations to climatic variability and projected climate change--including design of energy generation assets as well as associated infrastructure, such as port facilities. * Diversify energy generation asset types into non-hydropower renewables and thermal power plants, ensuring that site selection and design are resilient to climate change. Increase hydropower installed capacity, ensuring that new facilities are designed to cope with changing climate risks. * Provide better interconnections to facilitate regional energy trade. * Reduce energy demand and improve energy efficiency through greater use of domestic solar water heating, improved building standards, use of lower energy appliances, and use of alternative heating 130 Next steps Actions marked with an asterisk (*) are no-regrets actions that could improve Albania`s energy security even without climate change. Those marked with a cross () are included in the draft NES active scenario. sources other than electricity. Optimize transmission and distribution by reducing technical losses (e.g., insulation of cables, under grounding of critical cables, consider DC rather than AC for long lines). * Install alternative fuel sources (other than electricity) for heating buildings, such as solar water heaters, geothermal. 131 ANNEX 7: ALBANIA POWER SUPPLY DEMAND SCENARIO PROJECTIONS 2003 TO 2050 Table A7.1: Passive Scenario Projections 2003 to 2050 Installed Capacity in MW 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Existing HPPs 1,445 1,445 1,445 1,445 1,445 1,445 1,445 1,445 1,445 1,445 1,445 1,445 1,445 1,445 SHPP 15 15 15 15 15 15 15 46 57 67 77 88 98 108 Bratila New HPP 75 75 75 75 75 Kalivaci New HPP 80 80 80 80 80 80 Ashta New HPP 44 44 44 44 44 Rehabilitation of Fier TPP 12 12 12 12 12 0 0 0 60 60 60 60 60 60 CCGT with distillate/natural 97 97 97 97 220 320 320 320 gas Devolli Cascade 100 100 Vjosa Cascade Skavica Wind PPs 20 25 Solar PPs Import - NTC 380 380 600 600 600 600 600 900 143 294 423 556 667 797 812 Generation/Supply in 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 MWh*000' Existing HPPs 4,888 5,325 5,274 5,410 2,900 4,000 4,149 4,149 4,149 4,149 4,149 4,149 4,149 4,149 SHPP 20 25 30 45 80 102 143 185 226 268 309 351 392 434 Bratila New HPP 0 0 0 0 0 0 0 0 0 330 330 330 330 330 Kalivaci New HPP 0 0 0 0 0 0 0 0 356 356 356 356 356 356 Ashta New HPP 0 0 0 0 0 0 0 0 0 202 202 202 202 202 Rehabilitation of Fier TPP 76 77 87 55 0 0 0 390 390 390 390 390 390 CCGT with distillate/natural 226 679 679 679 1,540 2,240 2,240 2,240 gas Devolli Cascade 0 0 0 0 0 0 0 0 0 0 0 0 400 400 Vjosa Cascade 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Skavica 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Wind PPs 0 0 0 0 0 0 0 0 0 0 0 0 54 68 Solar PPs 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Import - NTC 4,908 5,426 5,381 5,542 3,035 4,102 4,518 5,013 5,800 6,374 7,276 8,018 8,513 8,569 Import 1,295 747 1,018 1,058 3,865 3,302 3,186 3,124 2,746 2,584 2,143 1,907 1,779 2,084 6,203 6,173 6,399 6,600 6,900 7,404 7,704 8,137 8,546 8,958 9,420 9,925 10,293 10,653 Load shedding 908 1,121 1,077 1,058 940 619 501 397 329 271 152 0 0 0 Demand in MWh '000 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Demand Baseline Scenario 7,111 7,293 7,476 7,658 7,840 8,023 8,205 8,533 8,875 9,230 9,571 9,925 10,293 10,653 Demand Active Scenario 7,111 7,293 7,476 7,658 7,840 8,023 8,205 8,388 8,570 8,752 8,935 9,117 9,342 9,567 Baseline Demand 7,111 7,293 7,476 7,658 7,840 8,023 8,205 8,533 8,875 9,230 9,571 9,925 10,293 10,653 132 Installed Capacity in MW 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Existing HPPs 1,445 1,445 1,445 1,445 1,445 1,445 1,445 1,445 1,445 1,445 1,445 1,445 1,445 1,445 SHPP 119 129 140 150 165 180 195 210 225 240 255 270 285 300 Bratila New HPP 75 75 75 75 75 75 75 75 75 75 75 75 75 75 Kalivaci New HPP 80 80 80 80 80 80 80 80 80 80 80 80 80 80 Ashta New HPP 44 44 44 44 44 44 44 44 44 44 44 44 44 44 Rehabilitation of Fier TPP 60 60 60 60 60 60 60 60 60 60 60 60 60 60 CCGT with distillate/natural gas 420 420 420 420 520 520 620 620 620 620 620 620 750 750 Devolli Cascade 100 100 100 200 200 200 200 200 200 200 200 200 200 300 Vjosa Cascade 100 100 100 100 200 200 200 200 200 200 200 200 200 200 Skavica 150 150 150 150 350 350 350 350 350 350 Wind PPs 30 35 40 45 60 60 60 60 60 80 90 100 110 120 Solar PPs Import - NTC 900 900 900 900 900 900 900 900 900 1,200 1,200 1,200 1,200 1,200 1028 1043 1059 1174 1554 1569 1684 1699 1914 1949 1974 1999 2154 2279 Generation/Supply in 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 MWh*000' Existing HPPs 4,149 4,149 4,149 4,149 4,149 4,149 4,149 4,149 4,149 4,149 4,149 4,149 4,149 4,149 SHPP 475 517 558 600 660 720 780 840 900 960 1,020 1,080 1,140 1,200 Bratila New HPP 330 330 330 330 330 330 330 330 330 330 330 330 330 330 Kalivaci New HPP 356 356 356 356 356 356 356 356 356 356 356 356 356 356 Ashta New HPP 202 202 202 202 202 202 202 202 202 202 202 202 202 202 Rehabilitation of Fier TPP 390 390 390 390 390 390 390 390 390 390 390 390 390 390 CCGT with distillate/natural gas 2,940 2,940 2,940 2,940 3,640 3,640 4,340 4,340 4,030 4,340 4,340 4,340 5,250 5,250 Devolli Cascade 400 400 400 800 800 800 800 800 800 800 800 800 800 1,200 Vjosa Cascade 410 410 410 410 820 820 820 820 820 820 820 820 820 820 Skavica 0 0 0 0 600 600 600 600 1,400 1,400 1,400 1,400 1,400 1,400 Wind PPs 81 95 108 122 162 162 162 162 162 216 243 270 297 324 Solar PPs 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Import - NTC 9,733 9,789 9,843 10,299 12,109 12,169 12,929 12,989 13,539 13,963 14,050 14,137 15,134 15,621 Import 1,292 1,568 1,854 1,726 252 501 58 322 105 63 369 686 104 43 11,026 11,356 11,697 12,025 12,361 12,670 12,987 13,312 13,645 14,027 14,419 14,823 15,238 15,665 Load shedding 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Demand in MWh '000 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Demand Baseline Scenario 11,026 11,356 11,697 12,025 12,361 12,670 12,987 13,312 13,645 14,027 14,419 14,823 15,238 15,665 Demand Active Scenario 9,792 10,017 10,242 10,467 10,697 10,932 11,172 11,418 11,668 11,925 12,187 12,454 12,728 13,008 Baseline Demand 11,026 11,356 11,697 12,025 12,361 12,670 12,987 13,312 13,645 14,027 14,419 14,823 15,238 15,665 133 Installed Capacity in MW 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 Existing HPPs 1,445 1,445 1,445 1,445 1,445 1,445 1,445 1,445 1,445 1,445 1,445 1,445 1,445 1,445 1,445 SHPP 315 330 345 360 375 390 405 405 405 405 405 405 405 405 405 Bratila New HPP 75 75 75 75 75 75 75 75 75 75 75 75 75 75 75 Kalivaci New HPP 80 80 80 80 80 80 80 80 80 80 80 80 80 80 80 Ashta New HPP 44 44 44 44 44 44 44 44 44 44 44 44 44 44 44 Rehabilitation of Fier TPP 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 CCGT with distillate/natural gas 900 900 900 900 1,100 1,100 1,100 1,100 1,200 1,200 1,300 1,300 1,300 1,500 1,500 Devolli Cascade 300 300 300 300 300 300 300 300 300 300 300 300 300 300 300 Vjosa Cascade 200 200 300 300 300 300 300 300 300 300 300 300 300 300 300 Skavica 350 350 350 350 350 350 350 350 350 350 350 350 350 350 350 Wind PPs 130 140 150 160 170 180 190 200 210 220 220 220 220 220 220 Solar PPs 10 10 10 10 10 30 Import - NTC 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 2394 2419 2544 2569 2794 2819 2844 2854 2964 2984 3084 3084 3084 3284 3304 Generation/Supply in 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 MWh*000' Existing HPPs 4,149 4,149 4,149 4,149 4,149 4,149 4,149 4,149 4,149 4,149 4,149 4,149 4,149 4,149 4,149 SHPP 1,260 1,320 1,380 1,440 1,500 1,560 1,620 1,620 1,620 1,620 1,620 1,620 1,620 1,620 1,620 Bratila New HPP 330 330 330 330 330 330 330 330 330 330 330 330 330 330 330 Kalivaci New HPP 356 356 356 356 356 356 356 356 356 356 356 356 356 356 356 Ashta New HPP 202 202 202 202 202 202 202 202 202 202 202 202 202 202 202 Rehabilitation of Fier TPP 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 CCGT with distillate/natural gas 5,850 6,300 6,030 6,300 6,875 7,029 7,579 7,700 8,400 8,400 9,100 9,100 9,100 10,500 10,500 Devolli Cascade 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 Vjosa Cascade 820 820 1,230 1,230 1,230 1,230 1,230 1,230 1,230 1,230 1,230 1,230 1,230 1,230 1,230 Skavica 1,400 1,400 1,400 1,400 1,400 1,400 1,400 1,400 1,400 1,400 1,400 1,400 1,400 1,400 1,400 Wind PPs 351 378 405 432 459 486 513 540 567 594 594 594 594 594 594 Solar PPs 0 0 0 0 0 0 0 0 0 30 30 30 30 30 90 Import - NTC 15,918 16,455 16,682 17,039 17,701 17,942 18,579 18,727 19,454 19,511 20,211 20,211 20,211 21,611 21,671 Import 138 3 187 252 22 206 5 303 33 443 202 672 1,152 243 686 16,056 16,458 16,869 17,291 17,723 18,149 18,584 19,030 19,487 19,955 20,414 20,883 21,364 21,855 22,358 Load shedding 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Demand in MWh '000 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 Demand Baseline Scenario 16,056 16,458 16,869 17,291 17,723 18,149 18,584 19,030 19,487 19,955 20,414 20,883 21,364 21,855 22,358 Demand Active Scenario 13,268 13,533 13,804 14,080 14,361 14,649 14,942 15,240 15,545 15,856 16,142 16,432 16,728 17,029 17,336 Baseline Demand 16,056 16,458 16,869 17,291 17,723 18,149 18,584 19,030 19,487 19,955 20,414 20,883 21,364 21,855 22,358 134 Installed Capacity in MW 2046 2047 2048 2049 2050 Existing HPPs 1,445 1,445 1,445 1,445 1,445 SHPP 405 405 405 405 405 Bratila New HPP 75 75 75 75 75 Kalivaci New HPP 80 80 80 80 80 Ashta New HPP 44 44 44 44 44 Rehabilitation of Fier TPP 0 0 0 0 0 CCGT with distillate/natural gas 1,700 1,700 1,800 1,800 1,900 Devolli Cascade 300 300 300 300 300 Vjosa Cascade 300 300 300 300 300 Skavica 350 350 350 350 350 Wind PPs 220 220 220 220 220 Solar PPs 30 30 30 30 30 Import - NTC 1,200 1,200 1,200 1,200 1,200 3504 3504 3604 3604 3704 Generation/Supply in MWh*000' 2046 2047 2048 2049 2050 Existing HPPs 4,149 4,149 4,149 4,149 4,149 SHPP 1,620 1,620 1,620 1,620 1,620 Bratila New HPP 330 330 330 330 330 Kalivaci New HPP 356 356 356 356 356 Ashta New HPP 202 202 202 202 202 Rehabilitation of Fier TPP 0 0 0 0 0 CCGT with distillate/natural gas 11,390 11,900 12,600 12,600 13,300 Devolli Cascade 1,200 1,200 1,200 1,200 1,200 Vjosa Cascade 1,230 1,230 1,230 1,230 1,230 Skavica 1,400 1,400 1,400 1,400 1,400 Wind PPs 594 594 594 594 594 Solar PPs 90 90 90 90 90 Import - NTC 22,561 23,071 23,771 23,771 24,471 Import 266 235 24 524 334 22,827 23,306 23,796 24,296 24,806 Load shedding 0 0 0 0 0 Demand in MWh '000 2046 2047 2048 2049 2050 Electricity Demand Baseline Scenario 22,827 23,306 23,796 24,296 24,806 Electricity Demand Active Scenario 17,648 17,965 18,289 18,618 18,953 Baseline Demand 22,827 23,306 23,796 24,296 24,806 135 Table A7.2: Active Scenario Projections 2003 to 2050 Installed Capacity in MW 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Existing HPPs 1,445 1,445 1,445 1,445 1,445 1,445 1,445 1,445 1,445 1,445 1,445 1,445 1,445 1,445 SHPP 15 15 15 15 15 15 15 46 57 67 77 88 98 108 Bratila New HPP 75 75 75 75 75 Kalivaci New HPP 80 80 80 80 80 80 Ashta New HPP 44 44 44 44 44 Rehabilitation of Fier TPP 12 12 12 12 12 0 0 0 60 60 60 60 60 60 CCGT with distillate/natural 97 97 97 97 220 220 220 220 gas Devolli Cascade 100 100 Vjosa Cascade Skavica Wind PPs 20 25 Solar PPs Import - NTC 380 380 600 600 600 600 600 900 TOTAL 143 294 423 556 567 697 712 Generation/ Supply in MWh `000 Installed Capacity in MW 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Existing HPPs 4,888 5,325 5,274 5,410 2,900 4,000 4,149 4,149 4,149 4,149 4,149 4,149 4,149 4,149 SHPP 20 25 30 45 80 102 143 185 226 268 309 351 392 434 Bratila New HPP 0 0 0 0 0 0 0 0 0 330 330 330 330 330 Kalivaci New HPP 0 0 0 0 0 0 0 0 356 356 356 356 356 356 Ashta New HPP 0 0 0 0 0 0 0 0 0 202 202 202 202 202 Rehabilitation of Fier TPP 76 77 87 55 0 0 0 390 390 390 390 390 390 CCGT with distillate/natural 226 679 679 679 1,540 1,540 1,540 1,540 gas Devolli Cascade 0 0 0 0 0 0 0 0 0 0 0 0 400 400 Vjosa Cascade 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Skavica 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Wind PPs 0 0 0 0 0 0 0 0 0 0 0 0 54 68 Solar PPs 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Supply from IC 4,908 5,426 5,381 5,542 3,035 4,102 4,518 5,013 5,800 6,374 7,276 7,318 7,813 7,869 Import 1,295 747 1,018 1,058 3,865 3,302 3,186 2,978 2,441 2,107 1,507 1,799 1,529 1,698 Total Supply 6,203 6,173 6,399 6,600 6,900 7,404 7,704 7,991 8,241 8,481 8,783 9,117 9,342 9,567 Load Shedding 908 1,121 1,077 1,058 940 619 501 397 329 271 152 0 0 0 Demand in MWh `000 Total Demand 7,111 7,293 7,476 7,658 7,840 8,023 8,205 8,388 8,570 8,752 8,935 9,117 9,342 9,567 136 Installed Capacity in MW 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Existing HPPs 1,445 1,445 1,445 1,445 1,445 1,445 1,445 1,445 1,445 1,445 1,445 1,445 1,445 1,445 SHPP 119 129 140 150 165 180 195 210 225 240 255 270 285 300 Bratila New HPP 75 75 75 75 75 75 75 75 75 75 75 75 75 75 Kalivaci New HPP 80 80 80 80 80 80 80 80 80 80 80 80 80 80 Ashta New HPP 44 44 44 44 44 44 44 44 44 44 44 44 44 44 Rehabilitation of Fier TPP 60 60 60 60 60 60 60 60 60 60 60 60 60 60 CCGT with distillate/natural 220 220 220 220 220 220 320 320 320 320 320 320 320 320 gas Devolli Cascade 100 100 100 200 200 200 200 200 200 200 200 200 200 300 Vjosa Cascade 100 100 100 100 200 200 200 200 200 200 200 200 200 200 Skavica 150 150 150 150 350 350 350 350 350 350 Wind PPs 30 35 40 45 60 60 60 60 60 80 90 100 110 120 Solar PPs Import - NTC 900 900 900 900 900 900 900 900 900 1,200 1,200 1,200 1,200 1,200 TOTAL 828 843 859 974 1254 1269 1384 1399 1614 1649 1674 1699 1724 1849 Generation/ Supply in MWh `000 Installed Capacity in MW 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Existing HPPs 4,149 4,149 4,149 4,149 4,149 4,149 4,149 4,149 4,149 4,149 4,149 4,149 4,149 4,149 SHPP 475 517 558 600 660 720 780 840 900 960 1,020 1,080 1,140 1,200 Bratila New HPP 330 330 330 330 330 330 330 330 330 330 330 330 330 330 Kalivaci New HPP 356 356 356 356 356 356 356 356 356 356 356 356 356 356 Ashta New HPP 202 202 202 202 202 202 202 202 202 202 202 202 202 202 Rehabilitation of Fier TPP 390 390 390 390 390 390 390 390 390 390 390 390 390 390 CCGT with distillate/natural 1,540 1,540 1,540 1,540 1,540 1,540 2,240 2,240 2,240 2,240 2,240 2,240 2,240 2,240 gas Devolli Cascade 400 400 400 800 800 800 800 800 800 800 800 800 800 1,200 Vjosa Cascade 410 410 410 410 820 820 820 820 820 820 820 820 820 820 Skavica 0 0 0 0 600 600 600 600 1,400 1,400 1,400 1,400 1,400 1,400 Wind PPs 81 95 108 122 162 162 162 162 162 216 243 270 297 324 Solar PPs 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Supply from IC 8,333 8,389 8,443 8,899 10,009 10,069 10,829 10,889 11,749 11,863 11,950 12,037 12,124 12,611 Import 1,459 1,628 1,799 1,568 688 863 343 528 -81 61 236 417 604 396 Total Supply 9,792 10,017 10,242 10,467 10,697 10,932 11,172 11,418 11,668 11,925 12,187 12,454 12,728 13,008 Load Shedding 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Demand in MWh `000 Total Demand 9,792 10,017 10,242 10,467 10,697 10,932 11,172 11,418 11,668 11,925 12,187 12,454 12,728 13,008 137 Installed Capacity in MW 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 Existing HPPs 1,445 1,445 1,445 1,445 1,445 1,445 1,445 1,445 1,445 1,445 1,445 1,445 1,445 1,445 1,445 SHPP 315 330 345 360 375 390 405 405 405 405 405 405 405 405 405 Bratila New HPP 75 75 75 75 75 75 75 75 75 75 75 75 75 75 75 Kalivaci New HPP 80 80 80 80 80 80 80 80 80 80 80 80 80 80 80 Ashta New HPP 44 44 44 44 44 44 44 44 44 44 44 44 44 44 44 Rehabilitation of Fier TPP 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 CCGT with distillate/natural 435 435 435 435 550 550 550 550 700 700 700 700 800 800 800 gas Devolli Cascade 300 300 300 300 300 300 300 300 300 300 300 300 300 300 300 Vjosa Cascade 200 200 300 300 300 300 300 300 300 300 300 300 300 300 300 Skavica 350 350 350 350 350 350 350 350 350 350 350 350 350 350 350 Wind PPs 130 140 150 160 170 180 190 200 210 220 220 220 220 220 220 Solar PPs 10 10 10 10 10 30 Import - NTC 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 TOTAL 1929 1954 2079 2104 2244 2269 2294 2304 2464 2484 2484 2484 2584 2584 2604 Generation/ Supply in MWh `000 Installed Capacity in MW 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 Existing HPPs 4,149 4,149 4,149 4,149 4,149 4,149 4,149 4,149 4,149 4,149 4,149 4,149 4,149 4,149 4,149 SHPP 1,260 1,320 1,380 1,440 1,500 1,560 1,620 1,620 1,620 1,620 1,620 1,620 1,620 1,620 1,620 Bratila New HPP 330 330 330 330 330 330 330 330 330 330 330 330 330 330 330 Kalivaci New HPP 356 356 356 356 356 356 356 356 356 356 356 356 356 356 356 Ashta New HPP 202 202 202 202 202 202 202 202 202 202 202 202 202 202 202 Rehabilitation of Fier TPP 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 CCGT with distillate/natural 3,045 3,045 3,045 3,045 3,300 3,850 3,850 3,850 4,200 4,550 4,900 4,900 5,600 5,600 5,600 gas Devolli Cascade 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 Vjosa Cascade 820 820 1,230 1,230 1,230 1,230 1,230 1,230 1,230 1,230 1,230 1,230 1,230 1,230 1,230 Skavica 1,400 1,400 1,400 1,400 1,400 1,400 1,400 1,400 1,400 1,400 1,400 1,400 1,400 1,400 1,400 Wind PPs 351 378 405 432 459 486 513 540 567 594 594 594 594 594 594 Solar PPs 0 0 0 0 0 0 0 0 0 30 30 30 30 30 90 Supply from IC 13,113 13,200 13,697 13,784 14,126 14,763 14,850 14,877 15,254 15,661 16,011 16,011 16,711 16,711 16,771 Import 154 333 106 295 235 -115 91 363 291 195 130 421 17 318 564 Total Supply 13,268 13,533 13,804 14,080 14,361 14,649 14,942 15,240 15,545 15,856 16,142 16,432 16,728 17,029 17,336 Load Shedding 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Demand in MWh `000 Total Demand 13,268 13,533 13,804 14,080 14,361 14,649 14,942 15,240 15,545 15,856 16,142 16,432 16,728 17,029 17,336 138 Installed Capacity in MW 2046 2047 2048 2049 2050 Existing HPPs 1,445 1,445 1,445 1,445 1,445 SHPP 405 405 405 405 405 Bratila New HPP 75 75 75 75 75 Kalivaci New HPP 80 80 80 80 80 Ashta New HPP 44 44 44 44 44 Rehabilitation of Fier TPP 0 0 0 0 0 CCGT with distillate/natural gas 900 900 1,000 1,000 1,100 Devolli Cascade 300 300 300 300 300 Vjosa Cascade 300 300 300 300 300 Skavica 350 350 350 350 350 Wind PPs 220 220 220 220 220 Solar PPs 30 30 30 30 30 Import - NTC 1,200 1,200 1,200 1,200 1,200 TOTAL 2704 2704 2804 2804 2904 Generation/ Supply in MWh `000 Installed Capacity in MW 2046 2047 2048 2049 2050 Existing HPPs 4,149 4,149 4,149 4,149 4,149 SHPP 1,620 1,620 1,620 1,620 1,620 Bratila New HPP 330 330 330 330 330 Kalivaci New HPP 356 356 356 356 356 Ashta New HPP 202 202 202 202 202 Rehabilitation of Fier TPP 0 0 0 0 0 CCGT with distillate/natural gas 6,300 6,300 7,000 7,000 7,700 Devolli Cascade 1,200 1,200 1,200 1,200 1,200 Vjosa Cascade 1,230 1,230 1,230 1,230 1,230 Skavica 1,400 1,400 1,400 1,400 1,400 Wind PPs 594 594 594 594 594 Solar PPs 90 90 90 90 90 Supply from IC 17,471 17,471 18,171 18,171 18,871 Import 176 494 117 446 82 Total Supply 17,648 17,965 18,289 18,618 18,953 Load Shedding 0 0 0 0 0 Demand in MWh `000 Total Demand 17,648 17,965 18,289 18,618 18,953 139 ANNEX 8: ESTIMATING IMPACTS OF CLIMATE CHANGE ON LARGE HYDROPOWER PLANTS IN ALBANIA This Annex outlines the approach to estimating the impacts of climate change on large hydropower plants (LHPPs) in Albania. These estimates are required to make an initial assessment of climate change risks to Albania`s energy sector, which will feed into the high- level cost­benefit analysis of adaptation options. It was outside the scope of this vulnerability assessment to undertake hydrological assessments including climate change for Albania`s LHPPs, and the data needed were not available to do this. The report therefore utilizes information from existing studies for Albania and other countries. It is recognized that Albania could benefit from additional investment in hydrological and meteorological monitoring and research/assessments to understand these issues better. A8.1 EXISTING AVAILABLE INFORMATION ON LHPPS AND CLIMATE CHANGE IMPACTS The following information was reviewed linking climate change and hydropower production: a. Work by IEWE (formerly HMI) at Tirana Polytechnic University for Albania`s First National Communication to the UNFCCC b. Recent work by IEWE on the Vjosa Basin in southern Albania c. Recent work by IEWE on the Mati River catchment for Albania`s Second National Communication d. A correlation of annual average inflows to Fierze and electricity generation e. Verbal information from the World Bank`s Senior Energy Economist in Albania6 f. Roberto Schaeffer et al. (2009), recent assessment of climate change impacts on LHPP in Brazil7 These are reviewed in turn as follows. 6 Meeting with Demetrios Papathanasiou, Senior Energy Economist at the World Bank, on April 22, 2009. 7 Reported in: Pereira de Lucena, A.F., Szklo, A.S., Salem, A., Schaeffer, R. de Souza, R.R., Borba, B.S.M.C., da Costa, I.V.L, Junior, A.O.P., da Cunha, S.H.F. (2009). The vulnerability of renewable energy to climate change in Brazil, Energy Policy, 37: 879­889 and Roberto Schaeffer's presentation on the above at World Bank Energy Week 2009. 140 A8.2 ALBANIA'S FIRST NATIONAL COMMUNICATION The range of projected climate changes for Albania presented in the 1NC8 is shown in Table A8.1 Table A8.1 Climate Change Scenarios for Albania (CCSA) Scenarios for Albania Time Horizon 2025 2050 2100 Annual Temperature (oC) 0.8+1 1.2+1.8 2.1+3.6 Precipitation (%) -3.8+-2.4 -6.1+-3.8 -12.5+-6 Winter Temperature (oC) 0.8+1.0 1.3+1.8 2.13.7 Precipitation (%) -1.6+0 -1.8+0 -3.7+0 Spring Temperature (oC) 0.7+0.9 1.0+1.5 1.8+3.0 Precipitation (%) -2.7+-1.3 -3.6+-2.1 -7.4+-3.4 Summer Temperature (oC) 0.9+1.2 1.2+2.0 2.3+4.1 Precipitation (%) -0.8+-5.6 -20.0+-9.1 -27.0+-14.4 Autumn Temperature (oC) 0.9+1.1 1.1+2.0 2.1+3.8 Precipitation (%) -4.3+-3.4 -11.2+-2.1 -16.2+-8.6 Sea Level (cm) 20-24 48-61 Cloud Cover (%) -1.3+-1.5 -2.6+-2.0 -4.6+-3.1 Wind Speed (%) 0.7 1+1.3 1.6+2.3 To assess the impact of climate change on the mean annual runoff, two models that relate runoff forming factors (annual sum of precipitation and mean annual evapotranspiration) to the long term mean annual runoff were used. The 1NC states that: The models forecast a decrease in the long term mean annual runoff, respectively from ­9.8 percent to ­13.6 percent and from ­6.3 percent to ­9.1 percent, for 2025 (see the black line in Figure A8.1). According to Figure A8.1: a. The projected climatic changes for 2050--that is, decreases in annual precipitation of ­6.1 percent to ­3.8 percent and temperature increases of +1.2 deg C to +1.8 deg C--translate into a decrease in annual runoff of about ­15 percent by 2050. b. The projected climatic changes for 2100--i.e. decreases in annual precipitation of ­12 percent to ­6 percent and temperature increases of +2.1 deg C to +3.6 deg C--result in a decrease in annual runoff of about ­35 percent by 2100. 8 Islami, B., Kamberi, M., Demiraj, E., Fida, E. (2002). The First National Communication of the Republic of Albania to the United Nations Framework Convention on Climate Change (UNFCCC). Ministry of Environment, Republic of Albania. 141 Figure A8.1: Average change in mean runoff according to CCSA for three time horizons: 2025, 2050, 2100 A8.3 ASSESSMENT OF CLIMATE CHANGE IMPACTS ON THE VJOSA BASIN The assessment of climate change impacts on the Vjosa Basin 9 presented a slightly different set of climate change scenarios, with larger changes for Albania than the 1NC, as shown in Table A8.2. Table A8.2: Climate Change Scenarios for Three Time Horizons: 2025, 2050, 2100 Scenarios for Albania Time Horizon 2025 2050 2100 Annual Temperature (oC) 0.8 to 1.1 1.7 to 2.3 2.9 to 5.3 Precipitation (%) -3.4 to -2.6 -6.9 to -5.3 -16.2 to -8.8 Winter Temperature (oC) 0.7 to 0.9 1.5 to 1.9 2.4 to 4.5 Precipitation (%) -1.8 to -1.3 -3.6 to -2.8 -8.4 to -4.6 Spring Temperature (oC) 0.7 to 0.9 1.4 to 1.8 2.3 to 4.2 Precipitation (%) -1.2 to -0.9 -2.5 to -1.9 -5.8 to -3.2 Summer Temperature (oC) 1.2 to 1.5 2.4 to 3.1 4.0 to 7.3 Precipitation (%) -11.5 to -8.7 -23.2 to -17.8 -54.1 to -29.5 Autumn Temperature (oC) 0.8 to 1.1 1.7 to 2.2 2.9 to 5.2 Precipitation (%) -3.0 to -2.3 -6.1 to -4.7 -14.2 to -7.7 A rainfall-runoff model was used to assess the impacts of these changes on Vjosa River runoff. The projected changes in runoff are shown in Figure A8.2. The paper notes that during winter, precipitation feeding the Vjosa River falls as snow and that the presence of deep karst aquifers assure an abundant underground supply during the dry season. According to Figure A8.2 which presents data drawn from that paper: a. The projected climatic changes for 2050--that is, decreases in annual precipitation of ­6.9 percent to ­5.3 percent and temperature increases of +1.7 9 M. Bogdani Ndini and E. Demiraj Bruci, 2008 142 deg C to +2.3 deg C--translate into a decrease in annual runoff of about ­18 percent to ­25 percent by 2050. b. The projected climatic changes for 2100--that is, decreases in annual precipitation of ­16 percent to ­9 percent and temperature increases of +2.9 deg C to +5.3 deg C--translate into a decrease in annual runoff for the Vjosa River in the range ­30 percent to ­47 percent by 2100. Figure A8.2 Projected Climatic Changes to 2100 A8.4 ASSESSMENT OF CLIMATE CHANGE IMPACTS ON THE MATI RIVER BASIN The assessment of climate change impacts on the Mati River10 presented the same set of climate change scenarios as the assessment of the Vjosa River (see Table A8.2). The assessment states that snowfall is not a frequent phenomenon, even in the hilly part of the study area and notes that increasing temperatures will make snow in future even rarer. According to Figure A8.3: a. The projected climatic changes for 2050--that is, decreases in annual precipitation of ­6.9 percent to ­5.3 percent and temperature increases of +1.7 deg C to +2.3 deg C--translate into a decrease in annual runoff of about ­18 percent to ­25 percent by 2050. b. The projected climatic changes for 2100--that is, decreases in annual precipitation of ­16 percent to ­9 percent and temperature increases of +2.9 deg C to +5.3 deg C--translate into a decrease in annual runoff for the Vjosa River in the range ­30 percent to ­47 percent by 2100. 10 B. Islami and E. Demiraj Bruci, 2008. Impacts of Climate Change to the Power Sector and Identification of the Adaptation Response Measures in the Mati River Catchment's Area. 143 Note that these are the same graphs as were presented above for the Vjosa River study. Figure A8.3 Expected changes in runoff, Mati catchment's area This report states that there is a strong correlation between Mati River flow and power production from Ulėza and Shkopeti HPP, as shown in Figure A8.4 (taken from the report). This graph implies that if the flow of the Mati River declined by 20 percent, electricity generation would fall by about 15 percent. 144 Figure A8.4: Relation of electricity production to river flow, MRCA A8.5 CORRELATION OF ANNUAL AVERAGE INFLOWS TO FIERZE AND ELECTRICITY GENERATION The World Bank office in Albania has provided Excel spreadsheets that include data on monthly and annual average inflows (m3s-1) to Fierze from 1948 to 2007, as well as annual energy generated (GWh) from all sources for the years 1999 to 2007. A linear correlation of these data is provided in Figure A8.5. It indicates that a 20 percent fall in inflow leads to a reduction in energy generated of approximately 15 percent. Figure A8.5: Electricity generation and Fierze inflows, 1999­2007 145 A8.6 VERBAL INFORMATION FROM THE WORLD BANK The World Bank`s Senior Energy Economist in Albania reported verbally that at Skavica a 20 percent reduction in precipitation translated into an approximate 20 percent reduction in HPP output. A8.7 ASSESSMENTS OF LHPP IN BRAZIL Research undertaken by Schaeffer and colleagues (Schaeffer, et al,.2009) used regional climate modeling for Brazil at 50 km 50 km spatial resolution and on monthly timesteps to project impacts on LHPP. First, projected changes in climate were used to generate perturbed river flows taking account of climate change. Then, using the SUISHI-O HPP operation simulation model, projected changes in HPP output were generated. The projected changes in hydropower production for the period 2071 to 2100 are summarized in Table A8.3, (from Schaeffer et al., op. cit.) Table A8.3: Results for Hydropower (Deviation from the Reference Projections) and Relative Participation of Each Basin in the Brazilian Hydropower System Basin Average Annual Flow Average Power Firm Power Percent A2 (%) B2 (%) A2 (%) B2 (%) A2 B2 Brazil SINa Parana River -2.40 -8.20 0.70 -1.20 15.90 17.60 Grande 1.00 -3.40 0.30 -0.80 9.20 10.20 Paranaiba -5.90 -5.90 -1.40 -1.90 10.20 11.30 Paranapanema -5.00 -5.70 -1.40 -2.50 3.00 3.30 Parnaiba -10.30 -10.30 -0.80 -0.70 0.30 0.30 Sao Francisco -23.40 -26.40 -4.30 -7.70 8.50 9.40 Tocantins- -14.70 -15.80 -0.30 -0.30 15.80 17.60 Araguaia Brazil (SIN) -8.60 -10.80 -0.70 -2.00 -1.58% -3.15% 62.80 69.80 a SIN ­ Sistema Interligado Nacional (Brazil Interconnected Electric Power System) Schaeffer and colleagues state that in some of the river basins, reservoir management could go some way to mitigating the runoff changes in some basins, but not all: The Parana River, Paranaiba Basin, Paranapanema Basin and the Grande Basin--which all belong to the major Basin of Parana--show similar results. Besides the estimated negative average effect on flow, the seasonal variations in flow tend to be positive in the months when flow is increasing and negative in the months when it is falling. If this were the case, these power plants would face an earlier dry period, as well as an earlier start of the humid period. Given the not so relevant net annual results and the favourable seasonal pattern (higher flows in the beginning of the wet season), by adjusting the reservoir management in these existing power plants the estimated effects of GCC would be attenuated. The remaining basins all show an average negative impact on flow, especially the Sao Francisco Basin, where there is an installed hydroelectric capacity of 6.8GW. In that case, reservoir management would not be enough to compensate for the losses in the inflows to the hydropower plants. (Schaffer et al., 2009), 146 A8.8 SUMMARY The range of projected changes in annual climatic conditions, runoff, and hydropower production from the above studies are summarized in Table A8.4. The research in Brazil indicates less severe impacts than the analyses above suggest for Albania, and Schaeffer and colleagues state that in Brazil reservoir management can compensate to some extent for reduced river flows. According to this analysis, the high-level cost­benefit analysis for Albania uses an estimated decrease in annual hydropower output of 15 percent by 2050, associated with an average annual decrease of 20 percent in runoff. In addition, if possible, the CBA should test the sensitivity of these results to changes in annual power output in the range ­20 percent to ­5 percent. Table A8.4: Projected Changes in Annual Climatic Conditions, Runoff, and Hydropower Production Study Change in annual average Change in annual Change in annual climatic conditions by 2050 runoff by 2050 (%) hydropower output (%) First National Precipitation: ­6.1% to ­3.8% ­15% Communication Temperature: +1.2oC to +1.8oC Vjosa River Precipitation: ­6.9% to ­5.3% ­18% to ­25% Temperature: increases of +1.7oC to +2.3oC Mati River Precipitation: ­6.9% to ­5.3% ­18% to ­25% Figure A8.4 indicates Temperature: increases of that a 20% reduction in +1.7oC to +2.3oC runoff would cause a reduction of 15% in power generation Correlation of A 20% reduction in Fierze inflows inflows to Fierze is and energy associated with a 15% generation reduction in power generation Verbal 20% reduction in information precipitation translates from World into a 20% reduction in Bank HPP output Schaeffer et al. Parana River (2071­ ­1.2% to +0.7% 2100) ­8.2% to ­ 2.4% ­7.7% to ­4.3% Sao Francisco (2071­ 2100) ­26.4% to ­ 23.4% 147 ANNEX 9: ESTIMATING IMPACTS OF CLIMATE CHANGE ON ENERGY GENERATION IN ALBANIA, EXCLUDING LARGE HYDROPOWER PLANTS This Annex outlines the estimates of climate change impacts on Albania`s energy assets, excluding large hydropower plants11, to be used in the cost­benefit analysis. It has been developed by considering the climate change projections for Albania and drawing on the authors` engineering expertise of the relationships between climatic factors and asset performance. A9.1 SMALL HYDROPOWER PLANTS (SHPPS) Assume a 1 to 1 relationship between reduced river flows and SHPP production, that is, a 20 percent reduction by 205012. A9.2 THERMAL POWER PLANTS (TPPS) Estimate a 0.5 percent reduction in TPP output associated with higher temperatures in 2020, rising to 1 percent in 2050. A9.3 WIND The climate change scenarios`13 projections of changes in wind are low confidence and show little or no change. The report therefore assumes no change. A9.4 DOMESTIC SOLAR HEATERS The climate change scenarios14 indicate a reduction in cloudiness as shown in Table A9.1. Table A9.1 Range of Projected Changes Compared to 1961­1990 Baseline Range of projected changes compared to 1961­1990 baseline 2020s 2050s Climate Annual Summer Winter Annual Summer Winter variable Cloudiness ­4 to ­1 ­5 to ­2 ­2 to 0 ­5 to ­2 ­8 to ­6 ­3 to 0 (%) In summer, domestic solar heaters already provide all the required energy for water heating, so decreases in summer cloud cover will not act to reduce energy demand for water heating. In winter, however, this is not the case, so the report assumes that the winter water heating demand, taking account of climate change, should be reduced by 1 percent by the 2020s and 2 percent by the 2050s. For autumn and spring we suggest reduced demand of 1.5 percent by the 2020s and 3.0 percent by the 2050s. 11 For LHPP estimates see Annex 8. 12 See Annex 8. 13 Acclimatise. (2009). Climate change projections for Albania. Acclimatise, United Kingdom. (Jane, is this the elusive "CCSA"? If so the word here would be Scenarios? not projections) 14 Ibid. 148 A9.5 CONCENTRATED SOLAR POWER The report uses the data on decreases in cloudiness to estimate equivalent increases in output from concentrated solar power. A9.6 TRANSMISSION AND DISTRIBUTION The efficiency reduction for transmission and distribution is estimated as 1 percent by 2050, associated with rising temperatures. 149 ANNEX 10: GLOSSARY OF KEY TERMS Adaptation Actions to reduce the vulnerability of natural and human systems to climate change effects. For instance, an adaptation action that can be taken to reduce the damaging effects of rising sea levels is to build higher sea defences. Various types of adaptation exist, e.g., anticipatory and reactive, private and public, and autonomous and planned. Adaptive capacity The ability of a system to adjust to climate change (including climate variability and extremes) to moderate potential damages, to take advantage of opportunities, or to cope with the consequences. Baseline The reference against which change is measured, e.g., baseline climate is normally defined as the period 1961­1990. Carbon dioxide (CO2) CO2 is a naturally occurring gas, and a byproduct of burning fossil fuels or biomass, of land-use changes and of industrial processes. It is the main greenhouse gas produced by man that is driving climate change. CEZ CEZ Group, a privately owned Czech energy production group that has recently taken over management of Albania`s power distribution system. Climate change Climate change refers to any change in climate that lasts for an extended period, typically decades or longer, whether due to natural variability or as a result of human activity. Climate hazards Climate variables that have consequences for the system being studied (in this case, Albania`s energy sector). The main climate hazards to be discussed at the workshop are temperature, precipitation, relative humidity, sunshine, winds, sea level rise and extreme events such as storms. Climate impacts The effects that climate hazards have on a given system (in this case, Albania`s energy sector), such as reductions in rainfall have impacts on hydropower generation. Climate variability Climate variability refers to variations in the average state of climate. Rainfall, for instance, has high natural variability, which makes it difficult to detect a climate change signal. GCM General Circulation Model / Global Climate Model A computer-based numerical model of the climate system. GCMs are developed and run by climate modeling centers around the world and are used to project changes in climate. Greenhouse Gases (GHGs) Greenhouse gases absorb and emit infrared radiation. This property causes the greenhouse effect. Water vapour (H2O), carbon dioxide (CO2), nitrous oxide (N2O), methane (CH4) and ozone (O3) are the primary greenhouse gases in the earth`s atmosphere. Intergovernmental Panel on Climate Change (IPCC) The Intergovernmental Panel on Climate Change was formed in 1988 by the World Meteorological Organization (WMO) and the United Nations Environment Programme (UNEP), and is the international advisory body on climate change. Mitigation Actions to reduce man-made effects on the climate system. These include actions to reduce emissions of greenhouse gases (such as energy efficiency measures or the use of 150 renewable energy resources), as well as actions to increase greenhouse gas sinks (such as planting forests). Risk Risk is the product of the likelihood (or probability) of an event occurring and the magnitude of its consequence. Scenario A plausible description of how the future may develop. Scenarios are not predictions or forecasts, but are useful to provide a view of the implications of actions. Sensitivity Sensitivity is the amount by which a system is affected, either adversely or beneficially, by climate variability or climate change. For instance, the efficiency of gas turbines is sensitive to temperature. As temperatures rise, efficiency falls. Special Report on Emissions Scenarios (SRES) To provide a basis for estimating future climate change, the IPCC prepared the Special Report on Emissions Scenarios in 2000. It provides 40 greenhouse gas and sulphate aerosol emission scenarios based on different assumptions about demographic, economic and technological factors. The emissions scenarios are fed into Global Climate Models, to project future changes in climate. Threshold A property of a system where the relationship between the input and the output changes suddenly. For example, the height of a flood defence represents a critical threshold--if water levels exceed the defence height, flooding will occur. It is important to identify climate- related thresholds, as they indicate rapid changes in the level of risk. Timeslice Projections of climate change are usually given for three timeslices--the 2020s, 2050s, and the 2080s. The projections are a 30-year average, centered on each of the given timeslices, (i.e., the 2020s is 2010­2039). Climate models cannot predict what the specific climate will be in any given year, due in part to the interannual variability of climate variables, so the projections are 30-year averages of future climate. Uncertainty An expression of the degree to which a value is unknown (e.g., the future state of the climate system). Uncertainty can result from lack of information or from disagreement about what is known or even knowable. 151