62247 Albania’s Energy Sector: Vulnerable to Climate Change Jane Ebinger This Knowledge Brief provides an overview of a pilot vulnerability, risk, and adaptation assessment undertaken Key Messages for Albania’s energy sector by the Energy Sector Management Assistance Program (ESMAP), the World Bank and the Trust Fund for Environmentally and Socially Water resources are a national asset for Sustainable Development (TFESSD)1, in partnership with Albania: the river Drin generates about stakeholders in Albania’s energy sector. The assessment 90% of the electricity used by Albania’s raised awareness and initiated dialogue on energy sector local industry and households. adaptation. It was aimed at building greater understanding of the climate risks faced by the energy sector and of High dependence on hydropower brings priority actions that could be taken to reduce vulnerabilities, challenges: electricity production can by addressing the following question: “How can Albania vary from almost 6,000 GWh to less best manage its future security of energy supply in the face than half that amount in very dry years. of a changing climate?” Climate change will likely have an adverse effect on hydropower production: by 2050, annual average Hydropower is a National but Variable Asset electricity output from Albania’s large hydropower plants could reduce by The River Drin is the main source of electricity for Albania, about 15% and from small hydropower delivering power for local industry and households and plants by around 20%. providing about 90% of domestic electricity generation. However, Albania still finds it difficult to meet energy Critical actions taken by Albania now to demand and maintain energy supply due to the fluctuations support optimal use of energy, water in the country’s rainfall and other precipitation on which resources and operation of hydropower hydropower depends. Hydropower production can vary plants will help the country better between almost 6,000 GWh in very wet years to less than manage climate variability and build half that amount in very dry years. In 2007, a drought in the resilience to climate change. Drin’s watershed led to severe electricity shortages and blackouts, affecting businesses and citizens alike. Figure 1 shows lower domestic power production linked to low Introduction rainfall in 2002 and again in 2007, with resultant associated high energy imports. Energy security is a critical concern in Albania which relies on hydropower for about 90% of its electricity production. While renewable energy resources like hydropower play a fundamental role in moving the world towards a low-carbon economy, they can also be vulnerable to climatic conditions. 1 Climate variability already affects Albania’s energy production to a considerable extent and climate change is http://web.worldbank.org/external/default/main?sortDesc=DOCD bringing further challenges. T&theSitePK=301412&cntry=82664&piPK=51189446&pagePK =51187344&menuPK=301440 ECA Knowledge Brief Figure 1: Generation, Import, and Supply of Figure 2: Annual Precipitation Trends (%) over Electricity in Albania from 2002 to 2008 Albania, 1961-1990 Source: Situation of Energy Sector and Activity for ERE for 2008. Annual report. Energy Regulator of Albania. Other factors that constrain Albania’s ability to manage energy challenges are limited regional electricity interconnections and inefficiencies in domestic energy supply, demand, and water use. Losses in the electricity distribution system were about 33% in 2008. Together, these factors create frequent load shedding and adversely impact Albania’s economic development. Meanwhile, small hydropower plants compete for limited water resources with the irrigation needs of the agriculture sector. This problem Source: Bruci, E. (2008). Climate Variability and Trends in Albania. is exacerbated during summer when rainfall is at its lowest Institute of Energy, Water and Environment, Tirana Polytechnic and agriculture requires greater water supply. Improving the University, Tirana, Albania. efficiency of water use in Albania’s irrigation system, Note: Blue colors are areas that become drier. where 10% to 20% of water resources are lost, is an adaptation mechanism that can help both the energy and agriculture sectors. Higher temperatures due to climate change may reduce the demand for heating in winter but will increase demand for air conditioning and refrigeration in the summer. The Climate Change Could Make Matters Worse seasonality of Albania’s supply-demand imbalance raises this problem: summer temperatures increase the demand for Climate forecasters project an increase in droughts resulting cooling and refrigeration at the same time that hydropower from global warming and changing hydrology. These production is most constrained by reduced rainfall. Summer changes could reduce annual average electricity output from temperatures also coincide with greater irrigation needs in Albania’s large hydropower plants (LHPPs) by about 15% agriculture, which may compete directly with small and from small hydropower plants (SHPPs) by around 20% hydropower plants for limited water supplies. by 2050. Most of the country has already seen decreases in precipitation (Figure 2). Current Efforts to Support Increased Energy Other energy assets are not immune from climate impacts. Security Rising temperatures can reduce the efficiency of transmission and distribution lines, as well as the power Efforts are underway to address these challenges and produced by thermal power plants (TPPs) by about 1% each improve resource use efficiency. In 2008, for the first time, by 2050. If river-water cooled TPPs were developed in the no electricity load shedding was programmed. Along with future, they would be affected by changes in river flows and reductions in electricity losses from the transmission higher river temperatures, further reducing their efficiency. system, losses from the distribution system were reduced by Solar energy production in Albania may, however, benefit 5.5% in 2008 compared to 2007. from projected decreases in cloudiness as it is estimated that output from solar power could increase by 5% by 2050. ECA Knowledge Brief Management actions were also taken to improve water use must provide financial incentives to promote their use. efficiency in electricity generation. In 2007 and 2008, However, based on experience from other countries, inflows to the Fierze Reservoir were similar (approximately implementing these measures in a timely manner will be a 4,120,000,000 m3) but power generation in 2008 was 29.4% significant challenge. 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 Climate Vulnerability Assessment Study Reveals production. This improvement is reflected in a metric Energy Shortfall by 2030 in Albania known as specific consumption (m3 of water consumed per kWh of electricity generated). Specific consumption in 2007 Together with Albanian energy practitioners, the Climate was 1.40 m3/kWh, whereas in 2008 it improved to 1.04 Vulnerability and Adaptation Assessment team at the World m3/kWh. Through a new Energy Community of South East Bank extrapolated the energy planning scenarios to 2050, as Europe – Albania Dam Safety Project that aims to safeguard outlined in the draft NES’ active scenario, to illustrate the major hydroelectric dams of Albania, the Government potential longer term impacts of climate change on energy will also support improvements in the operational efficiency supply and demand. Assuming full implementation of the of dams and enhance the stability of power supply for the measures already identified in the extrapolated active regional electricity market. Overall, this will assist Albania scenario, the potential supply-demand gap would grow to to maximize its benefits from existing hydropower and an estimated 350 GWh per year by 2030, equivalent to a regional interconnections, thus increasing energy security. power generation facility of 50 MW. By 2050, the shortfall would rise to 740 GWh per year (105MW), or 3% of total demand. Embedded within these figures are the more Adapting to Climate Variability is Crucial for significant seasonal impacts on energy security due to Albania’s Energy Sector changing demand and production over each year, with summer peak demand increasing when hydropower Adapting to climate variability and change is becoming production is at its lowest. increasingly important for the Albanian energy sector. The country’s recent draft National Energy Strategy (NES) sets A high-level cost benefit analysis (CBA) was undertaken to out a so-called active scenario which aims to improve estimate the relative costs and benefits to Albania of energy security. This active scenario looks out to the supplying the shortfall in its electricity production attributed medium term (the year 2019) and describes plans to to climate change impacts. Using financial (capital and diversify Albania’s energy system by encouraging the operational costs), environmental (water value, greenhouse development of renewable energy generation assets (solar, gas and other emissions, and ecosystem values), and social small hydropower plants, wind, and biomass) and thermal (disturbance to people and property) parameters identified power plants. It does not consider climate change impacts by Albanian stakeholders, the CBA ranked the sustainability on energy security in this timescale. Yet, over the longer of the options, such as increased energy trade and different time horizons of the ESMAP, World Bank and TFESSD types of domestic energy generation (Figure 3). study mentioned earlier (out to the year 2050), these assets will be increasingly affected by climate change. Figure 3: Net Present Value of Diversification The draft NES’ active scenario notes the importance of new Options to 2030 electricity interconnection lines to facilitate Albania’s active Net Present Value of Options participation in the southeast European energy market. The 400 wider region will also be affected by climate change—about 300 one quarter of the region’s electricity is generated by 200 hydropower plants; regional summer energy demand will USD millions rise along with temperatures and due to economic 100 development. This could increase import prices and reduce - supply unless region-wide coping strategies are devised. -100 -200 The draft NES’ active scenario also emphasizes the need IMPORT Enhance CCGT Enhance New WIND CSP New for improved energy efficiency through greater use of Extg. LHPP Extg. SHPP SHPP LHPP domestic solar water heating, improved building standards, Source: An Assessment of Climate Change Vulnerability, Risk, and lower-energy appliances, and alternative heating sources Adaptation in Albania’s Power Sector. World Bank. 2009. other than electricity. These energy-efficiency measures are increasingly critical as the climate changes and Albania ECA Knowledge Brief Figure 3 presents the Net Present Value results in current Improving energy efficiency by reducing system (2010) US$ terms for each of the options tested, under a losses and encouraging and helping end users to base case set of assumptions for the period to 2030. Based manage their demand for power. on this analysis, the most economic options for Albania would be to upgrade existing LHPPs and SHPPs in the Upgrading Emergency Contingency Plans (ECPs) medium term, followed by development of new SHPPs and for hydropower plants where needed, to account for TPPs (shown in Figure 3 as combined cycle gas turbine, expected increases in precipitation intensity due to CCGT). Sensitivity analyses explored how assumptions climate change. Power producers and local about discount rates2 and the value placed on greenhouse authorities may also need to improve their capacity gas emissions could impact the priority placed on these to implement ECPs, ensuring that they provide options. The analyses confirmed that upgrading existing sound mechanisms for monitoring weather and its LHPPS and SHPPs were the most economic options under a influence on river flows and reservoir levels. They broad range of assumptions. would also need to improve their communication with downstream communities and contingency plans for evacuation. Options for Building Climate Resilience in the Energy Sector Ensuring the management and development of water resources is integrated across all sectors-- There are several critical actions that Albania could take energy, agriculture, water supply, and sanitation-- now to support optimal use of energy, water resources, and and takes into account cross-border concerns, operation of hydropower plants. Taking these steps now along with environmental and social concerns. will help Albania better manage climate variability and build resilience to climate change: Exploring further adaptation opportunities. Climate change makes it imperative that Albania should Improving the way hydro-meteorological diversify its energy supplies through increased institutions monitor, forecast, and disseminate regional energy trade and more diverse portfolio of information on meteorological and hydro- domestic generation assets. With the country meteorological conditions. Albania could develop considering major investments in upgrading new in-country or obtain from elsewhere, weather and energy assets and the privatization of assets, the climate forecasts appropriate for energy sector earlier climate risks are considered, the greater the planning. These would cover short-range forecasts opportunities to identify and implement solutions (1-3 days), medium-range forecasts (3-10 days), that make the energy system more robust and seasonal forecasts, and regional downscaled climate resilient for coming decades. change projections. The information could help energy sector stakeholders undertake joint climate About the Authors risk assessments on shared water resources and Jane Ebinger is a Senior Energy Specialist in the Energy regional energy networks, and devise agreed Sector Management Assistance Program of the Energy strategies to manage identified climate Transport and Water Department of the World Bank. vulnerabilities and risks. “ECA Knowledge Brief” is a regular series of notes highlighting recent analyses, good practices and lessons learned from the development work program of the World Bank’s Europe and Central Asia Region http://www.worldbank.org/eca