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Assessing climate risks and vulnerabilities of Albania’s energy sector 12 March 2009 Dr Richenda Connell Chief Technical Officer & Co-founder, Acclimatise © Copyright Acclimatise and Climate Risk Management Limited 2009 Overview of presentation • • • • • Aims of World Bank assignment Introducing the team Aims of 10 March workshop Overview of climate change Decision-making in the face of climate risks and uncertainties © Copyright Acclimatise and Climate Risk Management Limited 2009 Aims of World Bank assignment • Overall aims: to help support the development of robust energy sector policies and projects, in the face of changing climate risks • 10 March workshop: to help develop understanding of climate vulnerabilities and risks to Albania’s energy sector • Second workshop (April 2009): to help identify priorities for climate change adaptation and undertake rapid cost benefit analysis © Copyright Acclimatise and Climate Risk Management Limited 2009 Acclimatise • Acclimatise helps governments and businesses assess and manage the risks and opportunities of inevitable climate change by: – Bridging the gap between the scientific community and the corporate world, reviewing the latest climate change science, providing guidance on the potential business and financial impacts. – Working with our clients to understand direct and indirect climate change impacts for their strategies and business models. – Assessing the implications for financial performance, as well as brand, reputation and litigation risk. – Advising on the climate change strategies being developed by our clients' key stakeholders, including governments, regulatory agencies, investors, banks, insurers, analysts and NGOs. – Advising on robust strategies to manage risks and uncertainties and realise business opportunities. © Copyright Acclimatise and Climate Risk Management Limited 2009 WorleyParsons WorleyParsons is a leading provider of professional services to the resource & energy sectors and complex process industries Infrastructure & Environment Power Complete solutions for the transportation, coastal & marine, water & wastewater, resources & energy, municipal and urban infrastructure sectors Renewable energy, clean coal, nuclear and natural gas generation, transmission networks and retrofit project solutions from pre-feasibility to asset operation and maintenance Hydrocarbons Minerals & Metals Full-scope global project delivery in deepwater, floating, subsea & conventional structures, topsides, onshore oil & gas, pipelines, LNG, and refining & petrochemicals Delivering comprehensive “mine to market” projects and solutions in base metals, alumina, aluminium, coal, iron ore, steel and chemicals across the world A range of services and technologies that profitably embed environmental, social and financial sustainability into all aspects of the project life-cycle. © Copyright Acclimatise and Climate Risk Management Limited 2009 Albanian experts • Prof Dr Eglantina Demiraj Bruci, National Project Coordinator, UNDP/GEF Climate Change Programme • Dr Besim Islami, Expert on Energy and Climate Change • Both are lead authors of Albania’s First and Second National Communication to the United Nations Framework Convention on Climate Change (UNFCCC) © Copyright Acclimatise and Climate Risk Management Limited 2009 Overview of 10 March workshop Working sessions discussed: • Overall context, objectives and strategies for Albania’s energy sector – for existing and planned future energy assets • Albanian experts’ experience of energy sector climatic vulnerabilities, sensitivities and critical performance thresholds • Albanian experts’ views of the risks posed by changing climate conditions © Copyright Acclimatise and Climate Risk Management Limited 2009 Overview of climate change Decision-making in the face of climate risks and uncertainties © Copyright Acclimatise and Climate Risk Management Limited 2009 The natural greenhouse effect Sunlight passes through the atmosphere.. SUN Most escapes to outer space and cools the earth... but some is trapped by water vapour, and keeps the earth warm enough for us and warms the earth. © Copyright Acclimatise and Climate Risk Management Limited 2009 infra-red “heat” radiation is given off by the earth The enhanced greenhouse effect Sunlight passes through the atmosphere.. SUN and warms the earth; © Copyright Acclimatise and Climate Risk Management Limited 2009 Some escapes to outer space and cools the earth, . but some is trapped by water vapour, and keeps the earth warm enough for us. infra-red “heat” radiation is given off by the earth. A NEW BALANCE IS ACHIEVED AT A HIGHER TEMPERATURE But now, more is trapped by greenhouse gases, and heats the earth further, until… Carbon dioxide levels are rising fast • Carbon dioxide concentrations in the atmosphere are higher now than at any time during the past 650,000 years • Man-made emissions have already increased CO2 concentrations by 1/3 compared to pre-industrial levels • By mid-century, concentrations are expected to be 2x pre-industrial levels © Copyright Acclimatise and Climate Risk Management Limited 2009 Source: IPCC Climate is changing This map shows observed changes in physical and biological systems from 1970-2004 Source: IPCC © Copyright Acclimatise and Climate Risk Management Limited 2009 Climate change can not be stopped • Changes until about 2040 are Inevitable climate already inevitable change • Changes later in the century will depend on greenhouse gas emissions in the next couple of decades • We need both to reduce greenhouse gas emissions (‘mitigation’) and adapt to inevitable climate change • Adaptation strategies need to Annual average global temperature increases be robust to climate to 2100 under different greenhouse gas uncertainties © Copyright Acclimatise and Climate Risk Management Limited 2009 emissions scenarios, relative to 1980-1999 baseline Assets designed based on historic climate data may no longer be robust Increasing CO2 concentrations Increasing temperatures over land and sea Increasing risk of heat waves Rising sea levels Changing precipitation patterns - increasing drought and flood risks • Possible increasing storm intensities & storm surge heights • • • • • Europe summer 2003: US$15bn economic losses, ca. 35,000 deaths Hurricane Katrina: US$40bn-60bn insured losses, ca. 2,000 deaths © Copyright Acclimatise and Climate Risk Management Limited 2009 Higher confidence Lower confidence European summers like 2003 will be considered ‘normal’ by 2040 and ‘cool’ by 2060 Summer 2003 © Copyright Acclimatise and Climate Risk Management Limited 2009 Climate change projections for Albania Annual changes in temperature Changes in temperature, summer 6 8 7 6 5 4 3 2 1 0 1990 change (°C) change (°C) 5 4 3 2 1 0 1990 2025 year 2050 2100 2025 2050 2100 Changes in precipitation, summer 2100 0 -101990 2025 2050 change (%) change (%) annual changes in precipitation 0 1990 -5 2025 year 2050 -20 -30 -10 -40 -15 -50 -20 -60 year 2100 • Annual increase in temperature: 1.0, 2.0 and 4.1°C by 2025, 2050 and 2100 • Decrease in annual precipitation: 3%, 6% and 12% by 2025, 2050 and 2100 • Decrease in summer precipitation: 10%, 22% and 42% by 2025, 2050 and 2100 year [Source: E. Bruci] © Copyright Acclimatise and Climate Risk Management Limited 2009 Effects of climate change on space heating and space cooling energy demand in Shkoder region Alternative energy scenario © Copyright Acclimatise and Climate Risk Management Limited 2009 [Source Besim Islami] Climate risks, uncertainties and decisionmaking • There will always be natural climate variability • Climate change trends will be superimposed on natural variability • The effects of natural variability may dominate climate change effects for several decades • We need to make decisions that are robust to climate variability and future climate Variability and change trends in precipitation for • This is particularly important for long-lived assets, which Durres and Tirana (Source: E. Bruci, need to perform for decades HMI, 2008) into the future © Copyright Acclimatise and Climate Risk Management Limited 2009 Albanian power system (GWh) Import Small HPP Thermal Pow er Plants Hydro Pow er Plants 2006 Small HPP 0.53% Import 15.00% Thermal Pow er Plants 1.32% 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 6750 6500 6250 6000 5750 5500 5250 5000 4750 4500 4250 4000 3750 3500 3250 3000 2750 2500 2250 2000 1750 1500 1250 1000 750 500 250 0 © Copyright Acclimatise and Climate Risk Management Limited 2009 [Source Besim Islami] Hydro Pow er Plants 83.15% Stakeholders are concerned about climate change and adaptation • “The World Bank Group will give considerable attention to strengthening resilience of economies and communities to increasing climate risks and adaptation… Adaptation will require more resilient infrastructure, broader disaster relief and preparedness measures, and new agricultural technologies and practices to counter increased climate risks.” • European Commission: “Climate-proofing must be integrated into the Environmental Impact Assessment (EIA) Directive and the Strategic Environmental Assessment (SEA) Directive.” • Investors: “To help investors analyse these risks, investors encourage companies to analyse and disclose material, physical effects that climate change may have on the company’s business and its operations, including their supply chain.” • Banks: Starting to incorporate climate risk screening into credit risk assessments and due diligence processes • Insurers are voicing their concerns – some now refuse to insure in vulnerable locations © Copyright Acclimatise and Climate Risk Management Limited 2009 Changing climate risks can be incorporated into financial models • Importance of cash flow forecasting • Impact on profit of small % increase in operating costs • Impact on profit of decrease in income • No provision for unplanned additional investment • Effect on investor confidence Cost & income pressures on free cash if climate risks are ignored © Copyright Acclimatise and Climate Risk Management Limited 2009 Climate risk management can be integrated into the asset lifecycle • For new assets, changing climate risks should be considered at the ‘feasibility’ and ‘front end engineering design’ stages – There may be low cost opportunities to build in resilience for climate change • For existing assets, building in resilience for climate change should be considered as part of major refurbishments and upgrades © Copyright Acclimatise and Climate Risk Management Limited 2009 Key messages from 10 March workshop Strengths Weaknesses Water resources for hydropower Good transmission grid Feed in tariffs High dependence on hydropower Existing assets in need of rehabilitation Lack of data on windspeeds Legacy of contamination around oil wells Opportunities Threats Energy efficiency Diversify energy sources Solar water heating Reduced winter energy demand Rehabilitation of existing hydropower facilities Design of new energy assets Private sector investment Impacts on hydropower production of decreases in summer precipitation Small efficiency losses for thermal power plants with higher temperatures Increased summer energy demand Dry periods followed by sudden downpours of rain – pollution Dam safety Mal-adapted design Financial losses © Copyright Acclimatise and Climate Risk Management Limited 2009