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WORLD BANK WORKSHOP ON CLIMATE RISKS AND VULNERABILITIES OF ALBANIA'S ENERGY SECTOR

WORKSHOP REPORT

10 March 2009, Tirana International Hotel, Tirana, Albania

WORLD BANK WORKSHOP ON CLIMATE RISKS AND VULNERABILITIES OF ALBANIA'S ENERGY SECTOR | WORKSHOP REPORT

HEAT (Hands-on Energy Adaptation Toolkit) | Stage 3.2

Workshop participants

Name Position Organisation

Lufter Xhuveli Minister Ministry of Environment, Forestry and Water Administration

Camille Nuamah Country Manager World Bank Tirana Office Suzana Goxholli Economic Advisor to the Prime

Minister Council of Ministers

Neritan Alibali Deputy Minister Ministry of Economy, Trade and Energy Sherefedin Shehu Deputy Minister Ministry of Finance Ndue Preka Deputy Minister Ministry of Agriculture, Food and

Consumer Protection Fatjon Tugu Director of Power Policies Ministry of Economy, Trade and Energy Kristo Rodi General Director of

Regulations Ministry of Economy, Trade and Energy

Mimoza Simixhiu Director of Licenses and Management of Contracts

Ministry of Economy, Trade and Energy

Sokol Mati Director of Industrial Policies Ministry of Economy, Trade and Energy Stavri Dhima Head of Sector for Primary

Policies Ministry of Economy, Trade and Energy

Ilia Gjermani Expert at Sector of Primary Policies

Ministry of Economy, Trade and Energy

Arben Mukaj Head of Water Sector Ministry of Agriculture, Food and Consumer Protection

Engjell Dakli Head of Department for Renewable Energies and Energy Efficiency

National Agency for Natural Resources (AKBN)

Teuta Thimjo Specialist at the renewable energies and energy efficiency directorate


Piro Mitrushi Specialist at the Renewable Energies and Energy Efficiency




Directorate Mitat Sanxhaku Permanent Representative of

WMO Institute of Energy, Water and Environment

Molnar Kolaneci Head of Hydrology Department

Institute of Energy, Water and Environment

Miriam Bogdani Hydrology Expert Institute of Energy, Water and Environment

Agim Nashi Director of Licensing and Market Monitoring

Albanian Energy Regulatory Authority (ERE)

Marialis Celo Head of PMU DRCRP Albanian Power Cooperation (KESH) Fatmir Hoxha Director of Projects and

Studies Albanian Power Cooperation (KESH)

Muharrem Stojku General Vice Director Albanian Power Cooperation (KESH) Ymer Balla General Director Transmission System Operator (OSSH) Martin Graystone Director of Project Services Bankers Petroleum Albania Ltd. Leonidha Cobo Production Director Bankers Petroleum Albania Ltd. Genc Myftiu National Expert Iride Acqua Gas S.p.A. Arben Gazhel Iride Acqua Gas S.p.A. Marinela Jazoj Executive Director FIAA Kole Gjoni Head of Association Association of Small Hydropower

Developers Merita Mansaku Head of NGO EDEN Center Peter Troste Head of Development

Cooperation Swedish International Development Agency (SIDA)

Niklas Mattson Expert Swedish International Development Agency (SIDA)

Donald Mishaxhi Principal Banker European Bank for Reconstruction and Development (EBRD)

Sokol Aliko Project Management Specialist USAID Nevton Kodheli Lecturer, Faculty of Geology

and Mining Tirana Polytechnical University

Ramadan Alushi Head of Energy Department Tirana Polytechnic University Erion Kalaja Expert at PIU of Water

Resource Management Project Ministry of Agriculture, Food and Consumer Protection

Andi Vila Expert at PIU of Water Resource Management Project

Ministry of Agriculture, Food and Consumer Protection

Niko Kurila Expert at PIU of Water Resource Management Project

Ministry of Agriculture, Food and Consumer Protection

Mirela Kamberi National Coordinator for Climate Change Program

UNDP

Dorina Mehmeti Operations Analyst, IFC Advisory Services – SECA, Housing Finance, Albania

IFC

Petrit Ahmeti Advisor at Board Albanian Energy Regulatory Authority (ERE)

Lavdie Konjari Specialist at the Directorate of Prices and Tariffs

Albanian Energy Regulatory Authority (ERE)

Zhuljeta Hoxha Environmental Specialist Transmission Operating System (OST) Denisa Saja Environmental Engineer Transmission Operating System (OST) Eida Hoxha Project Assistant Biopower

Green Energy Marsiglia Group

Agim Bregasi Head of Sector Ministry of Economy, Trade and Energy



Qerim Ismeni Chairman Trade Union, Chemistry and Metallurgic Industry

Marjola Hametaj Specialist at DPE Ministry of Economy, Trade and Energy Afrim Malaj ‘Change Energy’ Bikore Mala ‘Change Energy’ Nikolin Prifti Director of Monitoring National Agency of Natural Resources

(AKBN) Eduart Cani Senior Project Manager REC Albania Piro Trebicka KfW Anastas Risha Association of Small Hydropower

Developers Anisa Xhitoni EDEN Center Eduart Reimani NPO Albanian-Swiss Cooperation Kliti Storja Specialist National Agency of Environment and

Forestry Eglantina Bruci National Project Coordinator,

UNDP/GEF Climate Change Programme

UNDP

Hysni Laci Electrical Engineer (National Expert)

DECON – German-Albanian cooperation on small hydropower plants

Drita Dade Senior Project Officer World Bank Tirana office Demetrios Papathanasiou

Senior Energy Economist World Bank Tirana office

Jane Ebinger Senior Energy Specialist World Bank Antonio Lim Operations Officer World Bank Lucy Hancock Consultant World Bank Magnus Gehringer Senior Energy Specialist World Bank Besim Islami Energy and Climate Change

Consultant

Aferdita Ponari Consultant World Bank Tirana office Stuart Arch Senior EcoNomics Analyst WorleyParsons Ivaylo Mirchev Projects Budget and Cost

Controller WorleyParsons

Richenda Connell Chief Technical Officer & Co-founder

Acclimatise


HEAT (Hands-on Energy Adaptation Toolkit) | Stage 3.2 1

Overview

To build greater understanding of potential climate risks and management options, the World Bank, together with the Government of Albania, conducted a workshop in Tirana on 10 March 2009 on climate risks and vulnerabilities in the country’s energy sector, as well as opportunities presented by climate change. This was the first of two workshops planned in Albania to pilot a hands-on climate vulnerability and adaptation assessment for the energy sector. Together the workshops will:

1. Screen the energy sector to identify and prioritize hazards and vulnerabilities to projected climate scenarios (2025-2050),

2. Identify options for adaptation to reduce overall vulnerability, and 3. To the extent possible, look at the costs and benefits of adaptation options.

The March workshop focused on identification of hazards and vulnerabilities, item 1.

Workshop participants included a cross section of stakeholders from the Government, key agencies and institutions, academia, donors, the private sector and civil society. The workshop was run by consultants appointed by the World Bank, Acclimatise and WorleyParsons. The workshop agenda is provided in Annex A. Further details on the workshop, including presentations, can be found at: http://www.worldbank.org.al.

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). Emphasis was placed in opening remarks on maintaining energy security and sustainable growth, recognizing the need to adapt to weather and climate issues going forward as well as opportunities linked to energy efficiency, water management, power interconnections and renewable resources.

Plenary sessions were followed by four breakout group discussions on various aspects of Albania’s energy sector which could be vulnerable to climate risks:

a. Hydropower plants and energy demand, b. Other forms of energy generation: thermal power plants and renewable energy, c. Electricity transmission and distribution and small hydropower plants, d. 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.

This report presents the outcomes of the working group discussions. It is hoped that the discussions that began at the workshop will help to support the development of policies and projects (future energy assets) in Albania that are robust in the face of climatic uncertainties. It should also assist in managing Albania’s existing energy assets.

http://www.worldbank.org.al/



Summary of key points from workshop: strengths, weaknesses, opportunities and threats

The SWOT (strengths, weaknesses, opportunities and threats) table shown below summarises the key points raised in the working group discussions:

Strengths and weaknesses describes the current energy situation and the future plans for the energy sector, as outlined in Albania’s National Energy Strategy,

Opportunities and threats relate to the risks and opportunities for the energy sector from climatic variability and climate change.

Strengths Weaknesses

National energy strategy promotes security through additional power generation from diversified sources and interconnectivity with regional power grids allowing energy trading

Existing energy supply-demand imbalance – energy security is a national issue and goal

Albania has plentiful water resources High dependence on climatically-sensitive hydropower production

Feed-in tariffs help to promote small hydropower development and are planned for other renewable resources, diversifying the energy portfolio

Existing older hydropower and other energy assets are in need of rehabilitation

Some assessments of climate change risks to hydropower production have been undertaken

Mis-management of water resources: deforestation causing siltation; and high technical and commercial water losses (about 70%)

Electricity transmission grid has been improved and its design takes account of a wide variability in climatic factors

Existing climate risks and extreme events are not generally well understood or managed

Distribution grid has just been privatised and should see new investment

Climate change is not currently taken into account in energy asset design and planning

In general, existing oil production facilities are not very vulnerable to climatic risks – with the exception of contaminated land issues

Quality and availability of data on current and future meteorological and hydrological conditions makes it difficult to determine optimal asset locations and designs

Parts of electricity distribution grid need upgrading, especially those serving rural and mountain communities; grid losses are high

Lack of national wind resource mapping at turbine height (about 80m)

Vlore Port has a transgressive geological structure and at Fier, the coast has eroded about 200m over past 20 years

Significant legacy of contaminated land around oil production facilities at Patos Marinza and at coal mine



sites (existing and closed)

Opportunities Threats

New energy assets can be designed to be climate-resilient

Higher financial losses, increased OPEX and CAPEX if climate risks are unmanaged – could lead to reduced shareholder value

Rehabilitation of existing assets provides an opportunity to build in climate-resilience

Concerns about unmanaged climate risks could mean that Albania is less attractive to foreign investors

Consideration of climate change can be built into long-term energy sector contracts

Higher peak demand for space cooling and refrigeration in summer – in Albania and across the wider region

Tariffs and incentives can be developed to promote climate resilience of energy sector

Less electricity generation from hydropower facilities due to reduced precipitation and increased siltation

Climate risk assessments can be further developed and incorporated into energy sector planning and asset design

Higher costs for maintaining dam security

Climate change models are generally in agreement over Albania that future summers will be drier and temperatures will increase throughout the year, providing a basis for climate-resilient planning

Climate change could increase risk of conflicts between water users

There is considerable scope for additional hydropower generation at existing facilities, large and small, if climate information were updated and available.

Environmental performance of water-cooled thermal power plants reduced due to impacts of water abstractions and discharges on local environments, due to reduced precipitation and increased temperatures

There is large potential to improve energy efficiency (supply and demand side)

Sea level rise could lead to increased coastal erosion, potentially affecting port facilities

Reduction of space heating energy demand and lower peak energy demand in winter, due to higher temperatures

Changing ground conditions due to climate change could increase concentrations of ground pollutants at Patos Marinza entering watercourses

Thermal power plants are not as climatically vulnerable as many other forms of energy generation

Slight efficiency losses for thermal power plants due to higher air and water temperatures and potential scarcity of cooling water

Higher solar radiation (due to less cloud cover) increases opportunities for solar water heating

Hydrological basins are changing due to the effects of erosion

Opportunity to develop and diversify energy sources (geothermal, solar, wind, biomass)

Potential mal-adapted infrastructure design if climate resilience is not built in

Geothermal is not climatically vulnerable



Energy Security was a major concern expressed by participants, especially for transmission-distribution systems and small hydropower facilities. Unstable power supplies and lack of access in some rural communities were at the center of the discussion. In the latter case, winter snow or ice storms can damage rural distribution lines and roads, preventing necessary repairs and maintenance. During the past 3 years of drought, small hydropower plants were unable to produce the needed power to feed into the grid or even to supply their communities on a sustainable basis, reducing the total power available. Energy trade is a solution but limited interconnectivity with neighboring countries prevents robust trade at present.

The State-owned Power Transmission System was recently upgraded, aligning with EU standards, and ongoing investments are focusing on regional interconnectivity. Recent technical upgrades of the transmission lines have been completed in accordance with EU standards and the performance of the system is not expected to be significantly affected, even with projected extreme climatic conditions (temperature and precipitation variations). However the present EU standards do not account for projected climatic change and the technical specifications may require review in the years to come.

Power Distribution Systems are highly unstable due to poor maintenance and limited investment; the latter significantly contributing to unstable power supplies. The distribution system has just been privatized, and this is expected to lead to new investment and upgrades, including rehabilitation of lines and substations.

Small Hydropower Plants (less than 15 MW capacity) – 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 (SHPP) owners in Albania. A special feed-in tariff for small hydropower is a major incentive for new investments. During 3 years of consecutive droughts, small hydropower producers were only able to produce about half of their normal power production. Production is below expectations, even in normal years, possibly because of changes to hydrology since the 1990 era of planning data. SHPP owners have started to look into adaptation strategies to address current circumstances and future droughts. One adaptation strategy being discussed is to create a water reservoir or water storage to continue power production even during times of lower river flows. In this way, duration of electricity generation can be extended in spite of the decline in precipitation. A more challenging adaptation option is to develop new hydropower technologies that will improve efficiency.

Large Hydropower Plant planning draws on new river gauge data gathered for a year prior to application. However rating curves linking river level to discharge have not been updated. As the calibration is likely to have changed as a result of natural and man-made erosion of river beds, river flow remains uncertain in most basins other than the Drin and to some extent the Mati.

All Hydropower Plants are sensitive to the changing balance between snowfall and rainfall, even if precipitation volumes overall do not change. Methods are needed to assess how much water will become available from snowmelt, an unknown, especially as past climate becomes a weaker guide to the future. Erosion appears to have become more intense, possibly as a result of climate change and also as a result of illegal logging, which tended to dispose of unneeded timber in the reservoirs. Current sedimentation of the reservoirs is not known. Hydropower projections are also vulnerable to climate change in upstream countries. As with all meteorological data, past climate is becoming a weaker guide to the future; in this case, updated data sharing is needed to fill the information data gap.



Oil, Gas and Coal – the main vulnerability identified was the potential for spreading of ground/ water contamination linked to legacy issues, as a result of changing climate patterns that include increasing frequency of heavy downpours. While there could be impacts on refining and port operations (due to sea level rise), these were considered manageable. Energy security was a general concern.

Renewable Energy Resources and Thermal Power – geothermal resources were not considered at risk from changing climate conditions, but asset performance could be sensitive. The availability of wind resources is not known because wind field maps draw on data obtained at 10m height (per World Meteorological Organization, WMO, standard) rather than 80m height where the turbines would be located. Especially in Albania’s mountainous terrain, there is no consensus model for extrapolation. These considerations make wind farms vulnerable to climate uncertainties that can affect design and operational parameters. Solar resources are likely to increase, as cloudiness decreases (especially in summer) and the chief climatic vulnerability (not major) concerns the solar cells used in different temperature regimes. Thermal resources were not considered to be particularly climatically-vulnerable, although operation is somewhat more efficient in a colder atmosphere, and can be affected by water scarcity.



Working Group A: Climate vulnerabilities and risks for hydropower plants and energy demand

Working group participants

Name Organization

Petrit Ahmeti, Advisor ERE

Agim Bregasi, Head of Sector METE

Nikolin Prifti, Director of Monitoring AKBN

Lavdie Konjari, Specialist at the Directorate of Prices and Tariffs

ERE

Teuta Thimjo, Specialist at the renewable energies and energy efficiency directorate

AKBN

Miriam Bogdani, Hydrology Expert Institute of Energy, Water and Environment

Hysni Laçi, Electrical Engineer DECON SHPP Project

Besim Islami Workshop facilitator, Energy consultant

Aferdita Ponari Workshop scribe, Consultant

Summary SWOT analysis


Albania has plentiful water resources Existing imbalance of supply-demand

Regional energy market will help to improve security of supply

High dependence on hydropower

Existing old hydropower assets are in need of rehabilitation

Mis-management of water resources and high technical and commercial losses

Climate change not currently taken into account in hydropower plant design and planning


Improve energy efficiency (supply and demand side)

Higher peak demand for space cooling in summer due to higher temperatures

Reduction of space heating energy demand due to higher temperatures

Less electricity generation from hydropower facilities due to reduced precipitation, especially in summer

Lower peak demand in winter Changes in seasonality of river flows could create more problems for electricity supply from hydropower

Higher solar radiation (due to projected less Increased sedimentation of hydropower



cloud cover with climate change) increases opportunities for solar water heating

facilities, leading to reduced output

New energy assets can be designed to be climate-resilient

Higher financial losses, increased OPEX and CAPEX if climate risks are unmanaged – could lead to reduced shareholder value

Rehabilitation of existing assets provides an opportunity to build in climate-resilience

Concerns about unmanaged climate risks could mean that Albania is less attractive to foreign investors

Consideration of climate change can be built into long-term energy sector contracts

Higher costs for maintaining dam security and transmission losses

Plans to diversify energy supply through renewables and thermal power plants should provide greater energy security

Quality of data on current and future wind speeds creates some uncertainty concerning optimal site locations and designs for wind power facilities

Climate change could increase risk of conflicts between water users

Climatic vulnerabilities, risks and opportunities for energy demand

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 all over Albania due to climate change are likely to affect the following major electric end uses:

Space heating Energy demand for space heating will reduce,

Air conditioning Energy demand for space cooling will increase,

Water heating Energy demand for water heating will be slightly reduced,

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. The use of fossil fuels and firewood for space heating in households and public buildings (service sector) is the direct use of fossil fuels that is most affected by climate change. If climate change shortens the cold season and reduces the severity of cold weather events, energy demand for heating will be less. Consequently, effects of climate change on the direct use of fossil fuels can easily be determined – this use is likely to decrease. Increases in extreme weather might result in some regional changes in consumption, if such weather changes result in population shifts. Climatic vulnerabilities of hydropower production

Changes in energy consumption as a result of climate change will lead to changes in energy supply. There will also be direct impacts of climate change on energy production facilities. Hydroelectric generation may be much more sensitive to changes in river flows than other types of water systems and also subject to competition with other water users. For example, water rights for irrigation



and municipal water systems have seniority over rights for hydroelectric generation. Climate change will lead to increased demand for potable water and more irrigation water will be needed for agriculture. According to research, a 20% reduction in natural water runoff is projected to cause a reduction in power generation of 60%, whereas a 20% increase is projected to lead to an increase in generation of 40%. Changes in maximum river flows have direct impacts on the design of large, medium and small hydropower plants. At present, climate change impacts are not being taken into account in hydropower design and planning. This could lead to failure to comply with laws, regulations and consents as climate change intensifies. The following climate change-related variables were seen by the group as most important for electricity generation from hydropower plants:

Reduced annual average and summer average precipitation;

Less snow;

Increased incidence of extreme climatic events, such as heavy rainfall events;

Shifting of seasonal maximum river flows (related to increased temperature leading to rapid and earlier snowmelt / and reduced precipitation); and

Increased sedimentation. These changes will not only affect Albania, but many other countries too. However, it was noted that some catchments in Albania have been showing increasing trends in flows in recent decades, i.e. the anticipated climate change signal is not yet apparent in the observed flow records. Vulnerabilities related to energy security and service

There already exists an imbalance of energy supply and demand in Albania. Climate change impacts on the supply-demand imbalance need to be considered. Above-standard system losses

Higher spillover at hydropower facilities due to increased extreme precipitation events causes direct loss of energy generation (costs) and direct financial losses;

Extreme climatic events cause the power system to be out of its normal operating situation and bring higher transmission losses.

Impacts on financial performance

The group identified the following impacts of climate change on financial performance:

Impacts on operation and maintenance will increase operating costs (OPEX) for hydropower facilities;

Financial losses in extreme cases will increase the need for higher capital expenditure (CAPEX) at facilities;



Higher financial losses, increased OPEX and CAPEX, would lead to reduced shareholder value;

Concerns about climate change risks could potentially mean that Albania is less attractive to foreign investors. The group felt that investors need to be aware of climate change and to consider it in their planning;

Albania could look at the approach to feed-in tariffs for renewables used in Portugal, where they have introduced variable tariffs related to the cost of avoided conventional generation that the renewables project offsets, considering both direct costs as well as environmental costs;

Insurance companies are expected to see financial losses as customer claims for weather-related losses increase.

One of the most important problems which was identified by the working group is the current mismanagement of water resources. Climate change could potentially lead to increased risk of conflict between water users, due to increased demand and lower resource availability. Potential adaptation actions to manage climate change risks

The group identified the following actions which would help to manage climate risks:

Increased energy efficiency was seen as the best adaptation measure;

Increased irrigation demand for agriculture should utilize efficient irrigation methods such as droplet irrigation;

Extreme events should be considered in the definition of Force Majeure, taking account of climate change;

The regulation on ‘dam security’ should be enforced, taking climate change into consideration; and

Consideration of climate change should be built into long-term energy sector contracts.



Working Group B: Climate vulnerabilities and risks for thermal power plants and renewable energy


Name Organization

Anisa Xhitoni EDEN Center

Nevton Kodheli, Faculty of Geology & Mining Tirana Polytechnical University

Marjola Hametaj, DPE METE

Arben Gazhel, Representative Iride Acqua Gas S.p.A.

Eduart Cani, Senior Project Manager Regional Environmental Center, REC Albania

Ramadan Alushi, Head of Energy Department Tirana Polytechnical University

Ivaylo Mirchev Workshop facilitator, WorleyParsons

Lucy Hancock Workshop scribe, World Bank

Magnus Gehringer Workshop scribe, World Bank



Plans to diversify energy supply through renewables and thermal power plants should provide greater energy security

Quality of data on current and future wind speeds makes it difficult to determine optimal site locations and designs for wind power facilities


Decreased cloudiness due to climate change (particularly in summer) will benefit solar energy production

Slight efficiency losses for thermal power plants due to higher air and water temperatures and potential scarcity of cooling water

Thermal power plants are not as climatically vulnerable as other forms of energy generation

Environmental performance of water-cooled thermal power plants reduced due to impacts of water abstractions and discharges on local environment, due to reduced precipitation and increased temperatures

Solar and geothermal energy resources for heating



Existing assets

There are no existing thermal power plants (TPP) or renewable power generation assets (other than hydropower) in operation.

Planned assets

The following assets are planned:

A new oil/gas TPP near Vlore 1 x 97MW will be in commercial operation June/July 2009 (World Bank).

The two TPPs near Korce are under discussion for possible rehabilitation.

The TPP southeast of Fier is also under discussion for rehabilitation.

In Lezhe, plans for a joint wind/biomass plant, possibly to go online 2011, possibly wind 140 MW, biomass 240 MW, although these numbers are uncertain, because plan is still in draft.

In Karabun peninsula, wind energy facility planned, 500 MW, possibly also 2011.

Solar and geothermal are nor foreseen for power generation purposes. However, they are considered for heating purposes (water and houses).

Other Greenfield TPPs to be built by Italian investors were discussed. Most of their output would go to Italy. The capacity discussed is between 800MW and 1600MW.

The Government has a pro-renewables policy, in part as a means to diversify Albania’s energy sources and in turn to manage a range of risks, including weather and climate risk among others.

As to how the renewables sub-sector will develop, the Government receives many unsolicited proposals for renewable resource development and has not found it necessary at the moment to define a tight strategy for this sector; instead, proposals are reviewed and approved, considering environmental, technical, economic and other criteria.

The regulatory licensing process has recently been altered. The Power Sector Law has assigned the Regulatory Licensing Authority, ERA, the role of licensing new energy facilities. In the past year, regulations have been developed corresponding 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. The revised approval process covers authorization of generation capacities not covered by the Concession Law. Under the new regulations the initial licensing decision is made by the Council of Ministers, taking into consideration the criteria mandated by EU directives and applicable law. This new process concerns biomass, wind, other renewables and thermal power plants. It does not include small hydropower (which is covered by the Law on Concessions).

Climatic vulnerabilities and risks

Geothermal: Availability of the underlying resource is not at risk from changing climate, nor will optimal site location change. But asset performance is climate sensitive: the efficiency of geothermal energy production depends on the availability and temperature of the cooling water. To cope with rising temperatures, in theory, a geothermal power plant’s condensers could be enlarged. However, the projected increases in temperature are expected to lead to only a slight reduction in efficiency, so it was considered unlikely that increases in equipment size would be needed.

Wind: Availability of this resource and optimal site location are vulnerable to climate change. It was noted that, whether the wind speed decreases or increases, wind farms may slip out of the optimal



design band. That is, turbines that are too large for the wind field will not move at all; turbines that are too small will be destabilized if operated in wind fields too energetic for the design. Maximizing the number of operational hours depends on correct anticipation of wind speed maximum, minimum and average.

No easy means of addressing this vulnerability were apparent. Maps of Albania’s wind energy resource have been prepared but must be affected by certain observational issues. Monitoring of wind speed by the meteorological agency, in accordance with WMO standards, is undertaken at 10m above the land surface, which is not linked to wind at the height of turbines (80m and above) by a consensus model. Monitoring undertaken by firms proposing wind concessions is short-term and also may not measure wind speeds at 80m above surface. While weather models describe the wind field, the group noted Albania’s mountainous topography as a reason why low-resolution models may not capture optimal site locations and may not rightly assess the wind energy resource. Finally, projections of changes in the future wind field, due to climate change, are considered unreliable (compared for example to projections of future temperatures). The group generally believed, if not at very high confidence, that the sites of wind maxima are not so likely to change as is average wind speed, and that climate change projections, such as they are, suggest that wind speed might increase in the longer term, not threatening availability of the resource although calling for re-optimization of design and operations.

Solar: The availability of this resource is projected to increase in the face of climate change. Site location is not difficult to optimize at present, and is not expected to become difficult in the future. The chief climate vulnerability is not a major one, but concerns the different solar cells used in different temperature regimes. In principle, optimal technology is temperature dependent. However, this vulnerability does not seem a major one. Further, it was acknowledged that the efficiency of solar panels used for water heating is technically greater when the water being heated is relatively cold (although photovoltaic cells are not affected by this issue). This technical issue is also not regarded as a key vulnerability. Uncertainty about future cloudiness was noted as a possible vulnerability, considering that common technologies for solar energy generation depend on direct sunlight. Nevertheless the meeting expected that solar energy will be more readily available in the future. Thermal: This power generation technology is not particularly climate-vulnerable. A concern was expressed whether transport, i.e., fuel pipelines, might be affected by changing seismic risk, potentially arising from changes in atmospheric pressure gradients. This would need to be discussed with a seismic expert. As for site location of TPPs, assets close to coasts and rivers could be vulnerable to sea level rise and high water levels. The meeting agreed that optimal TPP design and asset performance would be slightly vulnerable to climate change, considering that turbine selection/power plant efficiency depends on the availability and temperature of the cooling water. To manage the effects of rising temperatures, in theory, either the power plant’s condensers could be enlarged or cooling water flow rates could be increased. However, the projected increases in temperature are expected to lead to only a slight reduction in efficiency, so it was considered unlikely that increases in equipment size would be needed. The group remarked that as for environmental performance of thermal power plants, changes in wind and atmospheric stability would influence the diffusion of carbon dioxide and pollutants, although considering the weakness of future wind projections it was premature to guess whether pollutants would be more concentrated or more widely diffused. This was considered to be already significantly



managed, however, in that modern plants scrub pollutants. A different environmental performance issue was raised, in that a larger volume of cooling water (from the sea, rivers or groundwater) would be used in the case of a warmer climate. Although emissions of the larger volume of coolant to the sea were not considered likely to be environmentally important, the larger withdrawal from aquifers could be important where groundwater is used. Biomass: The climate-change vulnerability identified by the group is that the performance of a biomass combustion plant depends on ambient air temperature; i.e., it is insignificantly less efficient in a warmer climate. The biomass fuel being considered for Albania is imported palm oil from Argentina, and it was thought that if this was less available due to climate change, then an alternative source could be readily found.



Working Group C: Climate vulnerabilities and risks for electricity transmission and distribution and small hydropower plants


Name Organization

Piro Mitrushi, Specialist at the Renewable Energies and Energy Efficiency Directorate

AKBN

Molnar Kolaneci, Head of Hydrology Department

Institute of Energy, Water and Environment

Agim Nashi, Director of Licensing and Market Monitoring

ERE

Kole Gjoni, Chairman Association of Small Hydropower Developers

Niklas Mattson, Expert SIDA

Piro Trebicka KfW

Denisa Saja, Environmental Engineer OST, KESH

Zhuljeta Hoxha, Environmental Specialist OST, KESH

Stuart Arch Workshop facilitator, WorleyParsons

Antonio Lim Workshop scribe, World Bank



Transmission grid is in good condition Regional transmission grid not yet completed, preventing regional energy trading

Regional (Balkans/Greece) grid will help address demand-supply imbalance (improve energy security)

Significant parts of distribution grid need upgrading, especially those serving rural and mountain communities

Growth in number of small hydropower plants Effective enforcement of rules and regulations at the local level is an issue

Design of transmission grid already accounts for wide variability in temperature and other climatic factors

Deforestation and poor watershed management already cause siltation, affecting small hydropower plant performance


Distribution grid has just been privatised and should see investment

Small hydropower plants already experiencing lower production over last 3 years due to reduced precipitation – expected to worsen with climate change

Projected climatic changes will lead to shorter operating periods for small hydropower projects and increased siltation

(Mis)management of watershed and climate



change could lead to reduced operating capacity and increased unit cost for SHPP

Snow is important for SHPP, as it extends operation time, by slowly releasing stored water. More rapid snowmelt due to higher temperatures will affect this.

Existing and planned assets – electricity transmission and distribution Domestic electricity transport This is carried out via two grid systems:

Distribution Grid operating at 110KV or below

o 20KV network: New in 1994 and substations are in good condition.

o 10KV / 6KV network: City networks are in good condition. However, rural and mountain communities do not have secure energy supplies because of the deterioration of the existing distribution network or simply because some communities are not linked to the national grid. There are also losses from the system, both technical and commercial. Upgrades of the distribution system and substations are needed. It is hoped that CEZ (Czech private operator now the owner) will invest in upgrading the system.

Transmission Grid operating above 220 KV (220KV and 400KV): This is in good condition.

Interconnections with other countries – regional transmission system The existing transmission grid does not have enough capacity to allow for full regional energy trade with Albania’s neighbors at present. Current and proposed connections are described below:

A one-way transmission line exists, connecting Albania (Elbasan) to Greece (Kardia).

A new transmission line from Greece through Albania (Elbasan-Tirana) to Montenegro (Podgorica) will be completed by 2012.

Construction of a new transmission line linking Albania (Tirana) to Prishtina (Kosovo) is expected to be completed by 2015.

Discussions are underway regarding the development of a new transmission grid located in the south of Albania, connecting Albania and Macedonia (financing is not yet secured) – expected to be complete in about 2015-2016 at the earliest.

2 possible DC links (subsea) with Italy are planned, for export of green energy (wind) – expected to be complete in about 2017-2018 at the earliest.

A new transmission line is planned from Albania to Italy (financing is not yet secured).



Climatic vulnerabilities and risks – electricity transmission and distribution

1. Asset design and performance – transmission system: Most transmission lines are either new or have been upgraded, with the exception of the old one-way transmission line between Albania and Greece. EU standards apply for design. Wind, temperature and precipitation are important for design. The technical specifications of the transmission grid were designed to be stable even if there is a wide variation in temperature and other climatic conditions. Given the projected future climatic conditions for Albania, ERE and the transmission operator (OST) representatives did not foresee problems with the existing transmission grids.

2. Asset design and performance – distribution system: During high winter precipitation, snow and ice can cut off the distribution lines. Because of difficult road conditions, repair crews have difficulty repairing damaged networks. Maintenance of the distribution network has been transferred to local authorities. In most cases, they may not have the resources and expertise to repair damage quickly. The privatization of the distribution system is expected to increase investment and upgrade of the power grid, thereby contributing to its stability.

3. Performance of operations: Linked to points 1 and 2 above. There are standardized norms. Stable tariffs reduce uncertainties and will provide the needed incentive to improve operational performance. ERE has the mandate to ensure long term stability of the power sector.

4. Emergency planning and business continuity: The group did not foresee vulnerabilities under climate change; local resources are employed and can respond.

5. Social performance: Snow and ice can cut off rural and mountain communities.

6. Seasonality of energy demand and supply-demand imbalance:

Long-run variability / fluctuations,

Price / tariff adjustments – ERE uses the tariff structure to balance supply and demand in the power sector.

Existing and planned assets - small hydropower plants

SHPPs are now defined in Albanian law as 0-1MW and 1-15MW, in line with EU norms.

While there are 84 SHPPs, only about 20 (privately owned) SHPPs operating at present, all connected to the distribution grid.

Existing SHPPs need rehabilitation.

50 new SHPP concessions have been approved by the government.

SHPPs are generally constructed to serve local communities and sized accordingly, not because they are necessarily the best locations or that the size was the optimum for water flows.

Climatic vulnerabilities and risks - small hydropower plants

1. Availability of natural resources: SHPP performance is linked to the intensity and duration of precipitation, because they do not have reservoirs. Albania has experienced 3 years of drought recently (2005, 2006, 2007) where the months of operation have halved – facilities used to operate 8 months per year; in recent years some have only operated for 4 months per year. It was thought that this may be linked to less snow.



2. Reliability of transport and supply chain: Snow and ice in mountains sometimes affects accessibility.

3. Site location and ground conditions: In general, the group felt site location and ground conditions were not affected by climate change, though river bed erosion and flooding under climate change (which could be important) were not discussed.

4. Asset design and performance: This can be affected by changes in the intensity and duration of precipitation. There are also minimum flow requirements in rivers to protect ecology. Historic design parameters have been used for SHPP facility design, based on the requirements of local communities, not the optimal designs for particular rivers. Climate change, along with deforestation and poor watershed management, is expected to lead to increased risks of siltation. Owners of SHPPs are considering two potential adaptation strategies: (i) developing water storage capacity to allow for longer periods of operation (ii) finding more efficient ways to generate power for the expected decline in water supply due to climate change.

5. Performance of operations: This is linked to point 4 above. SHPPs need investment to increase capacity and to upgrade assets to make use of shorter annual operational periods or to enable power generation to be extended into drier periods.

6. Environmental performance: There are minimum flow requirements to protect fish in rivers so if flows are lower due to climate change, this could affect the flow available for SHPPs to utilize. It was suggested by some participants that SHPP may assist in reducing soil erosion and siltation build up in larger hydropower facilities downstream.

7. Social performance: Rain and snow cut-off rural communities (in the north and north east of Albania) in mountainous areas.

8. Seasonality of energy demand and supply-demand imbalance: Snow is important for SHPP, as it extends operation time, by slowly releasing stored water. In summer there is lower energy demand and low SHPP capacity.



Working Group D: Climate vulnerabilities and risks for fossil fuel supply and transmission / transportation


Name Organization

Martin Graystone, Director of Project Services Bankers Petroleum

Leonidha Cobo, Production Director Bankers Petroleum

Ilia Gjermani, Specialist at Primary Policies Unit, Industrial Policies Directorate

METE

Qerim Ismeni, Metallurgical Engineer, Chairman

Trade Union, Chemistry and Metallurgic Industry

Merita Mansaku-Meksi, Head EDEN Center

Richenda Connell Workshop facilitator, Acclimatise

Jane Ebinger Workshop scribe, World Bank



In general, oil production facilities are not very vulnerable to climatic risks – with the exception of contaminated land

Vlore Port has a transgressive geological structure and at Fier, the coast has eroded about 200m over past 20 years

Significant legacy of contaminated land at Patos Marinza and at coal mine sites (existing and closed)


Slight positive impact of higher temperatures on cost profile at oil production facilities

Sea level rise could lead to increased coastal erosion, potentially affecting port facilities

Changing ground conditions due to climate change could increase concentrations of ground pollutants at Patos Marinza entering watercourses

Low pressure gas pipeline has experienced loss of integrity, due to landslips after heavy downpours and climate change could increase risks

Heavy downpours at mines can lead to pollution incidents and loss of coal products stored outside



Existing and planned assets Oil production The main oil producers are Bankers Petroleum and Albpetrol. Bankers Petroleum are currently producing about 600kt/yr - about 75% of Albania’s domestic production, approximately half of which is for export markets. The remainder is mainly produced by Albpetrol. The current oil price is affecting Bankers Petroleum investment and ongoing investment is focused on maintenance of existing facilities. Bankers Petroleum has recently concluded an IFC/EBRD loan with a US$55/bbl trigger for development focused on reactivating existing wells, new vertical and horizontal wells and enhanced oil recovery (using water flooding/ thermal techniques). This could enable production to increase from the present level of 6,200 bbl/d to 15,000 bbl/d in the next 3-4 years (a conservative estimate). Albpetrol operations are likely to shrink with Bankers Petroleum expansion. Other actors are:

Stream Oil and Gas - 4 field licenses for onshore exploration

DMW - 2 offshore exploration licenses

Londing - offshore exploration, 1 block

Sherwood - in JV with Albpetrol and Bankers Petroleum on operations. Refineries (ARMO 85% privatized, AMRA international consortium) There are two refineries in the process of being privatized with a view to increased investment and facility renewal:

The main refinery is at Ballsh (1 m bbl/yr, HFO, low grade diesel (8 API) and bitumen),

Fier – variable and lower production, about 0.5 m bbl/yr. Oil and gas pipelines and interconnections

No current oil and gas pipeline connections to regional markets.

Some proposals regarding Balkans Gas Ring.

TAP (Trans-Adriatic Pipeline) proposal most advanced.

Swiss AGL proposal about to start negotiations.

Memorandum of understanding signed for Yonan Adriatic Pipeline with Montenegro and Croatia.

AMBO, US led oil pipeline proposal, has signed convention with Albania, Macedonia and Bulgaria guaranteeing rights to construct. New pipeline must comply with EU standards.

LNG terminal proposed in Fier Region by AGC Power. Coal

About 200 people are working in Albanian coal sector.

The previous main operating center until 1990 was at Tirana (3,500-4,000 kcal reserves). Coal enrichment plant used to be located about 6 km outside Tirana. This has been shutdown and flooded; i.e. not in operation.



Memalija is the oldest coal mine and of highest quality (5,500 kcal) operating at 10% of capacity, used mainly as fuel for construction processes.

Mborje-Drenova mine is running at low capacity, good quality coal but small reserves. There are no investors to resume operations at larger scale. Mainly used as an input for central heating.

Legal framework

Albania is part of the EU Energy Treaty and is committed to bring its oil and gas sector in line with EU standards by 2012.

New Gas Law has just been approved covering supply, networks and distribution and requiring EU Directive compliance.

Climatic vulnerabilities and risks Oil production

Availability of power:

Bankers Petroleum does not use grid (KESH) supply because of stability issues; instead it imports diesel and propane (LPG). Downside of this is high costs and higher greenhouse gas footprint.

High temperatures:

Oil production facilities already experience temperatures of 45-50oC for up to a week per summer. Bankers see no direct negative impact on operation.

There is a slight positive impact of higher temperatures on cost profile, from reduced need to heat oil to maintain tank temperatures at 80-90 oC and greater ease of clean up (10 API of oils in contaminated land).

Low winter temperatures can lead to LPG freeze, which adds to costs as burn propane in preference to butane.

Import/export facilities, sea level rise and coastal erosion:

Vlore port is a naturally protected harbor that is used by Bankers Petroleum to import LPG and export crude. Bankers Petroleum has a 25 year contract with Petroliferia to use Vlore Port.

At present there are about 20-30 days per year when ships are delayed entering Vlore Port. Bankers can generally plan around this and it has not affected operations over the past 4-5 years. Extreme weather can delay arrivals by 1-2 days.

New Vlore Port (wider channels), opening this summer, will reduce the problem and open up more market opportunities, due to port storage tanks (currently restricted parcel size, and 72-96 hour window to transfer product to port by road).

It is not clear whether the new port design takes account of sea level rise projections, but it is known that Vlore Port has a transgressive geological structure. Northern zones have a regressive structure with subsiding and active geologic zones. Land north of Vlore Elbasan Dibra fault is subsiding, while land is rising on the southern side.

Porto Romano at Durres is another main shipping point, used for import of by-products – gas-oil and benzene. At Fier, the coast has eroded about 200m over past 20 years, affecting Porto Romano. A third port, also at Durres, is Shengjin.



Changing ground conditions – droughts followed by heavy downpours:

There is significant legacy pollution from contaminated land. Pollution is being carried via drainage channels into the Gjanica River, which is heavily contaminated by oil operations.

This is the state’s responsibility but there is a lack of funds for clean-up of state lands.

Bankers Petroleum is actively cleaning up contaminated land in their zone.

This is a continuing long term issue and Patos Marinza is identified as one of five European environmental hotspots.

Under Bankers Petroleum’s loan with IFC/EBRD, a project steering committee is being set up to deal with broad environmental management, including the contaminated land. The committee includes Bankers, AKBN, Albpetrol, METE, MoEW.

It was recognized that climate change could lead to increased risk of contamination from land entering watercourses, due to changes in ground conditions, with droughts followed by heavy downpours posing a particular threat. However, it was considered unlikely that this would change the current timescales for clean-up.

Refineries

Water availability:

There is high (and over) use of potable water at Ballsh refinery for steam production, from the mains supply to Ballsh city. In future, if investment is secured, Ballsh thermal power plant will be restarted, and will provide the refinery with steam and electricity.

Fier refinery relies on water from a local stream that will in future also supply the thermal power plant.

Power availability:

Ballsh refinery relies on the grid. There is an estimated 10 m LEK (US$100k) loss for the refinery when there is a blackout. However, the last event was thought to have occurred in 1961.

It is planned to connect to the international grid in future.

The economic cost of blackouts are not a question of how long the blackout lasts (i.e. opportunity cost), rather the cost to put the refinery back into operation. This involves recycling products in the process, and restarting the thermal process). These impacts are insignificant if the power cut is less than 1 hour.

Gas pipeline

The existing low pressure gas pipeline has a small dimension and was not considered to be at much risk of subsidence, heave or landslip.

However, on isolated occasions the pipeline has experienced leaks / loss of integrity, due to landslips at valley crossings, after storms/ heavy downpours.

Probably more significant for the pipeline are social and political risks – sabotage.



Coal

Main concern is heavy downpours because all minerals are stored outdoors and some are not on flat land making run-off of pollutants (copper, lead, etc) an issue.

This impacts on economics too as minerals are also lost due to run-off.

Thousands of tonnes of mine and coke stored at industrial plants.

Waste materials are stored in enrichment facilities near mines and contain high percentages of minerals. Dam breaks due to heavy rain could release contaminants into river water. This has happened in the past.



Annex A Workshop Agenda

Time Item Who

8.00 – 9.00 Registration, coffee and refreshments

9.00 – 9.05 Welcome Camille Nuamah, World Bank

9.05 – 9.15 Introduction and workshop objectives Dr Suzana Guxholli, Council of Ministers

9.15 – 9.20 Opening remarks H.E. Lufter Xhuveli, Minister of Environment, Forestry and Water Administration

9.20 – 10.45 Plenary session

9.20 – 9.40 Briefing: Overview of World Bank assignment Aims of today’s workshop Overview of climate change Decision-making in the face of climate risks and

uncertainties

Dr Richenda Connell, Acclimatise

9.40 – 10.00 Briefing: Observed climate variability and trends in

Albania Climate change projections for Albania

Dr Eglantina Bruci, UNDP

10.00 – 10.20 Briefing: Current understanding of vulnerabilities of

Albania’s power sector (demand and supply) to climate risks

Dr Besim Islami, Energy consultant

10.20 – 10.45 Question & answer session All

10.45 – 11.15 Break and workshop photo

11.15 – 13.00 Workshop session 1

11.15 – 11.25 Structure of working groups Questions to be discussed

Dr Richenda Connell

11.25 – 11.45 Mapping Albania’s energy assets against climate risks

Andrew Popelka, WorleyParsons



Time Item Who

11.45 – 12.00 Participants go to breakout rooms

12.00 – 12.30 Working groups discuss overall strategies and objectives for Albania’s energy sector:

Hydropower generation Other forms of energy generation: thermal

power plants & renewable energy (solar, wind etc)

Electricity transmission Fossil fuel supply & transmission /

transportation

All

12.30 – 13.00 Working groups discuss climatic vulnerabilities, sensitivities & critical performance thresholds of existing & planned energy sector assets:

How do climatic conditions currently affect Albania’s energy sector?

What are the effects of current climatic variability?

All

1300 – 14.00 Lunch

14.00 – 15.30 Workshop session 2 All

14.00 – 15.00 Working groups discuss climate change risks: How could climate change affect the

performance of energy sector assets? If extreme climate events occur more

frequently / more severely, what impacts could occur?

What are the effects of changes in average climatic conditions?

Could critical thresholds be exceeded due to climate change?

15.00 – 15.30 Working groups agree on priority climate-related risks All

15.30 – 16.00 Break

16.00 – 17.00 Plenary session

16.00 – 16.45 Brief feedback from working groups Final plenary discussion

All

16.45 – 17.00 Next steps, thanks and close of workshop Jane Ebinger, World Bank

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